January 21, 2022
It helps to be a little naive when it comes to running a business because becoming VAT registered is an enormous pain in the a**
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Thinking Fast and Slow by Daniel Kahneman has been in my periphery for a few years now, it’s been mentioned as a ‘must read’ from many in my network and many more in the public press. It’s a long piece, it requires some persistence to stay with it, but I thoroughly enjoyed it and hope you do too.
In the book the author explains that there are two systems that determine the way we think and how our mind works. The first system (System 1) is the fast thinking system that is intuitive, and emotional. The second system (System 2) is the system that we deploy when we analyse in-depth , it requires more effort and conscious activation. Daniel Kahneman goes on to describe the impact of using one system over the other in pretty much every situation that requires judgement and decision, whether that is strategy planning in a Fortune 500 or strategy planning your next vacation. He also explains that more often than we realise, we are using system 1, when we should be using system 2.
Intuition is defined as knowing without knowing how you know. That’s the wrong definition. Because by that definition, you cannot have the wrong intuition. It presupposes that we know, and there is really a prejudice in favour of intuition. We like intuitions to be right.
What you see is what there is: Our brains confidently form conclusions based on our own personal, limited experience. We are drawn to taking the cognitively easy route of listening to others on “our side”, until eventually the only information we’re exposed to is that which confirms our existing bias. So, actively seek out those who are, not on ‘your side’ as a way to gather more comprehensive information.
When Faced With a Difficult Question, We Answer a Cognitively-Easier One: When we’re asked a question that is not cognitively easy, our brains unconsciously substitute the original question for one that is easier to process e.g ‘Should I invest in Apple stocks?’ becomes ‘Do I like Apple products’. So when you are thinking about a question, take a minute to check in with yourself if you are in-fact answering the original question, or an easier substitute!
When Judging Likelihood, We Overvalue What “Feels” Right and Undervalue Statistics: Think of “base rates” as the statistically frequency of an event occurring, based on historical and observable data. Our brains tend to ignore these base rates when we judge the likelihood of something and as a result often judge’ incorrectly.
Here’s an example from the book, where Kahneman asks you to guess someone’s job based on some info:
“Steve is very shy and withdrawn…he has a need for order, structure and has a passion for detail.”
Is he more likely to be:
A) Librarian
B) A Farmer
What was your answer? If, like most people you used your system 1 for this answer you will have guess that he is a librarian, because of the description.
If you used system 2 for your answer you will have concluded that it is statistically more likely that Steve is a farmer, simply because there are far more farmers than librarians in the world.
I really enjoyed the exploratory nature of this book which is filled with opportunities to test yourself and your systems to see how you measure up.
Have fun reading it and I hope you enjoy!
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