AI & the Emergence of System-3 Thinking
An opportunity to upgrade the human brain!
Which camp do you belong to: listening to your head or following your heart?
This dilemma has existed since time immemorial: be it the passionate lover who can’t decide what they want or the college grad evaluating their career trajectories. Our movies, novels, and poems are brimming with this everlasting conundrum.
Moreover, as with any “us vs. them” situation, those in the “head” camp dedicate ample time proving why their approach is more practical, while those in the “heart” camp passionately extol its contribution to greatness.
Well, in the modern world, things have taken a turn for the worse thanks to a new complication. A new camp is emerging, albeit small, yet it has the potential to fundamentally disrupt the way humans think and make decisions.
Let’s find out!
Cognition as Two Systems!
Human cognition has been of great interest to ancient philosophers, with countless theories attempting to decode its mechanisms. It remains those mysteries where, despite significant discoveries, much is yet to be understood.
For our purposes though, we are grateful to the late Nobel Laureate, Late Prof. Daniel Kahneman, who offered a scientifically backed framework for understanding cognition, one that sheds light on what it means to listen to your heart vs your head.
The Two Systems Theory proposes that human “thinking” or cognition arises from the complementary interplay of two distinct systems:
System 1: The instinctual, subconscious, emotional self that makes us cheat our protein diets, react aggressively or swiftly escape dangerous situations
System 2: The rational, reflective, conscious self that regulates System 1 and helps with long-term planning, logical reasoning, and emotional control.
Both systems evolved to enhance survival, yet they are fundamentally different. System 1 is ancient, forming the primal instinct we share with other species. System 2, however, is a relatively recent evolutionary development unique to humans.
System 1 governs about 95% of our daily actions: automatic and quick responses like anger after an insult, fear-induced freezing, or impulsive expressions of love. System 2, on the other hand, is slower, deliberate, and often acts as a brake on System 1: helping us analyze situations or make logical decisions.
Let’s look at some examples:
Solving 2+2 = 4 engages System 1 but proving Pythagoras engages System 2
Completing the phrase “bread and ___” uses System 1, while writing a coherent essay requires System 2.
Hurling abuses in rage activates System 1, whereas confronting your manager on email calls upon System 2.
Indulging in cheat meals stems from System 1, but planning your weekend is task for System 2.
Since Systems Thinking is widely popular and can be understood in a 5-min conversation with ChatGPT, we’ll directly jump to the new system that’s gaining prominence: System 3.
Cognition as Three Systems!
Before we dive deeper, it’s imperative to ask: What makes a system?
We know Systems 1 and 2 aren’t physical structures or tangible parts that have clear boundaries in the brain. As Prof. Kahneman explained, they are metaphorical constructs, helpful models for understanding our thought processes and decision-making behaviors. They represent our different modes of thinking and describe how we perceive, judge, and decide in everyday life.
For nearly two decades, these metaphors have sufficed in explaining cognition. But things began to change in 2020 with the advent of OpenAI’s ChatGPT.
Let’s re-consider our previous examples (in 2025’s context):
Solving 2+2 may still rely on System 1, but proving the Pythagorean theorem? Students are increasingly outsourcing such tasks to ChatGPT instead of engaging System 2.
Completing the phrase “bread and ___” remains within System 1, but writing essays has now been delegated to ChatGPT.
Angrily shouting abuses still engages System 1, but handling office politics via email is becoming 10x easier with AI-crafted assistance.
Impulsively indulging in cheat meals involves System 1, but many are using ChatGPT to plan their diets and weekends.
It’s clear that a new way of cognition is emerging. Rather than relying solely on System 2 for higher-order cognitive tasks, humans are now integrating AI, which is like a new, external system with immense processing power. Let's call it System 3.
For the first time in evolutionary history, we see the emergence of a cognitive system that is not carbon-based but silicon-driven: a powerful network of 0s and 1s operating on microchips. Critics may argue that System 3 is merely an assistant and doesn’t fundamentally alter our cognitive framework.
But will this remain the case? We think not.
Our hypothesis is that, as accessibility improves, System 3 will shift from being an auxiliary tool to becoming an integral layer of human cognition, a true Three-System Model will emerge.
Let’s explore this shift further.
Sofware Upgrade: Integrating System-3
The human brain is a complex machine, consuming 20% of the body’s energy to process sensory data and filter the millions of inputs surrounding us at any moment. Cognitive information processing can be broken into six steps: Input, Encoding, Storage, Processing, Retrieval, and Output.
