Dr. Daniel Kahneman, winner of the 2002 Nobel Prize in economics, joins us to discuss his book Thinking, Fast and Slow. 

In this video segment, Kahneman explains two types of thinking in terms a newsroom filled with reporters and an overworked editor. Who determines the content of your "newspaper"? The full version of the interview can be seen hereA transcript follows the video.

Morgan Housel: Let's talk a little about your book, Thinking, Fast and Slow. The theme throughout the book is that there are two types of thinking, fast and slow; System 1 and System 2. Tell me about the difference between the two.

Daniel Kahneman: Fast thinking is, I think, most of the way that we think. It's what your memory delivers to you. You start talking, and you talk. You don't have to deliberate about one word and then the other. You walk. You don't deliberate and decide to put one foot in front of the other.

Most of what we do sort of comes automatically. Most of what we do is highly skilled and emotional -- some of it is emotional, much of it is highly skilled -- and all of that is automatic. There's just an awful lot of automatic stuff that goes on.

Then there is System 2.

If I say, "2 plus 2," a number came to your mind. That's System 1. If I say "The relationship between China and Japan," now it's not one word that came to your mind, but a whole set of words, a whole set of ideas. I mentioned that, you were thinking islands, you were thinking war, you were thinking navies.

You might have been thinking about the history of China and Japan. A lot happened that you were not ... it happened at once. Those are not explicit thoughts, but you are ready for a whole topic, as soon as I mention something. That's System 1.

I mention the word "mother," "your mother" -- you are having an emotion. That's System 1.

There's an awful lot that System 1 does. System 1 has judgments and opinions and attitudes and impressions that are generated -- like when I said "think of China and Japan" -- that a whole lot happened at once. You were not conscious of it all at once, but your mind was ready. It was getting ready with it.

That's the idea, that there is that thing going on in our minds, silently. Then you have System 2.

System 2 is the effortful one. It depends on the allocation of attention. It's what we are paying attention to, mostly. It's involved in computations. It's involved in difficult decisions. It's involved in controlling yourself and not telling somebody to go to hell. That demands System 2. It's all part of an effortful system.

What's the relationship between the two of them? That's the interesting part.

I compare that, and maybe that image -- it's not in the book, but I now wish it had been -- I compare it to a newspaper room. You have the reporters and they are writing stories. They're interpreting the world.

Then you have an editor. In my story, the editor is sort of lazy, and is badly overworked. What the editor does mostly is endorse the stories and send them to the printer. Now, occasionally the editor will stop a story, think more slowly, assign it to another reporter, or altogether stop it, like not telling somebody to go to hell.

If you look at where the product is, the newspaper is really written by the reporters. It's not that the editor has no role. It's not that ... the editor is a very important figure, but the newspaper was basically produced by the reporters. That's one theme of the book.

Basically, it's not that the editor produced the newspaper. The editor is, to a large extent, in the business of endorsing emotions and responses and impressions that come from somewhere else. The editor also is in the business of defending what's in the paper to the public.

Here went that story, and he endorsed it without really thinking about it, but now there is flak about it. Now he is asked, "Why did you publish that story?" He's not going to say, "Well, I just sent it to the printer." He's going to find a reason for why that story got ... that's the way our mind works. We believe the thing that we believe and we have the opinions that we have, not so much because we have reasons for them. If we had reasons for our religious beliefs, then people would change their religious beliefs. If we had reasons for our politics, we would change our views and arguments.

I don't want to say that nobody ever changes their minds, but people rarely change their minds. That's because our beliefs come from somewhere else. We believe the arguments that are compatible with our beliefs. It's not that we believe in things because we have the argument for them.

A lot of things -- System 1 comes first, System 2 endorses and rationalizes. That's a big theme in the book, is this view of how the mind works.

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