Little Nathan has a way of saying things that provoke deeper reflection on my part. Recently, he has a penchant for throwing a ball at me when I’m least expecting it. And he’ll exclaim, “Think Fast!”, forcing me to catch it before it hits me.
This led me to question: Is there a constructive role for fast thinking? When is speed thinking effective? When does it result in haste and waste?
The Perils of System 1
On the one hand, we all know the perils of System 1 thinking. It subjects us all to the attendant heuristic biases as explained by Kahneman, Cialdini and Munger. Hence my previous memo, What Did I Miss?, highlights the importance of slowing down and re-examining the finer prints.
The Power of a 30-Second Mind
On the other hand, Charlie Munger is widely accredited for his powerful 30-second mind. Talk about thinking fast! This pertains to his ability to quickly size up an idea and results in him saying ‘No’ quickly. For dangerous ideas when entertained for too long can lead to false confidence and disastrous results. Just like playing with fire.
Intuition as a Weapon
John Malone is another leader praised for his extraordinary intuitive mind. Here’s an interesting excerpt from his biography, Cable Cowboy:
“Malone continued to seek counsel from his father, who one day gave his son puzzling advice about taking tests: “Guess at the answers,” he said. John gave him a perplexed look. “Guess before you figure the problems out!” … Malone was amazed at how he could guess what waveforms would look like at the end of a circuit even before doing the underlying mathematics. This ability to make split-second calculations … became the one weapon in his arsenal – to see the answers before others did – that gave him an edge over future rivals.”
The Pitfalls of Precision
However, we see the pitfalls of even such precise fast thinking! (The Chinese call this: “一针见血” – roughly translated all it takes is one prick to see the blood!) For Charlie, it led to mistakes of omission that has proven to be rather costly!
Mistakes of Omission and Commission
Think railroads and airlines. Charlie conceded that he was almost too slow to recognise the positive changes in competitive dynamics in such tainted industries! It even led them to miss the boat on Google when Larry & Sergey came knocking on their doors!
Buffett himself admitted that he should have given Mastercard more thought when Todd bought it in 2011. Fast thinking also led to mistakes of commission. Buffett bought Exxon at the peak of oil prices. Charlie was so convinced by the lowest-cost steel maker POSCO, that he bought a large stake at the peak of steel prices!
Finding the Balance
This is really a most puzzling and intractable problem. Kahneman suggested a conscious effort to call for reinforcements from the other system when one system is overly utilised in a particular situation. That way, deficiencies in one system should be remedied by the other. Of course, it’s easier said than done.
Is there a better way to thinking fast and slow?
