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Find a new way of thinking

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It is all too easy for accountants to get buried by the minutiae of existence. But reading Thinking, Fast and Slow by Daniel Kahneman could improve your business and your life.

4th Aug 2022
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Most of us are probably heartily sick of being told that the latest over-hyped self-help book will change our lives. From long experience, only about one book in a thousand could conceivably have that kind of powerful impact.

Everyone is different but many accountants might discover that Thinking, Fast and Slow by Daniel Kahneman could just be that one publication in a thousand.

A week before reading it, this writer had never heard of the author, nor his seminal volume. In retrospect, that sounds unbelievable, given that the decade-old book has practical applications for anyone in business, while it also offers useful ideas about how to improve every reader’s quality of life more generally.

In addition, although he is primarily a psychologist, Kahneman is obviously a big hitter across the piece, having won the Nobel Prize for Economics in 2002.

Fortuitously for me, a friend who held a high-profile executive role in a financial institution dropped into conversation and recommended a book that has clearly had a significant influence on his life and work.

Clear explanations

One of the pleasures of reading this book is that although he clearly has long academic experience and impeccable credentials, the Israeli psychologist turned author has a knack of explaining complicated concepts in language so simple that even a run-of-the-mill accountant can understand it.

Primarily, he achieves this by using everyday examples that everyone can readily understand and convert into their own lives and language.

The main thrust of Thinking, Fast and Slow follows the path of behavioural economics and runs in many directions but in particular, it is very strong on decision-making and the ways that bias, which can often be wholly illogical, will change people’s outlook and behaviour. While most of us are likely to be excited by the prospect of a new book that could boost our practices, it is also impressively instructive regarding the strange ways in which people behave.

Exciting concepts

The title gives away the game about some of the most exciting concepts, in particular the interaction between two different modes of thinking – the instantaneous reaction contrasted with the lesser used but often more valuable considered view.

Rather than writing a formal book review, it might make more sense to point out some of the practical applications that prospective readers will discover and emphasise that these could genuinely increase both the top and bottom lines for any accountancy practice, in addition to making life rather pleasanter along the way.

It is hard to know where to start, since there are so many riches buried within its covers. For example, by understanding the psychology of buying and selling, we should be able to improve our marketing strategies no end. In addition, applying surprisingly simple principles will help to optimise pricing models, while at the same time reducing the time that we all waste in arguments over fees with even our favourite clients.

On a different tack, utilising probabilities could massively help not only with sample sizes for auditing and then interpreting the resulting data, but also negotiating fees with clients, settlements with HMRC and even salary reviews, whichever end of that transaction you might be sitting on.

Psychological insights

People figure large and this is where the author’s experience as a psychologist is so helpful. There is a strong possibility that the average accountant will learn much that they haven’t previously considered regarding the ways in which people behave in particular situations. This could be a game changer whenever you are on the recruitment trail or dealing with individuals who appear to be awkward but may just have found themselves painted into what they regard as an unacceptable corner.

Gushing can be tiring both for the writer and the reader so the final word is simple. Go and invest a few pounds in a copy. The upside could be worth millions, while the downside for anyone who fails to be infused will be limited to a small outlay and a few hours of valuable time.

Readers who find the underlying concepts in this book attractive might also wish to try Nudge by Kahneman associates Richard H Thaler and Cass R Sunstein, which is less business-focused but has many useful lessons about how to influence people without the need to browbeat or bully. The principles could prove helpful to marketing and dealing with both clients and colleagues effectively.

Replies (8)

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By Justin Bryant
04th Aug 2022 18:00

This is not new at all. This book (by a Nobel Prize winner) was first published many years ago now and it's all very well known about.

The fact that you've only just read it is hardly news.

It's like saying Tom Peters' in Search of Excellence is a new management style you've just come across.

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By Hugo Fair
04th Aug 2022 17:56

Oh dear, and you were doing so well (admittedly without providing supporting evidence) ... until you started promoting "Nudge by Kahneman associates Richard H Thaler and Cass R Sunstein".

This was a favourite of David Cameron ... need I say more?

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Head of woman
By Rebecca Cave
05th Aug 2022 10:01

I second the recommendation to read 'Nudge' - to understand the theory behind many of the Tory Govt initatives eg pension auto enrolement. You may not agree with the policies but it helps to understand the roots.
I also recommend: Thinking, Fast and Slow - but its not such an easy read as Nudge.
I just wish there was some more deep thinking within Govt, and long-term planning, before policies are rolled-out.

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By Brend201
05th Aug 2022 14:49

To counter the "meh" responses: I may have heard of these books before but I haven't read them - and it looks like I should. I shall seek out a copy of each one.

Thank you for the recommendations Philip.

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
05th Aug 2022 16:48

I wholly endorse Philip's recommendation for 'Thinking, Fast and Slow'. It's based on the research of Kahneman and his late friend Amos Tvsersky and is full of insights that will spark instant recognition, as well as more considered lessons that will appeal to the more rational of your thinking systems.

One of the things I most enjoyed about it was the way that so much of their research was based on simple thought experiments: two guys sitting around trying to formulate hypotheses and ways to test them managed to tease out new ideas that have had a monumental impact on all of us.

Yet... the evolution of behavioural economics into the be-all and end-all of political thought probably wouldn't impress Kahneman and Tversky. Within our own sphere, the nudge policies adopted by the tax department have been clumsy to the point of incompetence.

In a regulatory setting, setting clear and simple rules, explaining them in a transparent fashion and applying them consistently would be more effective than making assumptions about how people behave and trying to manipulate them. Also see: government behavioural modelling strategies during the pandemic.

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Replying to John Stokdyk:
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By Hugo Fair
05th Aug 2022 20:29

A much better considered response than my brief carping above.

I'm certainly all for people continuing to learn throughout their lives (irrespective of their levels of 'expertise') - in particular where it encourages the combination of thinking and listening that is central to growth.

It's the way that concepts are labelled, put in a box and then pronounced as the next magic bullet (efficacious in all circumstances even in the hands of the untrained) which riles me ... and this is no longer the preserve of management consultants.
The seepage into our political classes has become an endemic part of their DNA ... hence my previous reference to Cameron's acceptance of the Behavioural Insights team.
Indeed his fawning near-idolatry enabled them to pull off a dubious pseudo-privatisation (see P Eye ad infinitum) - and that's before infecting the likes of HMRC with their simplistic understanding & mis-application.

I take Rebecca's point that (to wildly paraphrase) it's as well to know how your enemies think ... not a novel idea to Machiavelli over 500 years ago, but still true.

But I particularly like your conclusion that:
"setting clear and simple rules, explaining them in a transparent fashion and applying them consistently would be more effective than making assumptions about how people behave and trying to manipulate them."
[If only that switch could be turned on for MTD - and rather quickly].

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FirstTab
By FirstTab
08th Aug 2022 10:13

Over my head.

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Replying to FirstTab:
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By Hugo Fair
08th Aug 2022 13:19

No, it's "On me head, son" ... that is if you want to score!

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