Money Quotes - How We Decide

The Money Quotes…

Emotion and motivation share the same Latin root, movere, which means "to move.”

Here was a computer that did nothing but measure what it got wrong. That's all it did. And it was as good as me.

The physicist Niels Bohr once defined an expert as "a person who has made all the mistakes that can be made in a very narrow field.”

Loss aversion is an innate flaw. Everyone who experiences emotion is vulnerable to its effects. It's part of a larger psychological phenomenon known as negativity bias, which means that, for the human mind, bad is stronger than good.

Instead of asking people if they want to start saving right away - companies in the Save More Tomorrow program ask their employees if they want to opt into savings plans that begin in a few months. Since this proposal allows people to make decisions about the future without contemplating possible losses in the present, it bypasses their impulsive emotional brains.

When the choice is framed in terms of gaining twenty dollars, only 42% of people choose the risky gamble. But when the same choice is framed in terms of losing thirty dollars, 62% of people opt to roll the dice. This human foible is known as the framing effect, and it's a byproduct of loss aversion …

As the psychologist George Miller demonstrated in his famous essay "The Magical Number Seven, Plus or Minus Two," the conscious brain can only handle about seven pieces of data at any one moment.

…a professor of marketing at Cornell, used a bottomless bowl of soup - there was a secret tube that kept on refilling the bowl with soup from below - to demonstrate that how much people eat is largely dependent on serving size. The group with the bottomless bowls ended up consuming nearly 70 % more soup than the group with normal bowls.Economists call this sleight of mind mental accounting, since people tend to think about the world in terms of specific accounts, such as scoops of candy or bowls of soup or lines on a budget. While these accounts help people think a little faster … they also distort decisions.

Knowledge has diminishing returns, right up until it has negative returns.

…a few dozen people were each given $128 of real money and allowed to choose between keeping the money and donating it to charity. When they chose to give away the money, the reward centers of their brains became active and they experienced the delightful glow of unselfishness. In fact, several subjects showed more reward-related brain activity during acts of altruism than they did when they actually received cash rewards.
From the perspective of the brain, it literally was better to give than to receive.

Once people become socially isolated, they stop simulating the feelings of other people. Their moral intuitions are never turned on.
As a result, the inner Machiavelli takes over, and the sense of sympathy is squashed by selfishness.

…the problem with statistics is that they don't activate our moral emotions. The depressing numbers leave us cold: our minds can't comprehend suffering on such a massive scale.
As Mother Teresa put it, "If I look at the mass, I will never act. If I look at the one, I will.“

When making decisions, actively resist the urge to suppress the argument. Instead, take the time to listen to what all the different brain areas have to say.

The best decisions emerge when a multiplicity of viewpoints are brought to bear on the situation.

Bad decisions happen when that mental debate is cut short, when an artificial consensus is imposed on the neural quarrel.

It doesn't matter if your field of expertise is backgammon or Middle East politics, golf or computer programming: the brain always learns the same way, accumulating wisdom through error.There are no shortcuts to this painstaking process; becoming an expert just takes time and practice. But once you've developed expertise in a particular area - once you've made the requisite mistakes - it's important to trust your emotions when making decisions in that domain.

Alfred P. Sloan, the chairman of General Motors during its heyday, once adjourned a board meeting soon after it began. "Gentlemen," Sloan said, "I take it we are all in complete agreement on the decision here . . . Then I propose we postpone further discussion of this matter until our next meeting to give ourselves time to develop disagreement and perhaps gain some understanding of what the decision is all about.”

Paul Hebert
Managing Director – I2I
paulhebert@i2i-align.com
+1 864 . 286 . 6780
Website and Blog: www.i2i-align.com
Linkedin: http://www.linkedin.com/in/paulhebert
Twitter: @incentintelwww.twitter.com/incentintel

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Money Quotes - How We Decide

by i2i on Jan 01, 2010

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Money Quotes - How We Decide — Presentation Transcript