Thinking, Fast and Slow Study Guide

Kahneman was born in Tel Aviv in 1934 and spent his childhood years in Paris, France. He and his family lived in Paris when it was occupied by Nazi Germany in 1940, and they spent most of the war attempting to avoid internment. With the exception of his father, who died due to diabetes in 1944, his family survived. The family then moved to British Palestine in 1948, just before the creation of the state of Israel. Kahneman attended the Hebrew University of Jerusalem in 1954 for psychology and then served in the psychology department of the Israeli Defense forces. In 1958, he traveled to the United States to earn his PhD in Psychology from the University of California, Berkeley. Kahneman then became a lecturer in psychology and collaborated with Amos Tversky to study judgment, decision-making, and prospect theory. Kahneman was ultimately awarded the Nobel Prize in Economics in 2002 for his work on prospect theory.

Kahneman’s work on prospect theory is built on the history of behavioral economics, particularly the work of Swiss scientist Daniel Bernoulli, who created utility theory. This theory, which stood the test of time for nearly 300 years, argued that the value of money (its utility) is proportional to the amount of money someone already has. Therefore, a gift of 10 ducats has the same utility to someone who already has 100 ducats as a gift of 20 ducats has to someone who already has 200 ducats. But in the book, Kahneman shows how Bernoulli’s theory is flawed: it doesn’t always take into account the difference in utility between a gain and a loss. This crucial error becomes the basis of Kahneman’s own theory, prospect theory, which argues that people value losses more than they value gains.

Kahneman’s book follows a tradition of contemporary creative works meant to help the public understand scientific and statistical topics. His work is styled similarly to Malcolm Gladwell’s books, such as Outliers and The Tipping Point, which analyze the factors that contribute to success and popularity, respectively. Thinking, Fast and Slow bears similar themes to another of Gladwell’s works, Blink, which emphasizes the strength of intuition. Kahneman has actually criticized some of the ideas in Blink, arguing as he does in Thinking, Fast and Slow that rationality is more advantageous than intuition because intuition often has severe flaws. Kahneman also elaborates on some of the ideas presented in Richard Thaler’s Nudge, which coined the two systems of thinking that Kahneman defines in the first part of his book. The book’s discussion of relying on statistics rather than stereotypes also bears comparison with Michael Lewis’s Moneyball.