Kahneman - Two Thinking Systems

Latest revision as of 18:05, 28 February 2021

Every day we make decisions from the simple ones as to put on pants or not, to take more complex decisions where large consequences are at stake, such as to choose the right material within a budget to build a bridge where road users are able to cross a river safely. The two types of decisions have different duration of time for consideration. The first decision is automated, whereas the second decision requires more time to investigate the alternatives in order to make the most satisfactorily choice regarding the safety of the road users.

Many years of research performed by Noble Prize winner of economics, Daniel Kahneman and Amos Tversky (died in 1996) is distilled into a book titled; “Thinking, Fast & Slow”^[1], which was published by Kahneman in 2011. Kahneman’s thesis has revolutionized the understanding of the human behavior and highlights our cognitive biases and thereby shows the brilliance and the limitations of the human mind. Kahneman discovered the two operating systems of our brain; System 1, which represents fast thinking and System 2, which represents slow thinking. Kahneman's realization of this dichotomy shows that the two systems of thinking will arrive at different end-results with identical input of data.

Decision-making is crucial in project, programming, and portfolio management, which makes Kahneman’s revolutionary discovery essential to the understanding of how we act as humans. This article will focus on the Two-Thinking system in relation to project management ^[2], how it effects the engine of human thinking and how we can learn to actively use the two systems most effectively when managing projects.

[edit] Why the Two-Thinking System is Relevant for a Project Manager

Project management as a job can be described as the way a person organizes and manage the resources, that are necessary to complete a specific project ^[2]. Every project has criteria within agreed parameters that must be achieved. In order to succeed with this, a project manager must handle processes, methods, skills, knowledge, and have the correct experience to achieve those parameters on an acceptable level ^[3]. In other words, a project manager is not only responsible for planning and overseeing the whole project, but also interacting with both personnel and stakeholders.

The role of a project manager requires a certain skillset such as a high level of communication, the ability to share a clear vision and to motivate the colleagues to perform at their best ^[4]. The project manager has responsibility for the whole “project life cycle” ^[5]. The role of a project manager also requires the skills to be able to solve problems, building a team, to delegate, to make decisions, and to show integrity ^[2]. In other words, it requires the skill of shaping the required behavior of the people involved in the project, in order to accomplish your task in the best possible way. How do they work?, how do they think?, how do they commit to the project? We will look at these questions and try to come up with some answers. Furthermore, we will look at the changing and shaping of the certain behavior amongst co-workers through focusing on Kahneman’s theory about fast and slow thinking. This theory is built on the two systems; System 1 and System 2.

[edit] System 1

System 1 is the automated system which we as human has no control over. System 1 relates to our feelings and our memory and is based on first impressions and intuition. As Kahneman states in his work “System 1 operates automatically and quickly, with little or no effort, and with no sense of voluntary control” ^[1]. It is possible to show some examples of the characteristics of System 1, see below:

• Orient on the source of an unexpected sound
• Answer simple mathematical questions as 1+2 = ?
• Read words on large billboards
• Depth between two objects (which object is closer than the other)
• Understand simple sentences
• Connect specified characteristics with stereotypes (curly long hair, tanned, seashell necklaces, loving the sea equals to a “surfer dude”) ^[1]

System 1 is the system humans use almost all the time. When System 1 meets difficulty, it calls on System 2 to support with more details to solve the current problem. As humans we tend to believe that we are rational human beings and always in control. We tend to believe that we have reasons for our course of action which refers to System 2, but it has been proven that we are not in control. This might be hard to believe, but System 1 is generally very good at what it does. Its short-term predictions are normally accurate, it can model familiar situation and its initial reaction to challenges is generally quick and suitable. One of the disadvantages of System 1, is that due to its fast decision-makings, it is prone to errors and is easily biased.

[edit] System 2

Figure 1: An overview of the significant differences between System 1 and System 2 made with Microsoft Powerpoint Icons by Julie Finne-Ipsen

System 2 is deliberate and controlling which makes it possible for us to solve complicated computations. It can be very effective if we slow things down and focus. It makes it possible for us to control/restrain our actions and can make us blind or deaf to the surroundings that are not implicated in the task that it is used on. This is tested in “The Invisible Gorilla” study by Christopher Charbis and Daniel Simons ^[6]. System 2 has the advantage that it can register things that System 1 does not see and that it is logical, thus less error prone. The various operations of System 2 have one thing in common – they require your full attention, and the operations are disrupted when attention is drawn to something else. Below are some examples of System 2 activities.

