Thinking, Fast and Slow

by Daniel Kahneman

System 1 is impulsive and intuitive; System 2 is capable of reasoning, and it is cautious, but at least for some people it is also lazy. We recognize related differences among individuals: some people are more like their System 2; others are closer to their System 1. This simple test has emerged as one of the better predictors of lazy thinking.

On the first week of the experiment (which you can see at the bottom of the figure), two wide-open eyes stare at the coffee or tea drinkers, whose average contribution was 70 pence per liter of milk. On week 2, the poster shows flowers and average contributions drop to about 15 pence. The trend continues. On average, the users of the kitchen contributed almost three times as much in “eye weeks” as they did in “flower weeks.” Evidently, a purely symbolic reminder of being watched prodded people into improved behavior. As we expect at this point, the effect occurs without any awareness.

As expected, easily pronounced words evoke a favorable attitude. Companies with pronounceable names do better than others for the first week after the stock is issued, though the effect disappears over time. Stocks with pronounceable trading symbols (like KAR or LUNMOO) outperform those with tongue-twisting tickers like PXG or RDO—and they appear to retain a small advantage over some time. A study conducted in Switzerland found that investors believe that stocks with fluent names like Emmi, Swissfirst, and Comet will earn higher returns than those with clunky labels like Geberit and Ypsomed.

Another remarkable discovery is the powerful effect of mood on this intuitive performance. The experimenters computed an “intuition index” to measure accuracy. They found that putting the participants in a good mood before the test by having them think happy thoughts more than doubled accuracy. An even more striking result is that unhappy subjects were completely incapable of performing the intuitive task accurately; their guesses were no better than random. Mood evidently affects the operation of System 1: when we are uncomfortable and unhappy, we lose touch with our intuition.

We see the same strategy at work in the negotiation over the price of a home, when the seller makes the first move by setting the list price. As in many other games, moving first is an advantage in single-issue negotiations—for example, when price is the only issue to be settled between a buyer and a seller. As you may have experienced when negotiating for the first time in a bazaar, the initial anchor has a powerful effect. My advice to students when I taught negotiations was that if you think the other side has made an outrageous proposal, you should not come back with an equally outrageous counteroffer, creating a gap that will be difficult to bridge in further negotiations. Instead you should make a scene, storm out or threaten to do so, and make it clear—to yourself as well as to the other side—that you will not continue the negotiation with that number on the table.

In another paper, titled “Boys Will Be Boys,” they showed that men acted on their useless ideas significantly more often than women, and that as a result women achieved better investment results than men.

Decision makers tend to prefer the sure thing over the gamble (they are risk averse) when the outcomes are good. They tend to reject the sure thing and accept the gamble (they are risk seeking) when both outcomes are negative.

The high-donation countries have an opt out form, where individuals who wish not to donate must check an appropriate box. Unless they take this simple action, they are considered willing donors. The low-contribution countries have an opt-in form: you must check a box to become a donor. That is all. The best single predictor of whether or not people will donate their organs is the designation of the default option that will be adopted without having to check a box.

“They will feel better about what happened if they manage to frame the outcome in terms of how much money they kept rather than how much they lost.”

“They ask you to check the box to opt out of their mailing list. Their list would shrink if they asked you to check a box to opt in!”

The biggest surprise was the emotional experience of the time spent with one’s children, which for American women was slightly less enjoyable than doing housework. Here we found one of the few contrasts between French and American women: Frenchwomen spend less time with their children but enjoy it more, perhaps because they have more access to child care and spend less of the afternoon driving children to various activities.

Why do these added pleasures not show up in reports of emotional experience? A plausible interpretation is that higher income is associated with a reduced ability to enjoy the small pleasures of life. There is suggestive evidence in favor of this idea: priming students with the idea of wealth reduces the pleasure their face expresses as they eat a bar of chocolate!

“The easiest way to increase happiness is to control your use of time. Can you find more time to do the things you enjoy doing?”