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Lessons from Thinking, Fast & Slow – System 1 and System 2

Much of conventional market research assumes that decision-making is done only by System 2 (rational) and that too with little input from System 1 (emotional). Kahneman shows that that is not the case (as demonstrated by a variety of experiments in behavioral economics) and researchers would be well advised to take note and think about how to account for the influence of System 1 in consumer decision-making.

Illustration by David Plunkert, via The New York Times

 

By Rajan Sambandam

The Nobel Prize winner and the intellectual godfather of behavioral economics, Daniel Kahneman, has summarized a lifetime of research in his recent book Thinking, Fast & Slow. In the next few blog posts I will be drawing upon some concepts that he espouses and link them up to research to see what practitioners can take away from his four decades of work.

This post goes directly to the title of the work; fast and slow thinking. This is the foundation of his work. He and his great collaborator Amos Tversky, (who passed away and therefore could not receive the Nobel) see human thinking in two forms that they call System 1 and System 2. More aptly they could be called “automatic” and “effortful” systems, but Fast and Slow is a good shorthand description. According to Kahneman’s description,

System 1 operates automatically and quickly, with little or no effort and no sense of voluntary control

System 2 allocates attention to the effortful mental activities that demand it, including complex computations”

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So system 1 is fast, intuitive and emotional, while System 2 is slower, more deliberative and logical. An example of System 1 thinking is detecting that one object is more distant than another, while an example of System 2 thinking is parking in a narrow space. Using the two system view as the foundation, Kahneman discusses human judgment and decision-making with all of its biases and heuristics. Along the way we get all kinds of interesting nuggets about how we behave and should behave. In this post let’s stay with the basic ideas of Systems 1 and 2.

Kahneman’s fundamental proposition is that we identify with System 2, “the conscious, reasoning self that has beliefs, makes choices and decides what to think about and what to do”. But the one that is really in charge is System1 as it “effortlessly originates impressions and feelings that are the main sources of the explicit beliefs and deliberate choices of System 2”. Most of the time System 1 runs automatically and System 2 is in a comfortable low-effort mode in the background. When the two agree, impressions get turned into beliefs. When System 1 runs into trouble, it asks for processing help from System 2. This is a very good system that works very well most of the time. But System 1 has systematic errors and much of Kahneman’s research is focused on identifying these. As he himself readily admits, identifying them is one thing but avoiding them is entirely another. Here are a couple of problem areas.

System 2 is a lazy controller and doesn’t like to expend much effort. One of its main functions is to monitor and control thoughts and actions suggested by System 1. But the fact that it often doesn’t do that was cleverly shown by Kahneman and our friend Shane Frederick (who is now at Yale). And it has implications for market research. If people are asked questions, especially ones that require thinking, but their System 2 is not being engaged are we getting useful information or surface impressions? For example, if we want respondents to generate ideas for us, we need to get System 2 into the action. If it doesn’t because it is lazy, then we get a bunch of superfluous answers with little depth. However, if we can use some other external mechanism to activate System 2 then we are in the game. Smart Incentives is an effective idea generation and gamification approach we have used at TRC for this purpose.

Another one that I particularly like is the issue of answering the wrong question. Kahneman says that people are remarkably adept at coming up with answers to all kinds of questions without knowing how or why (surveys researchers beware!). His explanation for a lot of this is the idea of substitution. That is, people answer an easier but wrong question rather than the difficult one they were asked. So when asked whether they approve of the President’s performance, they simply answer it by assuming that the question is really whether they like the President. They may not even know that they have done that. This obviously has implications for market research where respondents are asked all kinds of questions, some of which are quite difficult. If they are simply answering an alternate easier question then it is no wonder that the data don’t make sense!

Much of conventional market research assumes that decision-making is done only by System 2 and that too with little input from System 1. Kahneman shows that that is not the case (as demonstrated by a variety of experiments in behavioral economics) and researchers would be well advised to take note and think about how to account for the influence of System 1 in consumer decision-making.

In the next post, we’ll take a look at other interesting ideas from the book.

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2 Responses to “Lessons from Thinking, Fast & Slow – System 1 and System 2”

  1. stefanie says:

    May 19th, 2013 at 2:32 pm

    very interesting article

  2. #digitalswot 2014 delivers « Republic of Digital says:

    February 7th, 2014 at 1:58 pm

    […] is behind unconscious customer decision making. To demonstrate what he meant we were introduced to System 1 and System 2 thinking. So to really get behind the metrics here are some tips from James – and here is where we had […]

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