| We have, in effect, two forms of thinking: fast and slow. Fast thinking involves tapping into our experience, our habits, or our understanding of processes or things familiar to us. When we think quickly, we can often do other things simultaneously. Slow thinking involves reasoning, mathematics or statistics. This takes longer and requires our full attention. Our fast thinking works fine for most things, most of the time. A good portion of our lives functions through well-practiced habits. But most of the biases and mistakes that can get us into trouble - financially or otherwise - come from using our fast thinking in situations where slow thinking is called for. Nobel Prize winner Daniel Kahneman and his colleague Amos Tversky made their careers by identifying and understanding these types of mistakes. In Kahneman's book Thinking, Fast and Slow, he describes these mistakes in wonderful detail. Let's play with this, so you can experience the difference directly. Start by solving this question quickly... A bat and a ball together cost $1.10. The bat costs $1 more than the ball. How much does the ball cost? |
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