MGT Notes

Reference: Strategic Management (5e) – Frank T. Rothaermel (Pg 58)

Our brains operate in two distinct modes of decision making :

System 1 : This is the brain’s default mode akin to the ‘gut reaction’. It is fast, prone to snap judgments, efficient, often automatic and is common when tired or aggravated. However, this mode is error prone and highly correlated to the occurrence of cognitive biases.

System 2: This mode is related to thinking that is more complex, logical, analytical and deliberated. It consumes much more of the brain’s energy compared to System 1 and is more slower, effortful and reliable, leading to a much lower likelihood of cognitive biases.