Daniel Kahneman's two systems of thinking

Revision as of 15:38, 17 February 2021

In the book "Thinking, fast and slow", writen by the nobel price winner in econonics and professor in psychology Daniel Kahneman, two different methods of thinking is presented, called system 1 and 2.

System 1 rely on knowledge and rutine, and is engaged when a subject is dealing with a task that requires little to no effort, e.g. simple mathematical calculations or rutine work ^[1]. System 2 is engaged when dealing with tasks in which attention is required and necessary for completing the task, e.g. searching for at specific person in a crowd or parallel parking a car ^[2]. Both of the systems run simultaneously whenever we are awake, normally system 2 is in a low effort mode, where system 1 "continuously reports impressions, intuitions, intensions and feelings"^[3]. These impressions and intuitions can be turned into beliefs and voluntary actions by system 2. In decision making under uncertainty, a cognative bias can thus interfere with the decision making process and have a impact on the thinking of system 2. It is therefore a general misunderstanding that humans think logically, which is why the two systems are relevant in project management.

This article will focus on the correlation between the two systems of thinking and forecasting ^[4] in project management. More precisely the article will investigate the two systems internal interaction when affected by the anchoring effect and its influence on the optimistic bias when predicting cost, duration and benefits of projects.

Bias and the two systems in project management

The anchoring effect

Earlier research done by Kahneman together with Amos Tversky showed, that when people were presented with a number about a subject before asked to take a stand on the same subject, the number presented would have great impact on the final decision ^[5]. This is what is called the anchoring effect. Even though there is no correlation between the anchor presented to people and their answer about a different subject, they would still interfere. This is one of the things that makes system 2 susceptible to biasing influences, and therefore a vital weakness in projects and decisions in general. As cited earlier, system 2 is continuously influenced with impressions, intuitions etc. witch means that people, reluctantly, take decisions without having a logic argumentation.

There are several parts of projects where the anchoring effect is important to consider, e.g: project cost management ^[6]. Consider the following situation, a project manager is continuously working on two projects which is far from each other in cost. When shifting between the two projets, the former project is going to make a anchor in the projects managers mind. E.g. In the large project the project manager have to order 1000 windows for a construction project, and because of the large quantity, the project manager can get a considerable discount, but still would have to accept a high total price . When the project manager then soon after starts working on the other smaller project, this price would have left an anchor. Which means that the project manager, both would make higher estimates of total cost, but also lower estimation cost per window/unit because the lacking of quantity discount.

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Planning fallacy

Another commen bias seen in project management, among others, is the planning falacy. The planning fallacy basically means that peoble inwolved in projects genereally overestimate

Sunk cost

Sample size bias

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References

1. ↑ Kahneman, D. (2012) Thinking, fast and slow . London: Penguin.
2. ↑ Kahneman, D. (2012) Thinking, fast and slow . London: Penguin.
3. ↑ Kahneman, D. (2012) Thinking, fast and slow . London: Penguin. side 24
4. ↑ Project Management Institute, Inc.. (2017). Guide to the Project Management Body of Knowledge (PMBOK® Guide) (6th Edition). Project Management Institute, Inc. (PMI).
5. ↑ kilde om anker
6. ↑ PIM standard cost