“There are two systems of thought: The Intuitive System 1, which does the fast thinking, and the effortful and slower System 2 which does the slow thinking, monitors System 1, and maintains control as best it can within its limited resources.”
--- Daniel Kahneman, Thinking Fast and Slow (2011)

Introduction

The fact remains whether we like to admit it or not, our minds are susceptible to systematic errors in thinking and judgment. And when we are under pressure or lacking total information, our minds are strongly biased toward causal explanations. To wrap our minds around all the ways we make mistakes in our thinking and judgment, Daniel Kahneman simplified the mind into two systems:

• The Intuitive System 1 thinks VERY FAST
• The effortful and controlled System 2 thinks VERY SLOWLY

The point Kahneman drives home in his book is by learning to recognize these patterns of thinking in yourself, you can minimize the mistakes when the stakes are highest.

System One … The Hare … All Gas No Brakes!

To put it quite simply: System 1 thinking is impulsive and intuitive and is designed to jump to conclusions from very little evidence. What’s worse, System 1 isn’t designed to know the size of the jumps it is making in its thinking. With System 1, WHAT YOU SEE IS ALL THERE IS (WYSIATI), and because of this, only the evidence at hand counts. In the absence of an explicit context, System 1 will generate its own context, and it really excels at constructing the best possible story … Are you scared yet? If not you should be!

System 1 is highly adept in one form of thinking … Automatic and Effortless. It identifies causal connections between events, sometimes even when the connection itself is spurious.

System Two … The Tortoise … All Brakes No Gas!

Like most things in life, there is a yin-and-yang or balance to things. Your brain’s method of thinking is no different. If System 1 is your default, fast, and reflexive method of thinking, System 2 is the opposite of this. To be specific, System 2 controls thoughts and behaviors, and it is the only system that can follow rules, compare objects on several attributes, and make deliberate choices between options.

Okay… Now What?

Here is the thing… Regardless of Systems 1 and 2, our brains are pattern-matching machines subject to a plethora of cognitive biases. Here are a couple of my favorites: 

• Anchoring Effect
• Availability Heuristic
• Halo Effect
• Hindsight Bias
• Representativeness Heuristic

We often ignore relevant statistical facts and we rely almost exclusively on rules of thumb. When you factor in that System 1 is our default fast way of thinking, and the deep, deliberate, and controlled System 2 way of thinking is lazy and hard to consistently deploy, it’s not surprising that we humans make a ton of decision-making errors. Often, we are inconsistent in our evaluations, and we often make errors in summary judgments. Kahneman found in his research that humans when asked to evaluate the same information twice frequently give different answers.

Reading through Daniel Kahneman’s work convinces me of a couple of solutions to human decision-making shortcomings that a lot of us humans are not going to like to hear… Humans need help to make good decisions, and there are informed and unobtrusive ways to provide this help:

• Whenever we can replace human judgment with a formula, we should at least consider it.
• Since machines are more likely than human judges to detect weakly valid cues, we should consider complementing or augmenting human-only judgments with human + machine judgments
• Maximize predictive accuracy by using machine logic, especially in low-validity environments

Conclusion and Final Thoughts

In Thinking Fast and Slow, Daniel Kahneman set out to improve the ability in all of us to identify and understand errors of judgment, and choice in others, and ultimately in ourselves! He wanted to provide his readers with a richer and more precise language to discuss decision-making and thinking within the brain. Because our System 1 method of thinking is our default and intuitive way of thinking, it’s easy for us to ignore relevant statistical facts that don’t fit the patterns we want. By nature, our slower and more methodical way of thinking (System 2) takes more time than we want and is lazy by nature. Humans need help to make good decisions because there is overwhelming evidence that we Humans can’t think rationally 100% of the time.

What Will I Do Differently As a Result of This Book?

• Learn to recognize situations in which mistakes are likely and try harder to avoid making significant decision-making mistakes when the stakes are high
• Understand that even when I think that I am being rational there is a good chance my default System 1 way of thinking has quickly pattern-matched and downplayed disconfirming information.
• Understand how deep the halo effect goes in clouding/painting my judgment of a person with a favorable first impression versus not.
• The major source of error in forecasting is our prevalent tendency to underweight or ignore distributional information. We forecast based on information in front of us (WYSIATI).
  • Consequently, I will therefore make every effort to frame the forecasting problem so as to facilitate utilizing all the distributional information that is available
• Here is the thing … We are pattern seekers, believers in a coherent world in which regularities appear not by accident but as a result of mechanical causality or of someone’s intention.
  • This fact means that we humans often misclassify random events as systematic and we are far too willing to reject the belief that much of what we see in life is random.
  • This means for me, as I continue to plan I MUST EMBRACE THE RANDOMNESS OF LIFE!
• Lastly, beware when I am in a good mood and I have had limited sleep … My System 2 will be weaker than usual and I should pay extra attention to my default System 1.

Downloadable Content

Thinking Fast, and Slow is a must-read for anyone interested in gaining insights into the Human mind and the manner in which decisions are made. The following book notes have been created to help you with your understanding of Daniel Kahneman’s concepts within Thinking Fast, and Slow.