A common understanding is that people are generalization artists: they require far fewer experience to generalize their knowledge when compared to contemporary AI systems, i.e. deep neural network models. Here, we summarize evidence in favor and against this notion. We propose three stages, determining how people generalize. First, people must infer what aspects of an environment are relevant for a task. Second, they need to develop a strategy to solve it. And third, while repeatedly carrying out the task, mental representations required to solve the task change. Mechanisms in all three stages can decrease the correspondence between the structure of the actual task and how peoplesolve it. People use their lifelong experiences to constrain what features of a task are important, and they tend to start solving the task with a simple rule. On average, these decisions correspond well to natural circumstances. The true artistry of human generalization is therefore not a general ability to generalize well in any scenario, but to establish and revise efficient representations in the face of limited processing capacity.