bias, he says, he would like to eliminate the most if he had a magic wand. But it is built so deeply into the structure of the mind that you couldn’t change it without changing many other things – “Overconfidence” is the most damaging among all, says Daniel Kahneman, the Israeli-American author, psychologist, and economist who is known for his work in behavioural economics for which he was jointly awarded the 2002 Nobel Memorial Prize in Economic Sciences.
I have been so fascinated by Kahneman’s writings and the way he explains the complexities of the human mind in decision making, that I decided to write about this Nobel Prize laureate’s tragic demise recently, which has left a void in the field of financial decision making.
In his 2011 book, ‘Thinking, Fast and Slow’, he talks about the ‘two systems’ of thought, one instinctive and emotional, the other deliberative and more logical. Now, imagine you're standing in the queue at a grocery store, and you see a display of chocolates by the checkout counter.
Without much thought, you grab a bar of your favourite chocolate impulsively. This decision is driven by ‘System 1’ thinking, which relies on quick, instinctive reactions and doesn't involve much deliberate analysis.
Now, let's consider purchasing a house instead, which involves significant financial investment and long-term commitment— that entails carefully researching factors such as location, property condition, market trends, financing options, and future resale value, etc., and for all this you need to