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Sunday, July 15, 2012

Decisions, Decisions

I have a couple of famous problems for you to solve today. I know, some of you hate puzzles and challenges, but please, just play along with me. Besides these are not very complicated questions to ponder. Consider your answers for both problems before reading any further.

1. A bat and a ball together cost $1.10. The bat costs a dollar more than the ball. How much does the ball cost?

2. You toss a coin six times. Which is more likely?

a. heads-heads-heads-tails-tails-tails
b. tails-tails-heads-heads-tails-heads

We all make bad decisions sometimes. I'm sure you've made one in your life. In some contexts, to a certain extent, psychologists know why. Much research on the subject was done by Daniel Kahneman and Amos Tversky, who shared the 2002 Nobel Prize in Economics for their models of how intuitive reasoning is flawed in predictable ways. Kahneman is now professor emeritus at Princeton University, and Tversky died in 1996.

The two problems you worked were from Kahneman and Tversky's research. They found humans are not too bad about making basic judgments. In general, they did well at lower-level, nonlinguistic tasks, but with higher-level probability problems involving words, people didn't fare so well.

So, why don't people seem to reason well when dealing with higher-level probability problems?Psychologists believe the human mind has two systems for decision-making: intuitive and reasoning. The intuitive system is emotional, fast, automatic but slow-learning, while the reasoning system is emotionally-neutral, slow, controlled, and rule-governed. Neither, of course, is always right, but there are certain simple problems that reveal flaws in intuition. (Elizabeth Landau, "Why Your Brain Can't Always Make Good Decisions," CNN Health, January 12 2009)

Let's get to the answers for the questions above.

Problem #1: Your intuitive system may quickly tell you that the ball costs 10 cents. That would be an easy solution, but it would also be incorrect.

In fact, if the ball costs 10 cents, that would mean the bat costs $1.10, so the two together would be $1.20 -- violating the first piece of information you had. A little algebra, or a little more thought, reveals that the ball must have cost 5 cents. Were you guilty of trusting your intuition and missing the answer?

Problem #2: Now, think about tossing a coin six times. Which is more likely: heads-heads-heads-tails-tails-tails or tails-tails-heads-heads-tails-heads?

You might think that the second one seems more random, so it's more likely. That error would fall into what Kahneman and Tversky would call the “representativeness heuristic” or, more specifically, the misconception of chance -- in other words, people tend to go on their intuitive notions of what an unrigged coin toss should look like rather than actually calculating. If you think about the probabilities of each, you'll realize the two combinations are equally likely.

What Affects Poor Decision Making?

Poor decision-making may stem from the subconscious ways people trick their brains to make choices that they later realize are completely wrong. Take, for example, the idea of a self-serving bias, which enables humans to see themselves as much better than they are. If 80 percent of people rate themselves as "better-than-average" drivers, it's clear that a large number of them are fooling themselves. (Robert Huebscher, “Why We Make Bad Decisions,” April 13, 2010)

Humans are also irrational in how they frame information, or fail to comprehend how the sources of this information may frame it to sway their opinions. Choices are remarkably susceptible to the manner in which options are presented. For example, most people are much more likely to undergo an operation with a reported 80 percent success rate than one with a reported 20 percent risk of death, even though these numbers represent the same level of risk. (Benedetto De Martino and others, “Frames, Biases and Rational Decision-Making in the Human Brain, Science, August 4 2006)

De Martino and colleagues asked 20 men and women to undergo three 17-minute brain scans while being asked to gamble – or not – with an initial pot of English pounds worth about $95. When told they would "keep" 40% of their money if they didn't gamble, the volunteers chose to gamble only 43% of the time. Told they could "lose" 60% of the money if they didn't gamble, they rolled the dice 62% of the time.

Their chances of winning the money were carefully explained beforehand, and participants knew the odds were identical. But the framing effect still skewed their decisions significantly.
The brain images revealed the amygdala, a neural region that processes strong negative emotions such as fear, fired up vigorously in response to each two-second (on average) gambling decision. Where people resisted the framing effect, a brain region connected to positive emotions such as empathy, and another that activates whenever people face choices, lit up as well, seeming to duke it out over the decision.
"We found everyone showed emotional biases, more or less; no one was totally free of them," De Martino says. Even among the four participants who were aware they were inconsistent in decision-making, "they said, 'I know, I just couldn't help myself,' " he says. It seems the brain's wiring emphatically relies on emotion over intellect in decision-making.

My Final Take

With so many decisions to make and so little time to make them, people often rush to judgment. An important decision requires a thorough inspection of all aspects of the subject, and this investigation very frequently takes quite a long time. Anything causing indecision must be re-evaluated with the understanding that perfection is impossible, but that making the most rational choice is wise.

Another problem is that many people do not realize they might be making a crucial judgment that might seriously impact their lives. These people take all decision making the same, even those with potentially great consequences. They buy into the idea of being able to correct endless mistakes and the dreaded “Oh well” attitude. People must be accountable for their own hasty bad thinking.

I think most people believe they are “good decision makers” within their own limited frameworks, and they overestimate their ability to make good judgments alone, without qualified assistance. So, they prefer to make judgments based on their often unreliable intuitions. Instead of pursuing a lifelong education and the valuable expertise of others, they become lazy and content to hold their own opinions despite inevitable changes all around them, and they believe the world itself is “wrong.”

And, without a doubt, too many let their emotions drive their choices instead of relying on controlled, rule-governed reasoning. How many lives are lost and ruined because emotion drives the actions of the moment? High emotions tend to increase the risk of making stupid decisions: Emotions cloud the issue while pushing people toward quick conclusions and hasty generalizations.

Emotional thinking and intuition cannot be trusted as people make important choices. Too many believe that the “gut” is the “brain.” Why else would the “take a chance” philosophy take preference over the “sleep on it” view of making correct vital decisions?

Keeping an open mind and continuing to learn is truly liberating. It allows humans to look at all sides of an issue while living a more productive life. These people also soon realize how dependent they are of others, others who will help them think and learn in new ways. Seeking wisdom requires interaction with folks who have “walked similar paths.” Others are essential to all. They help the individual fashion his or her own valuable, reasonable opinions.

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