On the Hunt for System 3 – Is it Real?

As Daniel Kahneman continues to stay in the spotlight, one of the theories mainly attributed to him (whether appropriately so or not), continues to receive attention: dual system reasoning. The idea that we have a “system 1” and a “system 2”. For those who are new to dual system reasoning, let’s quicky outline it. System 1 is fast, automatic and non-conscious. System 2 is slow, controlled and conscious. Typically, cognitive biases are attributed to system 1, which is heuristic or associative, and system 2 corrects for these with logical responses, characterised as rule-based or analytical. So there you have it. Now this theory is old. Dual processing or dual systems of reasoning is not a remotely new theory. I presume that most people who are in the field of behavioural science, or simply interested in behavioural science have heard of this theory and its two systems. But have you heard of system 3?

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According to Professor Emeritus Ikujiro Nonaka (Graduate School of International Corporate Strategy at Hitotsubashi University) and Professor Hirotaka Takeuchi (Strategy Unit of Harvard Business School) there is a third system. Or at least, that's what Peter Webb claims. Now that we have both associative, fast and logic-based and slow reasoning out of the way, what is left? Well, according to Peter Webb, the third system on the other hand is a more ‘considerative’ way of assessing information and arriving at a decision. We use system 3 when we need to think about how to balance the various interests in the short and long term, and when dealing with complex and poorly defined problems that have multiple, unknown solutions. Peter gives the examples of deciding on a particular career path, accepting the death of a loved one, or solving long-lasting conflicts among family members. As I read through this article by Peter, I am starting to realise that this man is trying to promote his book like no other, and am becoming rather skeptical of what he’s trying to tell me. Especially, as the original theory proposed by Nonaka and Takeuchi is a theory on leadership (wise leadership), not cognitive reasoning, in dual or triple-fold. Their theory outlines very quickly why leaders should be phronetic (from phronesis, as identified by Aristotle: “a true and reasoned state of capacity to act with regard to the things that are good or bad for man”). I think this specific paragraph phrases very well what is meant by phronesis, explicit knowledge and the wisdom referred to throughout the article, and how this refers to leadership:

“Practical wisdom, according to our studies, is experiential knowledge that enables people to make ethically sound judgments. It is similar to the Japanese concept of toku—a virtue that leads a person to pursue the common good and moral excellence as a way of life. It is also akin to the Indian concept of yukta, which connotes “just right” or “appropriate.” For instance, executives who believe that the purpose of a business—and even of making profits—is to serve people and enhance society’s well-being observe yukta and shy away from excess and greed.” As a result of this definition, Nonaka and Takeuchi outline 6 abilities of phronetic (wise) leaders. They are as follows:

1. Wise Leaders Can Judge Goodness

2. Wise Leaders Can Grasp the Essence

3. Wise Leaders Create Shared Contexts

4. Wise Leaders Communicate the Essence

5. Wise Leaders Exercise Political Power

6. Wise Leaders Foster Practical Wisdom in Others

This article is filled with business case examples, good references and implementations. It’s a damn good article and I do suggest you read it, but what does this have to do with third system reasoning? If that even exists? Continuing through the Peter Webb article (that book promo is so intense), he also defines 6 factors (no that’s not a coincidence) of “System 3 Thinking for Wise Decisions”:

1. Focus (ever read Deep Work by Cal Newport? This is the same thing).

2. Life Experience (often used for associative reasoning, it’s its main foundation)

3. Decisiveness (a personality trait often cultivated by your environment)

4. Compassion (see above, also massive established difference in culture and gender)

5. Emotion regulation (see point 4)

6. Tolerance for Divergent Values (see Big Five Personality test, also known as Openness and to some extent Extraversion)
   

