Thinking Fast and Slow by Daniel Kahneman

This book answers the question of "Do people act rationally when they are engaged in spending lots of money--buying and selling stocks, getting mortgages, etc?" Economists think yes, but psychologists beg to differ. The author is a psychologist who won the Nobel Prize in economics, so he has some street cred in this area. I really loved this book--it was 'Blink' with more data, and lots of examples of how you can break down the decision making process. Kahneman builds an understandable (for the lay person) framework for how, or why, the mind reasons as it does. There are two factors at play--which he calls System 1 and System 2 (which is my least favorite part of the book--it would have been nice if they were named in some way that related to how they operate). System 2 is your conscious, thinking mind. We conceive of this active consciousness as the principal actor, the “decider” in our lives. System 2 thinks slowly; it considers, evaluates, reasons. Its work requires mental effort—multiplying 24 by 17 or turning left at a busy intersection. We attribute most of our opinions and decisions to this thinking, reasonable fellow. For Kahneman, however, the main player is System 1. This is the agent of our automatic and effortless mental responses. System 1 can add single-digit numbers and fill in the phrase “bread and —.” It is equipped with a nuanced picture of the world, the product of retained memory and learned patterns of association (“Florida/old people”) that enable it to spew out a stream of reactions, judgments, opinions. System 1 can detect a note of anger in a voice on the telephone; it forms snap judgments about those we meet, Presidential candidates, investments that we might be considering. The flaw in this remarkable machine is that System 1 is faster, surer of itself, and it works with as little or as much information as it has. System 1 has no ability to say 'garbage in, garbage out'. Once these two ways of thinking are thoroughly explained, he spends the rest of the book showing us how and why that matters. He gives some great examples of how differently the same 'factual' information can be perceived, depending on how it is presented. It is wonderfully readable, and very thought-provoking.