60-second book review: ‘Thinking, Fast and Slow’ by D. Kahneman

60 Second Book Review: ‘Thinking, Fast and Slow’ by D. KahnemanKahneman, D. 2011. Thinking, Fast and Slow. Farrar, Straus, Giroux.

I highly recommend this book to anyone looking for a breath of fresh air and the promise of ‘a new way forward’ for business and commerce. Kahneman, a Nobel laureate in Economics, makes a clear and cogent case, based on decades of research on behavioral psychology in decision making, that “we have found the problem and it is us”.

 

The future of global commerce is in a quagmire, with institutional structural fractures threatening economic vitality.  This work is a timely introspection on the often astounding capacity of individuals and groups to make quite bad decisions, and thus is a hopeful guide as to how we might better manage ourselves and our institutions.  A ‘must read’ for business leaders charged with making impactful decisions, as well as for professional advisers and experts involved in decision making processes.

Simply and clearly, Kahneman lays out a story of how we often make quite poor decisions, both as individuals and in groups via inbuilt cognitive traps, but that there is hope if we can achieve an understanding of our biases and master the tools to consciously re-assess our decisions and the decisions of our institutions better.

I am not given to bombast and this book may be too didactic for some who prefer the high drama of airport business best-seller “self-help bubble gum”, but if read carefully and attentively, it will change your life and how you think about your place in it…

I also bought the ‘audio’ copy for listening to in the auto (http://tinyurl.com/dx2west ). The legacy of Kahneman’s work is a big trend now in the academic world, shaking up disciplines from finance to operations management.  Generally, Kahneman has posed a compelling methodological problem:  how to manage decision making with the understanding that humans, including institutional leaders, are often given to making quite poor decisions.

Perhaps the significance of Kahneman’s work to the decision management and analytics field is the notion that we must become better at managing ourselves and our ‘primitive systems’ (what Kahneman calls ‘System 1’) tendency to overlook the ‘most rational’ decisions (from a pure logic perspective). From a certain perspective the legacy of the 20th century itself marks a struggle to come to terms with the failures of decision making at the scale of large institutions. The failures of decision making in the great wars and the Cold War aftermath now continue in the shape of struggles with global economic planning, problems of ‘the tragedy of the commons’, and issues with building consensus around sustainable global strategies.

There is room for pessimism and optimism alike: Kahneman reveals that we have not evolved to understand and manage the problems that now confront the world. However, he offers clear techniques and questions organizations can pose to overcome the deadly temptation of bias in decision making.

For those either managing decision making, analytics, or conducting research on these subjects, this is a “must read”.  Indeed, those struggling with issues of decision management must confront the biases revealed by Kahneman’s legacy.  Understanding is the first step…

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About SARK7

Scott Allen Mongeau (SARK7) is an INFORMS Certified Analytics Professional (CAP) and a Data Scientist in the Cybersecurity business unit at SAS Institute. Scott has over 20 years of experience in project-focused analytics functions in a range of industries, including IT, biotech, pharma, materials, insurance, law enforcement, financial services, and start-ups. Scott is a part-time PhD (ABD) researcher at Nyenrode Business University. He holds a Global Executive MBA (OneMBA) and Masters in Financial Management from Erasmus Rotterdam School of Management (RSM). He has a Certificate in Finance from University of California at Berkeley Extension, a MA in Communication from the University of Texas at Austin, and a Graduate Degree (GD) in Applied Information Systems Management from the Royal Melbourne Institute of Technology (RMIT). He holds a BPhil from Miami University of Ohio. Having lived and worked in a number of countries, Scott is a dual American (native) and Dutch citizen. He may be contacted at: webmaster@sark7.com All posts are copyright © 2015 SARK7 All external materials utilized imply no ownership rights and are presented purely for educational purposes.

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8 Comments on “60-second book review: ‘Thinking, Fast and Slow’ by D. Kahneman”

  1. AnalyticExec Says:

    I think analytics shops must incorporate cognitive science into the model development process, if we’re going to improve how people make decisions with models. Thinking Fast and Slow is a validation for the science but also a caution: when people are anywhere in the system, we must understand how they make decisions, what kind of data is available to them, how good their decisions typically are and what biases we can improve on.

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