As you can read by the stuff I put in brackets, I am not convinced we’re dealing with a new system of reasoning here. A lot of things that are being merged into this theory do not make for a consistent system. To have focus is not part of a system, although it does aid system 2. To have life experience aids system 1 in making associative judgements: “this reminds me of…” or “this is similar to…”. Points 3-5 vary greatly per person and are more likely to be personality traits than anything else, but to have a personality trait (or lack thereof) does induce a new system of reasoning. And the last point is literally a rephrased personality trait from the Big Five. At least give credit where credit is due. Peter also has this paragraph in his epistle, which really just knocked it out of the park for me: “Wisdom is balance. It is balance between the proverbial father-like thinking and the proverbial mother-like thinking...” Just go home…

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If you think I’m being too harsh here, I was genuinely hyped about there being a third system. So far, I’ve been met with nothing but disappointment. Anyway, looking up some further (other!) sources, we find that the third system is supposed to be something completely different: imagination. I know, it surprised me too. According to the Irrational Agency, the two processes in dual system reasoning don’t capture every decision we make: “Indeed they might only encompass a minority of our daily choices.” Well, there goes that I suppose. They quote “recent work in neuroscience and psychology” but forget to actually reference or hyperlink it, so… Anyway, assuming that this work does exist, it supposedly has discovered another way of making choices where customers imagine their possible futures: the outcomes they would experience after a choice, and how those outcomes will make them feel. The future that makes them feel happiest will be the one they choose. These choices use different parts of the brain than System 1 and 2. They are called System 3 choices.” They further argue their statement by a car example, first outlining what systems 1 and 2 would do, and then moving onto system 3. In their argument system 1 makes you fall in love with the colour, shape or brand of the car. System 2 will make you decide based on price, financing options, fuel efficiency, resale value etc. Issue is, most of the time we use both. We use them interchangeably. And I think that’s also what’s going on with this idea of system 3. I think the example they provide themselves will explain this really clearly: “A System 3 decision would look like this: imagine yourself driving that car. Feel, in your mind, the sensations of the seats and how it drives. Imagine how your partner or your friends would view you in it. Consider, too, the impact on your bank account and what else you would be missing out on to pay for it. How you’d feel about the environmental impact and the safety this model offers your family. How do you feel? Is it good? Maybe you also have another model in mind. Try the same process on that. Does it feel better? The car you feel best in – within this mental simulation – is probably the one you’ll choose.” That’s not system 3, that’s clever marketing. To be able to imagine yourself sitting in a car, feel the seats, hear the engine roaring, these are “sensations” that invoke emotions, which is system 1. To picture yourself owning something already aims straight for the endowment effect, where you put more value on the things you already own, or feel ownership of (this can be waaay before we start talking financing options). Then moving onto safety, environmental impact etc. we’re back at system 2, making the logical decision, but probably after system 1 has decided that this is “our” car. You might argue that system 2 is trying to build a case for system 1’s attraction. We’re great at providing ourselves with reasons for why we did something. We fabricate bullshit really well.

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This article has also not given my system 3, which is what I’m looking for. (I do know which sitebuilder the Irrational Agency uses, same as mine, Wix.com, if you were ever so inclined, not spon.). So far, nada. Moving onto WARC, which comments on the presentation of system 3 as given by Leigh Caldwell, from the Irrational Agency. But ironically, WARC put a lot more effort into describing system 3 than its originators have in their post, so I now have a better idea of what they mean by it. According to Leigh, as described by Brian Carruthers (from WARC), the imagination of system 3 allows “your brain to be rewarded for something that isn’t real.” Or at least not real yet. Now I doubt that all my readers have had the pleasure of being taught Neuroeconomics by the amazing Elliot Ludvig, but the idea that your brain reacts to the possibility of a reward is, well, really basic neuroscience. It’s known as one part of the prediction error, where the thought of a reward happening already releases dopamine (the reward neurotransmitter in pop science). The second part of the prediction error is the reward itself, which can lead to varying levels of dopamine release (or even lack thereof or reduction), depending on how correct you were in anticipating the reward. If you thought you were going to get a reward (dopamine release at the thought of the reward), but didn’t actually get one, you will experience a lower than base-rate dopamine firing (or release) at the time at which you expected your reward. I tried my best explaining this, if you want actual scientific articles explaining this, hit me up. Best thing to do might actually just be to google or youtube “prediction error” and it’ll show. Now why did I give you neuroscience 101? Because this isn’t new at all, and has very little to do with a new system, or system 3. Again, think back to the car example, it’s an interaction between system 1 and 2, where system 2 is trying to justify all the illogical shit that system 1 used to decide whether you wanted this car in the first place. And the dopamine release associated with sitting your ass down in soft leathery seats (preferably vegan), having the wind blow through your hair as you drive with the roof down (when am I ever doing this in the UK?!) is just the prediction error, which is system 1. It’s also a very important aspect of forming habits btw, and works for model-free and model-based decision-making. Again, that’s non-basic neuroscience stuff for you, but I have a feeling not everyone has gotten there yet. All I can say is, thank you Elliot!

