Book Recommendation - Thinking,Fast and Slow

As leaders, there are two key things we do every day - make judgment calls about the work we do and the people we interact with. Needless to say, both of these are extremely important jobs and have a profound impact on the business, careers, and lives of people.

Both of these tasks inherently depend on our intuition and cognitive ability. Yet, as human beings, we all are subject to many biases that influence the way we go about making these decisions and judgments.

Here is a description of two people. What do you think of Alan and Ben?

Alan: Intelligent-Industrious-Impulsive-Critical-Stubborn-Envious

Ben: Envious-Stubborn-Critical-Impulsive-Industrious-Intelligent

A lot of us probably view Alan much more favorably than Ben. The initial traits in the list change the very meaning of the traits that appear later. This is a great example of the cognitive biases we all are subject to.

"Thinking, Fast and Slow" by Daniel Kahneman discusses many such types of cognitive illusions and intuition biases we face as humans. Professor Kahneman who is a psychologist, won a Nobel Prize for his work on this subject. While this book discusses these in the context of Economics, what is interesting, is that all this work applies equally well to business leaders, as it helps us to recognize and understand our own biases and cognitive illusions. 

The book explains the fact that there are two ways to think about anything - Fast and Slow, based on the existence in our brains of two independent systems for organizing knowledge, logically referred to as System One and System Two. System One operates automatically and quickly, with little or no effort and no sense of voluntary control. System Two is slow, deliberate, analytical, and allocates attention to the effortful mental activities that demand it, through conscious thinking and critical examination of evidence. System 2 also has another job - it checks on the actions of System One and is mobilized when it detects an error is about to be made, and it gives us a chance to correct the mistakes and revise our opinions.

System One is much more vulnerable to errors, biases and illusions than System Two.  Here are some examples of biases discussed in the book:

• "Availability Bias” which is the process of judging frequency by the ease with which instances come to mind.  An example that is quoted in the book to illustrate this is: “Because of the coincidences of two planes crashing last month, she now prefers to take the train. That’s silly. The risk hasn’t really changed; it is an availability bias”.

• “Representativeness heuristic”. Here are some examples that illustrate this bias - “he won’t go far as an academic, he has too many tattoos”, or “The lawn is well trimmed, the receptionist looks competent, and the furniture is attractive, it must be a well managed company”.

• Jumping to conclusions based on limited evidence is an attribute of system one’s intuitive thinking. The book refers to this by the abbreviation WYSIATI, which stands for What You See Is All There Is. An example that is quoted in the book to illustrate this is: “They made that big decision on the basis of a good report from one consultant. WYSIATI. They did not seem to realize how little information they had.”

•  "Planning fallacy", which is our tendency to overestimate benefits and underestimate costs, and hence miscalculate the risk of certain projects or decisions.

All of these have far reaching consequences in our daily lives. Why do we need a System One if it is so vulnerable to biases? Why not just rely on System Two for every decision?

The reason is that activating System Two requires mental effort, which takes time and energy. Constantly questioning our own decisions can be tedious and System Two is too slow and inefficient for making routine decisions in place of System One. By contrast, System One is fast and is generally very good at what it does and works in most cases. The key is not to abandon System One, but understand and recognize the existence of these systems and the biases they come with and use each system as appropriate. We want rationality, but not paralysis, and as anything else in leadership, it is a matter of balance.

This book is an intense and intellectual but a fascinating read, as a large part of the book is based on stories and real experiments conducted over many years. It certainly is a classic on the topic and in my opinion, ranks as one of the must reads.

Happy Thinking…..Fast and Slow!