Important decision-making in life deserves careful, rational thought and most of us think we do that. We would never make such a decision rashly and impulsively. Or so we think. There are occasions where gut instinct takes over, but we wouldn’t be ruled by it, that would be chaotic. Everything that makes each of us unique, our opinions, our beliefs and our judgements; leading to the ways we speak and act are based on what we have reasoned based on experience and education.
Not so, says Daniel Kahneman, renowned Nobel prize-winning professor from Princeton and author of Thinking Fast and Slow. He has identified two distinct ways of thinking that he divides into System One and System Two. His research into how the mind works has changed the assumption that we tend to act rationally. According to Kahneman, neither our beliefs, nor our hopes or wishes are “anchored in reasons.”
Nearly all of the time, in the many hundreds or thousands of decisions we make every day, System One thinking is in charge. This is our super-fast intuitive mind, which functions on auto-pilot, without us even realizing it. Because System One effectively has a mind of its own, it is sometimes called “the stranger within.”
System Two is much slower and takes time and difficulty to access. In System Two thinking, we can slowly and carefully use logic to puzzle things out, but we don’t often allocate the time to do so. When people were randomly asked what is two plus two, they could all answer readily and quickly. When the question was changed to what is 17 times 24, they all had to literally slow down, stop and think. System Two had to be called into action to answer the harder question. However, all too often, System One remains in control throughout, and without resort to System Two, and this is when we all make mistakes.
A lot of these automatic responses are laden with “cognitive biases.” They lead to systematic errors. The list of these grows longer all the time as they are recognized, there is even one called the IKEA effect where people place more value on something they have partially assembled themselves. One of the best known is Hyperbolic discounting, also called the present bias. Present bias shows human tendency to prefer not to think about the future. It is important in understanding indulgence in behaviors we know are bad for us, like unprotected sex, eating, smoking or drinking too much.
To illustrate present bias, consider these choices. You can wait a year to receive half a box of chocolates, or wait a year and a day to get the whole box. Nearly everyone will choose to hang on for the extra day, it is so far off, it seems so make little difference. If the offer is brought into the present moment, half a box of chocolates right now, or a whole box tomorrow, most take the chocolate. It is there, why not take it. Waiting the entire extra day seems much harder when it is right in front of you. It is completely the same choice, the decision-making is completely different.
Another important bias is confirmation bias, where we seek information with the intent of confirming what we already know. Loss aversion is one of the most powerful biases we all carry, and it was for his work in this arena that Kahneman won the Nobel. It opened up a whole new field – behavioral economics. Strangely, we suffer more from a loss than we rejoice in a gain. If you lost a $10 bill today, you would have to find at least $20 tomorrow to make up for it.
Complementary research by Dr Laurie Santos from Yale, has revealed that many biases are so deep-rooted that can be found in our evolutionary ancestors. By training monkeys to use money, giving them tokens to exchange for food, she discovered they too were extremely loss averse. She concluded that if this bias is 35 million years old, it is going to be impossible to try to change it. The monkeys made just the same stupid mistakes in their decision-making as we do. The solution is to design our environment in a way that allows for the likelihood of these mistakes.
Dan Ariely of Duke University in North Carolina, says it is dangerous for us to ignore the consequences of these understandings. He thinks that we may not have had to suffer the global financial collapse if the system did not operate on the assumption that everyone within it was making rational decisions. They clearly were not. From running a huge bank, to choosing which kind of coffee to buy, every decision, large or small, is compromised by bias. “We are irrational in all kinds of ways” he says, but his hope is that we can build a world that is compatible with this.
Not everyone agrees of course. Malcolm Gladwell, in his book Blink, argues against pontification and in favor of paying attention to “fleeting moments.” It is his consensus that acting on intuitions will lead to the better world. He thinks we have it drummed into us far too much that we “look before we leap” and other such maxims,that encourage dutiful deliberation over decisiveness.
In the information-overcrowded world we live in, slow-time activities, reflection and meditation are harder to accommodate. Given Kahneman’s definitions for System Two thinking, that it is “slow, effortful, infrequent” as well as “logical, calculating” and “conscious” it is not surprising that System One takes precedence. It is more geared for the twenty-first century pace with its modes of “automatic, frequent, emotional” as well as being stereotypical and subconscious.
There are techniques to surmount this tendency, one of the simplest of which is the good old list of pros and cons. This was the trick used by Charles Darwin in making his decision whether to get married or not to his cousin, Emma Wedgewood. Famously scribbled down on the back of an envelope, his “cons” included “charms of music and female chit-chat” and “object to be loved and played with – better than a dog anyway.” He envisioned a “nice soft wife” on a sofa by the fire and how this would be good for his health. On the other hand, he dreaded the “terrible loss of time” the fact he would not be able to travel and the “duty to work for money.” How was the poor man to choose? He even pined over the thought he may never go up in a balloon.
In the end, he numerically calculated the advantages over the disadvantages and elected to marry. He and his wife had 10 children and remained together until he died in 1882.
This is technically known by cognitive psychologists as multi-attribute utility and is recommended for such big decision-making. Another strategy to extend the range of hypotheses we consider when making a big decision is to try to broaden the search as far as possible. If thinking of changing jobs, for example, the idea is to try to evaluate at least five reasons why. Analyzing the decision at five different levels is far better than acting on one impulse, such as the pay is too low.
Faced with overwhelming amounts of information, as often happens with a medical diagnosis, or when trying to revise for important exams, breaking it all up into more manageable chunks is much easier to cope with. The mind can only handle so much, and each chunk can then be further broken down, until the information is more digestible.
In the near future it is forecast by one of the most eminent minds in Artificial Intelligence, Ray Kurzweil, Google’s engineering director, that our computers will know us better than our own significant others. Or even ourselves. Like couples who understand each other so well, they finish their partner’s sentences, within fifteen years Google will know what we’re thinking and answer our questions before they have been asked. This merging, called “the singularity,” will absorb and translate by them coming to an understanding of language. Once they get a grip on human semantics, says Kurzweil, computers will understand everything. But will they understand how to make a good decision? Or will they too inherit the cognitive biases from our modes of thinking?
We may have to think again if we think we are good at decision-making.
By Kate Henderson