S+B: Can you describe the two-system theory?
KAHNEMAN: Many of us who study the subject think that there are two thinking systems, which actually have two very different characteristics. You can call them intuition and reasoning, although some of us label them System 1 and System 2. There are some thoughts that come to mind on their own; most thinking is really like that, most of the time. That’s System 1. It’s not like we’re on automatic pilot, but we respond to the world in ways that we’re not conscious of, that we don’t control. The operations of
System 1 are fast, effortless, associative, and often emotionally charged; they’re also governed by habit, so they’re difficult either to modify or to control.
There is another system, System 2, which is the reasoning system. It’s conscious, it’s deliberate; it’s slower, serial, effortful, and deliberately controlled, but it can follow rules. The difference in effort provides the most useful indicator of whether a given mental process should be assigned to System 1 or System 2.
S+B: How did you begin your research into the two systems?
KAHNEMAN: In our first paper, Tversky and I did a study of the statistical thinking of professional statisticians when they’re thinking informally. We found what we called the Law of Small Numbers, a term we coined in 1971 to describe how people exaggerate the degree to which the probability distribution in a small group will closely resemble the probability distribution in the overall population. And we also found that people, experienced statisticians, do not apply rules that they’re aware of in guessing the probability of statistical outcomes.
S+B: So even “good” statisticians can be “bad” statisticians.
KAHNEMAN: That’s right. When they’re not computing seriously in System 2 mode, they rely on their intuitions for the kind of simple problems we gave them. We were hoping that, where things really mattered, they would replace their intuitions with computations. Yet what was striking to us was that even people who should know better were making those mistakes.
S+B: Has your perception of risk and the meaning of risk evolved or changed since you began doing this work?
KAHNEMAN: The perception of and reaction to risk previously had been seen as emotional.
S+B: Not just seen as emotional; dismissed as emotional.
KAHNEMAN: Yes, exactly right. Our innovation was that we identified some categories of risk that were the result of certain cognitive illusions. That was a novelty and that got people excited. But it’s only part of the picture. There is an alternative way of looking at this that is becoming much more fashionable. There’s a paper that I really like a lot. The title of it says the whole story: “Risk as Feeling.” The idea is that the first thing that happens to you is you’re afraid, and from your fear you feel risk. So the view of risk is becoming less cognitive.
S+B: So it’s not that generalized emotion influences decision making. It’s that one emotion — fear — distorts the perception of risk and introduces error into decision making.
KAHNEMAN: What actually happens with fear is that probability doesn’t matter very much. That is, once I have raised the possibility that something terrible can happen to your child, even though the possibility is remote, you may find it very difficult to think of anything else.
S+B: It’s like a Lorenzian imprinting of goslings: The phenomenon of fear imprints on a decision maker.
KAHNEMAN: Emotion becomes dominant. And emotion is dominated primarily by the possibility, by what might happen, and not so much by the probability. The more emotional the event is, the less sensible people are. So there is a big gap.