• Calculate a more complicated mathematical expression (27 x 43 = ?)
• Spot a woman with white hair in a crowd
• Focus on a certain voice in a noisy room
• Compare two similar products to determine the overall value
• Monitor your appropriateness in a social gathering
• Check the validity of complex logical argument
• Control outburst when needed in social circumstances ^[1]

So why don’t we use the more logical System 2 all the time? The main reason is ego depletion. The heavy work of using System 2 causes ego depletion which means that our self-control and willpower draws upon a limited pool of mental resources ^[7]. System 2 uses so much more energy and therefore its mentally tiring for our mind and physically exhaust our bodies to cope with logical thinking all the time. Therefore, System 2 is working on low effort, especially compared to the highly active System 1. System 2 has the advantage that by operating at a minimum effort, it can still be used to optimize performance. As an example, you are able to control your feelings when it is necessary. It can be in a situation where your boss is being rude, but you decide to control yourself and put up a facade in order not to scream at her/him and tell her/him to shut up. System 1 & 2 are complementary systems that works together to produce an effective and efficient decision in any situation we find ourselves in. System 2 is considered to be lazy, but a reason for this slow processing is the sheer availability of continuous information from System 1. The quick intuitive respond to changing circumstances performed by System 1 is far greater than the effort it requires to leverage and engage the logic of System 2. Hence, whenever System 2 is engaged in a decision, it often has the last word in the decision. The main differences between System 1 and System 2 are illustrated in Figure 1.

[edit] Impact of the Two-Thinking System regarding project management

The theory about System 1 & 2 enlightens how choices are made in business and in our personal life. In theory, there are some mental aspects which can be related to project management. Kahneman describes bias, effects, fallacies, illusions, and neglects as a part of our mind which can have a considerably impact on us and our decisions. These factors will be discussed in context with a view to project management.

[edit] Bias

A cognitive bias is a systematic pattern that diverges from rational judgement and norms ^[1]. Kahneman discusses three types of bias; confirmation, hindsight and outcome biases.

The confirmation bias ^{[1] [8]} has wide influence on project management decisions and is a result of selective thinking. It is described as when we have a belief and only seek out information that confirms our belief instead of focusing on things that can challenge it. In brief, System 1 notices and more easily remembers information that supports our idea, while System 2 is being motivated to analyze new information that supports the existing belief. In project management, this will often occur since people tend to find data (statistic, literature, processes etc.) to support their specific idea and thereby ignore all other data.

How can we prevent selective thinking in project management? It is difficult to eliminate a confirmation bias, but it needs to be adressed with critical thinking. A method to handle this can be to challenge the data identified by seeking any disagreement. A tool to do so is The Six Thinking Hats^[9], which is a technique that forces your team to consider a situation from multiple perspectives. Moreover, by using this type of tool we can perform extensive research and ensure that we ask the right questions. Thereby, it can be possible to remove the ego and the selective thinking, and finally end up with a non-biased decision.

[edit] Effects

Kahneman identified twelve effects originated from cognitive bias’ some of them are named; The Anchoring Effect, The Halo Effect, The Endowment Effect, The Priming Effect, The Possibility Effect and more. As a relevant example within project management we have The Anchoring Effect ^{[1] [10]}. The anchoring effect is a phenomenon where the project manager often uses System 2 to rationally analyze the input before making a choice or determine a value. However, it often ends up with the project manager lingers to the first perception. The result of this behavior is that often other relevant perspectives/factors are neglected or ignored. This is an issue when performing as a project manager, because one of the important features of the job is to analyze constrains and have an overview of all aspects of the project. The Anchoring Effect is difficult to avoid and it reduces the value of project management techniques and tools, because the result is already based on the first perception. Anchoring occurs due to either the deliberate adjustment in System 2, which basically means that our System 2 is too lazy to reevaluate. It may also occur by priming in System 1, where we, based on an initial impression, tend to stick to a certain reference point and thereby influence subsequent decisions.

