Making Rational Decisions

In our pursuit of expertise and high performance, we understand that in our daily challenges, our ability to make rational decisions is a valuable skill. We employ forebrain analytical thinking to navigate our way linearly through what we believe should be an emotionless route to the best solution. We hold that emotions have no place in the decision-making process of rational human beings. This is what our western industrialised culture teaches. But what is a rational decision and are our ideas about the best way to solve problems working for us or against us? The study of human behaviour has shown us that rational thinking is not always as reliable as we think it is. Flaws in human cognition such as availability bias and conjunction fallacy have shown us that rational thinking can get us into trouble. It has also shown us that perhaps emotion is an important component in making the best decision possible. In this week's Sunday Letters article, I'm taking a look at how we can make rational decisions and how sometimes, what we think is rational is actually irrational, and if not irrational, certainly to our disadvantage.

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Rational Thinking Without Emotion

Elliot was a thirty-something father and husband, held down a well-paying executive position with his employer, and provided well for his family. But things began to change dramatically after he had undergone an operation to remove a benign tumour from the central area of his prefrontal cortex – that area of the brain primarily responsible for executive decision making and cognition.

The operation was technically successful, however, upon his return to work, his previous high performance began to decline. He could no longer seem to make rational decisions because he couldn't decide what was most important to do. A series of poor decisions turned into more dramatic ones and soon he was fired from his job. He had some savings and a severance package from his prior employer but he soon lost his money in a risky business venture and became bankrupt.

His private life also suffered. His wife divorced him, then he remarried, and soon after that, his second wife divorced him also. He had no home of his own, his financial situation was dire and to make matters worse, he didn't even qualify for disability benefit because there was no proof that his brain was not working normally. Standard neuropsychological tests did not reveal any significant pathology. Elliot’s cognitive abilities, his motor and linguistic abilities seemed not to be adversely affected by the operation some eight years earlier. He tested well on standard IQ tests of intelligence, his long and short-term memory and perception were intact. But the problems Elliott was experiencing clearly showed that something was wrong.

When Antonio Met Elliot

Doctors, family, friends, could not understand how when Elliott tested well on standardised tests of cognition, that his life had fallen apart so dramatically. In search of answers, he was referred to Neurologist, Antonio Damasio. Damasio writes in his 1994 book, Descarte's Error ¹;

The tragedy of this otherwise healthy and intelligent man was that he was neither stupid nor ignorant, and yet he acted often as if he were… The machinery for his decision making was so flawed that he could no longer be an effective social being.

Antonio Damasio, Descarte's Error

Damasio realised that perhaps it was not a deficiency or a malfunctioning intellect that was the cause of Elliot's real-life trauma, but maybe an emotional deficiency. Damasio put Elliot through a series of tests designed to measure his emotional reaction. Damasio exposed him to emotionally charged images of burning buildings, gruesome accidents, and people drowning and asked Elliot to report how he felt. Elliot stated that he remembered how similar images used to bring about strong emotions, but now he couldn't feel anything. He had no emotional response.

I began to think that the cold-bloodedness of Elliot’s reasoning prevented him from assigning different values to different options, and made his decision-making landscape hopelessly flat”

Antonio Damasio

Damasio's experience working with Elliot led him to conclude that the apparent schism between emotions and logic is illusory and unhelpful to our understanding of the human brain. Emotions, it seems, are crucial to decision making and reason, especially when it comes to personal values and social interaction. And while it seems clear that all too often heightened emotion can negatively affect sound decision making, Damasio posits that a reduction in emotion can be an equally important source of irrational behaviour.

Often we read, that the so-called emotional brain is an ancient, primitive area, over which the analytical prefrontal cortex of healthy functioning people can exercise control. To express oneself in a stable manner we must exercise control over our emotions. However, this idea presents an inaccurate view of the structure and functioning of the brain. Separate areas of the brain such as the prefrontal cortex, and amygdala – which is often called the brain's emotional centre – do not have sole control over decision making. Making decisions is a vastly complex process that involves many areas of the brain and body working in unison.

Rational & Irrational Decision Making

I wonder if we are at all capable of making rational decisions. Often we abdicate that responsibility to others such as doctors, economists and politicians as if their social position or education makes them any better at making rational decisions than the rest of us mere mortals. But this may be a poor decision in its own right. Consider the following example.

