Series 1, Episode 4: Two modes
In this article, we look at the next part of the decision making story - the part that sees us thinking either fast, or slow. So what do I mean by that?
When we think about stuff, or process information to make a decision, our brain uses two different types of thinking. These two types of thinking - or modes of thinking - were first described by two experts in human behaviour called Daniel Khaneman and Amos Tversky - as System One thinking and System Two thinking.
System one thinking is quick and intuitive and it operates in our unconscious, or in the background, all of the time. Now, System One is capable of making really quick decisions and it can do this based on very little information. However, it also relies on taking mental shortcuts in order to reach these quick decisions.
Now because System One takes short-cuts to reach a decision, it can make it more open to biased thinking as well as other errors - all of which can come together to impact the final decision we end up making.
But even though it has its issues - if that’s even the right word to use - System One thinking is incredibly effective. To start with, we know that it places less demand on our thinking capacity as well as taking less mental effort to work. This means we can function on auto-pilot, making quick decisions, and reserving our energy for other bodily functions that may require it. But even though System One thinking can, and often does, deliver the right result for us, it can also lead us to make many quick and inappropriate decisions, and this is especially true of decisions involving complexity, such as many financial decisions.
One of the other key aspects of System One thinking, is that it’s built on a foundation of feelings and emotions. We often choose what feels right and we often avoid what makes us anxious. So we use System One impressions and feelings as a guide. The main problem this can bring is that people accept System One outputs too easily and that can lead us into all sorts of problems when we need to make important decisions.
Now, System Two thinking on the other hand, is much more analytical and deliberative. This is when we tend to consciously work through a process in our heads. It's under conscious control and requires - surprise, surprise - a great deal of mental effort. You’ll find that when you are absolutely shattered - properly tired - you will engage in a lot less System Two style thinking - simply because we have less mental capacity and physical effort available to us. System Two thinking is also very much a victim of that limited capacity we mentioned in the last episode. In other words, and here’s the crucial point - we can't do very much with System Two.
So, given that System Two thinking is hard work and uses up mental effort, unfortunately there is a strong automatic bias for System Two to just accept whatever System One does, even when it's inappropriate. Think of a time when you’ve gone with your gut, or you’ve said something like “Ah, just go with that!” but at some point in the future you regret not thinking longer and harder about the choice you made. The fact of the matter is that System Two does not jump in no where near as much as it should, meaning it allows far too many incorrect assumptions and ill-informed decisions to slip through the net.
In order for us to be in with a good chance of arriving at the right decision every single time, we would need to rely heavily on slower, deeper, System Two thinking, and as you now know, this is just not how the brain is wired to work. System Two thinking takes time, and in many situations, we need to make decisions much quicker - sometimes in milliseconds. Relying on an energy-sapping slow process just wouldn’t serve us well - especially from an evolutionary perspective. Imagine 3 million years ago when faced with a killer animal if we used System Two to decide if we should run or not. I suspect our species would have died out a long time ago if that was how we naturally think.
But apart from System One being quick and intuitive, our brains have also evolved various other shortcut mechanisms to help us speed up the decision making process, especially when the problems we are facing are complex, when we have incomplete information, or when there is a risk involved.
In these situations, we examine the information available to us, focus on the pieces of information that we believe are the most critical and then we make a decision based on a rule-of-thumb, or a shortcut that just gets the job done. And this rule-of-thumb process is what psychologists call a heuristic.
In the next installment in this series, we’ll explore what a heuristic is, we’ll look at three examples and how they impact your decisions, and we’ll look at how they can lead to behavioural biases.