A method to prevent anchoring in project management is by using “the devil’s advocate”, which directly challenges the first perception. The devil’s advocate is a person who is chosen to present arguments against a proposed idea. In industries where agile planning is often used, a method called poker planning ^[11] is used to prevent anchoring because it forces you to argue with your colleagues ^[12].

Another example of a cognitive biased effect is The Halo Effect^{[1] [13]}. This phenomenon appears when we see a person that is performing well during task A, which subsequently leads to automatically assume, that the same person will also excel performing at task B. If someone has a certain characteristic look or competence, it often tends to affect our overall assessment of that person. The Halo Effect has a major impact on the organization which means it also affects the project manager. The Halo Effect has some drawbacks which need to be enlightened. Firstly, it can create favoritism within the project team, which eventually can lead to conflicts. If the project manager is biased by The Halo Effect, it can also affect the changeability within the project. If you tend to “like” colleague A, then you are more likely to present him/her to more tasks which he/she may not be the best qualified employee to take on. This reduces the changeability in the project and can reduce the level of the final outcome of the project. If you are affected by the halo effect, you risk that your decisions are based on the wrong parameters.

A method to take the personal judgement out of the assessment of an individual is to try a more objectively approach. This can be done either by status reports and statistics or by anonymizing the assessment of each individual and try not to compare the co-workers ^[12].

[edit] Fallacies

A fallacy is the use of a faulty reasoning when constructing an argument ^[14]. Fallacies often happen when substituting an easy question with a hard question. As mentioned before, the easy question will quickly be solved by System 1. The hard question is more requiring and thereby System 2 is needed to come up with a more satisfying solution to the mind. A fallacy happens when System 2 applies faulty rules or is not alerted well enough ^[14]. In the Two-Thinking System theory we are introduced to four fallacies: The Planning Fallacy, The Narrative Fallacy, The Conjunction Fallacy and The Sunk-Cost Fallacy.

The Planning Fallacy ^{[1] [15]} is truly a familiar phenomenon in project management. This faulty reasoning is when people underestimate the costs, risks of planned actions and completion time, and at the same time overestimate the benefits of the same actions. A counter action is to actually accept planning fallacy and thereby take the necessary time to consider it as a factor. A method to prevent or reduce fallacies is to use more of the known management tools, to challenge the data and evaluate the mistakes that are being made. The planning fallacy can be reduced having constant follow ups on the project ^[12], but this is often considered relatively time consuming.

Another familiar fallacy within project management is The Sunk-Cost Fallacy^[1]. Many project manager have relent to this type of fallacy, where you stick with a team member or a project based on already invested money and time, even though there is no sign of the project to turn around. It is important as a project manager to be aware of this phenomenon in order to make sure that emotions do not affect rational decision-making. A way to prevent this type of fallacy is by continously follow up on your project and keep track of your investments. It is easier to be objective if you have a clear overview over your specific project. Furthermore, it is also important to try and let go of your personal attachement and accept that sometimes it is okay to be wrong and make mistakes.

[edit] Illusions

Often, we associate illusion with visual illusions which tricks the mind. But our visual senses are not the only place where illusions can occur. Our memory can also be susceptible to illusions ^[1] and thereby it is often associated with a thinking trap or an error thought. The sensation of illusion often arises by sympathy which relates to our System 1. System 2 needs to learn rules to mistrust what we see, feel, and think in certain situations. It is difficult to prevent cognitive illusions because our System 1 is turned on all the time. Kahneman presents six types of illusions: The Focusing Illusion, The Control Illusion, The Mosses Illusion, The Validity Illusion, The Skill Illusion and The Truth Illusion.

The Control Illusion ^{[1] [16]} is essentially a paradox regarding project management. As a project manager you need to control and structure the processes to successfully complete the project. But the control illusion is the illusion that we can control everything. In reality as a project manager, we plan a lot in advance during a project, but the truth is that it is not in reality possible to fully control our project. There are changes and uncertainties during a project period, which means that we as project managers must be prepared to change and adapt ^[17]. Many management tools, as the Risk Matrix^[18], Risk Wheel ^[19] and many more, can help us prepare for risk and changes, but as a project manager it will be wise to expect the unexpected and accept that total control is out of your hands.

