The shaky foundations on which we act

In any given situation we assume that people, including ourselves, will act sensibly. But that is not an assumption on which we can rely. We live our lives and make our decisions on much shakier foundations than reason and good sense. It is important to understand that people seldom think logically and therefore very often do not act rationally.
The long testimony of history, and the recent researches of behavioural scientists, clearly indicate that the cool exercise of logic is only one influence in how people think and therefore act. There are other influences at work which are all too often more powerful.

●    There is fear of feeling regret.  Too frequently we pass up benefits well within reach to avoid even a small risk of feeling we have failed and that people  will think less of us.

●    We are prone to cognitive dissonance: holding a  belief at odds with the evidence, usually because the belief has been cherished for a long time. This is all         too common as a sentimentalist and traditionalist like myself knows very well.

ian on sunday●    There is what is termed anchoring. We are overly influenced by outside suggestion even when we should be quite aware that the suggestion is being  made by someone who is very likely not as informed as we are. Consultants from abroad depend on anchoring for the prosperous living they make.

●    We all suffer, some badly so, from status quo bias.  People are willing to take much bigger gambles to  maintain the status quo than they would be to
establish it in the first place. Give the same crystal glass at random to some people in a group, then ask those who have the glass their selling price and those     who don’t their buying price: the average selling  price will be considerably higher than the average price offered.

●    We compartmentalize, we do not look at the big picture. We make decisions in one particular mental compartment without taking account of the implications in other compartments.

●    We are persistently over-confident. Asked to answer a factual question and then asked to estimate the  probability of the answer being correct, people typically overestimate this probability.

●    A very human habit is magical thinking. We vaingloriously assume we have greater influence over events than is the case. You cover-drive an excellent out-swinger from Dale Steyn to the boundary one time and become convinced that you are a highly skilled batsman rather than just a fortunate one – with dire consequences.

●    We are very vulnerable to hindsight bias. Once something has happened we over-estimate the extent         to which we could have predicted it. Closely related         to this is memory bias. When something happens we easily persuade ourselves that we actually predicted it, even when we certainly did not.

●    Finally, of course, we are emotional. Above all, millions of years of evolution have hard-wired the  brain’s fear circuitry so strongly in place that it quite  overwhelms the more recently evolved reasoning faculty. This is why the fear of terrorism after 9/11 paralyzed good sense in so much that was decided in paranoid America in its aftermath.

Other emotions also prevail over pure logic. A famous experiment demonstrates emotion in play. It is called the “ultimatum game” in which one player, the proposer, is given a sum of money, say $100, and offers some portion of it to the other player, the responder. The responder can either accept the offer, in which case he gets the sum offered and the proposer gets the rest, or reject the offer in which case both players get nothing. In experiments, very low offers (less than 20% of the total sum) are often rejected, even though it is rational for the responder to accept any offer which the proposer makes. Responders seem to reject offers out of sheer indignation at being made to accept such a small proportion of the whole sum, and they seem to get more satisfaction from taking revenge on the proposer than in maximizing their own financial gain.

Anyone thinking that politicians, businessmen, husbands, wives, investors or bankers, poets or pastors, scientists, beggarmen or presidents, Nobel prize-winners, tinkers, tailors, soldiers, you, me or anyone else will think straight and act accordingly, please think again and act accordingly – if you follow me.