Over 500,000 people visited Farnam Street last month to expand their knowledge and improve their thinking. Work smarter, not harder with our free weekly newsletter that's full of time-tested knowledge you can add to your mental toolbox.

Is Thinking Slow An Argument for Bureaucracy?

An observer of policy based on behavioral economics might well conclude that an assumption of irrationality may be valid, but irrational behavior is hard to predict. Why, for example, do people (even experts and managers who should know better) act in their own worst interests or those of their firms? Can such behaviors be predicted and averted?

That is a subject of Daniel Kahneman's new book, Thinking, Fast and Slow. He concludes, based on his research, that as decision-makers, we rely too heavily on System 1 thinking (recall Malcolm Gladwell's book Blink) that helps us summon whatever knowledge we think we have. Among other advantages, it saves us time in situations with similar patterns. But errors of judgment occur when we apply it to complex issues that require more careful consideration, investigation, and reasoning–System 2 thinking. It helps explain behaviors ranging from overconfidence in planning to the defense of sunk costs and the failure to cut our losses in investments.

Kahneman implies, among other things, that in selecting decision-makers we should look for those who know when to switch from System 1 to System 2, that is, when to think fast and when to think slow (using his grammar). Another antidote to thinking fast at the wrong time, according to Kahneman, is to have an objective observer who can flag those situations requiring slow thinking when they arise.

But the best check on too-fast decision-making may be the organization itself. As Kahneman puts it, “Organizations are better than individuals when it comes to avoiding errors, because they naturally think more slowly and have the power to impose orderly procedures.” Rather than castigate the bureaucratic nature of large organizations, Kahneman suggests we try to make them more efficient at slow thinking by improving processes for deliberation and making decisions

Still curious? Thinking, Fast and Slow.