There has been a rigorous debate for the last 2000 years dating back to the Platonic ages pertaining to free will, consciousness and decision-making. Have you ever asked yourself when making decisions, what are the influences of the decisions? Do I have free will? Is the outcome already determined?
It is beneficial for us as conscious creatures to try to understand the dynamics of the decision-making process and the process the brain uses. I would like to individually examine some of the crucial factors of the decision making process. We can call it the mental model of metacognition, or thinking about how we think.
The first factor of the decision making process I would like to examine is justification. Justification was chosen first because it is our personal perception of why we made the choice, whether known or not beforehand.
“I think therefore I am” - Rene Descartes
A little contextual backdrop
Our minds work in a hierarchical and linear fashion as a result of billions of neurons and trillions of connections simultaneously firing, strengthening synaptic connections through continuous electrochemical reactions, or as the old saying goes “neurons that wire together, fire together.”
If the electrochemical threshold is not met between synapses, the neuron does not fire. The complexity of the microscopic process is distilled into a simple probabilistically determined answer, with a personal narrative interwoven by our neocortex. The neocortex is the wrinkled and folded external portion of our brain. The probabilities are determined like a hidden Markov model or Bayesian network of prior, conditional, joint and revised probabilities that we can only begin to understand.
Consciousness is defined by Oxford dictionary as:
“The state of being aware of and responsive to one’s surroundings”
Consciousness cannot be distilled into simple language, as we do not have the words available to describe it in our vocabulary. Think of how you would describe through speech or writing the experience of salty, clear ocean waves splashing rhythmically into your chest. Language, whether written or spoken does not compensate experiencing the waves. For simplicity let us think of unconsciousness/consciousness as perception. Perception is not always deliberate or remembered, like how one perceives their procedural morning commute or what they ate last Tuesday for lunch.
Now that we have some background information let us start with a mind experiment of choice and justification.
Look at the two pictures below and think about which one you prefer. Before you choose, think about why you prefer that particular picture.
Picture 1 [Abstract Lines]
Picture 2 [House in the Forest]
So which picture did you prefer? Why?
The majority of respondents will have said picture two because of the prime that was used, asking you to justify your choice. In the original experiment, the control group that was not asked to justify their choice usually chose the abstract painting of the colored lines. Only when the group was asked prior to choosing to justify their response was the picture of the forest chosen.
Prior justification single handily changed the outcome.
Now what if you were told it is harder to make a choice without justification and then went a little further, explaining that the majority of people will actually pay money to postpone the decision if there is not justification for it to be made?
Well that is exactly what Tversky and Shafir did in 1992 with the following experiment.
Imagine that you have just taken a tough qualifiying examination. It is the end of the semester, you feel tired and run-down, and you find out that [(pass group) you passed the exam; (fail group) you failed the exam and will have to take it again in a couple of months – after Christmas holidays]. You now have the opportunity to buy a very attractive 5-day Christmas vacation package to Hawaii at an exceptionally low price. The special offer expires tomorrow. Would you
- Buy the vacation package?
- Not buy the vacation package?
- Pay a $5 nonrefundable fee in order to retain the right to buy the vacation package at the same exceptionally low price the day after tomorrow?
|Passed||Failed||Result in 2 Days|
Pay $5 to Keep Option
The interesting results to note are in the column “result in 2 days” as those students were told they would not receive their exam marks for two more days. Almost two thirds of students could not make the decision without their exam mark, opting to pay $5 to retain the option until they could justify making the decision.
Tversky and Shafir suggest that students who passed reward themselves for passing while students who failed use the trip as recuperation. There are other interpellations one could arrive at from the results but it does provide some intrinsic evidence that justification if a factor in the decision making process.
Why Does It Matter and What Can We Do?
Our brains our naturally hardwired to be lazy, pursue the road of least resistance (availability bias) and think in linear hierarchies in fractions of a second. The confluence of factors leads to heuristics and mental short cuts, some of which are very helpful, others inhibit rational thought and action. Unfortunately there is likely nothing we can do as the process begins before we are even aware of it, deep inside the unconscious controlled by constantly changing implicit and procedural algorithms.
Vilayanur Subramanian “Rama” Ramachandran explains the situation differently stating there is always a lot going on inside of our minds and that we are consciously aware of very little of it. Decisions of all magnitudes are continuously being processed with proposed solutions arriving at our consciousness. Rama suggests instead of focusing on “free will” of the decisions, we should focus on “free won’t” – the power to reject solutions proposed by our unconscious.
Consider the analogy (borrowed from Ray Kurzweil) of a military campaign. Army officials prepare a recommendation to the president. Prior to receiving the president’s approval, they preform prep work that will enable the president to make the decision. The proposed decision is presented to the president who approves it or disproves it. If the decision is approved the mission is undertaken.
We can argue how much or how little influence is exerted on the president but the structure of the analogy remains the same, the decision making process begins (and is usually presented) before we become consciously aware of it.
As investors let us think about the justification prior to making the decision and to attempt to inhibit the profound availability bias. Do not settle for surface justification but rather look for the structural ones and above all, never be afraid to answer:
I… Don’t … know.
The Brain – is wider than the Sky –
For – put them side by side –
The one the other will contain
With ease – and You – beside –
The Brain is deeper than the sea –
For – hold them – Blue to Blue –
The one the other will absorb –
As Sponges – Buckets – do –
The Brain is just the weight of God –
For – Heft them – Pound for Pound –
And they will differ – if they do –
As Syllable from Sound
- Emily Dickinson