[POD] Human beings are bad at decisions – why? Psychologist Annika Strömsten answers

Do human beings tend to be irrational in making decisions? If so, why? And what can we do about it?

In this pocast Wenell Partner Annika Strömsten is interviewed on the HAAARTLAND POD, a podcast run by HAAARTLAND, a big data company helping SMBs succeed with their marketing efforts.

Transcript

Welcome to the HAAARTLAND Pod. I’m Niklas Lohmann. With us today we have Annika Strömsten, licensed psychologist and partner at Wenell.

Annika, you work with making leaders better and teams cooperate better. Today’s subject is decision making. How rational or rather irrational we are when making decisions, and the stepping stones for this is. I will say beforehand that I heard you make an excellent presentation where the crowd was really amazed by how irrational we are. So the stepping stone for this conversation is the presentation you held. The first thing you talked about were System One and System Two.

Yes, System One and System Two are ways to describe how our brains work. It’s not physiological, it’s more a way to describe how System one is the more immediate reactions—gut feelings, if you want—and System Two  is more reflecting, analysing how we perceive things. So both those two systems are needed.  But the thing is how we use them and when we use them.

Could you say that the first system is more reptilian, you react and things go very fast, and System Two is more “human”.

That is a good way to describe it. It has developed during the years. In the beginning, when we discovered we can hide water in a couple of days or weeks later. It involves our frontal lobe and it involves thinking much more than System One, which is more immediate reactions, as you say.

To me it’s a bit spooky, because it’s almost like two persons living in the brain, or at least two really different characters.

Yeah, yeah, you can say that. And sometimes there’s a conflict between those two guys. For example if you sit in an open landscape and you’re gonna focus on your work. maybe there’s a lot of distractions, and then you have to use your System Two to concentrate on your task. But you should actually not try to use System Two like that. It involves too much, far too much energy to use it like that.

So is System One the more reptilian system pulling you away?

Yeah, exactly.Because you’re noticing. Someone is saying something, maybe it’s about me. Those things.

Maybe it’s a huge elephant moving towards me, from when we were in the Stone Age. So you’re saying that the systems consume different amounts of energy?

Yeah, exactly, They think that we can use System Two in an efficient way for three or four hours a day, so you should use it when you really have to and not otherwise. And for example, people say that in the morning when they have breakfast, when they plan their day, they have you know get their kids ready for school. Then, if I can remove some things in the morning then I can focus and just let System One work along the way. Because we need that, a lot.

Some routines are actually good. You can use System One and that is a low cost thing but when does it brome dangerous. Is it when you should be doing System Two things but you are using System One. When does that mix up the decision-making?

One problem is that when you use System One when you should System Two, because you don’t have the energy to reflex, to analyse. So you just feel that, I’ll do this or something  that you haven’t really thought of.

So you’re making an investment decision out of stress.

Yes.

Or you’re just fed up and you should really shut up and reflect so you don’t let the reptilian brain go.

That’s a problem that we all face a lot. It’s a bad thing to use System Two when System One is enough. You don’t have to use all the energy of System Two. So it’s the other way around as well, yeah.

Interesting. Also, in your lecture you talk about  when you’re being… there’s an abundance of — we know this at Haaartland for sure —  we know that there’s an abundance of information. You talked about being an information junkie, and the observations that psychologist have made there.

Yeah, you can call it information junkie. It’s about, you know, that we seek more and more information. And nowadays we have all the opportunities with our smartphones and so on, and when we have the opportunity, we always want more.

We continue looking.

Yeah, we continue looking all the time. And people, studies show, we check our  smartphones ninety times an hour. That’s quite a lot, when you think about it. So constantly this input of information. And the thing is, information should be a good thing when you make decisions, right? The problem is that we tend to not use it.

So we’re looking, we have the information but we’re not using it in our decisions?

Exactly. And that is because when we seek information we filter it. We have biases, for example confirmation bias, and that means that when we seek information, we pick the part that fits us. For example if I strongly believe in this material and we’re gonna build this material out of this type of glue, then when I seek out the information I just see all the positive data.

You’re kind of seeking an affirmation.

Yes. So that’s a problem, seeking information and not using it. And also of course, the seeking activity itself is reinforcing it feels like “at least I’m doing something, I’m working hard, I’m busy”. That’s also something. It’s part of the problem.

It’s a feel good thing.

That would also be an accelerating problem with all the cloud services and every process being digital and therefore also giving feedback.

Definitely. Within an organisation I think that other people, when they see that you seek information — maybe you do some graphs and outlines and you describe what you see and people see that and goes “oh you’re really working hard here. But they don’t do a follow-up to see  if you really use the data. Sop that’s a problem as well.

Another point that was interesting was Yesterday’s you’ve talked about this filter of the past this has worked or it hasn’t worked before, so this ought to be exactly the same but the situation is of course new.

Exactly. For example, one manager told me that “last week I used the same things as I always do when I meet a new group of people , it didn’t work this time”. And he was astonished because he tend to use what has worked before of course —  and we all do that. We use the same jokes or ways of connecting people and that might be a mistake, because of course the situation has changed, and the thing is that we invest time, money perhaps, prestige in what we do  , and we really want to keep that and  not feel that we’ve done something in vain. Without succeeding. So that’s a problem.

The person is getting into a situation and has already decided really on the outcome, what should work and what shouldn’t work and is not open to weighing in all the factors, and to having an open mind in that situation. i can see it in my own behaviour, of course , that it’s a rational thing to learn, but then you have to be open, and that demands energy.

