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Wharton marketing professor Gideon Nave wants to know what makes people tick. Specifically, he studies the relationship between biology and decision-making. He latest research focuses on how hormones and stress alter the way people think, and he found some interesting results.
An edited transcript of the conversation follows.
Knowledge@Wharton: Give us a brief overview of your research.
Gideon Nave: I came to Wharton from a neuroscience department, and my work is mostly focused on the biological basis of how people make decisions. We all know that the way we make decisions is influenced by our biological state. Things like hunger, sleep deprivation and stress influence the process of decision-making, and I’m trying to study this in a rigorous way, using lab experiments and some biological data.
Knowledge@Wharton: What have been some of the key takeaways from your research?
Nave: One of the things I study is hormones and how hormones influence decision-making. We all know the dominant situations in which different hormones fluctuate in our bodies. Stress is a good example. We all have a very clearly measurable biological stress response that consists of elevation of several hormones in our body, like noradrenaline and cortisol. One of the things that I am studying is how cortisol specifically affects decision-making. We do it by pharmacologically administering this hormone to people under a double-blind and placebo-controlled protocol.
“We are living now in a time when we can measure and manipulate a lot of factors that we couldn’t in the past.”
What’s interesting is that giving cortisol to people is not stressing them out. Cortisol is actually a stress response. It’s something that makes people more relaxed. But the interesting thing that we find is that even though people are not aware of the fact that they received cortisol, we see very clear behavioral effects of this drug on how people make decisions.
One thing we take a look at is the trade-off between people’s accuracy and speed when making the decisions. We have this paradigm called the Cognitive Reflection Test. I don’t know if you’ve heard about it, but I can give an example using one question.
Knowledge@Wharton: That would be great.
Nave: So, there is a baseball bat and a ball. Together, they cost $1.10. Now, the bat costs a dollar more than the ball. What’s the price of the ball?
Knowledge@Wharton: Ten cents.
Nave: You just gave me your intuitive answer, which is the intuitive answer of most people. If the ball is 10 cents, and the bat is $1 more, that means that the bat is $1.10, so together they would be $1.20. The correct answer is 5 cents and $1.05.
What we see is that when you give cortisol to people, they’re more likely to do what you just did and say 10 cents and not deliberate and think it through, even though they have some incentives to really think it through, and they get paid for being correct. They’re just giving their gut answer faster, as if they’re under a kind of time pressure. They’re more likely to rely on this incorrect but simple heuristic in the decision-making process. I’ve used this test many times, and I find it quite interesting to study.
We have other studies where I give testosterone to people. Testosterone is a hormone that is involved in instinctive behaviors in animals, such as intra-male aggression and mating behaviors. Again, it typically rises in contexts where it’s better to act fast, and we see again that men who receive testosterone are more likely to fail in questions like the bat and the ball ones.
Knowledge@Wharton: Other than my questionable math skills, what can businesses take away from this? I imagine there are many applications for this, from human resources departments dealing with their employees to businesses dealing with their customers.
Nave: Yes. For a start, failing in this question is not necessarily bad. If you have a good intuitive response, you will answer it faster when you’re stressed or having a high level of testosterone. But there are some situations where deliberation is needed, and there are some situations and some people that are more vulnerable to making fatal mistakes in these situations.
“The best type of behavioral data we can get is now coming from marketing and online behavior.”
I think it’s important that we pay attention in these situations and make sure that this won’t happen. For example, once you’re stressed, if you’re put in an environment that you know well, perhaps you’ll respond well. But if you’re put in a completely novel environment and given some easy-to-fail questions, you may be worse off dramatically because of being stressed. I think it’s important that we know when and where to expect these fatal mistakes.
Knowledge@Wharton: It seems that from the point of view of a retailer, for example, if you can figure out what state the customers are in when they come in your door, then you can try to adjust your environment accordingly. You could try to make them less stressed or point them toward the decision you want them to make.
Nave: That’s true. One would say that maybe you can manipulate people more easily when they’re stressed or when they have this boost of testosterone. On the other hand, I don’t know if that’s what you want to do because we want customers to be satisfied overall. If they’re more likely to make mistakes, they’re more likely to regret their purchase, enjoy it less and not come back. Again, it depends on the situation. But on my side, I think it’s better to know. Also, for me as a customer, it’s better to know that when I’m stressed, I’m not going to go to the supermarket.
Knowledge@Wharton: What’s next for this research?
Nave: We are living now in a time when we can measure and manipulate a lot of factors that we couldn’t in the past. It’s not only hormones; I’m talking about brain activity. We can look at where you’re looking at, eye-tracking data. We can look at brain images, meaning the anatomical structure of the brain. We can look at genes. All of these things are measurable nowadays, and we can learn a lot about individual differences between people from these measures. I think it’s a very exciting time to be working on this intersection between biological science and behavioral science. And obviously, the best type of behavioral data we can get is now coming from marketing and online behavior.
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2 Comments So Far
Anumakonda Jagadeesh
Outstanding.
Better decisions come from understanding how emotional and physiological responses brought about by the environmental conditions we are experiencing govern our thought processes. Emotions and reactions can override our attempts to be rational. On the other hand, people have the amazing capacity of directing their attention and taking control of their impulsive nature when they realize that the expenditure is worth the effort. Part of being a human decision maker is realizing that biological factors have a continual and often unnoticed influence on how we solve problems.
Researchers investigating decision making have classically reduced the complexity of the decision task in order to isolate certain important variables for study. However, most of the decisions we make in everyday life do not take place in the vacuum of the laboratory. We make decisions in the context of our environmental surroundings, taking into consideration a multitude of factors.
