Decisive Moment
   - How do we make decisions?

      by Jonah Lehrer.

      Amazon Review. June 26th 2010 by Simon Laub.

Amazon review: 4 stars out of 5.

Making good decisions is something of a black art. It takes years of practice, and still it can be
quite difficult to explain the mechanics behind it. In the end, our best decisions are a finely tuned blend
of feeling and reason, where the precise mix depends on the situation.
And with Jonah Lehrers book ''The Decisive Moment'' we become a little wiser on exactly how
the brain makes up its mind.
Still, when there is so much to learn, obviously, one book can only take us so far. But this book is a good place to start. And takes us through at least some of the issues involved
in human decision making:
a) Limbic impatience.
b) Framing.
c) Loss aversion.
d) Mental accounting.
e) The anchoring effect.
f) Rational vs. emotional
processing.
g) Outsourcing of decisions.

Neural learning:

And in order to improve our understanding - We must first understand that we are in for a learning experience. We can not just praise ourselves for our current understanding.
Here we are just like kids - I.e. the problem with praising kids for their innate intelligence - is that it misrepresents the neural reality of education. It encourages kids to avoid the most useful learning experience, which is learning from mistakes. Unless you experience the unpleasant symptoms of being wrong, your brain will never revise its models. Before you can be right, you will be wrong. There are no shortcuts for this painstaking process.

Limbic impatience

Understanding the brain circuitry of temptation is one of the practical ambitions of scientists studying
decision making. Jonathan Cohen, a neuroscientist at Princeton University, has begun to diagnose
the specific brain regions responsible for our attraction to credit card and subprime loans.
Putting people inside a fMRI machine he could see that when subjects contemplated long term
consequences for their actions, rational planning areas of the brain, such as the prefrontal
cortex region, were more active. But when subjects thought about satisfaction here and now, brain
areas associated with emotion were more active - such as the midbrain dopamine system and
nucleus accumbens. Cells that tell a person to take a morgage (he cant afford) and run up credit
card debt, damned be the future.
I.e. Cohens study locates the neural source for many financial errors. When self control breaks down,
and we opt for rewards we cant afford, it is because the rational brain has lost the neural tug of war.
The emotional brain is very impatient. When it wants something - it wants it now. And sometimes
this really isn't the right decision.

Framing

People are more likely to buy meat, when it is labelled 85% lean, instead of 15 % fat.
And twice as many patients opt for surgery, when told there is an 80 per cent chance of survival,
instead of a 20 percent chance of dying.
Inside the fMRI machine one can see an activated amygdala whenever a person thinks about losing something. So, framing a question in the direction of loss activates the amygdala and warps the decision towards not taking risks.

Financial investments and loss aversion

When markets are booming, investors keep increasing their investment. Not to invest is the same is waving goodbye to a lot of money. And then - just when the investors are convinced that the buble isnt a buble - the buble bursts.
According to Lehrer: Since the market is a random walk, the best solution is actually to pick a low-cost index fund and wait. Dont fixate on what might have been or obsess over someone elses profits. Indeed the passive investor who does almost nothing outperforms the average active investor by nearly 10 percent.
Still, one should be willing to take risks. Since 1926, the annual return on stocks after inflation has been 6.4 percent, while the return on treasure bills has been less than 0.5 percent. Then why are low-yield bonds so popular?
According to Schlomo Benartzi the key is loss aversion. Investors buy bonds because they hate losing money, and bonds are a safe bet.
So, sure - bonds is a well- intentioned strategy. But also misguided - when the fear of losses make investors accept such a measly rate of return.
Indeed, loss aversion makes us irrational when it comes to evaluating risky gambles.
In a brain study by Damasio and Loewenstein - people, with intact emotional brains, dont invest as much, as would be the rational thing to do - because of loss adversion. People are wired to dislike potential losses. Content to sacrifice profit for security. With the willingness to invest almost non-existing just after a loss. The pain of losing to fresh. Neurologically impaired patients on the other hand, who dosn't experience the full emotional sting of losing, actually perform better than the normal patients. As they are more rational in realizing that investing is actually the best long term strategy (at least in the Damasio & Loewenstein experiment).

Mental accounting

People tend to think about the world in terms of specific accounts. It helps us think faster,
but unfortunately, it also introduces new errors.
Richard Thaler, economist at the university of Chicago, has investigated mental accounting at work:
When he asked people: If they would save 5 dollars on a 15 dollars calculator by driving 20 minutes
to the other end of town - 68 percent said yes, they would do that.
However, only 29 percent would drive 20 minutes to save 5 dollars on a 125 dollar leather jacket.
The same principle goes for luxury hotels charging 6 dollars for a can of peanuts etc. Inside a larger budget
it doesnt matter - According to Thaler: ''We have a slow, erratic CPU, and we are always busy with other
stuff. The prefrontal cortex can only handle about seven things, so we have to bundle things in order to make
life manageable''. We dont have the computational power to do it better than this !?
Indeed, to much information is a huge distraction. As the brain has a lot of trouble ignoring irrelevant information.