[edit] Neglects

In Kahneman's two thinking system theory another mental factor is presented; neglection. A neglection is when you either disregard, ignore or pay little attention to something that may be of value. Kahneman presents to types of neglection: The Denominator Neglection and The Duration Neglection.

Denominator neglects ^{[1] [20]} will be explained with an example. Imagine, that two of your employees each present an idea for a new feature on a new product. In order to ensure that the new feature is suitable for the customers you have your employees to execute a survey to investigate 2000 customers regarding this new feature. After the survey, employee A presents the result that 100 customers do not like the new feature that employee A suggested. Employee B present the result of the survey and highlights that 7% does not like the new feature employee B suggested. If you are good at caculating fractions to absolute number, it would fast be clear that option A is the better choice. However, people tend to choose suggestion B because the number (7%) is significantly low using another conversion factor from the result of the survey than employee A presented. Hence, in total 40 more people disliked option B. This results in the denominator neglects because our mind neglected the rational facts.

In order to prevent this, it is necessary to ensure that the statistics are presented in the same way, due to the fact that the human mind tends to weight absolute numbers compared to fractions. The project manager must be aware of this tendency and therefore ensure to work out the mathematics, if necessary.

[edit] Conclusion

Kahneman’s dual-system theory is well acknowledged in both the academic as well as in the non-academic world. The theory is described in an accessible manner and with several examples and tests, which makes it possible to relate to and understand. The fictive characters, System 1 and 2, makes the behavioral economics approachable for everyone.

In this article it was explored how various biases, effects, fallacies, illusions and neglects can affect a project and the job as project manager. In general, it would be easy to state that every project manager and his/hers crew just need more time in order to take better decisions and thereby use their logical System 2 more. However, there is a tendency for organizations to not providing the time and resources needed to their project managers to secure decisions from heuristics and biases. This can have a negative effect on the end result of the given project. For multiple companies, it is not realistic to provide more time to their employees even though it would improve the decision-making process. This would end up with a lot of automated processes, in order to make the decisions quicker and prevent the ego from interfering. The integration of automated processes is done with a good intention but it inhibits criticism and innovation, it reduces self-engagement and thereby it reducesses the motivation (Marslow Hierachy).

For a project manager it is crucial to balance between fast and slow thinking. The project has a deadline and a goal, and you wish to reach the goal and meet the deadline in the best possible way. A possible way to affect the employees' behaviors is by actively use the knowledge about System 1 and System 2. One way to do this is by setting up real tangible goals and demands for the employees, which can have a positive influence on the employees because it can be processed and executed by System 1.

A lot of the managing tools can challenge the perception on how we make our decision. They help us putting our emotions aside and sets up guidelines to work within a frame when making decisions. Hence, all tools have benefits and accordingly drawbacks which limits the decision-making. In the future, organizations may have to realize and learn how to adjust their working procedures in project management directly to using System 1 and 2, effectively. Adjusting the working process to the Two-Thinking System can be the game changer when it comes to exceeding the competition and taking the project management to a new level.

[edit] Annotated Bibliography

1. The key reference in this article is the book "Thinking, Fast and Slow" by Daniel Kahneman. This book is essential to understand the Two-Thinking System and challenge yourself and your own beliefs. It has many tasks and example and is educational regarding economic behavior. Thinking, Fast & Slow by Daniel Kahneman 2011. Retrieved from https://ereolenglobal.overdrive.com/media/590824
2. This book is definitely worth your time if you want to learn more about behavioral tendencies inside organizations. It present classic office situations in a humorous and tangible way, and thereby connect System 1 and System 2 to every day scenarios. I'm Afraid Debbie From Marketing Has Left for the Day: How to use behavioral design to create change in the real world, authored by Morten Münster 2017
3. This article by Klaus Nielsen showcase Kahnemann's fast and slow thinking in regards to project management and is considered valueable if you want to learn more about the influence of all the biases, effects, fallacies, illusions and neglects. He associates these factors with different types of management in overviews which shows a clear connection. Project management - fast and slow by Klaus Nielsen, 2016. Retrieved at https://www.projectmanagement.com/articles/324993/Project-Management---Fast-and-Slow
4. If you want to know more about the Two-Thinking System and risk managemenet then the following article will be of interest. How the integration of System 1-System 2 thinking and recent risk perspectives can improve risk assessment and management by Terje Aven, 2018. Retrieved at https://www.sciencedirect.com/science/article/pii/S0951832017302508

