Thinking, Fast and Slow - Amazon Simple Storage Service

1 By Daniel Kahneman All Rights Reserved thinking , fast and slow Consider the following statements: Adolf Hitler loved children and dogs. The man walked to the bank. I didn t like him from the moment we met. I knew that was going to happen. You d probably be stumped to see the connection but there is one: The way we think about the subject matter is a preset, automatic function a mental reflex. In the first instance the Hitler statement our first reaction is to think it can t be true. We recoil at the thought. The man was bad so how could he be capable of anything good? The man walking towards the bank conjures up a mental image of someone with money on his mind.

2 But he might equally just have climbed out of a canoe and set off for a nearby river bank. And how many times have we said or heard someone say they took an instant dislike to another person. In fact, it s common knowledge that we have only a few seconds to create that all important first impression. Then there s that d j vu experience of feeling that we knew something was about to happen. For example, the number of people who knew the financial meltdown of 2008 was going to happen probably runs into tens of thousands. If so many people knew, how come it happened? What s going on here? Well, says Daniel Kahneman, it s the activity of a thought process that runs most of our lives, leading us to make on-the-spot judgments, colored by bias, intuition, overconfidence and a reliance on past experience.

3 There is another mental process that is much more ponderous, weighs things carefully, and even intervenes if the first process gets a little too compulsively crazy. But it takes a lot of effort to swing into action and keep going and, in most cases, is just too darn lazy to play the gatekeeper role. These are the fast and slow thinking processes of the book title that, for the sake of simplicity, Daniel Kahneman refers to as System One and System Two, though they don t reside in separate or any specifically identifiable parts of the brain. But together they govern everything we do that is automatic, impulsive or carefully thought out. And they are therefore critical to the decisions we make every day in business and in life. Kahneman, an Israeli-American psychologist, has been studying the whole subject of decision-making and behavioral economics for most of his adult life and he is now in his late 70s.

4 A Princeton Professor, he is among Foreign Policy magazine s list of Top Global Thinkers and was named by Bloomberg as one of the 50 most influential people in global finance. In 2002, he won the Nobel Prize for Economics, though, as he reportedly once said, he has never taken a single course in economics. It would be nice to say that thinking , fast and slow offers us a guide to managing our thought processes but, with a few exceptions, it does not. Instead, by helping us understand what s going on in our minds and by making us more aware of the fallibilities of each system, we should be more capable of devising our own way of optimizing their relative strengths. The Two Systems You ve met Systems One and Two already. Kahneman admits his book is mostly about System One, the fast thinker that jumps to conclusions, makes connections and sparks rapid cascades of thoughts by linking what it sees to past experiences and filling in the gaps where it doesn t have enough information.

5 System One can tell you the answer to two-plus-two without doing the calculation, automatically produce an expression of disgust when you see something unpleasant, detect which is the further away of two sights or sounds and generally give us instant feedback on what happens around us. It quickly creates associations word associations in psychology testing are an illustration of this ability and it responds to cues without us even being aware. For example, tests demonstrate that people are more likely to use an honesty box if there s a photo of a pair of eyes looking at them, just above it. It identifies patterns (even where they don t exist) and is good at recalling either repeated information (like TV ads) or the last thing that happened, and applying special significance to it.

6 And it does all of this with apparent ease and little conscious effort on our part. System Two, on the other hand, swings into action when you need to think things through say, for example, looking for a particular person in a crowded room, multiplying 23 by 47, or searching your memory to identify a familiar sound or face. It s good at these things but not at multitasking one thing at a time is enough, and that even goes for combining mental and physical tasks. For instance, if you were out walking and someone asked you to perform the aforementioned math calculation 23 times 47 you would almost certainly stop walking while you did so. Because of this, System Two can overrule System One by calling on other resources to analyze System One s judgments, but it rarely does so because it s preoccupied with its own activities.

7 More pragmatically, if we waited for System Two to deliver a verdict on everything we observe and plan to do, by carefully thinking them through, we d probably never get anything done! If you want proof, try this Simple experiment: Write down a series of four-digit numbers on successive index cards. Now, while tapping a beat with one hand, turn a card over a read out the number aloud; then add one to each of these digits and say the new number. Repeat, tapping your beat all the time. This is about the limit of what System Two can do at one time. Use five digits or try adding three to each number while keeping the beat and you ll quickly feel the immense, almost impossible, pressure of the task. Which is why we count on System One to do so much for us.

8 Automatically. It will happily construct an explanation or a conclusion based on the merest wisp of information, employing the well-known halo effect to confer broad attributes on something or someone based on a Simple observation of one feature. This tendency to build a whole mental picture story around a single fact gives rise to a phenomenon Kahneman calls what you see is all there is or WYSIATI (let s call it wizzy-attee, as a distant cousin of the concept wizzy-wig, or WYSIWYG what you see is what you get ). System One , says the author is radically insensitive to both the quality and quantity of the information that gives rise to impressions and intuitions. Another trick it uses, this time to get around difficult questions that might be more effectively dealt with by System Two, is to substitute an easier question and just answer that.

9 So, the vague and somewhat difficult question, How happy are you with your life these days? would be translated into, What is your mood right now? Easy, right? Biased thinking System One, Kahneman tells us, is not prone to doubt. It sidesteps ambiguity and does its best to draw a conclusion on the available information. There are a couple of good examples where you can see this at work: During World War II, a map showing the location of bomb strikes on London revealed a number of relatively unscathed areas. This was nothing more than the result of random bombing but the British media and the public were quick to conclude that the unharmed areas were actually the locations of Nazi spies. Second, the recent drive by the Gates Foundation, set up by Microsoft founder and philanthropist Bill Gates, to establish smaller schools in the US, was based on a finding that the best performing schools in the US were small.

10 As it happens, so are the worst-performing schools, but System One doesn t do statistics, or seek a more detailed explanation. It simply jumps to a conclusion and foregoes analysis. This type of behavior is an example of heuristics, a problem-solving technique based on drawing conclusions from limited amounts of information about behavioral characteristics. In technology, it s commonly used to identify potential new viruses by looking for particular types of behavior. It s also in action when System One uses anchoring as a short cut to making a decision. This is the process where we use an existing reference point as a springboard for our own conclusion. A Simple example would be the asking price for a property that s for sale. We make an offer that s linked to that price.