A year ago today, my wife and I were in the process of moving into our new house. As many of you know, buying a house is one of the biggest decisions a person can make. The decision is so big, that many huge decisions are sucked up into its wake. What school district will we live in? What is our budget? How many bedrooms do we need? Are we okay with a fixer upper? How far away from your parents should we live? Any of these decisions by themselves would be considered big. I remember thinking, “How are we supposed to answer all of these?” This led me to the question, “How do we answer anything at all?”
Have you ever examined your decision making? I’m not asking if you have ever questioned a decision you have made, I’m asking have you ever questioned your entire process for making a decision? One thing many of you may not know about me is that I have a passion for neuroscience. I’ve read books, taken classes, listened to podcasts, and even named my son after my favorite neuroscientist. (I’m not sure if my wife knows this though). It turns out that not all decision making is the same. Your brain has two different strategies on problem solving that it runs concurrently and will often result in very different solutions. You likely already know this since the two different processes come out in our language; “I feel that we should buy a bigger house,” vs. “I think we should buy a bigger house.” Thinking vs feeling. One strategy is better than the other, but which one it is all depends on the type of decision to be made.
Let’s start with the seemingly obvious front runner. Thinking. Logic has to be the ultimate form of problem solving, right? Well, it turns out it has its limitations. In his book, Descartes’ Error, neuroscientist Antonio Damasio tells the story of “Elliot,” a patient he treated who had a tumor cut out of his brain. The resulting damage made Elliot incapable of feeling emotion, turning him into a real life Spock. Elliot approached each decision purely by logic and his life was destroyed. The simplest decisions, such as choosing a restaurant, would take hours. He would compare menus, seating charts, prices, parking availability, and was paralyzed by the process. Have you ever had analysis paralysis? Elliot couldn’t get the feeling of “OOH Tacos! Yum.” and move on with his day. From Elliot we can learn one of the limitations with logic. It’s slow and it doesn’t handle apples to orange comparisons well. Logic has another limitation which may be more problematic. It’s not an infinite resource. Logic breaks down when you are tired, stressed, distracted, or overwhelmed.
In his book How We Decide, Jonah Lehrer describes a Stanford University experiment in which volunteers were split into two groups. Each was given a number to memorize, and then offered a choice between fruit and chocolate cake. The vast majority of volunteers who had to memorize a two digit number picked the fruit, but for the second group, who had to memorize a seven digit number, the opposite was true. The additional five digits were enough of a mental burden to shut down reason. With reason down, emotion took over and guess what the emotional center decided? “OOH Cake! Yum…”
Understanding the limitations of logic as a decision making tool enables us to make better decisions. For small insignificant decisions with several variables, don’t overthink it. The vast majority of the decisions we make in a day do not have a significant enough impact on us to be worth a careful analysis, such as where to order lunch from. Furthermore, logical decision making is best done when well rested and not distracted. Given how prone to error logic is, we should always go with our gut right? Not so fast.
Imagine this, you are busy at work when suddenly you find the need to join several pieces of paper together. You reach for your faithful red swingline stapler and find that someone has taken it. On your way home that day, you stop by a store and find a stapler being sold for an outrageous price of $30. You do a quick search on your phone and see that if you drive ten minutes out of your way, you can buy the same stapler for $15. Do you do it? Do you spend the 10 minutes to get the stapler at half price? The next morning you come into a surprising windfall of money and drive to an Apple store to purchase a new MacBook Pro for $2,399. You do a quick search on your phone and see that if you drive ten minutes out of your way you can buy the same MacBook Pro for $2,374. Do you do it? Logically the decision is exactly the same; 10 minutes to save $15, yet emotionally they feel very different. That’s because of one of the limitations of emotional reasoning; it’s terrible at math. We already discussed another limitation. Remember the cake experiment from before? The cake was chosen because emotions favor short-term benefit over long-term gain. Simply put, our emotions are illogical. Loss aversion, gambler’s fallacy, and Sunk Cost fallacy, are just a few of the many fallacies that we are prone to when we let emotions take the wheel.
Once again, understanding the limitations of emotions as a decision making tool will help us make better decisions. Financial decisions, purchasing decisions, decisions involving math, determining risks are often best handled through logic. So what about the big decisions like, promoting an associate to partner, buying an office building, or, the decision that brought us to this, buying a house? Let’s use hiring as our example.
Knowing what you now know, which strategy do you think would work best in hiring? Money and math is involved, so it must be logic right? But then there is the problem with apples to oranges. Who is better, the paralegal with five years of experience, a 90% profile match on your assessment test, willing to accept the position for the posted salary, or the paralegal with 15 years experience, an 85% match on your assessment test, and is asking for an extra $5,000 a year. How much is an extra ten years of experience worth or an extra 5% match? If logic is no good here, how about emotion? “I had fun talking to you. You’re hired!” Are they actually competent though? Are they a short-term benefit for a long-term problem? If this is too hard, what if you just kept your current employee? Sure they are terrible, but you have worked with them for so long that all of that time would have been wasted if you fired them now right? If both logic and emotion have flaws, what’s the best solution?
A psychologist at the University of Amsterdam named Dijksterhuis has done extensive research into the psychology of purchasing which gets discussed in Lehrer’s book. Dijksterhuis has studied everything from the purchasing of cars, expensive art, furniture, down to choosing a new vegetable peeler. What he concludes is that you need data to be able to make a good decision, but too much data will overwhelm your ability to logically think through the problem. Dijksterhuis says, “The moral of this research is clear. Use your conscious mind to acquire all the information you need for making a decision. But don’t try to analyze the information with your conscious mind. Instead, go on holiday while your unconscious mind digests it. Whatever your intuition then tells you is almost certainly going to be the best choice.”
It has been a year since I purchased my house. My wife and I had done a ton of research, looked at school districts, discussed locations, number of bedrooms, presence of solar panels, and yes, even the distance from her parents. After all that discussion though, when we walked into this house we didn’t think about any of that. Our unconscious minds had been digesting those decisions for weeks, and our emotions said “Ooh pretty. I want it!”
Practice Building Coach
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
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