[edit] References

1. ↑ ^{1.00 1.01 1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09 1.10 1.11 1.12} Thinking, Fast & Slow by Daniel Kahneman 2011. Retrieved from https://ereolenglobal.overdrive.com/media/590824
2. ↑ ^{2.0 2.1 2.2} Project Management Institute, Inc. (2017). Guide to the Project Management Body of Knowledge (PMBOK® Guide) (6th Edition). Project Management Institute, Inc. (PMI). Retrieved at https://app.knovel.com/hotlink/toc/id:kpGPMBKP02/guide-project-management/guide-project-management
3. ↑ What is project management? The APM Body of Knowledge 7th edition, 2020. Retrieved at https://www.apm.org.uk/resources/what-is-project-management/
4. ↑ 10 Great Leadership Skills of Project Management by Felix Marsh, 2018. https://aboutleaders.com/10-great-leadership-skills-of-project-management/#gs.t2fjpg
5. ↑ WHAT DOES A PROJECT MANAGER DO? | ROLES AND RESPONSIBILITIES by Kelsey Miller, 2019. Retrieved at https://www.northeastern.edu/graduate/blog/project-manager-responsibilities/
6. ↑ The Invisible Gorilla: How Our Intuitions Deceive Us by Christopher Charbis and Daniel Simons in 2007
7. ↑ I'm Afraid Debbie From Marketing Has Left for the Day: How to use behavioral design to create change in the real world, authored by Morten Münster 2017
8. ↑ SYSTEM 1 AND SYSTEM 2 THINKING by Crawford Hollingworth and Lis Barker. Retrieved at https://www.marketingsociety.com/think-piece/system-1-and-system-2-thinking
9. ↑ Six Thinking hats - run better meetings make faster decisions by Edward de Bono, 2016
10. ↑ A literature review of the anchoring effect by Adrian Furnham and Hua Chu Boo, 2011. Retrieved at https://www.sciencedirect.com/science/article/pii/S1053535710001411
11. ↑ Scrum Institute, Retrieved at "Scrum Effort Estimations – Planning Poker", 2018.
12. ↑ ^{12.0 12.1 12.2} Project management - fast and slow by Klaus Nielsen, 2016. Retrieved at https://www.projectmanagement.com/articles/324993/Project-Management---Fast-and-Slow
13. ↑ Why do positive impressions produced in one area positively influence our opinions in another area? by Decision Lab. Retrieved at https://thedecisionlab.com/biases/halo-effect/
14. ↑ ^{14.0 14.1} [Think Twice: Fallacies And Dual-Process Accounts Of Reasoning by Jan Henning Schulze. Reviewed at https://www.uni-bamberg.de/fileadmin/uni/fakultaeten/split_lehrstuehle/deutsche_sprachwissenschaft/PDF/Schulze/ISSA_Proceedings_2014_Schulze.pdf]
15. ↑ Chapter One - The Planning Fallacy: Cognitive, Motivational, and Social Origins by Roger Buehler, Dale Griffin† and Johanna Peetz, 2010. Retrieved at https://www.sciencedirect.com/science/article/pii/S0065260110430014
16. ↑ Keeping the illusion of control under control: Ceilings, floors, and imperfect calibration by Francesca Gino, Zachariah Sharek and Don A. Moore, 2011. Retrieved at https://www.sciencedirect.com/science/article/pii/S0749597810000853
17. ↑ How the integration of System 1-System 2 thinking and recent risk perspectives can improve risk assessment and management by Terje Aven, 2018. Retrieved at https://www.sciencedirect.com/science/article/pii/S0951832017302508
18. ↑ Basics of Hazard, Risk Ranking, and Safety Systems by Swapan Basu, 2017. Retrieved at https://www.sciencedirect.com/topics/engineering/risk-matrix
19. ↑ Five steps of the risk wheel figure by Evangelia Krassadaki. Retrieved at https://www.researchgate.net/figure/The-five-steps-of-the-Risk-Wheel-tool_fig10_305726417
20. ↑ Individual Differences in Base Rate Neglect: A Fuzzy Processing Preference Index by Christopher R. Wolfe and Christopher R. Fisher, 2013. Retrieved at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3736597/