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A Tale of 2 Systems
Daniel Kahneman, the world renowned psychologist, theorizes that our minds comprise of two systems of thinking.
Meet System 1; the impulsive, quick-acting agent that interprets its environment based on its surface level understanding.
Then there's System 2; the effortful, slow-acting agent that analyses each situation with a necessary focus of attention and provides insightful conclusions.
This isn't to say that System 1's instinctive actions are reductive because they are less comprehensive since they're dependent on emotions, thus leading to imperfect results. After all, the routing by System 1 is particularly useful for all time-sensitive decision-making, and situations that require constant vigilance. It acts as a necessary support for the analytical System 2.
But the problems we deal with in the 21st century are no longer simple fight or flight scenarios. System 1's throughput may lead to incomplete and even inconsistent results when compared with the reality of any encounter. And we won't even realize it.
Scenario A:
A speeding cab driver uses his quick instincts to swerve out of the way of a motorbike who brakes suddenly on the highway.
Scenario B:
A cruising cab driver casually steers away from the braking motorbike since he already made the effort to put enough space between him and the bike.
In both scenarios, the subject has made good use of a respective system of thinking and generated the best possible outcome, considering the circumstances.
But when it comes to agreeing on which outcome is better than the other, a couple of questions come to mind;
- Is it averting a dangerous outcome at the last second, or the effortful prevention of its occurrence in the first place?
- How is a better outcome to be perceived here, for the individual (the cab driver) or for the most people?
The Window to the Soul
The pupil dilation corresponding to the amount of effort gone into an activity is an excellent indicator of the stress we face w.r.t each task.
For tasks such as Add-1, in which a number is recited digit by digit to the best of a metronome, and on completing one number, each digit is added+1, the pupil dilates considerably.
For Add-3 task, the same but added by +3, the pupil dilates by almost 50%, as it is a very mentally taxing activity to follow multiple variable activities at once.
Anchoring
The effects of anchoring, both deliberate and suggestion, is the reason for the distorted, often times incorrect valuation of goods and services in the free market.
If the pricing for commodities and activities are estimated based on two factors; prevailing market rates and their individual notions of a fair cost, then we can assume that anchoring is a certain event.
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