Why Leaders Need to Think Slowly

One of the best-selling business books of 2012 was “Thinking, Fast and Slow” by Daniel Kahneman, the winner of the 2002 Nobel Memorial Prize in Economic Sciences.  The author asserts that there are two cognitive systems: “system 1” which does not take much effort and makes quick judgements based on familiar patterns; and “system 2” which takes more effort requiring intense focus and operates methodically. The first is fast and the latter is slow with both systems working continually but not necessarily fluidly: people prefer to make simple stories out of complex reality. Seeking causes in random events and giving too much weight to their experience, there are some “traps” for the unaware, particularly leaders.

Here’s a summary of the traps followed by further considerations (“et alors”).

Why Leaders Need to Think Slowly

When leading a team or making decisions, the prevalence of the “system 1” can cloud judgement in the following ways:

1.       Halo Effect

System 1 prefers links between discrete facts: if only one of the facts is available but it has been seen before associated with another fact, the link is made automatically. When a positive fact relates to a person, this can result in the “halo effect” and this can be a trap when it comes to talent selection.

2.       Anchoring

System 1 is responsible for unconsciously tying your thinking on a topic to information you have recently encountered (even if the two have nothing to do with each other). This can be a trap when it comes to (what is believed to be) “rational” decision-making.

3.       Hindsight Bias

System 1 simplifies the “narrative” such that success is ascribed to virtue and skill whereas failure is attributed to bad luck. By being overly optimistic and overvaluing your talents, the “hindsight bias” can be a trap when making investment decisions.

4.       False Expertise

System 1 promotes expertise in relatively simple environments; however where challenges vary, luck influences success and gaps exist between action and feedback, the trap is to rely on “expertise” which may give the wrong counsel (“quick answers to difficult questions”).

5.       Risk Bias

System 1 promotes “loss aversion” (rather than gain seeking) and individuals suffer from the “endowment effect” where ownership results in an overestimation of value. This can be a trap when it comes to divestment decisions.

System 2 promotes slow reflection and intense focus: the leaders can then help the organisation to “operate with more methodical rationality than can the separate individuals within it”. Achieving slower reflections can help leaders make better judgements and achieve a rationality that is otherwise only “fictional” when “system 1” is prevalent.

Et alors?

Most leaders will wonder when they will ever find time to think slowly! On the other hand, does any leader have the time to lead their company, department or team in the wrong direction due to having made a decision too quickly under the “influence” of “system 1”? In today’s instant-everything fast-paced environment it seems that this tension between careful reflection and getting things done is non-existent: getting things done always prevails! Whilst not slowing down permanently, most leaders might benefit from being able to at least recognise the “signs that you are in a cognitive minefield, slow down and ask for reinforcement from system 2”!

One definition of a group’s culture is the group’s collection of behavioural short-cuts. The group (be it a team, a company or a nation) has devised organisational and inter-personal “norms” that are essentially adhering to a collective “system 1”. So what happens when an outsider joins that group? Can all the members of that group be asked to convert to “system 2” to stop and reflect on the new member’s behaviours so as to welcome and possibly adapt? Whilst not everyone could, perhaps leaders should, especially when decisions relating to people might be clouded by a cultural “halo effect” bias. Diverse organisations need to be particularly aware and leaders should ensure that talent selection is performed in an objective and transparent manner!