One of these factors is the social context of the person making the decision. As the decision maker receives social information, either implicit such as reading facial expressions or explicit such as direct instruction from another person, they need to perform basic perceptual and cognitive processes to integrate this social information into the decision making process. Importantly, decision making in social contexts is not only the result of perceptual and cognitive operations but of emotional processes as well; it’s well established that emotions impact rational decision making.
Here are Views of Some Experts:
“A truly integrative study of decision making must synthesize evolutionary and psychological approaches. Though the emerging fields of cognitive ecology and evolutionary psychology have begun this integration, much work remains. Considering the selective pressures on decisions refines which kinds of correspondence and coherence criteria are feasible for decisions. Natural selection does not favor coherence to rational norms, but increases fitness relative to others in the population. Considering selection also emphasizes that natural selection is a process of optimization under constraints. Because a constrained optimization process cannot generate a universally optimal process, unboundedly optimal decision mechanisms cannot exist in nature. Therefore, studying decision making with an eye on evolution can aid in understanding the goals of decision and thereby explain (or dispel) notions of irrational choice. Despite the advantages of accounting for natural selection in decision making, an entirely evolutionary, outcome-based approach overlooks the limitations that cognitive abilities impose on decision processes; certain cognitive building blocks must exist to implement decision processes. Many decisions can be made with a set of simple building blocks, whereas some require more sophisticated cognitive abilities. Thus, a complete understanding of decision making rests on the appropriate integration of ultimate goals and evolutionary pressures with the psychological mechanisms of choice”(The Evolutionary Biology of Decision Making Jeffrey R. Stevens Center for Adaptive Behavior and Cognition, Max Planck Institute for Human Development, 14195 Berlin, Germany)..
The concept of decision making, has been a central focus of intellectual pursuit since the dawn of man. Previously a philosophical and theological discussion, in recent years this task has been taken up by neuroscientists and biological psychologists.
It is a common understanding among trial lawyers that decisions are made emotionally and not rationally. Attorneys are always looking for the emotional hook on which to hang the case and sway a jury to see the case through that emotional prism. Now science is teaching that decision-making is actually physical. In a 2014 article in the New York Times, John Coates, a research fellow at Cambridge, who studies the body’s physical response to risk, has identified the body’s stress response as having a powerful influence on risk taking and decision-making. This has to do with the level of cortisol in our bodies – the higher the level of cortisol, the lower the appetite for risk. According to Coates, cortisol levels are raised as uncertainty increases, and this physical stress response lessons our appetite for risk.( The Biology of Decision-Making, by Bruce A. Friedman,IAMS).
Speed-accuracy tradeoff (SAT) is an adaptive process balancing urgency and caution when making decisions. Computational cognitive theories, known as “evidence accumulation models”, have explained SATs via a manipulation of the amount of evidence necessary to trigger response selection. New light has been shed on these processes by single-cell recordings from monkeys who were adjusting their SAT settings. Those data have been interpreted as inconsistent with existing evidence accumulation theories, prompting the addition of new mechanisms to the models. We show that this interpretation was wrong, by demonstrating that the neural spiking data, and the behavioural data are consistent with existing evidence accumulation theories, without positing additional mechanisms. Our approach succeeds by using the neural data to provide constraints on the cognitive model. Open questions remain about the locus of the link between certain elements of the cognitive models and the neurophysiology, and about the relationship between activity in cortical neurons identified with decision-making vs. activity in downstream areas more closely linked with motor effectors”(Brain and Behavior in Decision-Making, Peter Cassey , Andrew Heathcote, Scott D. Brown,PLOS, COMPUTATIONAL BIOLOGY,Published: July 3, 2014
There are several important factors that influence decision making. Significant factors include past experiences, a variety of cognitive biases, an escalation of commitment and sunk outcomes, individual differences, including age and socioeconomic status, and a belief in personal relevance. These things all impact the decision making process and the decisions made.
Past experiences can impact future decision making. Juliusson, Karlsson, and Garling (2005) indicated past decisions influence the decisions people make in the future. It stands to reason that when something positive results from a decision, people are more likely to decide in a similar way, given a similar situation. On the other hand, people tend to avoid repeating past mistakes (Sagi, & Friedland, 2007). This is significant to the extent that future decisions made based on past experiences are not necessarily the best decisions. In financial decision making, highly successful people do not make investment decisions based on past sunk outcomes, rather by examining choices with no regard for past experiences; this approach conflicts with what one may expect (Juliusson et al., 2005).
In addition to past experiences, there are several cognitive biases that influence decision making. Cognitive biases are thinking patterns based on observations and generalizations that may lead to memory errors, inaccurate judgments, and faulty logic (Evans, Barston, & Pollard, 1983; West, Toplak, & Stanovich, 2008). Cognitive biases include, but are not limited to: belief bias, the over dependence on prior knowledge in arriving at decisions; hindsight bias, people tend to readily explain an event as inevitable, once it has happened; omission bias, generally, people have a propensity to omit information perceived as risky; and confirmation bias, in which people observe what they expect in observations (Marsh, & Hanlon, 2007; Nestler. & von Collani, 2008; Stanovich & West, 2008; see also West et al., 2008).
(Decision Making: Factors that Influence Decision Making, Heuristics Used, and Decision Outcomes By Cindy Dietrich,INQUIRIES).
Dr.A.Jagadeesh Nellore(AP),India
Noah Hyman
Fascinating article. I would love to learn more and understand how your research manifests itself in the closing minutes of a basketball game where stress levels are high and quick decision making is crucial. Sports seem to serve as a perfect blend to represent the intersection of biological science and behavioral science.