Firstly, thank you so much for your support in reading this blog. All views expressed are purely my own. Secondly, if this article has provoked any kind of reaction, positive or constructive, I would love to hear from you in the comments section below. If you like the contents of this blog, please do forward it to a friend.
This is the first of a series of blogs about how we should view decision-making as a precious resource rather than something we can apply at all times and to give it a term, let's call it 'Decision Bandwidth'. At the end of this series you should have learnt about the constraints we face whilst making decisions, how our brains make shortcuts and the various biases that occur because we need to simplify.
Today's blog is about the three key constraints we face whilst making decisions: mental effort, time and energy. These tend to be excluded from discussions around decision-making, but I believe you will be able to better understand decision-making by considering them. I hope you come away agreeing that Decision Bandwidth is finite and valuable.
Too. Much. Information.
Our eyes are seeing images all the time. Just imagine for a second how large the data set of our whole life's sensory data is. All five senses rolling throughout the day. Add to that the processing, storing and making all that data internally consistent in our brain so that we can recall it at a later date. How do we manage this?
Our brain squares this by making heroic trade-offs, simplifications and assumptions. We factor in priorities and time constraints to allow us to cut through the information to get us to a 'good enough' solution.
It is in these 'shortcuts' that we can find some systematic biases. Our shortcut algorithm can generally be predicted and we know that these shortcuts can be targeted to influence, or manipulate us.
Whilst many economists describe this as weaknesses or leading to 'bad decisions' I am going to try and show why we should start thinking about Decision Bandwidth as finite and valuable.
Decision Bandwidth is limited by three main constraints 1) mental effort 2) time and 3) energy. Let's go through them one by one.
In the book 'Thinking Fast and Slow' the Daniel Kahneman highlights two experiments which neatly explain the trade-offs of our mental effort.
1. Someone can comfortably listen to and follow a podcast when walking slowly, but cannot follow it at all when sprinting -> physical effort and mental effort are linked somehow
2. In a famous experiment by Roy Baumeister, people were split into two groups. One group was assigned to eating radishes and another assigned to eating cookies. The catch was that the freshly baked cookies was put in front of the group assigned to eating radishes, and took a lot of self control not to dive in and sample the cookies. Apparently some of the radish group picked up the cookies to smell them as the smell was so tempting. The groups were then given a supposedly unrelated experiment which was a problem to solve. The problem did not have a solution - it could not be solved! Interestingly, the group which had eaten the cookies tried solving the problem for an average of 18 minutes. The group that had to control their temptation and only eat radishes stayed at it for only 8 minutes. The need to exert self control clearly took away from their persistence to focus their minds on a problem
These experiments support the view that we have limited bandwidth for effort i.e. physical effort, willpower and mental effort are drawn from a single pot.
Point #1: We do not have unlimited mental processing power
(Try and avoid going to a bakery when scheduling a work meeting during your diet)
Time is most people's most valuable resource, so imagine decision-making that was so slow that it took minutes to decide whether a possible predator was a threat or not. It might have been a survival advantage to make a conservative decision quickly . Even outside of life or death situations, there is a trade-off between deliberating on what the right decision is and making sure you do not miss the opportunity (or threat).
Point #2: We need to make timely decisions
(Don't spend 3 months deciding whether the recent price decrease in shares is a buying opportunity)
It is estimated that the average man burns 2,500 and woman about 2,000 calories per day and that the brain accounts for about 20% of this number (400-500 calories).
More data and more processing = more energy! We know this both from the practical world (that urge to eat a chocolate bar after a exam or heavy meeting), and from the computing world (more data and processing is equivalent to more energy usage). So, if we tried to divert more energy towards decision making we would need to find more calories from our diet and build the internal plumbing to keep supplying the brain with lots of interrupted energy.
So here's the snag. We know that our hunter-gatherer ancestors had a variable supply of food, and therefore if you needed 50% more calories you will not make it through the lean periods.
To show that energy levels really did influence decision-making, a small selection of parole judges in Israel were studied. On average 35% of parole requests were granted, but interestingly there were patterns around food breaks. The judges took three food breaks per day. After each food break, the grant rate went up to 65% but slowly decreased over the next period to almost 0% just before the next break. The energy levels were truly impacting decision-making, showing that people default to lazy conservative defaults when they run out of energy.
Point #3: We are limited by access to energy.
(Take a snack to an important meeting)
Your brain needs to trade-off processing power, time and energy to come to a 'good enough' decision. It is here that many cognitive biases emerge.
Next blog in a week's time will cover some of the theories of how the brain works and the shortcuts that are made.