Thinking, Fast and Slow

Don't you forget about me
I'll be alone, dancing, you know it, baby
Going to take you apart
I'll put us back together at heart, baby
--Simple Minds

Finally finished Nobel laureate Daniel Kahneman's (2011) Thinking, Fast and Slow. The book compiles Kahneman's thoughts on judgment and decision-making grounded in 40+ years of inquiry.

There are many interesting points in this book, but Kahneman's primary contribution is his division of human thought into two categorical 'systems.' System 1 renders judgment quickly and effortlessly. It is influenced by emotion and favors intuition over reason. System 1 is comfortable with incomplete information and may even promote it. System 1 can deal with multiple thoughts at a time. It relishes in the here and now, often assuming that What You See Is All There Is (WYSIATI). Most of our thinking is done in System 1.

System 2 is slow, deliberate thought. Effort required for System 2 thinking is magnitudes greater than for System 1 thinking. System 2 is the domain of rational thought. It seeks data and is uncomfortable rendering judgment until data are carefully analyzed. Intuition takes a back seat to reason. When System 2 is engaged, it is difficult to think of anything else. Only a small portion of our thinking is done in System 2.

As Kahneman notes early on, his book is primarily about System 1. Not only is it where we spend most of our thinking lives, but System 1 is also the source of most errors in judgment and mistakes in decision-making.

System 1 is likely a product of our evolution. In prehistoric days when immediate threats abounded, our fast thinking System 1 was a ticket to survival. Although there are far fewer immediate threats to our livelihood today, System 1 still dominates our thoughts. This should probably not be unexpected. An axiom of human behavior is that we generally prefer less effort to more effort, and System 1 requires much less effort than System 2. Nevertheless, System 1 can be a source of error and bias.

Most of Kahneman's book discusses these various errors and biases, e.g., the availability heuristic, insensitivity to reversion-to-the-mean effects, anchoring, prospect theory, loss aversion, the endowment effect, confirmation bias, intuition, overconfidence, possibility and certainty effects in small probability situations. Most of these discussions are interesting.

Kahneman does not offer much in the way of overcoming or eliminating these biases. To be sure, he suggests that self-awareness of the potential for error (e.g., initial price points will likely serve as anchors) and outside feedback (e.g., from mentors, coaches) may mitigate some System 1 mistake.

By and large, however, Kahneman thinks that these biases are part of our humanity and therefore intractable. In fact, some of the solutions that he offers near the end of the book for taking decisions out of the hands of individuals 'for their own good' was reminiscent of discussions I heard two years ago at the NEFE conference.

An opposing view would be that, despite the headwinds in our face blown by System 1, humans do possess self-awareness and capacity for improvement.

Nonetheless, this is a thoughtful book that is well worth the read.

Reference

Kahneman, D. 2011. Thinking, fast and slow. New York: Farrar, Straus and Giroux.