The anchoring effect

Is about the brains spectacular inability to dismiss irrelevant information. In the United Nations game (first demonstrated by Daniel Kahneman) people are asked to estimate the percentage of African countries in the United Nations.
Before people guess, a random number is generated. People who see high numbers on the random number generator (-- fully aware that it is indeed a random number with no connection to the question --) generate significantly higher guesses for the percentage of African countries in the UN, than those who see lower numbers. Being exposed to extra, irrelevant information is indeed a distraction!
According to Herbert Simon: A wealth of information, creates a powerty of attention.

Rational vs. Emotional processing

So, a lot of the extra information just gets in the way. And often people can perform much better with less
information. Another problem is our bad understanding of when we are doing emotional reasoning,
and when we are being rational. Finding the right balance, where our emotional centers handles the
enormous complexities of daily life and rational centers help guide the emotions - isnt all that easy.
Instead, people can easily fall into the trap of spending to much time (with their rational centers) on thinking
about unimportant minor things. Ignoring that, the prefrontal cortex isnt a place that can handle to much
complexity by itself.
Loss aversion and limbic impatience is the other way around, with too much emotional control.

People also tend to confuse what decisions are actual rational decisions and what are emotional decisions!
It goes back to Kant. Where Kant and other philosophers thought that morality were based on the rational
brains thinking. It turns out not to be the case. Confronted by ethical dilemmas the unconscious (emotional)
mind generates an answer, which it then interpreted by rational brain centers.
With the human ethical decision system in the hands of the emotional subconscious system, what the
rational system actually does is working like a lawyer. It makes the emotional reaction seem reasonable
(Psychologist Jonathan Haidt has invented some rather startling examples that illustrates this - sibling sex, dog eating families,
etc. All demonstrating that emotions have decided what is right and wrong long before rationality have had
a chance of stepping in).

And that human behaviour isnt rational should come as no surprise.
Take altruism. It feels good to do acts of charity. From the perspective of the brain it is much better to give
(to the group) than to receive. People are programmed to care about each other.
And feel each others pain. Sympathy is one of humanitys most basic instincts. The brain is filled with mirror
neurons and brain areas that can theorize about other minds.
Same thing goes for monkeys - in one experiment with rhesus monkeys they would receive food by
pulling a chain. But with a terrible consequence - a separate monkey in a different cage was then given a
painful jolt of electricity. All the other monkeys saw what happened.
- And all the other monkeys were willing to settle for less food, as long as their fellow monkey wasn't hurt.
Some monkeys actually stopped pulling for food - Starving themselves for many days, so that the monkey
they didn't know wasn't hurt.
Hardly, rational monkeys?

Outsourcing of decisions

Economists also assume that humans are more rational than they actually are.
In a typical line of reasoning they assume that shoppers do a rational cost benefit analysis of a certain
items price and expected utility.
But studies have shown that it isnt always the case. Instead, it has been demonstrated that the brain
outsource these decisions to the emotional brain: The nucleus accumbens (Nacc) is activated according
to our desire for a particular object. And the insula produces aversive feelings when we think about the
amount of money the item will cost us. By measuring the relative amount of activity in each brain center,
scientists could predict the shoppers decisions. Apparently, even before the shoppers knew what they
would do. Pleasure vs. pain tells you when you want to buy.

The default state of the brain is indecisive disagreement.
Various brain parts are constantly insisting that other parts are wrong. Making up your mind is all about
ignoring annoying fears and nagging suspicions.
Still, the brain should keep on tracking dissonant data - Failing to respond to dissonant data can lead
to disastrous results. According to Jonah Lehrer, we should force ourselves to think about data that
disturbs our entranched beliefs. When we start censoring our minds, turning off those brain areas that
contradict our assumptions, we end up ignoring relevant evidence.
Sure, but it is obviously so much easier not to think things through, especially with limited
computational resources.

In a final piece of advice concerning good decision making, Mark Jung-Beeman has shown that
people in a good mood are considerable better at solving hard problems, than people who are cranky
or depressed. He speculates that this is because brain areas associated with executive control arent
preoccupied with managing emotional life. Happy people aren't spending cognitive resources on why
they are happy.
And complex problems needs all the resources they can get. According to Lehrer: Use the
conscious mind to acquire all the information needed for a decision, and then go on holiday while
your unconscious mind digest the information. Thats the smart way to make decisions.

-Simon

Simon Laub

Amazon: [1] Blogspot: [2].


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