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Moving on from this source as well, what’s left? Well, how do you feel about unconscious thought? “A Case for Thinking Without Consciousness” is the title of the 2016 paper by Dijksterhuis and Strick from the universities of Nijmegen (Radboud) and Utrecht, respectively. It's scientific research, published research and from two world-renowned universities with well-known specializations in psychology. My hopes are up. So what is it about? Dijksterhuis and Strick make the case that unconscious thought (UT) processes continue where systems 1 and 2 stop. Everyone has had this “eureka moment” after leaving a complex problem alone for a while, knowing that unconsciously their brain was still working on the issue “in the background”. Given that this makes sense intuitively and is commonly experienced, I’m genuinely intrigued. The article dives into several debates on conscious and unconscious thought, the existing of the latter still being heavily debated, especially its potential influence on decision-making is not agreed upon at all. However interesting this debate might be, for the sake of the length of this post, we’re going to skip to the meat: Dijksterhuis and Strick propose that conscious and unconscious thought alternate: “You think about a decision consciously, you sleep on it for a while, you then think a bit more after you have encountered relevant new information, you then again delegate it to your unconscious for a while, and so forth.” And that seems fair. Dijksterhuis and Strick outline really carefully what system 3 would look like: “Type 3 processes, we propose, are very slow; are periodically conscious as well as periodically unconscious; and during the unconscious phases—but not during the conscious ones—are largely, but not wholly, effortless. Type 3 processes do not seem to be rule-based, but they also do not seem to be merely associative. Type 3 processes organize and polarize and—as Newton would hopefully have agreed with—are exploratory or perhaps even playful.” Now it has to be mentioned that they continuously refer to the reasoning systems as “types” and not as systems. They explain in their article that there are no specific “systems” associated with type 1 and 2 reasoning, in which they mean the circuitry, and that there is quite a lot of interaction and overlap between these types of reasoning as is. Which is true. I think the end of their paper phrases my thoughts much better than I would be able to do myself. So I shamelessly copy their text:

“Whether we truly need a third type of thought or whether we can adjust Type 1 or Type 2 characteristics so that they can accommodate prolonged thought processes awaits further thinking and research. However, we do hope that the current analysis conveys that it is time to make room for UT—and for UT as part of prolonged thought processes—in future theories and research.” Amen.

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Now, after nearly 2,500 words, where do we stand? Type 3 reasoning, I also think the word type reflects it better than the word system, seems to be the interplay between types 1 and 2, interpreted in a variety of contexts. I don’t think type 3 has anything to do with leadership, or imagination. The former being taken completely out of context by someone trying to sell you his book, and the latter seemingly being a marketing ploy as well, where having an understanding of neuroeconomics makes a massive difference. If you think that’s harsh, try publishing in academia. You’ll reconsider. On the topic of published work in academia, the last article (scientific article!) I reviewed makes the most sense to me. Unconscious thought is notoriously difficult to study, and how types 1 and 2 interact, both consciously and unconsciously is not well established at all. If I had to put a bet on what type 3 would look like, it would be the implementation of unconscious thought into decision making. But I’m not a betting woman. If you’ve made it to the end of this article, please let me know your thoughts. I’m genuinely curious as to what you think of our dual, and potentially triple system reasoning processes. As for now, hasta la vista, baby!