A 1986 paper by Robyn Dawes ² cites a newspaper article which reported a well-intended surgeon who advised 90 of his female clients whom he judged to be at “high risk” of breast cancer, to undergo a mastectomy when in fact they were at low to no risk at all. Despite his education and clinical experience, the doctor failed to interpret the statistical data correctly and subsequently ill-advised his clients.

This dramatic advice offered by an experienced and supposedly rational professional is not isolated. In a study by David Eddy ³ 100 doctors were asked to predict the incidence of breast cancer in women whose screening showed possible evidence for the presence of the disease. In consideration of the rarity of the disease (1% at the time), and other important data, 95 of the doctors estimated a 75% probability of the presence of cancer. The correct rate was 8%.

The problem here is that due to the amount of data that needed to be analysed, the doctors in the Eddy study had significant difficulty. Instead of thinking in terms of frequency; the number of times something will occur, the doctors were asked to think in terms of probabilities; the likelihood something will happen. An understanding of Bayesian Statistics which take into consideration base rates is what was needed.

Consider the breakdown of this scenario from Better Explained:

• 1% of women develop breast cancer (and therefore 99% do not).
• 80% of mammograms detect the illness when it is there (and therefore 20% miss it).
• 9.6% of mammograms detect the illness when it’s not there (and therefore 90.4% correctly return a negative result).

In tabular form, the probabilities look like this:

How it should be read

• 1% of people have the illness
• If you already have the illness, you are in the first column. There’s an 80% chance you will test positive. There’s a 20% chance you will test negative.
• If you don’t have the illness, you are in the second column. There’s a 9.6% chance you will test positive, and a 90.4% chance you will test negative.

Suppose you test positive. What are the chances you have the illness?

Here’s how to consider it:

• A positive means you're somewhere in the top row of the table, but it could be a true positive or a false positive.
• The chances of a true positive = chance you have the illness * chance test caught it = 1% * 80% = .008
• The chances of a false positive = chance you don’t have the illness * chance test caught it anyway = 99% * 9.6% = 0.09504

The table looks like this:

The chance of an event is the number of ways it could happen given all possible outcomes:

The chance of getting a real, positive result is .008. The chance of getting any type of positive result is the chance of a true positive plus the chance of a false positive (.008 + 0.09504 = .10304).

The chance of illness is .008/.10304 = 0.0776, or about 7.8%.

Read the full article here

Frequencies & Probabilities

Adults and children appear to judge frequency accurately and almost automatically. This type of cognitive processing appears to occur naturally. However, in calculating the probability of a thing happening, we don't perform as well. When the information in the above example was presented to the doctors in terms of frequency; 10 out of 1000 women, as opposed to in terms of probability; 1% of women, it led to 46% of the doctors giving the correct answer compared to only 8% when the problem was presented in terms of probabilities. What is interesting, however, is that 54% of the doctors still got it wrong!

Decision making can be the difference between life and death and although not every decision we make will potentially save or end our lives, it is prudent to be forearmed with the right information and know how to read it. We're going to get things wrong, but at least when we do, when we make informed decisions, we can take responsibility for the outcome. To place your fate in the hands of someone who you believe knows better than you, as per the above breast cancer example, we lose control over our own lives.

Regardless, in taking responsibility for our decisions, there are several almost certain flaws in our thinking that we must become aware of. Availability bias, Conjunction fallacy and framing effects are just a few of the blockades to our rational decision-making processes.

Availability Bias

Availability bias is a term coined by Daniel Kahneman and Amos Tversky ⁴ in their landmark 1973 paper on the judgement of frequency and probability. It identifies a flaw in human cognition that brings us to the often incorrect assumption that things occur more frequently than they actually do. Take the following example;

Here is a list of names. Read through the list then looking away, estimate the number of women's names to men's names. Don't cheat!

Did you notice the women's names were that of celebrity and the men's names were not?

Did you over estimate the number of women's names?

Most people who take part in this test estimate more women's names on the list in relation to men's names. This is because famous names in the above list occur in popular media more often than other non-famous names and are therefore more readily available in memory. What is actually occurring here is greater familiarity rather than greater frequency.

Those things with which we are more familiar we tend to estimate as occurring more frequently. As you may appreciate, the availability bias can cause us all kinds of problems, although for marketers seeking your pounds, shillings and pence, it's a beautiful thing.

