Forget 'Fifty Shades' -- there's only one book to be seen with this summer
The wisdom of a 77-year-old economist has become a bestseller, says Glenda Cooper
Why would you want to be up in front of a judge just after lunch rather than later in the afternoon? Why do intelligent women marry stupid men? Why would investors make more money taking a shower than trading shares? And why is the work of a balding, bespectacled 77-year-old Israeli flying out of our bookshops?
After a lifetime of research, Daniel Kahneman, the psychologist who won the 2002 Nobel Prize for Economics, thinks he has the answers to all these questions.
He may seem an unlikely media star, but forget The Hunger Games or Fifty Shades of Grey, the paperback that the discerning reader will be parading on the beach this summer is set to be his Thinking, Fast and Slow, which unlocks secrets about the way we process information, and makes us think about the decisions we take as a result.
Despite the cascade of psychological and economic theories described in it, this compelling book has become a hit on both sides of the Atlantic. Having sold more than a million copies, it's been described as a "landmark book in social thought", while Kahneman himself has been called the "most important psychologist alive".
Kahneman lays out in Thinking his belief that we have two sorts of thought processes, which he calls System 1 and System 2.
System 1 (the 'fast' thinking of the title) is intuitive, unconscious, relying on past association of ideas. System 2 (the 'slow') is conscious, reasoning, full of effort and often lazy. While we identify with System 2 because we like to see ourselves as conscious beings, Kahneman sees System 1 as the "hero of the book".
But the problem with using System 1 is that we often end up behaving irrationally -- using information that comes to mind quickly to construct easy explanations. That explains, for example, why we think that clever women marry stupid men because they hate competition (it is a mathematical inevitability).
Before the research by Kahneman and his colleague Amos Tversky (who died in 1996), most economists operated on the presumption that people make rational choices.
For example, if you were to be offered a bet on a coin toss -- heads you lose €100, tails you win €150, the theory would be that you'd take it. Yet studies show that people often don't; we'd rather avoid losing something that we already possess than go for a bigger potential gain on the off chance.
While investors may tell themselves that they are making educated decisions on the state of the market, these are often no more accurate than blind guesses.
Kahneman cites research that examined 10,000 private investors over seven years. The research tracked every time the traders bought or sold stock. On average, the shares that individual traders sold did better than those they bought, by a very substantial margin: 3.2 percentage points per year.
"It is clear," concludes Kahneman, "that for the large majority of investors, taking a shower and doing nothing would have been a better policy than implementing the ideas that came to their mind."
One of Thinking's key messages is that we often underestimate the part luck plays in our lives. Google is held up as a paradigm of brilliant invention. Yet we don't know how lucky its creators Sergey Brin and Larry Page were. They were ahead of their time -- but we don't know by how much, because as soon as they were successful, it discouraged others from pursuing similar ideas.
So in that case, bear this in mind: if you're ever in jail, pray that you're lucky enough to see a judge straight after lunch when being considered for parole. Kahneman cites a study showing that prisoners' chances reached about 65pc after the judges had eaten a meal, but had dwindled towards zero by the time the next meal was due.
Whether they'd be more or less lenient if you quoted Kahneman at them is not clear.
Thinking, Fast and Slow by Daniel Kahneman (Penguin)