Exactly. It demands energy. And you have to behave differently and we’re very reluctant to do that. We  like to do what we have done before. We like old habits,  things we recognise before. That’s how we work. And that’s a way of rationing the energy as well. Like we talked earlier with System One. Of course, in a way it’s rational, but  the thing is you need to know when to use new data. When to behave differently. Not always doing what you have been doing before.

You really have to be aware of the two systems working together.. In your lecture you also talked about Relativity. And I thought this was extremely interesting. I’ve fallen into this trap many times where you walk into a store and you have some kind of vague idea about what you should buy and what’s a reasonable price point. And all of a sudden they have moved you up the ladder in a retail scenario. You’re now paying much more and you’re paying much more than you thought entering the store. So why does this work, and what is the rationelle about all this.

Yeah, it’s interesting because we’re always there not thinking about it, the relativity is about… Well, the brain has to measure things all the time, right? We have to decide is this good or bad, am I happy or sad, is this good enough? And the way we do that is that we have to have something to compare it with. Is this good or not? Is this cheap or expensive? So, since we don’t have any absolute measurements in our brains….

We have to get reference points.

Exactly. So that’s how it works with prices when we decide is this cheap or not? We compare it. Did I get a good bonus? It depends on what you got. So if I see it as good then. What about my house? Is it a villa, is it woeth one million then maybe I’m very pleased with it,   because it’s a good thing. But if others’ houses are worth five or ten million then maybe I’m not pleased. It’s a way of   judging my perceived status that affects if I’m happy or not, if I’m content.

I don’t remember the exact phrase but you seek always a middle  or a balance point. You will not take the highest, you will not take the lowest price but there’s a balance point. And of course, if you set up a reference point you can trigger a balance point for anything.

You can use it to steer people, yeah, definitely. Good salespeople do this a lot.

Another thing you mentioned was that everything that happens happens in a social context. There are many forces here that pull you in many directions. So what about that?

Yes, if you think about the human brain, it has developed through social interaction during all these years. And that’s a way of judging is this good enough do I get a response from you. So that is a thing we care a lot about. What people think about us. And we’re very afraid of being left out. It’s the same area in our brain as pain, to be left out.

To not be part of the group?

Yes.

Because it’s so crucial to survival.

Yes, that’s why.Being part of a group is very important so of course that affects our decision making as well. If you tell me something, and everybody seems to agree, that’s very hard for me to say. “frankly I don’t understand or I don’t agree with you.” It takes a lot to do that, yes. So we tend not to. We tend to agree. When we do brainstorming for instance we’re much less productive if we’re in a team than if we sit by ourselves first  and brainstorm, and then share.

Present to the team.

Yes.

Is it because the quality is lower or we don’t get as many ideas?

Both aspects, actually. So we tend to value and be afraid of not have a proposal that maybe you don’t like that. So we tend to be less productive, yes.

Now we’re moving a bit into solutions, but if you look at productive groups what have they mastered in this sense?

Well, there’s three things. One is the there’s hire someone that is different from yourself. We tend to do the opposite. We tend to hire people that look exactly as we do ourselves. The second thing is to listen to other people’s opinions, by using listening techniques. And the third is to talk about how we work together well, what do you say, this meeting has gone on for two hours and we have been discussing this and this. And I’ve noticed that this topic hasn’t come up. We haven’t talked about how we work together. So those three things is something you can do to improve teamwork.

It’s interesting because  one if the things that come to miy mind when you talk about this is start-ups and  that they’re agile and you have these stand-ups. it’s a democracy and everybody can stand up and talk and say this is what I think.  That ought to be an important task for a leader or a group that is cooperating how  we should we actually talk. What is the dialog form that we should employ to safeguard that we can be smart together.

Exactly, yeah, definitely. And also how to receive negative or critical information or points of view. I imagine that’s important  in a start-up.

Yeah, definitely, you are  everybody nowadays at least are talking about putting up a hypothesis and  have the customer respond via data or actual behaviour on something and then get the feedback in. But I think most would agree with that you feel thisthe ingrained feeling inside you that I know how things will be and  and so on. And the fear that we will be proven wrong, because in most cases we are wrong.

So when you are talking with groups or individual leaders about this, what’s the reaction you get when you talk of how difficult this is, how many programs are running in our heads that we’re not aware of?

That was a good question. People react differently, but one of the common reactions I get a lot is “Wow,  we’re not aware of this. And actually that is a big point that  we’re blind to our own blindness, and that of course makes it even more  difficult to do something about, because with there in it  and constantly working but we’re not aware of it.

To go back to the beginning of this pod, there are actually two really strong systems and they’re really strong on their own merits and the should be used correctly, and so on but if you look at this how could you actually deal with this. We’re blind to our own blindness, but how can we actually practice to get better, to master this.

I think the most important thing is to decide when at which moment is it most important to use the data I have, and not my intuition or gut instinct because we can’t do it all the time, but when is it most important and when we do that we do it in a systematic way, using the data. It could be an interview with someone you’re going to hire. you could do that in a systematic way. And it could be something else, because we have to pick our fights, so to speak. We can’t do it all the time. And one other thing is  one American psychologist who is very very famous in this area is Daniel Kahneman, the American psychologist,  and he said that whenever we can replace human judgement by a formula we  should at least consider it. So yeah. That says a lot. When it’s possible to really base our decisions on data, we should. While the rest of the time we have to sort of accept that it’s part of being human.

We are not perfect. Sometimes we react but sometimes we should go for the deluxe versions of who we are.

Thank you, Annika Strömsten thank you for taking the tie to explain how difficult it can be to make rational decisions.

Thank you.