Thinking fast and slow
Daniel Kahneman 2011
Winner of 2002 Nobel prize for economics
View of rationality
• 1970s believed that people are generally
rational
• Strong emotions cause departure from
rationality
Since then behavioural psychologists and
economists have developed a different view
based on an analysis of how we think…
System 1 thinking
How does this woman feel?
System 2 thinking
17 x 24 =
• Deliberate
• Effortful
• Orderly
System 1 – fast thinking
• Detect one object is more distant than
another
• Orient the source of a sudden sound
• Complete the phrase “bread and …”
• Make a “disgust face” when shown a horrible
picture
• Detect hostility in a voice
• Answer to 2 + 2 =?
System 1 – fast thinking
• Read words on large billboards
• Drive a car on an empty road
• Find a strong move in chess (if you are a chess
master)
• Understand simple sentences
• Recognise that a “meek and tidy soul with a
passion for detail” resembles an occupational
stereotype.
System 2 – slow thinking
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•
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•
Brace for the starter gun in a race
Focus attention on the clowns in a circus
Look for a woman with white hair
Search memory to identify a surprising sound
Maintain a faster walking speed than is
natural for you
• Monitor the appropriateness of you behaviour
in a social situation
System 2 – slow thinking
• Count the occurrences of the letter a in a
page of text
• Tell someone your phone number
• Park in a narrow space (for most people)
• Compare two washing machines for overall
value
• Fill out a tax form
• Check the validity of a complex logical
argument
System
1
System
2
Both active when awake
Automatically
generates
suggestions
Intuitions
Impulses
Usually accepts
suggestions
Belief
Voluntary actions
System 1
System 2
• Tries to make sense
• Is polite
Notices
anomalies
• Pays attention when
driving
Minimise effort and optimise performance
System 1
Generally very good
Short term predictions accurate
Initial reactions swift and appropriate
But
Has systemic biases
Doesn’t understand logic and statistics
Cannot be turned off
System 2 (I) knows they are the same length
System 1 still sees the top line longer
Attention & Effort
System 2 is the supporting actor who thinks he’s
the hero
It’s operations are effortful and it is lazy
System 2 = hard work
•
•
•
•
Self control
Cognitive effort
Consumes glucose
Ego depletion
Ego depletion consequences
8 parole judges reviewing applications for parole
6 minutes each
Default is denial
35% approved
65% approved after a meal
0% before next meal
Ego depletion consequences
When System 2 is tired:
• Supervisory function weak
• More impulsive
Impatient
Keen for immediate gratification
A bat and a ball cost $1.10
The bat costs one dollar more than the ball
How much does the bat cost?
What number comes to mind?
All roses are flowers
Some flowers fade quickly
Therefore some roses fade quickly
True or false?
vomit
The Associative Machine
• Experience unpleasant images and memories
• face twists slightly in disgust
• heart rate increases
• hair on arms rises a little
• sweat glands activated
Attentuated version of how you would react to
actual event, beyond your control
• May have a temporary aversion to bananas
The Associative Machine
• Spreading cascade of activity – memories,
emotions, facial expressions
• Coherent
• Each element is connected
• Each supports and strengthens the others
• Simultaneous and immediate
• Self reinforcing cognitive, emotional and
physical pattern
Priming
• Everything that happens around you
effects the state of your memory
• depending what you have just heard and
seen you are ready to recognise and
respond to associated objects and concepts
SO _P
The Florida Effect
• Students 18 – 25 NY university
• Assemble 4 word sentences from 5 words
Eg: “finds he it yellow instantly”
One group scrambled sentences include
Florida, forgetful, old, grey, wrinkle
Asked to walk to another room…
Priming
• Tests done while subjects are smiling or
frowning
• Nodding or shaking head
• Cartoons funnier
• Upsetting pics worse
Priming
Arizona ballot to increase school funding
Priming
• Support greater when in a school
• exposure to pictures of classrooms & school
lockers increased support
• bigger than parents
Disbelief is not an option
• These findings are true
• They are true of YOU
Cognitive Ease
Repeated
experience
Feels familiar
Clear display
Feels effortless
Primed idea
Good mood
Ease
Feels good
Feels true
Anything that makes associations easier will
bias beliefs
Repetition makes people believe falsehood
Familiarity is hard to distinguish from the truth
If you want people to believe
something
• Maximise contrast between characters and
background
• Text in bright blue or red
• Simple language
• Put in verse
• Cite source easy to pronounce
System 1 cluster
System 2 cluster
Good mood
Intuition
Creativity
gullibility
Sadness
Vigilance
Suspicion
Analysis
approach
effort
Jumping to Conclusions
What do these three have in common?
