Rational or intuitive decision making?

It is human to search for certainty and predictability, however history has shown many times that we humans are poor instruments for doing so, mainly because we aren’t nearly as objective as we think we are. System 1 and system 2 thinking

In the book Thinking fast and slow (2011) Daniel Kahneman describes how humans make use of two distinctly different cognitive systems when we draw conclusions and make decisions. System 1 is the automated system where intuition and different heuristic methods are active and system 2 which is where the more effortful and rational thinking takes place. Using system 2 demands use of energy and will, system 1 operates quickly and draws conclusions rapidly.

I don’t read the book Thinking fast and slow as being bias to either cognitive system, but it still seems to have been given fast thinking (system 1) a little bit of a bad reputation. The conception of intuition and experience based decision making as second best to rational thinking has lead to the degradation of automation and intuition as tools in management and decision making. Intuition and heuristics

To balance out the bad reputation of system 1 thinking, I would like to introduce you to some thoughts I have picked up from the German psychologist, Gerd Gigerenzer. He talks about how intuition and heuristics (e.g. our automated decision making systems) works and why they absolutely deserve to be included as relevant tools for managing risk and uncertainty. Intuition guides our actions more than we may like to admit, but what is it? Intuition can very quickly be described as a judgement or decision that is made quickly and the underlying processes are not in awareness. Intuition is intrinsic knowledge that we develop based on our learning and experiences through life. Reading, writing, catching a ball and choosing a line are actions we execute based on intuition.

Intuition and heuristic methods to solve problems

Heuristics on the other hand, can be described as problem solving techniques used when there is a need for a quick decision, but not necessarily a need for precision or optimal results. Heuristics are really strategies, such as rules of thumb, that we derive from previous experiences with similar problems. They can lighten the cognitive load of decision making and speed up the process of finding a satifying, however not perfect, solution to a problem or challenge. Kahneman describes how different people have different system 1 capabilities. For some people use of system 1 actually often gives great and precice results. For these people the system 2 can be allowed to function in the background as a verification system, hence requiring far less energy and will. One could argue that people with good system 1 capabilities are better at making right decisions quickly, but wether it is because they are more naturally rational or have better developed intuition is hard to say.

Better decison making My purpose with this short article is really to highlight that rationality is essential, but not all answers can be calculated and not all problems can be solved by hard thinking only. We need both rationality, intuition and heuristics to navigate risk and make good decisions. The good news is that our mind and cognitive abilities can be trained to function better on all levels. To become better risk managers and decision makers,