Book review: Thinking, Fast and Slow, by Daniel Kahneman.
This book is an excellent introduction to the heuristics and biases literature, but only small parts of it will seem new to those who are familiar with the subject.
While the book mostly focuses on conditions where slow, logical thinking can do better than fast, intuitive thinking, I find it impressive that he was careful to consider the views of those who advocate intuitive thinking, and that he collaborated with a leading advocate of intuition to resolve many of their apparent disagreements (mainly by clarifying when each kind of thinking is likely to work well).
His style shows that he has applied some of the lessons of the research in his field to his own writing, such as by giving clear examples. (”Subjects’ unwillingness to deduce the particular from the general was matched only by their willingness to infer the general from the particular”).
He sounds mildly overconfident (and believes mild overconfidence can be ok), but occasionally provides examples of his own irrationality.
He has good advice for investors (e.g. reduce loss aversion via “broad framing” – think of a single loss as part of a large class of results that are on average profitable), and appropriate disdain for investment advisers. But he goes overboard when he treats the stock market as unpredictable. The stock market has some real regularities that could be exploited. Most investors fail to find them because they see many more regularities than are real, are overconfident about their ability to distinguish the real ones, and because it’s hard to distinguish valuable feedback (which often takes many years to get) from misleading feedback.
I wish I could find equally good book for overuse of logical analysis when I want the speed of intuition (e.g. “analysis paralysis”).