Not aware of ambiguity
Bank could have been river bank
System 1
Neglect of Ambiguity
• Not aware of ambiguity
• Uncertainty and doubt belong to System 2
• When system 2 is busy or tired you are more
likely to believe almost anything
If you like one thing about a person you have
tendency to like everything (and vice versa)
• System 2 looks for confirming evidence
• We seek data compatible with our beliefs
• Without evidence we attribute good
qualities which reinforce our view
What do you think of Alan & Ben?
Alan: intelligent, industrious, impulsive, critical,
stubborn, envious.
Ben: envious, stubborn, critical, impulsive,
industrious, intelligent.
Critical and stubborn are ambiguous
We associate them with the first word
What you see is all there is
• System 1 constructs the best possible story
incorporating the ideas that have been
activated but does not (cannot) allow for info
it doesn’t have.
Will Mindik be a good teacher? She is intelligent
and strong…
Next adjectives could be corrupt & cruel
We don’t question or analyse, just produce best
story available
Coherence seeking system 1 +
lazy system 2
• We are rarely stumped
• Have intuitive feelings & opinions about
everything
• Like or dislike on sight
• Trust or distrust on sight
Lazy System 2 endorses our intuitive beliefs
explains many biases
• Confidence depends on the quality of the
story you can tell from what you see/hear
• System 1 fails to allow for missing or critical
evidence
“What you see is all you get”
explains many biases
Framing effects:
Odds of survival are 90%
Death within a month of surgery is 10%
Meat: 90% fat free
Meat: 10% fat
Substitution
Target question
Heuristic question
• How much would you
contribute to save an
endangered species
• How much emotion do I
feel when I think of
dying dolphins
• How happy are you
with your life these days?
• What is my mood right
now?
• How popular will the
president be six months
from now
• How popular is the
president now?
Substitution
Target question
Heuristic question
• How should financial
advisors who prey on
the elderly be punished
• How much anger do I
feel when thinking of
financial predators
• This woman is running
for the primary. How far
will she go in politics?
• Does this woman look
like a political winner?
Emotions and beliefs
• Our likes and dislikes determine our beliefs
ie: our political preferences
and which arguments we find more
compelling:
Red meat; nuclear power; global warming;
motorcycles; irradiated food; tattoos.
If you like these things you think the risks are low
and vice versa.
System 2 acts as biased lawyer
• Searches for information consistent with
existing beliefs
• Aplogist not critic
• Fights in the court of public opinion to
persuade others of
’s view
The Law of small numbers
• Study of the incidence of kidney cancer in 3141
counties in the USA
The counties in which the incidence of kidney
cancer is lowest are mostly rural, sparsely
populated, and located in traditionally Republican
states in the Midwest, the South and the West.
What do you make of this?
Clean living, no pollution, fresh food without
additives
The law of small numbers
• Study of the incidence of kidney cancer in 3141
counties in the USA
The counties in which the incidence of kidney cancer is
highest are mostly rural, sparsely populated, and
located in traditionally Republican states in the
Midwest, the South and the West.
What do you make of this?
No access to medical care, high fat diet, tobacco, alcohol
The law of small numbers
• The key factor is not Republican or rural it is
sparsely populated.
• Small samples yield extreme outcomes
• System 1 very bad at stats
• System 1 believes small samples closely
resemble the population from which they are
drawn.
System 1
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•
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•
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Exaggerates consistency
Suppresses ambiguity
Seeks patterns
Believes in a coherent world
Believes in causality
Many facts of the world are due to Chance
not causality
Anchoring
Built to stop at 10 & 65
• Is the percentage of African nations among
the UN members larger or smaller than the
number you just wrote?
• What is your best guess of the percentage of
African nations in the UN?
10 = 25%
65=45%
Annual donation “to save 50000 offshore Pacific
Coast seabirds from small offshore oil spills
until ways are found or prevent spills or
require tanker owners to pay for the
operation.”
No anchor ($65)
Would you be willing to donate $5? ($20)
Would you be willing to donate $400? ($143)
Anchoring
• House market
• Shops
• Political campaigns
Assume any number has an anchoring effect and
mobilise system 2 to combat it.
Ask people to estimate the frequency of an
activity:
What percentage of couples divorce after 60?
