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Thinking - Coggle Diagram
Thinking
Understanding
System :two:
Slow
Requires effort & deliberate thought
Logical
Importance
Strategic thinking
Problem solving
Planning
Making decisions (weighing pros and cons)
System :one:
Fast
Automatic
Importance
To learn associations between ideas
To learn skills (e.g. reading)
These knowledge can be accessed easily without effort
To recognise situations/objects
Problems caused
When it is used at the wrong time
Can lead to biases and fallacies
These would not happen if System 2 was used
e.g. A toy ball and bat costs $1.20. The ball costs $1 more than the bat. How much does the bat cost?
Most people will immediately say that the bat costs 20 cents
If they thought for a while longer, they will realise that the bat costs 10 cents
Sunk Costs
People tend to continue doing something once an investment (money/effort/time) has been made, even though it isn't optimal to continue
e.g.
A student buys a ticket for a concert for $100
On the night of the concert, he realises that he still has homework to do, due on the same night
If he goes for the concert, he will not be able to complete his homework. If he does his homework, he won't be able to attend the concert and the $150 will be wasted
Even though homework is more important, he still attends the concert
It happens when one thinks about his past investments instead of future outcomes and benefits
It can be avoided by ignoring our emotions, but this is very difficult as they are very powerful influences to our decisions
Another solution is to consult others for advice
The Science of Availability
A mental shortcut to help people make fast decisions
When one is exposed too much to a certain information, his thoughts will give greater credence to it and his thoughts will be influenced too
e.g. When one always reads news about terrorist attacks, he will begin to feel that they are very common
Advantages
It helps people to quickly arrive at a conclusion
Disadvantages
The decisions made can be incorrect
Loss Aversion
The tendency to prefer avoiding losses to acquiring lesser/equivalent/slightly greater gains
e.g. A person is given a choice to flip a coin
if he wins, he wins $1000
He will most likely not play the game to prevent losing money
if he loses, he loses $1000
If understood well, this method can be used in real life to convince people to make a certain decision
One just needs to tell another person what he risks losing, instead of what he could gain
This can also lead to making the wrong decision
e.g. If one is exposed too much to what he could lose instead of gain before doing something, he will not do it
this situation is similar to
{The Science of Availability}
Framing
The way information is worded
Framing a situation in a certain way can cause a very different consequence
This technique can be used to make good things more appealing to people, or make them decide to do a certain thing
Can be used with
{Loss Aversion}
e.g 2: If a doctor needs to do an operation on a person and he tells him
"You have a 10% chance of dying"
"You have a 90% chance of living"
There is absolutely no difference in both of these statements, but the patient might feel much worse when he hears that there is a 10% chance that he might die
e.g 1: One will most likely buy a disinfectant that claims to kill 95% of germs, instead of one that says 5% of germs will survive
Anchoring
When an individual's thought is influenced by a reference point
e.g. :moneybag: MSRP :moneybag:
Useful, especially when one doesn't know anything about the situation
e.g. if a person is 'anchored' to think that a particular item should cost $200, he will buy the item if it is sold for $100 only, but not when it's $300
However, if he was 'anchored' to think that it should cost $400, he might buy the $300 item (and maybe think that the $100 item is too cheap and its quality could be lower
This method can be used to attract customers to buy things
Benefits
It helps us make reasonable decisions/estimates, especially when we are given limited information
Disadvantages
If one relies too much on the false information that we receive, he will make the wrong decision
To prevent this, one can delay his decision and seek for more information
