Thinking, Fast and Slow (Daniel Kahneman, 2011)

On most occasions, people who act friendly are in fact friendly.
A professional athlete who is very tall and thin is much more likely to play basketball than football.
People with a PhD are more likely to subscribe to The New York Times than people who ended their education after high school.
Young men are more likely than elderly women to drive aggressively.

“The mistake appears obvious, but it is just hindsight. You could not have known in advance.”
“He’s learning too much from this success story, which is too tidy. He has fallen for a narrative fallacy.”
“She has no evidence for saying that the firm is badly managed. All she knows is that its stock has gone down. This is an outcome bias, part hindsight and part halo effect.”
“Let’s not fall for the outcome bias. This was a stupid decision even though it worked out well.”

“He knows that the record indicates that the development of this illness is mostly unpredictable. How can he be so confident in this case? Sounds like an illusion of validity.”
“She has a coherent story that explains all she knows, and the coherence makes her feel good.”
“What makes him believe that he is smarter than the market? Is this an illusion of skill?”
“She is a hedgehog. She has a theory that explains everything, and it gives her the illusion that she understands the world.”
“The question is not whether these experts are well trained. It is whether their world is predictable.

Bernoulli's error: a person accepts risk not only on the basis of possible losses or gains, but also based upon the utility gained from the risky action itself.

“He was very happy with a $20,000 bonus three years ago, but his salary has gone up by 20% since, so he will need a higher bonus to get the same utility.”
“Both candidates are willing to accept the salary we’re offering, but they won’t be equally satisfied because their reference points are different. She currently has a much higher salary.”
“She’s suing him for alimony. She would actually like to settle, but he prefers to go to court. That’s not surprising—she can only gain, so she’s risk averse. He, on the other hand, faces options that are all bad, so he’d rather take the risk.”

“She didn’t care which of the two offices she would get, but a day after the announcement was made, she was no longer willing to trade. Endowment effect!”
“These negotiations are going nowhere because both sides find it difficult to make concessions, even when they can get something in return. Losses loom larger than gains.”
“When they raised their prices, demand dried up.”
“He just hates the idea of selling his house for less money than he paid for it. Loss aversion is at work.”
“He is a miser, and treats any dollar he spends as a loss.”

Samuelson’s problem: in the theory of public goods in economics, is a condition for the efficient provision of public goods. When satisfied, the Samuelson condition implies that further substituting public for private goods (or vice versa) would result in a decrease of social utility.
Frames and reality

“They will feel better about what happened if they manage to frame the outcome in terms of how much money they kept rather than how much they lost.”
“Let’s reframe the problem by changing the reference point. Imagine we did not own it; how much would we think it is worth?”
“Charge the loss to your mental account of ‘general revenue’— you will feel better!”
“They ask you to check the box to opt out of their mailing list. Their list would shrink if they asked you to check a box to opt in!”

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