How many poisonous snakes are there in SA?
We judge frequency by the ease with which
examples come to mind.
When it is difficult to find examples System 2
becomes engaged and content receives
attention.
Availability
What comes easily to mind?
Stories with big media exposure:
• Hollywood divorces
• Politicians sex scandals
• Plane crashes
• Tsunamis and storms
Availability
What comes easily to mind?
Personal experiences:
• A bad judicial experience
– Undermines faith in judicial experience
• Being victim of a mugging
– The world seems a dangerous place
• Vivid examples
Availability
Conditions in which people go with the flow:
• When engaged in an effortful task at the same
time
• when in a good mood after happy memory
• If they score low on a depression scale
• If they are knowledgeable novices in contrast
to true experts
• When they score high on faith in intuition
If they are (or are made to feel) powerful
“I don’t spend a lot of time taking polls around
the world to tell me what I think is the right
way to act. I’ve just got to know how I feel”
George W Bush, November 2002.
Availability, Affect & Risk
Public perceptions of risk:
• Strokes cause almost twice as many deaths as all
accidents combined, but 80% of respondents
judged accidental deaths to be more likely.
• Tornados were seen as more frequent killers than
asthma, although the latter causes 20 times more
deaths.
• Death by lightning judged less likely than death
from botulism even though it is 52 times more
frequent.
Availability, Affect & Risk
• Death by disease is 18 times as likely as
accidental death, but the two were judged
equally likely.
• Death by accident was judged to be more than
300 times more likely than death by diabetes,
but the true ratio is 1:4.
Estimates warped by media coverage which is
biased to novelty and poignancy.
Availability cascade
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•
•
•
•
Media reports a relatively minor event.
Public reacts
Danger increasingly exaggerated in media
Public panic
Scientists who try to dampen fear attract little
attention mostly hostile
• Issue becomes politically important
• Unnecessary expensive legislation passed
Availability cascade
Terrorists most significant practitioners:
Casualities are small – even in Israel much lower
than traffic deaths.
Cost of the war on terror.
Linda: Less is more
Linda is thirty-one years old, single, outspoken,
and very bright. She majored in philosophy. As
a student she was deeply concerned with
issues of discrimination and social justice, and
also participated in antinuclear
demonstrations.
Linda: Less is more
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•
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•
•
Linda is a teacher in an elementary school.
Linda works in a book store & takes yoga.
Linda is active in the feminist movement.
Linda is a psychiatric social worker.
Linda is a bank teller.
Linda is an insurance salesperson.
Linda is a bank teller and is active in the feminist
movement.
Rank according to which most likely
Linda: Less is more
Ran experiment with nothing between bank teller and
feminist bank teller
• Stanford graduate school of business graduates in
probability, decision making & stats
- 85% ranked feminist bank teller higher.
In desperation:
Which alternative is more probable?
Linda is a bank teller.
Linda is a bank teller and active in the feminist movement.
85 – 90% of students in major universities rated feminist
higher
Linda: Less is more
“a little homunculus in my head continues to
jump up and down, shouting at me – ‘but she
can’t just be a bank teller; read the
description.’”
Stephen Jay Gould
The fallacy is attractive even when you recognise
it.
Linda: Less is more
System 1’s uncritical substitution of plausibility
for probability.
Which is more probable:
Jane is a teacher.
Jane is a teacher and walks to work.
Answer obvious because no competing intuition.
For economists and decision theorists:
(not Austrian school)
rationality = internal consistency
logical coherence
This definition demands rules of logic the
human mind cannot implement.
Behavioural economists:
believe in freedom – but that it has a cost:
Individuals who make bad choices and society
which feels obliged to help them
Libertarian Paternalism
How do you help people make good decisions
without curtailing their freedom?
Nudge them to make decisions in their long
term interests.
Rates of Organ Donation
Nearly 100% Austria
12% German
86% Sweden
4% Denmark
Why the difference?
Opt in or opt out
Why the huge difference?
• Default option perceived as normal choice
• Deviating is an act of commission, requires
deliberation, responsibility
Businesses take advantage of system 2 laziness
Hence contracts long and in small print
Nudge
• Pension scheme default option
• Contracts in large print and simple language
In Conclusion
• We think we are System 2
• System 2 articulates judgments and makes
choices but also endorses or rationalises ideas
and feelings from System 1
• System 2 is important but limited by its
abilities and the knowledge to which it has
access.
• System 1 is the origin of much we do wrong
but also most of what we do right.