Advances in technology, big data and analytics hold the promise to significantly augment our judgement and expertise and help us make smarter, more effective decisions. But, as we contemplate these exciting innovations, it’s good to take a step back and ask ourselves a few basic questions: How do we make decisions in the first place? What goes on in our minds when we are making decisions, from the simplest to the most complex?
I heard a fascinating talk by Daniel Kahneman that directly addressed these questions at the IBM Cognitive Systems Colloquium which I attended last month. Kahneman is Professor of Psychology Emeritus at Princeton University and Senior Scholar at the Woodrow Wilson School. In 2002, he was awarded the Nobel Prize in Economics “for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty.”
The talk was based on his 2011 bestseller Thinking, Fast and Slow. The book explains the major discoveries by psychologists and cognitive scientists over the past several decades that have led to our current understanding of judgement and decision-making. In particular, it describes the pioneering work of Kahneman and his long time collaborator Amos Tversky, who died in 1996.
In the 1970s, the prevailing view among social scientists was that people are generally rational and in control of the way they think and make decisions. It was thought that people only departed from rational behaviors because powerful emotions like fear, hatred or love distorted their judgement. Then in 1974, Kahneman and Tversky published Judgement under Uncertainty: Heuristics and Biases, an article that challenged these assumptions. In a series of experiments, they demonstrated that human behavior often deviated from the predictions of the previous rational models, and that these deviations were due to the machinery of cognition, that is, to the biases and mental shortcuts or heuristics that we use for making everyday decisions, rather than to our emotional state.
The book’s central thesis is that our mind is composed of two very different systems of thinking, which Kahneman calls System 1 and System 2. System 1 is the intuitive, fast and emotional part of our mind. Thoughts come automatically and very quickly to System 1, without us doing anything to make them happen. System 2, on the other hand, is the slower, logical, more deliberate part of the mind. It’s where we evaluate and choose between multiple options, because only System 2 can think of multiple things at once and shift its attention between them.
System 1 typically works by developing a coherent story based on its observations and the facts at its disposal. This helps us deal efficiently with the myriads of simple situations we encountar in everyday life. Research has shown that the intuitive System 1 is actually more influential in our decisions, choices and judgements than we generally realize. While System 2 is more deliberate and rational, it’s also lazy and tires easily, so we don’t like to invoke it unless necessary. “Although System 2 believes itself to be where the action is,” writes Kahneman, “the automatic System 1 is the hero of this book.”
But, while enabling us to act quickly, System 1 can lead to mistakes. It tends to be overconfident, creating the impression that we live in a world that is more coherent and simpler than the actual real world. It suppresses complexity and information that might contradict its coherent story, unless System 2 intervenes because it realizes that something doesn’t quite feel right. System 1 does better the more expertise we have in a subject. When operating within a domain we understand well, the biases and mistakes are minimized because our intuition is now based on real knowledge and experience. Mistakes tend to happen when operating outside our areas of expertise.
“System 1 and System 2 are so central to the story I tell in this book that I must make it absolutely clear that they are fictitious characters,” explains Kahneman. “Systems 1 and 2 are not systems in the standard sense of entities with interacting aspects or parts. And there is no one part of the brain that either of the systems would call home. . . . You should treat System 1 and System 2 as nicknames, like Bob and Joe, identifying characters that you will get to know over the course of this book. The fictitious systems make it easier for me to think about judgment and choice, and will make it easier for you to understand what I say.”
Thinking, Fast and Slow is quite an enjoyable book to read. Kahneman explains how our very complex minds work, as well as the experimental evidence underlying the science, using relatively simple language and concepts.
“Every author, I suppose, has in mind a setting in which readers of his or her work could benefit from having read it,” he writes in the books Introduction. “Mine is the proverbial office watercooler, where opinions are shared and gossip is exchanged. I hope to enrich the vocabulary that people use when they talk about the judgments and choices of others, the company’s new policies, or a colleague’s investment decisions.”
“So this is my aim for watercooler conversations: improve the ability to identify and understand errors of judgment and choice, in others and eventually in ourselves, by providing a richer and more precise language to discuss them. In at least some cases, an accurate diagnosis may suggest an intervention to limit the damage that bad judgments and choices often cause.”
Despite its watercooler objectives, the research described in Thinking, Fast and Slow has led to a major paradigm shift in our understanding of how the mind works. “As Copernicus removed the Earth from the centre of the universe and Darwin knocked humans off their biological perch, Mr Kahneman has shown that we are not the paragons of reason we assume ourselves to be,” wrote The Economist in its review of the book.
In a NY Times Op-Ed column shortly after its publication, David Brooks wrote that the work of Kahneman and Tversky “will be remembered hundreds of years from now,” and that it “helped instigate a cultural shift that is already producing astounding results. . .”
“Fifty years ago, people may have assumed we are captains of our own ships, but, in fact, our behavior is often aroused by context in ways we can’t see. . . Our free will is bounded. We have much less control over ourselves than we thought. This research yielded a different vision of human nature and a different set of debates. The work of Kahneman and Tversky was a crucial pivot point in the way we see ourselves.”
In his talk at the IBM Colloqium, Kahneman speculated on various ways in which cognitive systems might augment the workings of our minds. He pointed out that in many situations, computers will be able to gather information and process it really fast, thus responding like System 1. However, due to their huge stores of data and powerful analytics, the machines can provide System 2-like results.
Such cognitive systems will be particularly valuable in situations where the stakes are high and mistakes are likely due to the complexity of the problem being addressed, - e.g., sophisticated medical diagnoses or major business and financial decisions. In such situations, it will be invaluable to have highly sophisticated cognitive tools assisting the human experts.
The better we understand the workings of our mind - our intuition, judgement and decision making, - the better we can shape our new cognitive tools so they fit in as smoothly as possible with the way our minds work. And, as this WSJ review succinctly observed: “Thanks to the elegance and force of his ideas, and the robustness of the evidence he offers for them, [Kahneman] has helped us to a new understanding of our divided minds - and our whole selves.”