The Myth Of Rational Decision-Making

According to researchers, emotions rule our decision-making so strongly that cloudy days can affect stock market performance.

The Myth Of Rational Decision-Making
[Photo: Flick user Barney Livingston]

If you’ve ever felt your emotions strongly triggered while trying to make an important decision, you know how powerful they can be, often clouding our judgment and leading us to choices that mismatch with what we actually want.


Nobel laureate Herbert Simon perhaps said it best when he wrote, “In order to have anything like a complete theory of human rationality, we have to understand what role emotion plays in it,” in his 1983 book Reason In Human Affairs. Simon played a crucial role in contemporary science’s attention to emotions and decision-making and, as a result, we’ve seen research in this area rise significantly in recent years.

But just how much do emotions affect our choices? According to researchers, it’s scary how much they do.

Based on the assumption that sunshine makes us happier, researchers looked at how sunlight can affect moods on a macro level in one study and found a positive correlation between the amount of sunshine recorded and the stock market performance on those days across 26 countries. Unhappy moods, like the one you feel after your country’s soccer team is eliminated from the World Cup, led to a decline in stock market returns, according to another study several years later.

Irrelevant Factors With Significant Impact

Francesca Gino, a professor at Harvard Business School, conducts research on emotion, focusing specifically on how simple, seemingly irrelevant, factors can have a significant impact on the choices we make every day.


“What we find across various different studies is that our emotions can cloud our judgment in two main ways,” she says. “One is that they make it difficult for us to judge whether advice is good or bad. And then two, depending on the emotion we might be feeling, we might completely shut down and not listen to advice at all. Or actually rely on the advice too much.”

Gino, author of the book Sidetracked, explains that if someone feels anger, even if that feeling is completely unrelated to the decision they have to make at hand, that person might discount the information provided by others and focus solely on their own opinions. Or, if someone is feeling anxious, they might be unable to judge the quality of advice they receive, relying on the advice too much, because they don’t feel confident that they can come to a good decision on their own.

Case in point is Gino’s study where she and her co-author Maurice Schweitzer of the Wharton School found that the emotion people felt after watching a short movie clip affected whether they took into account advice they are given. In the study, participants were asked to guess a person’s weight based on a picture of the person. Everyone would be paid depending on the accuracy of their guess. Then, some participants were asked to watch a National Geographic clip about fish in the Great Barrier Reef while others were asked to watch a clip from the movie My Bodyguard that showed a young man being bullied.

Afterward, all participants were given another participant’s weight guess and asked if they wanted to revise their initial estimate now that new information has emerged. The findings showed that 74% of participants who watched My Bodyguard–and felt sadness for the young man–disregarded the information they were given, relying on their initial guess, while only 32% of participants who watched National Geographic disregarded the new information, which in turn, led to greater accuracy and pay.

Another study, led by Richard Larrick from Duke University, from 2011 found that aggression increases in hot temperatures. After analyzing data from 57,293 Major League Baseball games, he found that the probability of a batter being hit by the opposing team’s pitcher increases with a spike in temperature.

Now that we know emotions–even simple ones like the irritation one feels in a traffic jam–make it difficult to analyze information properly, what should we do about it? Below, Gino offers tips to consider:


Delay decisions
If possible, give yourself time to make decisions since research shows that emotions are short-lived and humans typically go back to “baseline states” after some time.

The significance of this “cooling off period” is shown in the example of Korea, where after the country introduced a six-month period between the time you file for divorce and the start of proceedings, they experienced reduced divorce rates. It’s also the reason why 21 U.S. states require couples to wait up to six days after receiving their marriage certificate to actually get married.

Increase awareness and question-asking
The more cognitively aware you are in a specific moment that emotions are affecting your decisions, the better off you’ll be. Gino suggests taking your “emotional temperature” in those moments.

“No matter how emotional you are as a person, we should be able to understand whether we are in the right mindset to make certain decisions,” she says. “Sometimes, this is difficult to realize so the solution is to find people who are close to us who are going to be able to point out to us that we’re really not in the right state to come to good decisions.”

She adds: “In a very honest way, ask yourself questions and really understand whether you’re in the right emotional state to make a decision. If you had a fight with a spouse or feel particularly stressed out at work, maybe that’s not the right time to make an important decision, so I would delay the decision to another point in time.”

It also helps to downplay the events that lead up to your emotions. For example, if you’re feeling angry after being stuck in a traffic jam for hours, remind yourself: “It’s just traffic.” This reduces negative feelings and affects the physiological and neural responses you’ll have to those events.


About the author

Vivian Giang is a business writer of gender conversations, leadership, entrepreneurship, workplace psychology, and whatever else she finds interesting related to work and play. You can find her on Twitter at @vivian_giang.