### System 1&2 thinking revisited

Question: a bat and ball together cost £1.10. The bat costs £1 more than the ball. How much does the ball cost on it’s own?

If you answered 10p then you’re wrong – and it’s not your mathematic skills that are the only issue, it’s your tendency to use System 1 thinking.

First, let me show you the calculation.

If the bat is £1 more than the ball, and the ball costs 10p, then the bat costs £1.10 on its own so add 10p for the ball the combined cost is £1.20.

The correct answer is the ball costs 5p on it’s own. As the bat costs £1 more than the ball it costs £1.05 on its own. £1.05 + 5p = £1.10

Now in this exercise it doesn’t really matter that you, well 95% of you, got it wrong. But what it does highlight is that we tend to leap to quick conclusions and often we get the wrong answers.

Daniel Kahneman highlights this trend in his excellent book: “Thinking Fast and Slow”. He offers the idea that there are two systems for thinking, a spontaneous “System 1” approach or a more considered and thought through “System 2” method. I believe that from the earliest school lessons we were rewarded for speed of answer over quality of response and that this has been further accelerated by the sheer quantity of decision making we have each and every day. And I’m suggesting that we all need to slow down.

In the last year I’ve seen the following issues all caused by inappropriate System 1 thinking:

1. Opening an office in an area with too few transactions to support another entrant, indeed too few for the 20 EAs already there. When asked “why did you open there then?” the EA answered, “because it’s the next town to where I am.”

2. Employing a manager for an office after one interview of less than an hour who clearly, from day one on the job, wasn’t going to fit culturally. When asked “why did you employ him?” the EA answered, “because he used to work for Foxtons.”

3. Winning an argument with a landlord over a £70 deduction for “essential repairs” that the landlord felt to be the responsibility of the tenant and subsequently being dis-instructed on three properties with annual fees worth £8,100. When asked “why didn’t you take the hit yourself?” the EA answered, “because I was right.”

Dr Steve Peters wrote in “The Chimp Paradox” how dangerous the “chimp brain”, what Kahneman calls System 1 thinking, can be. Now of course it has its place, indeed it’s responsible for keeping us alive enabling our “fight or flight” response. But the trouble it’s used too often or rather System 2 isn’t used enough. Here are three examples for when to use System 2:

1. When meeting any new client.
System 1 will cause you to think: “Oh, I know exactly what they need” before they’ve hardly started to tell you their circumstances. System 2 thinking will cause you to properly diagnose, to ask more questions and even if you arrive at the same conclusion as System 1 the client will feel much better listened to and will consequently listen more to what you have to say.

2. When interviewing a candidate.
System 1 will often cause you to want or to reject someone with a few seconds whereas System 2 will cause you to challenge your instinct and enable you to truly get to know the prospect colleague rather than relying on your gut.

3. When prospecting for business.
System 1 approach is to pick up the phone and start dialling. System 2 is to carefully map out a “guided conversation” to cause each prospect to have to truly think about their circumstances and whether now is actually a good time to sell or invest.

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