Human Decision-making:

Extracts from Daniel Kahneman’s Thinking Fast and Slow.

Daniel Kahneman, a Nobel prize winner for his work, first became famous for his article Judgement under uncertainty (1974) Heuristics and Biases. The Article was produced from research funded by US Department of Defense and Office of Naval Research. He expanded this into a book in 2011 called “Thinking fast and slow” describing how the human mind makes judgements and choices.

Two Systems

Kahneman talks of two systems referring to the brain’s two, side-by-side, modes of thinking when we make judgments or decisions.

System 1 – operates automatically and quickly with little or no sense of voluntary control.

System 2 – allocates attention to the effortful mental activities that demand it, including complex computations. System 2 is associated with conscious choice and concentration.

When we think of how we make decisions we generally identify with System 2. This is the idea that we are reasoning; we make choices determined by rational thought. 

However: Kahneman’s book uses as series of social experiments to prove time and time again that in fact, it is system 1 which dominates the way in which we take most decisions.

Characteristics of System 1:

• Operates automatically and quickly, with little or no effort, and no sense of voluntary control
• Executes skilled responses and generates skilled intuitions after adequate training.
• Generates impressions, feelings, inclinations; when endorsed by System 2 these become attitudes, beliefs, and intentions.
• Infers and invents causes and intentions
• Neglects ambiguity and surpasses doubt
• Is biased to believe and confirm 
• Focuses on existing evidence and ignores absent evidence
• Generates a limited set of basic assessments

Some examples of System 1 at work:

• Driving a car on an empty road.
• Answering of simple sums, e.g. 2 plus 2.
• Complete the phrase “bread and…”
• Detect that one object is closer than another.
• Orientate to the source of a sudden sound.

Some of these are involuntary – you can’t avoid doing them. Others are able to be voluntarily controlled but normally run on autopilot.

Characteristics of System 2

System 2 operations have one thing in common: they require high levels of attention and concentration dedicated to them and are disrupted when that attention is drawn away.

• Focus on the voice of a particular person in a crowded and noisy room.
• Search memory to identify a surprising sound.
• Count the occurrences of the letter ‘a’ in a page of text.
• Check the validity of a complex logical argument.
• Continuous monitoring of your own behaviour – the control that keeps you polite when angry, and alert when tired.

The two systems in tandem

• Both systems are active whenever we are awake. System 1 runs automatically, system 2 is normally in a comfortable low effort mode. 
• System 1 continuously generates suggestions for System 2: impressions, intuitions, intentions and feelings. If endorsed by System 2 then impressions and intuitions turn into beliefs, and impulses turn into voluntary actions.

Problem 1: Overconfidence in System 1

• People have too much faith in their intuition. Because cognitive effort is just that – it requires effort and therefore is mildly unpleasant, we all try to avoid it as much as possible. 

Problem 2: The Laziness of System 2

• System 2 is inherently lazy: For example. Quickly perform this little sum:

A bat and ball cost £1.10. The bat costs £1 more than the ball. How much does the ball cost?

Most people come to a quick answer of 10 pence. This is the intuitive answer. It is appealing, and wrong. Do the maths properly and you will see that if the ball costs 10 pence then the total cost will be £1.20. The correct answer is 5 pence.

Many thousands of university students have answered this question and more than 80% gave the answer as 10 pence. This shows a willingness to accept the easy ‘intuitive’ solution rather than engaging an effortful System 2 calculation.

• System 1 provides us with automatic impressions and intuitions. It is gullible and biased to believe. The role of doubting and ‘unbelieving’ is that of System 2. It has to challenge these by recalling knowledge, making comparisons, calculations and mental judgements. 
• It has been demonstrated that when System 2 is otherwise engaged by mentally demanding tasks, it loses the ability to check and balance the judgements of System 1. It is also lazy. There is ample evidence that people are more likely to believe obvious falsehoods, and make basic errors when they are tired or having to engage System 2 in other activities.

Your lazy brain:

• When faced with complicated judgements we all tend to simplify the question by substituting it with another, easier one. For example:
• Target question: How happy are you with your life these days?
• • Substituted question: What is my mood right now?
• Target question: How popular will the government be one year from now?
• • Substituted question: How popular is the government right now?

We have a powerful tendency for us to come to an answer by substituting a difficult question with an easier one. 

Here’s an example of how:

Steve is a very shy and withdrawn character, invariably helpful, but with little interest in people or in the world of reality. A meek and tidy soul, he has a need for order and structure, and a passion for detail.

What do you think Steve’s profession is? Order the following professions from Most to least likely:

Farmer, salesman, airline pilot, librarian, physician.

Research has shown that the vast majority of people make this judgement based on similarity or representativeness with no consideration to prior probability of outcomes. If you were to make this judgement based on statistical probability alone then you would first have considered how many farmers, salesman, airline pilots, librarians, physicians, that there are per head of population. The fact that there are many more farmers in the population that librarians should enter into any reasonable estimate of the probability that Steve is a farmer instead of a librarian.

Here’s another example:

A certain town is served by two hospitals. In the larger hospital about 45 babies are born each day, and in the smaller hospital about 15 babies are born each day. As you know, about 50% of all babies are boys. However, the exact percentage varies from day to day. Sometimes it will be higher than 50%, sometimes lower.

For a period of a year, each hospital recorded the days on which more than 60% of the babies born were boys. Which hospital do you think recorded more such days?

The larger hospital

The smaller hospital

About the same (that is within 5% of each other).

Over 50% of people selected that last answer. In contrast, sampling theory determines that the expected number of days on which more than 60% of the babies are boys is much greater in the small hospital than in the large one, because a large sample size is less likely to stray from 50%. This fundamental notion of statistics although we understand it perfectly well, is not part of people’s repertoire of intuitions.

Do not be fooled by your carefully reasoned judgement: You are a machine for jumping to conclusions!