The 6 Factors of System 3 Thinking for Making Wise Decisions!

Professor Emeritus of Psychology and Public Affairs at Princeton University's Woodrow Wilson School, Daniel Kahneman, won the 2002 Nobel Memorial Prize in Economics for his work on system 1 and system 2 thinking in “Thinking, Fast and Slow”. The idea that much of our thinking and decision-making is subconscious, and automatic (system 1), as opposed to rational and deliberate (system 2). But he missed the observation by Japanese theorists, Professor Emeritus Ikujiro Nonaka at the Graduate School of International Corporate Strategy, Hitotsubashi University, and Professor Hirotaka Takeuchi, of the Management Practice in the Strategy Unit of Harvard Business School that there is a third system.

We typically rely on system 1 thinking because it’s automatic, fast, and experience-based. We use our innate or gut feel to quickly arrive at a decision that “feels right”. System 2 thinking is logical, rational, and fact-based. We use system 2 when we need to slow down and analyse the information to deduce a solution.

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. For example, deciding on a particular career path, accepting the death of a loved one, or solving long-lasting conflicts among family members.

Distinguished Professor of Psychiatry and Neurosciences at the University of California San Diego, School of Medicine, Dr Dilip Jeste and his co-researchers allude to the operation of a third system through various neuro-correlates. Wisdom is a multidimensional and adaptive human attribute based in distinct regions in the brain. Within the prefrontal cortex, there are three regions that are important – dorsolateral, ventromedial and there’s something that connects them – the anterior cingulate. The dorsolateral prefrontal cortex is like a proverbial father. This is the part of the cortex that tells us not to do things that are socially unacceptable or undesirable. The ventromedial prefrontal cortex, on the other hand, is like the proverbial mother – kind, compassionate. Usually the dorsolateral and ventromedial parts function efficiently and don’t always need a mediator, but when necessary, the anterior cingulate can be the conflict detector and sometimes, resolver.

Wisdom is balance. It is balance between the proverbial father-like thinking and the proverbial mother-like thinking, and also between cognition and emotion, between the oldest and the newest parts of the brain.

In my own research I have identified 6 psychometrically valid factors of System 3 thinking which are activated when we  make wise decisions. I describe the 6 factors of system 3 thinking as competencies, which implies they can be developed and enhanced through coaching and mentoring:

Focus

In their 2018 book, "The Mind of the Leader", authors Hougaard and Carter highlight the debilitating effects of distraction on decision making effectiveness. System 3 decision-making requires sustained, focused attention to meaningful tasks and activities, balancing mental activity with mental control. Cultivating the ability to focus in the midst of noise has been found to enhance productivity and minimize stress. Coaches and mentors can introduce mindfulness practice to improve this competency.

Life Experience

Life experience is a necessary but not a sufficient condition for system 3 thinking. However, wise persons are more likely to reflect on their own life lessons and the lives of others to make sense of what it means to live a good life, and to offer practical and non-judgmental advice to others according to Professor of Sociology at the University of Florida, Dr Monika Ardelt. Coaches and mentors, drawing from the field of positive psychology, may demonstrate ways in which we can curate our memories and appreciate the course of our own life as a useful guide to what it means to live a flourishing life.

Decisiveness

Paradoxically, an important capability of system 3 thinking is acknowledging uncertainty and ambiguity yet making quick and effective decisions; not suffering "paralysis by analysis". Under complex conditions decision-making is a series of experiments in which we learn something new. We should not be fearful of making mistakes but rather accept the entrepreneurial "fail forward" principle. Coaches and mentors can help build this competency in clients through fostering the techniques of a growth mindset to speed up decisiveness according to Dr Carol Dweck, Lewis and Virginia Eaton Professor of Psychology at Stanford University. While at the same time balancing decision speed with a recognition of the mind traps which leaders often fall into as outlined by Jennifer Garvey Berger.  

Compassion

Compassion is the feeling that arises when we are confronted with another's suffering and feel motivated to relieve that suffering. Without compassion we cannot hope to face the collective problems of humanity and strive to do whatever is within our power to make positive change. Otherwise our decisions are confined to “me-first” and blind to the long-term consequences. Coaches and mentors can encourage self-compassion or suggest immersive experiences in which subjects are exposed to the suffering of others as a means of provoking compassion.

Emotion Regulation

One of the most critical capabilities of system 3 thinking is to recognize your feelings, yet not be overwhelmed by them. Control over emotions is not the same as the absence of emotions but rather having control over the intensity and variation in them, which yields a kind of contentedness. Harvard Medical School Psychologist, Dr Susan David distinguishes between emotional rigidity, “getting hooked by thoughts, feelings and behaviours that don’t serve us” and emotional flexibility, “being flexible with your thoughts and feelings so that you can respond optimally to everyday situations”.

Tolerance for Divergent Values

Dr Christopher Petersen, the Arthur F. Thurnau professor of psychology at the University of Michigan, and Dr Martin Seligman, Zellerbach Family Professor of Psychology at the University of Pennsylvania founded the Values in Action Institute after identifying 24 character strengths and virtues we all possess to a greater or lesser degree. Acceptance of diversity allows for our own unique signature strengths, but also opens us up to understand why someone else might rely on different strengths. The key to system 3 thinking appears to be in having strong values "weakly held", which means we are more prepared to change our mind if new information presents itself.

As Professor of Human Development at Cornell University, Robert Sternberg pointed out in his balance theory of wisdom, “information processing in and of itself is not wise or unwise. Its degree of wisdom depends on the fit of a wise solution to its context”. Likewise, coaching for wisdom is not solely concerned with enhancing system 1 and system 2 thinking to make better decisions. Wise reasoning has been found to be malleable across people and contexts in everyday life. Everyone possesses wisdom resources to a greater or lesser degree. The coach or mentor can deliberately stimulate these resources to help the leader use system 3 thinking to make wise decisions. In time, this may give rise to the characteristics of wisdom in leadership.