Emotions and Decision Making: Five Steps to Improve Your Process
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After considering the importance of emotions and how they influence our decision making, the logical question to ask is, What can we do about it? What steps can we take to improve our decision making?
1. We are not perfect! Let’s admit it.
To mitigate the effect of emotional and cognitive biases, we first need to acknowledge them. We are more prone to these shortcomings than we like to think. And Aristotle wasn’t exaggerating when he said, “Knowing yourself is the beginning of all wisdom.” Awareness helps us question our thought processes and engage the System 2 part of our thinking self that helps us channel our logical “Inner Spock.”
System 1 and System 2 thinking form the two pillars of the conceptual decision-making model popularized by Daniel Kahneman in Thinking, Fast and Slow. System 1 processes are fast, automatic, and instinctual. They require little effort to engage and often represent the primary response to a decision problem, ranging from quick intuitions to more extreme fight-or-flight reactions. System 2 thinking helps to regulate System 1 emotions and intuition through effort and deliberation. Since they are more reflective, System 2 decisions tend to be made more slowly and generally lead to better outcomes.
The best defense against bad decisions is to increase our awareness of these psychological factors and thus fire up our System 2 thinking.
2. Embrace meditation and mindfulness.
Many star executives, CEOs, and politicians — from Apple and Bridgewater founders Steve Jobs and Ray Dalio, respectively, to US congressman Tim Ryan — have long practiced and vouched for the positive effects of mindfulness and meditation.
Mindfulness and meditation have now gone mainstream in the corporate world. Apple and Google, for example, have introduced mindfulness training courses and practice tools to help employees relieve stress and improve concentration.
Extensive research in neuroscience demonstrates that meditation and mindfulness help regulate attention, emotion, and self-awareness, which lead to increased physical and mental well-being. A series of studies have also confirmed that they improve individual decision-making ability in varied fields by increasing our awareness of those internal thoughts, feelings, and attitudes that underlie our decision-making processes.
Not sure where to start? These meditation tips for beginners are a good jumping-off point, and there is plenty of excellent material for those willing to delve deeper. Of course, like most worthwhile endeavors, meditation and mindfulness require daily practice to master. But an investment of just 15 minutes each day is well worth the effort.
3. Keep a decision journal.
Memory is not a very reliable witness. It mostly helps you reconstruct an event rather than recall it.
So start reviewing your decision making in a decision journal. Record and detail your thoughts and analysis. Why did you choose a particular course of action? What were the factors that influenced you? Over time, you’ll begin to understand your process, what habits are recurring, what shortcuts you may be taking, and which of those shortcuts are productive and which are not.
A key challenge is not to fixate on poor decisions or adopt a negative mindset when things go wrong. Reframe these emotions as helpful and corrective feedback that is required for learning and improving.
4. Appoint a devil’s advocate.
Back in the 1600s, the Roman Catholic Church faced an interesting dilemma. As it considered candidates for sainthood, the Vatican had a hard time finding dissenting viewpoints to argue against a potential candidate’s elevation. Who would publicly and vigorously oppose the canonization of a presumed saint? Yet due diligence required someone to make the counter argument.
So the Vatican came up with an official position to take on the role of the opposition: the devil’s advocate. This not only gave the dissenting perspective sanctioned standing but also empowered the Vatican to seek out differing points of view.
Having a devil’s advocate can help your own decision making by forcing you to question your assumptions. Often what we take as a given does not hold up under scrutiny. Your devil’s advocate can uncover those blind spots and help you anticipate unforeseen challenges and obstacles. Their purpose is to encourage you to take into account information that you may have otherwise failed to consider.
Your devil’s advocate could be a trusted adviser or a friend, preferably one who cares more about you than your feelings. You can be your own devil’s advocate, but that requires a rigorous and fraught process to avoid building an autobahn of confirmation bias.
5. Work with a coach.
Coaching is one of the best kept secrets at Wall Street hedge funds. Coaches work with traders to help them keep calm and increase their awareness of their behavior in high-stress situations. Not all of us are hedge fund managers trading millions of dollars a day, but we could certainly use elements of coaching to help us improve our day-to-day decisions.
The coach’s most important function is to listen non-judgmentally and ask probing questions. They won’t offer any magical formula, but by encouraging you to externalize your thoughts, they can help you find the perspective that can lead to breakthrough ideas and solutions. You don’t have to engage a professional psychologist or other PhD to benefit from coaching. Simply a trusted friend or adviser will do. In fact, just talking to your rubber duck can provide some clarity. Computer programmers employ this approach as an effective de-bugging strategy. The very act of explaining a problem out loud can help find solutions.
To be sure, none of us will ever be able to completely filter out our emotions and cognitive biases. But by being mindful of them — indeed, by embracing mindfulness — we can reduce the toll they take on our decision making and help improve the choices we make for both ourselves and our clients.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.
Image credit: ©Getty Images/erhui1979
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