Highly illogical, Captain
Star Trek’s Mr Spock would often give his Enterprise shipmates a look of both sympathy and superiority whenever he believed they were allowing their emotions to rule over reason. However, the truth is that if the human race were more like the emotion-free Vulcans, our lives would be considerably more difficult, and in all likelihood, we would not have survived at all. Emotional reasoning can be a valuable part of decision-making. This is especially true in business where the best results can be achieved by using every aspect of our faculties to our full advantage.
Decision making tends to be seen as a process in which two separate and opposite mechanisms struggle with the other. The emotional and impulsive mechanism within us tempting us to choose the ‘wrong’ thing while the rational and intellectual mechanism slowly and ploddingly promises to lead us to the right choice. This description, which was also shared by many scientists until a few decades ago, is both simplistic and wrong.
Our emotional and intellectual mechanisms work together and sustain each other. Sometimes they cannot be separated at all. In many cases a decision based on emotion or intuition may be much more efficient—and indeed better—than a decision arrived at after thorough and rigorous analysis of all the possible outcomes and implications.
The new insights into the role of ‘rational emotions’ have been the result of a quiet revolution over the past two decades in three important research disciplines: brain sciences, behavioural economics and game theory.
These have shown that emotions aren’t a leftover from the evolutionary process but an effective and sophisticated tool for balancing and complementing our rational side. In the end, it is the feeling and thinking person who has the advantage, not the person who relies on thought alone.
So in business, and in the workplace, it’s important for this need for balance to be reflected in management development and training, and in day-to-day understanding and treatment of colleagues. The ideal employee isn’t a Vulcan, but a feeling and emotional human who takes into account both the benefits and threats of the interplay involved.
Why collective bonuses work better than giving rewards to individuals
Continental Airlines was on the verge of bankruptcy in the 1990s. A key issue was the number of delayed flights, the ‘on-time’ performance levels, leading to a poor reputation among regular travellers. The CEO introduced a new programme, “Go Forward”, which involved a simple deal: every employee - from the cleaners up to the board - would receive an extra $65 every month that Continental Airlines was in the top five for on-time performance. Staff weren’t working necessarily for the additional money for themselves, but to ensure that their peers didn’t lose out, a communal sense of needing to secure the cash for each other. No one wanted to be the weakest link that held up any aspect of the flight turnaround times. Within a single year, Continental went from a $619 million loss to a $224 million profit.
Why managers shouldn’t devalue gut feelings
Managers need to understand people for both everyday tactical reasons and for developing a vision and strategy. When we use our empathy we are more capable of recognising things that are hidden from those who use pure rationality. We need to have a grasp of the motivations and the feelings of others. That being said, emotions can also make those relationships more difficult - making us feel hostile when we meet people we perceive as different or strange. This is why it’s so important to appreciate the ways in which we use our emotions when making decisions. In this context, reason allows us to analyse our emotional instincts and gives us answers when we ask why we feel a certain way.
We know which type of decisions cause the most assiduous interplay between rationality and emotion. This uses the part of the brain called the prefrontal cortex, which is the part most closely associated with personality and feeling.
How fear governs investor choices
It is said that non-professional investors make mistakes because they don’t have the same logical understanding of the complexities of finance systems. But that’s not true; professionals make the same kinds of mistakes, because they experience the same emotions when making investment choices. One famous phenomenon is the way in which investors are reluctant to sell stocks at any kind of loss and wait until it turns to profit if the loss is increasing over time. The governing emotion is regret or fear of it. So long as they don’t sell there is no regret, it is postponed. Similarly, there is ‘herd behaviour’ among investors. They believe that others have special knowledge and are secure in the ‘safety of a crowd.’ They overvalue the choices of their associates. This is an instance in which people should be more aware of the negative effects of their emotions and should aim to behave more rationally.
Why trusting strangers appears essential for economic growth
In research carried out in 1997, thousands of individuals in dozens of countries were asked to rate their trust in people they didn’t know well. People like their car mechanic, their primary care physician and government officials. One finding pointed to a strong link between the trust people are willing to give to strangers and the GDP of the country in which they live. So countries with high levels of trust in strangers have correspondingly higher GDPs. The implication is that trust is an engine of cooperation between individuals. Cooperation, in turn, is an engine of economic growth and social welfare.
Provided we curtail our worst instincts, like those to over-conform or reinforce prejudice, emotions can be of great use in the workplace. Managers who foster a convivial office space encourage more collaboration between their employees. Countries which can replicate this on a mass scale foster trust between compatriots and can create a thriving culture of growth.
Eyal Winter is the PWS Andrews and Brunner Chair in Industrial Economics, specialising in game theory and behavioural economics. A Humboldt Prize winner, he recently joined Lancaster University from the Hebrew University of Jerusalem, where he was Director of the Centre for the Study of Rationality.
His book, ‘Feeling Smart: Why Our Emotions Are More Rational Than We Think’, was published in 2015 by Public Affairs (publicaffairsbooks.com).
Another version of this article first appeared in issue five or Fifty Four Degrees, the Lancaster University Management School magazine.