Thinking, Fast and Slow

by Daniel Kahneman

My experience illustrates how terrorism works and why it is so effective: it induces an availability cascade.

The probability of a rare event is most likely to be overestimated when the alternative is not fully specified.

idea that fluency, vividness, and the ease of imagining contribute to decision weights gains support from many other observations.

In an even more direct demonstration of denominator neglect, “a disease that kills 1,286 people out of every 10,000” was judged more dangerous than a disease that “kills 24.4 out of 100.”

Wow!

A rare event will be overweighted if it specifically attracts attention. Separate attention is effectively guaranteed when prospects are described explicitly (“99% chance to win $1,000, and 1% chance to win nothing”). Obsessive concerns (the bus in Jerusalem), vivid images (the roses), concrete representations (1 of 1,000), and explicit reminders (as in choice from description) all contribute to overweighting. And when there is no overweighting, there will be neglect. When it comes to rare probabilities, our mind is not designed to get things quite right.

We have neither the inclination nor the mental resources to enforce consistency on our preferences, and our preferences are not magically set to be coherent, as they are in the rational-agent model.

commitment not to change one’s position for several periods (the equivalent of “locking in” an investment) improves financial performance.

The outside view and the risk policy are remedies against two distinct biases that affect many decisions: the exaggerated optimism of the planning fallacy and the exaggerated caution induced by loss aversion. The two biases oppose each other.

To implement this rational behavior, System 2 would have to be aware of the counterfactual possibility: “Would I still drive into this snowstorm if I had gotten the ticket free from a friend?”

Santhanam chitappas "vitta panathai pidikkanum" attitude

The decision to invest additional resources in a losing account, when better investments are available, is known as the sunk-cost fallacy, a costly mistake that is observed in decisions large and small.

people expect to have stronger emotional reactions (including regret) to an outcome that is produced by action than to the same outcome when it is produced by inaction.

Remember the line "atleast I tried"

The dolphin is much more charming than, say, ferrets, snails, or carp—it has a highly favorable rank in the set of species to which it is spontaneously compared.

The system of administrative penalties is coherent within agencies but incoherent globally.

A bad outcome is much more acceptable if it is framed as the cost of a lottery ticket that did not win than if it is simply described as losing a gamble. We should not be surprised: losses evokes stronger negative feelings than costs.

Tendencies to approach or avoid are evoked by the words, and we expect System 1 to be biased in favor of the sure option when it is designated as KEEP and against that same option when it is designated as LOSE.

But System 1, as we have gotten to know it, is rarely indifferent to emotional words: mortality is bad, survival is good, and 90% survival sounds encouraging whereas 10% mortality is

Decision makers tend to prefer the sure thing over the gamble (they are risk averse) when the outcomes are good. They tend to reject the sure thing and accept the gamble (they are risk seeking) when both outcomes are negative.

“Charge the loss to your mental account of ‘general revenue’—you will feel better!”

This is how the remembering self works: it composes stories and keeps them for future reference.

tourism is about helping people construct stories and collect memories. The frenetic picture taking of many tourists suggests that storing memories is often an important goal, which shapes both the plans for the vacation and the experience of it.

The word memorable is often used to describe vacation highlights, explicitly revealing the goal of the experience.

One of the examples I had in mind for a situation that Helen would wish to continue is total absorption in a task, which Mihaly Csikszentmihalyi calls flow—a state that some artists experience in their creative moments and that many other people achieve when enthralled by a film, a book, or a crossword puzzle: interruptions are not welcome in any of these situations.

is only a slight exaggeration to say that happiness is the experience of spending time with people you love and who love you.

Very crucial point. Note for analysis

Can money buy happiness? The conclusion is that being poor makes one miserable, and that being rich may enhance one’s life satisfaction, but does not (on average) improve experienced well-being.

It is now conceivable, as it was not even a few years ago, that an index of the amount of suffering in society will someday be included in national statistics, along with measures of unemployment, physical disability, and income. This project has come a long way.

The only test of rationality is not whether a person’s beliefs and preferences are reasonable, but whether they are internally consistent.

System 1 is not readily educable.

Whatever else it produces, an organization is a factory that manufactures judgments and decisions.