Making smarter decisions
Aktualisiert: 4. Feb 2019
Decisions, decisions, decisions. All day long. If we know what really makes us tick, we can improve our decisions. Be aware that your brain doesn’t always do what you want.
"I can get there faster by car," we decide in the morning. Half an hour later, stuck in a mega traffic jam, it dawned on us that we had actually decided against the train only for convenience. "The expert fits perfectly into our team, we’ll take him", and four weeks later we ask ourselves what we actually thought about hiring this troublemaker? "The performance of this fund is great, the industry is growing, I just have to invest my money in there" - a decision that basically we can't understand six months later after the 20% decline in the share price. And instead of selling immediatiely, we decide to stay in and increase the losses day by day.
How we tick
A lot of decisions, the whole day, the whole life. If any, then we still perceive decisions as a mix of factual thinking and intuition - but do we really know something about what goes on in our minds, in ourselves? "The brain doesn't always do what we want". This was the title of the business newspaper Wirtschaftswoche a few years ago. Although we imagine we would make considerations, make cost-benefit calculations, calculate probabilities. In fact, that's usually true. But the final calculation, the final decision often looks quite different - as we unfortunately usually only notice afterwards. See our examples from the beginning. Let’s therefore take a closer look at how decisions are made, what happens to us when decisions are made. And how we can make better decisions with this knowledge - and with mindfulness.
Making decisions "objectively"? Certainly not!
"Many different brain regions are involved in every decision-making process, which influence each other..." describes the Hamburg neuroscientist Thomas Donner in Spectrum of Sciencethe complex interplay in the brain. And then comes to a serious realization: Above all the "activation state of the cerebral cortex... determines the outcome of a decision at least as muchas facts" (!). In other words: While you think you decide "objectively" and make unbiased decisions only on the basis of facts, messenger substances such as noradrenaline influence your brain condition and thus the result of your decision. In Mindful Solutions Blog from October 2016we've seen this stuff before: "Noradrenaline levels drop to low levels during prolonged heavy stress.Therefore it comes to an ominous connection: high stress, tiredness and strong lack of concentration". And thus we decide completely differently, often more aggressively, impatiently, narrow-mindedly. That should give us a lot to think about in today's business world. Therefore: read on mindfully...
Our feelings always influence our decisions!
It is not only our thinking apparatus in the brain, the cortex, that is involved in decisions. As this in turn is very closely linked to the limbic system, our "emotional brain". Roughly speaking, the cortex is responsible for the evaluation of sensory input, of information thus and the limbic system evaluates emotions, which also goes back deep into the past and the experiences made there. Then our feelings whisper "something" to us.
This can be right, this can be wrong. Perhaps the "old" experiences are simply no longer relevant, then the feeling could lead us in the wrong direction of the decision. But perhaps, if the experiences are stored due to the very same situation, then the feeling could "warn" or strengthen us. So be cautious: do not rely just on feelings when making decisions. There can be a lot of things in there that don't belong to the point. Therefore one should be able to listen very carefully to oneself. The scientist Francesco Ginofrom Harvard Business School speaks of checking one's "emotional temperature" before making decisions. Means: do a mindful self-check.
Money and emotion
This is especially true for our financial decisions, even if we are professionals. Our relationship to money, to finances is strongly determined by our past and basically highly emotional (whether we notice it or not). And that's a good thing, we can make use of that. Because emotions are neither good nor bad, they are, quite soberly considered, only one thing at first: Messages! And we should be able to read, interpret, accept them. Only then can we use them as a valuable source of information for us, especially when making financial decisions. MINDFUL FINANCEtakes this approach as a starting point (much more on this will soon be available on a separate website of the "MINDFUL FINANCE INSTITUTE")
Being mindful is "smart"
If we want to convert these findings into practical knowledge, then we should do one more thing beforehand: to know the phases and processes of a decision-making process. INSEAD researcher Natalia Karelaiadealt with the initial hypothesis "Why Mindful Individuals Make Better Decisions” and examined the decision-making process in four phases. And in each of these phases we could already make catastrophic mistakes on the one side. On the other, however, we could already use our knowledge and the specific conditions in order to improve our decision-making quality by being mindful (see also "The 6 Principles of Mindfulness"). Because as a reader of my Mindful Solutions Blogsyou know: there is always the mindful solution, the mindful approach!
Phase 1 "do I even have to decide?".To do this, you need clarity about your goals and sometimes have to override an old decision, especially when it comes to avoiding further losses on an investment. In technical terms, this is the so-called "sunk cost bias" or popularly "throw good money after bad one". You don't want to admit your own mistake and defiantly oppose it. And often increase the losses further. There's only one thing to do: Pause, listen to yourself, realize things from a "meta-perspective" despite all excuses ("come on, it will get better again, I don't have to decide now..."; "tomorrow it is also possible...") and admit ("accept") the mistake without regrets.
Phase II "what information do I need?". Values and goals also play a major role here. And above all the uncertainty which is always more or less included in decisions. If I am not clear about my risk appetite, my handling of uncertainties, then I will collect bags of information that will not in the least contribute to a better decision. But you feel good, you are doing something. So here too, again mindfully climbing the meta-level (Natalia Karelaia speaks of a metaphorical "balcony") and from up there looking at oneself, at one’s thoughts and feelings from a distance: how am I doing with risk, with insecurity? Am I stuck? What of the information is relevant? Am I going in circles? Do I really want to decide? Even the mindful "Curious Beginner's Eye"can bring out some amazing things here.
Phase III "this is how I do it now".The actual decision. There may be some information in favour, but the instinct speaks against it - or vice versa. Here, at the latest, the mindful view on oneself from the "inner balcony" becomes a duty. What does intuition call out to me? Is that true today? Which glasses do I wear, i.e. do I know my biases? How do I feel right now, emotionally and cognitively? Is there any stress, anger, dislike, fear, tiredness? Think of noradrenaline - because you may have too little of it, your cerebral cortex is not sufficiently activated: Then unconscious processes in the brain decide - but not you in an awake, present state. Too bad. The mindfulness principles "accept, let go, do not judge" work wonders and make mindfulness the parameter in decision-making.
Phase IV "what can I learn from it?".Here above all acceptance and letting go are such important principles. To realize that you were wrong ("accept") and then can let go of all possible excuses and prejudices ("let go") probably contributes best to a clear feedback, to learning. Mindfulness helps above all not to get stuck in the past. By focusing on the Now, negative emotions also lose their power and allow learning experiences.
Right, isn't it?
"One 15-minute focused-breathing meditation may help people make smarter choices", was the result of a research project of the renowned INSEAD Business School.That's a clear statement! And since a great many of our decisions concern money and finances, mindfulness gains in importance here. Whether in daily monetary decisions or in the context of entrepreneurial risk-decision: Mindfulness can point to new approaches to solutions. Mindful Solutionssimply. Or? What is your opinion? What are your experiences?
With kindest regards,