As more governments ease lockdown restrictions, it’s up to business leaders to make massive decisions and plans with limited information and few precedents. To understand what their brains are negotiating behind the scenes, we brought together a panel of experts in neuroscience, economics, psychology, and leadership for a workshop on crafting strategy amid stress and ambiguity.
The live, one-hour event—part of our Quartz at Work (from home) workshop series—was held June 25. Click the video above to watch the complete replay. Or check out our detailed recap below.
Neuroeconomics and the science of decision making
The past 15 years or so has given rise to the field of neuroeconomics, which considers how the brain is influenced by biology, psychology, and economics when it’s in decision-making mode. One of the founders of the field, Paul Glimcher, a neuroscientist, psychologist, and economist at NYU, said that examining decision making in a multidisciplinary way can help us explain decisions that don’t make sense from, say, the point of view of a traditional economist, who might focus on the decision maker’s goal and the actions taken to achieve it.
“Sometimes when we see people making decisions that look like they don’t make sense, it really reflect constraints that biology imposes on us in a very smart way,” Glimcher said. Or sometimes “we’re being economical with our brains, in that we’re not wasting energy, we’re not wasting neurons, we’re not wasting cells to improve decision-making in places where it doesn’t really matter,” and conserving our brainpower for more consequential matters.
Further reading: Neuroeconomics—Decision Making and the Brain, edited by Paul Glimcher and Ernst Fehr (Academic Press, 2014)
While the brain’s decision-making activity can be observable in the lab, panelist Tomas Chamorro-Premuzic, the chief talent scientist at ManpowerGroup and a professor of business psychology at University College London and Columbia University, warned that we shouldn’t get too dystopian about it. He said that with too narrow a focus on the physiological responses of the amygdala or the limbic system, for example, “you can end up justifying things like prejudice, racism, and sexism as though we have no control over these things.” He sees his role as helping people make decisions that are “rational, morale, and logical as possible, [while] understanding some of the structural constraints that we have.”
The role of emotions in decision making
“Emotions contribute fundamentally to our decision making,” Glimcher said. “They often contribute by making our decisions sharper, better, more efficient.” For example, he said, “[w]e know that when people are reasonably afraid, it makes them more risk-averse, and that is a feature, not a bug.” But other times, emotions can overwhelm us and lead to a poorer choice. The trick is to be aware of when our emotions might be inhibiting our decisions.
Ann Tenbrunsel, a professor of business ethics at the University of Notre Dame’s Mendoza College of Business, suggested that our emotions about a decision can signal important information to us. If a decision makes sense on paper but ultimately doesn’t feel right to you, “that’s when you have to dig deep,” she said, and ask yourself, “What isn’t being considered?” That’s a particularly potent question in cases where we’re perhaps making the right decision from a rational standpoint but not a morale standpoint. “I might not be considering the ethics because I don’t even code this as an ethical decision,” Tenbrunsel said.
Further reading: Blind Spots—Why We Fail to Do What’s Right and What to Do about It, by Max H. Bazerman and Ann E. Tenbrunsel (Princeton University Press, 2011)
What happens when intense stress gets layered into the decision-making process?
From a physiological standpoint, intense stress triggers the release of hormones like cortisol, the heart rate increases, and the pupils dilate. These reactions happen in the wild—in life-threatening situations, for example—and they have been replicated in the lab by putting a willing subject’s arm in ice water for three minutes. Behavior tests afterward have shown the subjects to be less trusting of others and more reliant on habits, with reduced flexibility and a “enhancement of negative emotional interpretations of events,” Glimcher said.
None of this is necessarily negative, Glimcher noted. “If I stress you out and you take the worst possible construction of all the social cues around you, that’s just being cautious.”
From an ethical standpoint, prolonged anxiety can be problematic—it’s becoming a concern of compliance executives right now, Tenbrunsel said. “Because of the stress, because we’re in a frame of loss, we’re going to engage in more risk-taking behaviors which could be unethical,” she explained.
But the presence of a threat also tends to encourage groups to become more cohesive. This is “a good thing because it helps us accomplish the mission and address the threat,” she said. But it also has a tendency to promote tribalism. In the context of a pandemic during which people are working remotely, the creation of tight-knit groups can become counterproductive when colleagues get reintegrated in their physical workspaces, and something business leaders ought to look out for, Tenbrunsel suggested.
Specifically the stress of not being socially connected also can lead to unethical behavior, she noted, because we become more insular and are prompted less to think about others.
Further reading: The scientist who coined “stress” wished he had chosen a different word for it (Quartz at Work, 2018)
An interlude with Xerox executive Louie Pastor
As an executive vice president and general counsel of Xerox, which sponsored the workshop, Louie Pastor heads up the company’s plans for returning to the workplace. With 27,000 employees across 250 facilities in 49 countries, it is no simple task. Leaders of far smaller companies are no doubt feeling the pressure as well.
“When and how to return employees to the workplace is a really big and stressful decision for any company to make in the current environment, from a business perspective obviously but also from the perspective of thinking about the physical and psychological health of employees,” Pastor said.
