A story about two minds: the vast difference between real and perceived risk

Wednesday, October 31, 2018

“In our society it is generally not considered justifiable to make a decision purely on an emotional response. We want to be considered scientific and rational, so we come up with reasons after the fact to justify our choice.” —Raj Raghunathan, McCombs School of Business, The University of Texas at Austin

Look carefully the following figures. Which one is the largest for you? The figure on the right or that one on the left?
Ebbinghaus visual illusion image

Yes, indeed they are identical. However, even if you know it, or even if you try to measure it with a ruler, you cannot avoid seeing the right one larger, right?

It is the well-known Ebbinghaus visual illusion and I’m sure you have seen many more like it. Anyway, did you know that not all the illusions that captivate us in our everyday life are visual? There are other much more dangerous: the mind or “cognitive” illusions.

These cognitive illusions make us to be more afraid of taking a flight than driving a car, or to think that there are more people who die of accidents than of heart disease. We are awful at assessing risk. According to psychologists, we lead ourselves astray by different ways:
  1. Distortion of Habitus: the more familiar you are with a risk, the more exposed you are to it and the more used you are to mitigate it, so it seems to you less risky. Nothing happens if you are using your mobile phone while driving, right? Conversely, you tend to overestimate an exceptional or unexpected risk. 
  2. Time distortion: you under-react to a slowly growing risk or to a long-term risk. These cigarettes you know you shouldn’t smoke… but one by one they seem to be less harmful. You know what I am talking about, right? Conversely, you tend to overreact to immediate risk. 
  3. Distortion of spirit: people overreact to risks that are personified, intentional or mediatized. Am I right if I say that your reaction is different when someone intentionally throws a stone at you than if this stone hit you because it detached from a cornice, or because of the wind? Conversely, you under react to hazard or natural risks.
If we are rational animals, the apex of Evolution, why are so awful at assessing risk and then can we make such bad decisions? Because we aren’t as rational as we think. Because indeed, we don’t have a mind: we are two minds!
Dionysus and Apollo coexisting in the same brain
We have two modes of though: the first one is intuitive and automatic, the other one is reflexive and rational. They are named AUTOMATIC and REFLEXIVE or SYSTEM I and SYSTEM II.  
 Thinking, Fast and Slow: image

As explained by Daniel Kahneman in his great book Thinking, Fast and Slow:

System 1 operates automatically and quickly, with little or no effort and no sense of voluntary control.

System 2 allocates attention to the effortful mental activities that demand it, including complex computations. The operations of System 2 are often associated with the subjective experience of agency, choice, and concentration.

When we think of ourselves, we identify with System 2, the conscious, reasoning self that has beliefs, makes choices, and decides what to think about and what to do. The automatic operations of System 1 generate surprisingly complex patterns of ideas, but only the slower System 2 can construct thoughts in an orderly series of steps.”

The following table includes several examples of operations from both systems:

There is no dichotomy between System 1 and System 2: they are not two homunculus sit on our shoulders and whispering in our ears. We are not perfectly rational, nor completely emotional and instinctive. We are both, all the time. They are the intertwined components of a unique system. It is true that sometimes we use one more than the other, but both are engaged in risk assessment.
If you can’t answer a difficult question, just replace it with an easy one
Why must our brain evolve towards this work division between System 1 and System 2? Just because it is really efficient: it minimizes effort and optimizes execution. Most of the time we do very well with this task division because, as conveyed by Daniel Kahneman in Thinking, Fast and Slow:

“System 1 is generally very good at what it does: its models of familiar situations are accurate, its short-term predictions are usually accurate as well, and its initial reactions to challenges are swift and generally appropriate. System 1 has biases, however, systematic errors that it is prone to make in specified circumstances.”

Where do these biases come from? Answer the following Yes/No questions and it will become clearer to you.
  1. Do you think that cyberterrorism is a big threat to citizen security?
  2. Do you think that crypto mining represents a serious threat to citizen security? 
  3. Do you think that using a smartphone with Internet connection is a grave threat to citizen security?
  4. Finally, the most important one: do you have at your disposal the required data and facts to give a full, critical and reasoned answer for the first three questions?
I don’t know your answers for the first three questions, but I would bet that you answered the third one with a resounding NO. No one thinks they have all the necessary facts to answer them! In spite of it, you answered with Yes or NO to the first three ones because you have an intuitive knowledge thanks to your experiences and readings on the risk of the mentioned threats.  

This is how we work most of the time in our lives: we must continually make judgements and take decisions, even if we don’t have all the necessary data and facts, the time to collect them, nor the intellectual ability to process them completely. Our rationality is limited or “bounded”, as named by Herbert Simon.
The modern world is so complex and our minds too limited to be able to process all the information before taking a decision. This is why, instead of seeking optimal procedures to maximize utility functions, we use heuristics! When we face a difficult question, we often tend to answer to an easy one, generally without realising it. It is a simple procedure that helps us find the appropriate answers, even if often imperfect, for difficult questions.

That is where the origin of our biases thrives. That is why there is often a vast gap between our risk assessment and the real risk. Our Systems 1 and 2 were developed in an environment where threats were relatively easy to understand: a predator leaping on you, a fire spreading, or a member of another tribe looking at you with a grim face while holding a hidden object. When assessing risk in the context of our modern society, System 1 often fails miserably, while System 2 is unable to gain control. Our brains are stuck in the heuristics from hundreds of thousands of years ago, appropriate for primitive life of the small social groups living in Nature. They haven’t had time to update a version for the 21st century.
We need to execute a new operating system in a hardware of over 100,000 years
This old software riddled with bugs and poorly patched is error-prone. When a heuristic fails, our security feeling moves away from security reality. Sometimes we pay more attention to the media or most threatening risk, instead of to the most prevalent but less newsworthy or striking one. Or even we create new risks when trying to avoid the old ones. Security is always a compromise. If the risk severity is misinterpreted, then the security will be inadequate. This is why it’s important to learn to overcome cognitive biases when taking security-related decisions.
To sum up, risk perception is a unique system, but multifaceted: each complex face contributes to our judgments about the threats hanging over us. In next blog entries we will explain why it’s so difficult to think statistically and, consequently, we are so awful at assessing risk, which leads to take bad security decisions. We will take a closer look to brain functioning, in order to understand the limits of our bounded rationality and be on guard against our most devastating thought errors.
Gonzalo Álvarez de Marañón
Innovation and Labs (ElevenPaths)

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