pen rainbow

Sunday, May 19, 2013

Sunday—Making Good Decisions

Why do people make bad choices?

There is a pot of gold at the end of every rainbow

Ironically, the answer is to avoid getting burned based on past experience.  The emotional memory of failed decision-making stays with us and influences our decision-making abilities later on.  And, there is brain science to back it up.

A study at UCLA in 2007 looked at how the brain responds when faced with risky decisions that involve gain or loss.  The research was set up to observe the brain activity of college students in their 20's who were given choices that involved financial gain or loss and differing degrees of risk.  They could strongly agree, weakly agree, weakly refuse, or strongly refuse to take the gamble.

Each person was given $30 and asked a series of 250 questions in which they had a fifty-fifty chance of winning or losing a specific amount of money.  Would they, for instance, gamble the money on a coin toss if they could double their money or lose two-thirds?  We know how much brain researchers love to hook their lab subjects up to MRI's.  That's because an MRI scan shows precisely which parts of the brain are active under certain controlled conditions, and by looking at the brain activity of a particular individual, researchers can also predict how risk-aversive that person will be in making decisions.

What the research found is that the reward centers of the brain were understandably activated when there was a gain or the potential for a gain.  And, these same areas of the brain responded even more as the amount of money increased.

But, when subjects were faced with loss, the same reward areas were dialed down.  What was surprising is that the areas of the brain associated with anxiety and fear were NOT activated under loss conditions.  What happened instead is that the reward centers dialed down much more when faced with loss than they dialed up when faced with gain.  This confirmed earlier behavioral research showing that people are more responsive to loss than they are to gain.  The UCLA study showed that the neural response to loss was larger than the neural response to gain.

So, what this says is that loss aversion is a powerful component of decision-making.  The more sensitized a person is to loss, the more he or she will try to avoid it.  The more sensitized a person becomes to loss, the more risk-aversive they become.  Risk involves the possibility of loss and risk-aversive people are much less likely to gamble on uncertainty because it literally does not feel good when they do.  Once burned, the brain sensitizes to loss and dials down the pleasure centers of the brain whenever risk is involved, particularly when the stakes are high.

Job and career changes, elective surgery, investing in a risky startup, leaving a bad marriage...these are all decisions that involve risk associated with high stakes.  Risk-aversive people will stay in a less than ideal situation before they will take the chance that an alternate choice won't work out.  That keeps them trapped by every bad decision they've ever made.

The script running in their heads is, "Boy, I don't want to make that mistake again!  So, I won't take a chance that it might happen again, and I'll stick with what I know."

So, what is the solution to breaking out of this self-sabotaging way of framing decisions?  From a neurological standpoint, the UCLA study also demonstrates that risk-aversive people will choose to take a gamble if the odds are stacked in their favor and the potential benefits far outweigh the status quo.  Their deactivated reward pathways need a lot more juice to make them feel good about taking a risk.  And, sometimes sadly, even that isn't enough to counter bad decision-making.

The anecdote to a brain that is telling you not to accept change for the better is to counter it with positive thinking and consider all of the wonderful possibilities.  Open up and let positive change happen.  When the gains are overwhelmingly in your favor, it is worth the gamble!

Have a great week, everybody!