S+B: Well, how about using evolutionary psychology? Maybe it makes sense that humans have evolved a cognitive bias toward drawing inferences from small numbers.
KAHNEMAN: You can always find an evolutionary quotation for anything. But the question is whether it’s functional, which is not the same as being evolutionary. There might be some environment in which
it’s dysfunctional, but mainly it’s inevitable.
But, you know, there’s also the issue of perception, which links to intuition. Perception evolved differently than either intuition or cognition evolved.
S+B: Now it seems like we’re dividing decision making into three systems: there’s the emotional stuff; there’s the rational-computational system; but there’s also a perceptual system.
KAHNEMAN: Yes, I think of three systems. In my current perspective, the question I ask is, What makes thoughts come to mind? And some thoughts come to mind much more easily than others; some really take hard work; some come to mind when you don’t want them.
S+B: When you began your research in the psychology of decision making, the business world was intent on making the managerial decision process as rational as humanly possible.
KAHNEMAN: The rational model is one in which the beliefs and the desires are supposed to be determined. We were real believers in decision analysis 30 years ago, and now we must admit that decision analysis hasn’t held up.
S+B: Didn’t your own research help kill it? The essence of your work seems to be the ongoing tensions and contradictions between System 1 and System 2 thinking. That makes it almost impossible for rational System 2 thinking to win out.
KAHNEMAN: That’s not quite true. Our research doesn’t say that decision makers can’t be rational or won’t be rational. It says that even people who are explicitly trained to bring System 2 thinking to problems don’t do so, even when they know they should.
S+B: Howard Raiffa, a father of formal decision analysis, basically recanted on his original work in the 50th anniversary issue of Operations Research. He argued that decision analysis didn’t have nearly the impact he felt it could have had on managerial thinking.
KAHNEMAN: And I think it’s very clear why that happened, but it was not clear then.
S+B: Does this obviate all the decision analysis courses — all the drawing of decision trees — that students take in graduate business programs?
KAHNEMAN: It doesn’t mean you shouldn’t take decision analysis. It just means that decision analysts are not going to control the world, because the decision makers, the people who are in charge, do not want to relinquish the intelligence function to somebody else. After all, in principle, under decision analysis, there would be somebody generating probabilities, and the decision makers would look at the trade-offs and decide about the assignment of utilities. In addition, the decision maker would have a managerial function, to ensure that the whole thing is done right. And that is absolutely not the way it is. Decision makers don’t like decision analysis because it is based on that idea that decision making is a choice between gambles.
S+B: That’s a wonderful phrase, “choice between gambles.” Is it more important to influence the choice between gambles, or to make a choice between gambles?
KAHNEMAN: I think decision makers, in business and elsewhere, just reject the metaphor altogether. Managers think of themselves as captains of a ship on a stormy sea. Risk for them is danger, but they are fighting it, very controlled. The idea that you are gambling is an admission that at a certain point you have lost control, and you have no control beyond a certain point. This is abhorrent to decision managers; they reject that. And that’s why they reject decision analysis.