Kahneman's two thinking systems

Summary

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As all decision-making emerges from the uncertainty, so does project management decisions. When trying to describing on the dynamics when assessing risk and reward, the lack of understanding the underlying rationale comes to mind. Daniel Kahneman, an Israelian-American Nobel prize winning psychologist, tries to elaborate the existing literature on uncertainties in decision-making, by introducing a new scope.

This new scope takes its starting point in two systems used when evaluating a decision, system 1 and system 2.

System 1 or the fast thinking system is defined by quick responses, automation and irrational thinking.

System 2 or the slow thinking system is defined by thought through repsones and rational thinking.

Kahneman describes the two systems as interdependent. System 2 is a slave to system 1 due to the cognitive biases our everyday experiences and impressions have imprinted in the unconscious.

When applying Kahneman's two system for project management it can be used to accommodate and explain uncertainty in decision-making. This could yield a better foundation to understand systematic errors and reveal flaws in a project. The development of the two systems also acknowledge the challenge of altering these systematic errors, as the system 2 mainly is used for decision-making in which system 1 can't handle the choice.

Kahneman also argues that system 2 is brought to work when some decision is out of scope for system 1. This is supported by the estimation that system 1 is used for approx. 98 % of our decisions and system 2 is only used for approx. 2 %[1]. This uneven balance implies that by this logic, humans are irrational by nature and that system 1 is used for not important decisions.

Kahneman's theory also have some limitations as the two thinking system to some extend is unsupported or at least not well documented. This was made clear as the errors in Kahneman's early work of the theory, with small samplesize and “watching-eyes effect” should be taking into consideration when using the systems for decision-making [2].

- Big idea
      - Introduction to the Kahneman 
      - Description of the two systems
      - Investigation of the working process and the development of the theory
      - Cognitive biases
      - Strategic misrepresentation / systemic errors?
      - How have the theory changed the way we look at project mangement uncertainty

- Application - use example from book in general.  
      - When is the theory applicable in the real world?
      - Relation to project, programme and/or portfolio management 
      - Exemplification in the three types of management 
 

- Limitations

      - Some opposing views of uncertainty and how to explain it
      - Shortcuts and limitations in the theory 

Introduction and relevance

When managing projects, programs or portfolios, uncertainty affects almost all decision-making whether it is directly or unconscious. Being able to foresight or understand the different uncertainties in decisions-making is an undervalued ability, as a better understanding of uncertainty enables the management to identify some underlying rationals behind decisions of the people involved in the projects. For all projects the risks and uncertainty needs to be evaluated, sometimes with risk anticipating tools and other times with the understanding of the pitfalls and challenges in the decision-making phase as a foundation for further handling or engagement of the team.

Daniel Kahneman is an Israelian-American Nobel prize winning psychologist and have investigated decision-making by humans. From his studies a book and the theory of same name, "Thinking, fast and slow", has emerged. To investigate the understanding of uncertainty an analysis of how the uncertainty affects the is decision-making is conducted with Daniel Kahneman's two thinking systems.

Big idea

Kahneman describes the decision-making in the human brain by two systems, the fast thinking system and the slow thinking system. These two also goes by the names system 1 and system 2 respectively. The two systems stands for their separate way of analyzing and evaluating all possible choices. These choices can vary greatly in complexity, from taking another step, to solving hardly advanced equations by hand. The complexity in the decision-making is essential for the understanding of the two systems. As we as humans unconsciously on averages have 35.000 decisions to make everyday[3], it sounds reasonable that we aren't able to make informed and rational decisions in every task, this would would be to high of a workload for our brain. System 1 is used for all fast decisions and impressions based on earlier experiences and the biases accumulated in our mind. Furthermore system 1 is effortless and happens by automation when the impression, decision or uncertainty is introduced. System 2 is contrarily used for the greater uncertainties when system 1 isn't able to take a fast decisions due to few to none experiences or specific challenges with demanding effort needed.

The interdependencies between the systems is also crucial for the understanding of Kahneman's theory. System 1 accounts for approx. 98 % of our daily decisions and system 2 only accounts for approx. 2 %, this uneven balance reflects the challenge of rational decision-making.

The two systems has a number of characteristics which can be found in the table

Application: - HabitsLink title - shortcut decisions - Heavy for the brain in system 2

Limitations: - simplification. - reflections in the subconscious. -

Annotated bibliography