The Irrationality of Choice when Thinking Fast and Slow
April 22, 2012
Think fast (Photo credit: freddie boy)
As marketers, we often rely more on instinct and perceptions of experience than rational thought. Marketers justify this type of decision making by convincing ourselves that when predicting the future, it's difficult to use the past or historical fact. Analysts on the other hand use historical fact and data as the only basis for decision making. They introduce a bias that often causes organizations to not see what is happening around them. This is how companies such as Folger's Coffee miss dramatic changes in a market, such as the coffee revolution sparked by a company like Starbucks.
In the book "Thinking Fast and Slow" , Daniel Kehneman demonstrates how bias influences decision making and how our minds are subject to systematic errors. As we all understand, but rarely consider, intuitive preferences consistently violate the rules of rationale choice. For example, if you like Ford cars, are you more likely to purchase Ford Stock, even if the stock isn't the best rational choice?
The notion of "Thinking Fast and Slow" refers to two systems in the mind, system 1 and 2. System 1 operates quickly without voluntary control, while system 2 are subject to the amount of concentration and reasoning you apply to a problem. For example, the author points our that system 2 applies to what we think of ourselves, while system 1 is the snap judgement we make when viewing others. Another example is the bias to act on an immediate emotional reaction, even when you are manipulated, instead of assuming or understanding that in fact you were manipulated into a decision, resulting in an error of judgement.
"We can be blind to the obvious, and we can be also blind to our blindness"
The book also explores the two dimensions of ourselves, the experiencing self, and the remembering self, which as noted by the writer, "do not have the same interests." For example, "what makes the experiencing self happy, may not make the remembering self happy." Another important point is that we are much better at recognizing mistakes in others, than spotting errors of judgement made by ourselves.
"Thinking Fast and Slow " is helpful in developing a higher degree of self awareness and promises to have a positive direct effect on your ability to formulate and execute marketing programs.