The Conjunction Fallacy

The conjunction fallacy accounts for our propensity to believe that two events are more likely to occur together than separately. Consider the following two scenarios and decide which of the two proceeding statements are true.

John is 36 years old, single, outspoken and intelligent. In college he studied economics and as a student was deeply concerned with issues of discrimination and social justice and regularly took part in student demonstrations for sexual equality. Which of the following conditions is most accurate?

1. John is an accountant
2. John is an accountant and active in the social reform movement

In a later study by Daniel Kahneman and Amos Tversky ⁵ which looked at conjunction fallacy, 89% of participants rated option 2 above more probably than option 1 despite the fact that this is logically not possible.

Here's why;

John has many interests, so for argument's sake, let's assume from all the options available to him, there's a 20% chance he'll dedicate his time to the social reform movement. Let's also assume that he had more than one career choice open to him so there was a 20% chance he'd choose accountancy. The product of these separate probabilities (20% x 20%) accounts for a 4% chance John would be both an accountant and an active member of the social reform movement. So you can see the probability becomes smaller.

John would be proud of our calculations methinks.

The combination of both events occurring together in the same space and time is always less than each occurring independently. The conjunction fallacy accounts for people's idea that the greater the number of information elements, the more likely that complex situation will exist. The truth is that it is the opposite.

Framing Effects

Very simply, how a statement or question related to a given problem is phrased or framed, will influence the answers people offer. If people are told that a given surgery has a 70% success rate then they are usually impressed. However, tell them instead that that same surgery has a 30% failure rate then they will perceive it as risky. The information is the same, just delivered in a different way. How it's framed will influence how rational decisions are made.

One of the most remarkable framing effects is sunk-cost fallacy which occurs where people make decisions about current conditions based on what they have previously invested in the condition. During the 1960s, British and French governments collaborated on the development of the first supersonic passenger aircraft, Concord. Design and construction costs soared to the point where the project was no longer financially viable, however, both partners continued to fund the venture because they had gone too far in the project to close it down ⁶

Marketers too understand this power of framing effects and often take advantage of our limited awareness of our aversion to loss. Next time you see sales copy that tells you “don't miss out on this never to be repeated 40% discount”, you'll know to be on guard.

Final Word on Making Rational Decisions

Elliot, who we discussed earlier, had significant trouble linking an emotional response to everyday problems of work and life. The damage to his prefrontal lobe had irreparably interfered with the complex neuronal messaging sequence in his brain limiting his emotional response. In subsequent studies, it has been shown that Elliot's situation was not unique. Similar problems exist for others who have suffered prefrontal lobe damage and for those who are addicted to drugs and alcohol. Results suggest that risky decision making moves out from an inability to connect future consequences to current decisions and behaviour.

But poor decision making is not reserved for those with acquired brain injury or addiction. Healthy people like you and me make everyday decisions that are flawed often despite what the evidence would otherwise convince us to do. We are influenced largely by what we think we know and believe to be true and make judgements based on established automatic cognitive processes.

Despite our best efforts and attention to data, our decisions often produce poor results. I think, therefore, all you and I can do is to get into a good place emotionally, weigh up the possible outcomes and make the best decision we can.

Getting everything right the first time is fantasy and fails to account for the positive and negative aspects of life. Both need to exist for life to be balanced. If things don't work out we get to try again, that's where the exploration and growth happen.

1. Damasio, A. R. (1994). Descartes’ error: Emotion, rationality and the human brain.
2. Dawes, R. M. (1986). Representative thinking in clinical judgment. Clinical Psychology Review.
3. Eddy, D. M. (1982). Probabilistic reasoning in clinical medicine: Problems and opportunities. In Daniel Kahneman, Paul Slovic & Amos Tversky (eds.), Judgment Under Uncertainty: Heuristics and Biases. Cambridge University Press. pp. 249–267 (1982)
4. Tversky, A., & Kahneman, D. (1973). Availability: A heuristic for judging frequency and probability. Cognitive psychology, 5(2), 207-232.
5. Tversky, A., & Kahneman, D. (1983). Extensional versus intuitive reasoning: The conjunction fallacy in probability judgment. Psychological review, 90(4), 293.
6. Arkes, H. R., & Ayton, P. (1999). The sunk cost and Concorde effects: Are humans less rational than lower animals? Psychological Bulletin, 125(5), 591.