Historically, every new technology (or psycho-technology) has extended our brain’s information processing capabilities by enhancing one of these steps:
Made new information easily accessible (Gossip, Books, Internet)
Made information encoding easier (Symbols, Stories, Mathematics)
Expanded storage capabilities (Writing, Drives, etc)
Made Processing & Retrieval instantaneous (Calculators, Computers)
Made Output easily consumable (Paper, GUI)
Every advancement expanded our System 2’s capabilities, but the brain remained reliant on System 2 to manually harness and apply these tools.
The entry of System 3, however, changes this dynamic. Tasks typically requiring System 2 (thinking, planning, creativity) can now be outsourced to AI systems with far greater efficiency and reliability. This shift challenges the traditional Two-System Model for cognition.
Here’s what’s likely to unfold:
As technology advances, System 3’s responsiveness and capabilities will grow exponentially.
Continuous accessibility via mobile devices, smart glasses, voice interfaces will drive habits around its usage.
When this new behavior becomes a habit, we’ll see a shift from the conscious, regulatory paradigm of System 2 to the sub-conscious, automotive-reflex paradigm of System 1. For example, after enough practice, driving a car, playing guitar, etc become part of our instinct and we don’t need the System 2 to engage.
Eventually, direct interaction between System 1 and System 3 will emerge, bypassing System 2 altogether for many complex cognitive tasks.
Let’s use an example to understand this better. Consider a user texting their crush:
System 1 responds to a stimulus with emotional highs (butterflies)
System 2 formulates response strategies.
Anxiety triggers System 2 to evaluate System 3 for possibility of better results
System 2 evaluates the all possible response strategies and selects the best one (often favoring the AI response due to its superior quality).
Over time, when users cycle through these steps enough times, habit formation causes this process to short-circuit, stimulus leads directly to sending the AI response without System 2’s involvement. This marks a fundamental shift: System 3 integrates into human cognition.
Understanding System-3!
System 3 represents a software upgrade, complementing Systems 1 and 2 in daily problem-solving. While slower than the other systems, it possesses infinitely greater data-processing power, memory, and reliability. (Systems 1 and 2 are dependent on memories/exposure for data, limited body energy for processing power & hormonal regularity for performance consistency).
While empirical data is missing, a short conversation with ChatGPT power users will reveal green shoots of this hypothesis. For example
College student are simply copy-pasting AI responses for their essays
Many dating app users copy flirty responses from AI-widgets to text matches
Employees are directly using AI-crafted messages in their emails
Instead of reflecting on their day, most ChatGPT users are asking it to analyse it for them.
Creative folks are asking AI for inspiration, instead of using System-2 for imagination.
We are nearing a world where System 3 rivals System 2 outright, becoming equally indispensable for cognitively demanding tasks.
And since we are essentially a collection of biochemical processes, by the Principal of Least Effort, our brains will increasingly default to System 3 to conserve energy and optimize outcomes.
Implications for Products!
For the first time in history, companies can directly influence users’ cognitive processes. It is obvious that ads will find a new home in such AI systems and will be far more persuasive than traditional ads. For example, imagine ChatGPT suggesting sponsored therapists after you confide in it about personal problems.
An even more promising opportunity lies in creating tailored System 3 solutions for each user. When a given AI system can handle most cognitively complex tasks for the user, with the right positioning, it has the opportunity to become a user’s System 3.
Consider this:
As per a recent report by HBS, the biggest ChatGPT use case in 2025 has been emotional support, where ChatGPT helps users reflect and provides insights unique to their personality. But ChatGPT has always been positioned as an assistant or a better Search Engine; its branding revolves around being a technically superior, utilitarian solution.
A real System 3 to every user might have to change this positioning. Imagine an AI system positioning itself as “your alter ego,” “your second brain,” or “your inner voice,” with the entire UX reinforcing the theme that it is not a separate assistant, but is actually a part of your cognitive machinery.
Such systems should begin by targeting high frequency, emotionally resonant, and cognitively complex tasks like:
Helping users vent about their problem & get unique reflection insights
Helping users with 2nd opinions on all personal issues and decisions
Helping users in their daily conversations with friends, family, relationships, etc
The Future!
As we stand on the brink of this cognitive evolution, one thing is clear: the way humans think, decide, and relate to their own minds is undergoing a profound transformation. Whether this unlocks unprecedented human potential or deepens societal dependency on technology will depend on how consciously we adopt and design this new cognitive layer.
Till then, there’s a real chance for startups by tapping into this emergent opportunity.
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