System 3 thinking

There was lots of talk of dual process theory at the 2017 System Dynamics Conference. Nelson Repenning discussed it in his plenary presentation. The Donella Meadows Award paper investigated the effects on stock-flow task performance of priming subjects to think in System 2:

The dual-process theory and understanding of stocks and flows

Arash Baghaei Lakeh and Navid Ghaffarzadegan

Recent evidence suggests that using the analytic mode of thinking (System 2) can improve people’s performance in stock–flow (SF) tasks. In this paper, we further investigate the effects by implementing several different interventions in two studies. First, we replicate a previous finding that answering analytical questions before the SF task approximately doubles the likelihood of answering the stock questions correctly. We also investigate effects of three other interventions that can potentially prime participants to use their System 2. Specifically, the first group is asked to justify their response to the SF task; the second group is warned about the difficulty of the SF task; and the third group is offered information about cognitive biases and the role of the analytic mode of thinking. We find that the second group showed a statistically significant improvement in their performance. We claim that there are simple interventions that can modestly improve people’s response in SF tasks.

Dual process refers to the idea that there are two systems of thinking at work in our minds. System 1 is fast, automatic intuition. System 2 is slow, rational reasoning.

I’ve lost track of the conversation, but some wag at the conference (not me; possibly Arash)  coined the term “System 3” for model-assisted thinking.

In a sense, any reasoning is “model-assisted,” but I think there’s an important distinction between purely mental reasoning and reasoning with a formal (usually computerized) modeling method like a dynamic simulation or even a spreadsheet.

When we reason in our heads, we have to simultaneously (A) describe the structure of the problem, (B) predict the behavior implied by the structure, and (C) test the structure against available information. Mentally, we’re pretty good at A, but pretty bad at B and C. No one can reliably simulate even a low-order dynamic system in their head, and there are too many model checks against data and thought experiments (like extreme conditions) to “run” without help.

System 3’s great weakness is that it takes still more time than using System 2. But it makes up for that in three ways. First, reliable predictions and tests of behavior reveal misconceptions about the problem/system structure that are otherwise inaccessible, so the result is higher quality. Second, the model is shareable, so it’s easier to convey insights to other stakeholders who need to be involved in a solution. Third, formal models can be reused, which lowers the effective cost of an application.

But how do you manage that “still more time” problem? Consider this advice:

I discovered a simple solution to making challenging choices more efficiently at an offsite last week with the CEO and senior leadership team of a high tech company. They were facing a number of unique, one-off decisions, the outcomes of which couldn’t be accurately predicted.

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These are precisely the kinds of decisions which can linger for weeks, months, or even years, stalling the progress of entire organizations. …

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But what if we could use the fact that there is no clear answer to make a faster decision?

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“It’s 3:15pm,” He [the CEO] said. “We need to make a decision in the next 15 minutes.”

“Hold on,” the CFO responded, “this is a complex decision. Maybe we should continue the conversation at dinner, or at the next offsite.”

“No,” The CEO was resolute, “We will make a decision within the next 15 minutes.”

And you know what? We did.

Which is how I came to my third decision-making method: use a timer.

I’m in favor of using a timer to put a stop to dithering. Certainly a body with scarce time should move on when it perceives that it can’t add value. But this strikes me as a potentially costly reversion to System 1.

If a problem is strategic enough to make it to the board, but the board sees a landscape that prevents a clear decision, it ought to be straightforward to articulate why. Are there tradeoffs that make the payoff surface flat? The timer is a sensible response to that, because the decision doesn’t require precision. Are there competing feedback loops that suggest different leverage points, for which no one can agree about the gain? In that case, the consequence of an error could be severe, so the default answer should include a strategy for detection and correction. One ought to have a way to discriminate between these two situations, and a simple application of System 3 might be just the tool.