Thinking, Fast and Slow

Which one of these choices would you take?

A. A guaranteed $900
B. A 95% at $1,000

I’m pretty sure you chose A. I would. But it’s the irrational choice. The truly rational person would see that choice B offers an expected win value of $950. So why don’t we make that choice? We think of ourselves as rational people but the truth is we make a lot of irrational decisions.

Thinking, Fast and Slow is the bible of Behavioral Economics. It is essentially the story of how we think and the two systems we use to do so. System 1 is fast and pretty accurate but it relies on patterns and heuristics to make decisions. System 2 is our rational system but it is slow to react and it’s lazy. Because System 1 dominates so much of our decision making we are prone to make “irrational” decisions. The biggest driver of irrational errors is our Loss Aversion. We hate losses more than we hate gains. It is why pro-golfers are better at putting for par than they are for birdie. It is why you chose scenario A above.

Knowing our biases and blunders will help us make slightly better decisions. It is very hard to stop our system 1. The true benefit is if you’re making a decision as a group. You can see the system 1 errors other are making and help the group make a better decision.

I can’t recommend this book enough. I’ve read it twice already and I’ll read it again next year.

Thinking, Fast and Slow by Daniel Kahneman

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Being Mortal

One day we will die.

I’m not trying to be profound. It is a fact of life. Barring an untimely accident, we will also grow old before then. For two events that we know for sure are going to happen, we are extremely ill-prepared for them.

Dr. Atul Gawande’s book Being Mortal is trying to change that. Confronting old age and our mortality is a series of hard questions and choices. Preparing ourselves and discussing these hard choices with our loved ones before they occur alleviates some of the burden and stress when these decisions need to be made. Discussing the hard stuff now makes sure that what you want is implemented. If the hard decision is left to your loved ones to make at the time of an event then they will make a decision from their perspective and under duress.

Being Mortal is not just about the end of life. The book is a great starting point when thinking about elder care. The struggle families have when the role of parent and child are reversed. The good and the bad of nursing homes. And how to allow the elderly to remain in control of their lives.

We will all face these issues as a child and as someone who will get old too. It is an important book to read.

Being Mortal by Dr. Atul Gawande

*If you’re always on the look out for something new to read then sign-up for my once a month-ish book recommendation email