Kahneman's research unveiled the dual nature of human thought processes, introducing the concept of System 1 and System 2 thinking. System 1, fast, intuitive, and emotional, governs our automatic responses and snap judgments. In contrast, System 2, slower, more deliberate, and logical, requires conscious effort and is engaged in complex decision-making. Understanding this duality is crucial for recognizing how cognitive biases influence our choices.

Kahneman's work illuminated the prevalence of heuristics, mental shortcuts our brains employ to simplify complex decisions. While efficient, these heuristics can lead to systematic errors in judgment known as cognitive biases. The book explores various biases, such as the availability heuristic, where we overestimate the likelihood of events easily recalled, and the anchoring effect, where we rely too heavily on initial information when making judgments.

This groundbreaking theory, developed with Amos Tversky, revolutionized our understanding of decision-making under risk and uncertainty. Prospect theory demonstrates that individuals are not always rational actors, as classical economics assumed. Instead, people tend to be loss-averse, feeling the pain of a loss more strongly than the pleasure of an equivalent gain. This asymmetry influences our choices, making us more risk-averse when facing potential losses and more risk-seeking when potential gains are at stake.