He’s closely monitoring the data on Covid-19 cases and the guidance from healthcare experts. None of it is easily reconciled, he said—the guidance of the World Health Organization doesn’t fully match that of the US Centers for Disease Control and Prevention, for example—but “while the facts and the circumstances on the ground is different in every geography, what is not [different] is how you transmit” the virus. That’s allowing Xerox to zero in on safety standards it can apply to its facilities across the board.
Pastor also spoke about being the youngest member of a relatively new executive team. Perhaps as a result of his age, he said, “I am constantly thinking about what inputs am I missing,” whereas his colleagues might have more experience to go on. “When things look similar enough to other things they see in their career, maybe they make faster decisions,” he said. “I’m quick to make decisions but very methodical in searching out all of the inputs and making sure I’m not missing the blind spots.”
Further reading: When everyone can work from home, who goes back to the office? (Quartz, 2020)
The roles of intuition and experience in decision making
Pastor’s observations of his older colleagues at Xerox jibes with Chamorro-Premuzic’s findings about intuition. In general, he said, intuition is overrated and over-celebrated—a shame because so many of the quick decisions we make in daily life are based on our intuition. But expert intuition tends to be of far greater quality.
“If you’re an expert and you’re really sage or wise in a field, you spend so many hours developing expertise that your intuition has become very data-driven,” Chamorro-Premuzic explained. “Whether you’re a stock broker in front of multiple screens or a pilot about to land the plane or a chess player looking at a chess board, you can be very fast because that intuition is very data-driven. The problem with intuition is that most people are not as intuitive as they think … [and it] accounts for many of the mistakes and problems we have in everyday life.”
Further reading: Are You Still Prioritizing Intuition Over Data? (Tomas Chamorro-Premuzic in Harvard Business Review, 2020)
The role of risk tolerance in decision making
Risk tolerance, whether at the individual or company level, is a key piece of any decision, and it can be driven by several factors.
One factor is age, or rather its impact on gray matter in the brain. Glimcher said that our appetite for risk is generally highest when we are adolescents. It then moderates when we are between the ages of 35 and 60; in our late 60s, 70s, and 80s, we become much more risk-averse. From an evolutionary standpoint, this makes perfect sense, Glimcher said. Younger people need more risk-taking to explore and make sense of the world, whereas elderly people may be wise to pull back in order to be more protective of their aging bodies.
But does this mean your age can make you more or less suitable as a leader, depending on economic circumstances or a company’s risk appetite? Not necessarily. “As an executive or a decision maker for large groups, you want to say, ‘Well, what is the target risk attitude I need under these circumstances?’ It doesn’t necessarily have to be yours,” Glimcher noted.
Chamorro-Premuzic, the author of Personality and Individual Differences, spoke about the role that personality plays in our decision making. “We know that there are important differences between people even in the same situation,” he said. The different choices that might be made could come down to a person’s short-term versus long-term focus, or their self control, or their level of conscientiousness, among other factors.
“I’ve been in Florida for the past three months I’m pretty sure that everyone here wants to stay alive and healthy and do whatever is good for them and for others,” he said. So then why are so many Floridians flouting guidance to wear a mask during the Covid-19 pandemic? It may have to do with how reckless or cautious people are, or how much they prioritize the short-term pleasure of being in large groups—”or is it a desire to express political values and beliefs that actually eclipses any utilitarian and pragmatic reasons” to wear a mask, he asked. (Plenty of social scientists no doubt will be looking into that question.)
One last note on risk aversion in a business context: it goes up if everyone in the decision-making group is risk averse, and down if everyone in the group is more of the risk-taking type. It’s the result of typical group dynamics, and an argument for making sure your decision making team is diverse in multiple facets, Tenbrunsel said.
“You really have to watch putting people together that are the same, in a variety of dimensions, because your decisions will not even reflect an individual preference,” she said. “It will be beyond the individual preference.”
Any tips for people who have to present information to decision makers?
Keep it simple, said Glimcher. Whereas scientists are trained to stay skeptical of anything with less than 100% certainty, “what the best plan [is] for me to make as a corporate leader might not require that I know something to 100% certain,” he said. Maybe a business leader only needs to be 98% sure, or even just 80% sure, about something before making a decision. “They do not want to hear all your doubts around the last 2%,” Glimcher said.
The pandemic offers plenty of real-world tests of this. For example, Glimcher said, health experts might not feel comfortable saying with certainty that masks in the workplace will stop the spread of coronavirus, but given the research that’s been done so far, they should feel comfortable explaining that if a sick person wears a mask in the workplace, the risk that anyone else gets infected is reduced by a factor of six. That’s the data point you would want to lead with in that instance, Glimcher said, as opposed to telling a CEO that you’re still not certain if masks will keep everyone safe.
Finally, any tips for the indecisive?
Indecisiveness can feel like a curse, especially in business, but Chamorro-Premuzic said there are plenty of scenarios where being less decisive might help you more.
Remember, “indecision is also a decision,” as Chamorro-Premuzic said. The trick is to “learn to decode your own style and then try to get better and measure improvements.”
For more Quartz at Work (from home) workshop recaps and replays, click here.