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We Are Not As Rational As We Think

If you think your choices are based on logic and reason, think again. Humans are irrational creatures. Cognitive scientists have known for decades that we are inherently irrational. Dan Ariely explains in his best-selling book, Predictably Irrational : “We all want explanations for why we behave as we do and for the ways the world around us functions. Even when our feeble explanations have little to do with reality. We’re storytelling creatures by nature, and we tell ourselves story after story until we come up with an explanation that we like and that sounds reasonable enough to believe. And when the story portrays us in a more glowing and positive light, so much the better.”

Humans are inherently emotional, so our biases and beliefs can blur our perception of reality. “Our thinking is riddled with systematic mistakes known to psychologists as cognitive biases. And they affect everything we do. They make us spend impulsively, be overly influenced by what other people think. They affect our beliefs, our opinions, and our decisions, and we have no idea it is happening,” says Toby Macdonald of the BBC.

We rarely make decisions based on facts. Rational decisions are those based solid statistics and objective facts. Rationality trains you to notice your beliefs, many of which you may not even be consciously aware of, and ask yourself: where did those beliefs come from, and do I have good reason to think they’re accurate? How would I know if they’re false? Have I considered any other, alternative hypotheses?

Rationality shows you how to evaluate advice, assumptions, and principles.

A rational person’s behaviour is guided more by conscious reasoning than by experience, and not adversely affected by emotions. When you are rational, you are likely to change your mind when presented with new and factual evidence that challenges your existing beliefs. Rationalists are interested in getting the right answer rather than in defending their own egos.

Rationality trains you to step back from your emotions so that they don’t cloud your judgment. Rationality breaks your habit of automatically trusting your instinctive, emotional judgments, encouraging you instead to notice the beliefs underlying your emotions and ask yourself whether those beliefs are justified.

Unfortunately, most people are not rational. Many of us make bad decisions in systematic ways. Nobody wants to make a bad decision, but we still all make bad decisions. Daniel Kahneman, Amos Tversky, and other psychologists have demonstrated that humans are systematically, and deeply irrational in their reasoning and decision making. They have shown that we make choices that defy logic.

“Our inability to understand ourselves in a different emotional state does not seem to improve with experience; when that happens, when our irrational self comes alive in an

emotional place that we think is familiar but in fact, is unfamiliar?” writes Dan Ariely.

Example, many people are willing to work for free, but once money is mentioned, they immediately revert back to market norms and demand what they are worth. Most people don’t mind adding an extra $100 to a $5,000, but they will clip coupons to save even $1 dollar when buying something else. They consider the value amounts relatively rather than objectively. Why is that?

When presented with a choice between two products: one free and the other at a cost, studies show that people irrationally opt for the free one, even if it means greater expenses in the long-term. And why do we always take what’s free, even if we don’t really want what’s on offer? When we are overly excited by free, we make mistakes.

Zero is not just a mere discount; it is a powerful decision-making factor.

And why does taking a cash gift from a friend make us feel uncomfortable, while a gift card is perfectly acceptable? When making a choice between three options (1, 2, and 3), you are most likely to value them differently if you had to choose between just 1 and 2. Economists say this is faulty thinking because the value of 1 and the value of 2 are not altered by the presence of 3. In many situations, our thinking process change and our decisions vary depending on how options are presented to us.

Most people don’t know what they want unless they see it in context.

We don’t know what kind of phone we want — until we see a review. We don’t know what kind of speaker we like — until we hear a set of speakers that sounds better than the previous one. We don’t even know what we want to do with our lives — until we find an influencer who is doing just what we think we should be doing.

Behavioural economists argue that human judgment is notoriously flawed in many ways and that we could achieve much better outcomes if we understood our flawed thinking for what it is. Professor Richard Thaler, one of the longtime leaders of this school of behavioural economics and his colleagues have pointed out all sorts of flaws in human judgment. In his book, Nudge: Improving Decisions About Health, Wealth, and Happiness ,Thaler writes:

“Hundreds of studies confirm that human forecasts are flawed and biased. Human decision making is not so great either. Again to take just one example, consider what is called the “status quo bias,” a fancy name for inertia. For a host of reasons, which we shall explore, people have a strong tendency to go along with the status quo or default option.”

The good news is, you can train yourself to question your repeated behaviours and make better decisions. Pay particular attention to your first decision. Question your assumptions, and decision making factors. Short-term decisions can influence long-term decisions. Every decision can have large consequences on the next one. First decision can have such a longlasting effect. Given this effect, the first decision is crucial, and we should give it an appropriate amount of attention. Making a rational decision involves an analysis of the inputs (information, assumptions, and biases) that form part of your reasoning. If you take your inputs seriously, the output (decisions) that result from your reasoning will improve. Making a rational decision means questioning continuously. It is drilling down to eliminate inaccuracies, wrong assumptions, improve comprehension, and strive for intellectually honest results.

Seek first to understand Most people don’t think their decisions are flawed but they are quick to observe irrational behaviour in others. They think they are being rational in the moment. In reality, nothing we think about or do fails to be influenced by a multitude of mental shortcuts that our brain has gathered through experience to allow us to get through the day. In his book, You Are Not So Smart , David McRaney, explains, “You are a confabulatory creature by nature. You are always explaining to yourself the motivations for your actions and the causes to the effects in your life, and you make them up without realizing it when you don’t know the answers. Over time, these explanations become your idea of who you are and your place in the world. They are yourself… You are a story you tell yourself.”

You have to be aware of your biases and create systems that mitigate the damage, otherwise, you will never come close to making rational choices. When you know the underlying principles, thoughts, and systems for making better decisions, extend them to new situations, and scenarios, discarding the ineffective parts and enhancing the parts that do work. The progress of knowledge is inevitable in any human environment, no matter how

long it takes. Sheer intellectual curiosity can help you question your assumptions and make better conclusions.

Stay curious and explore the hidden biases of your own thought processes to make better and informed decisions. And sometimes, the smarter you are, the more likely you are to fall victim to biases because you think you know it all. When in doubt, use precedents. But don’t follow what has worked in the past without first seeking to understand.

When something makes sense, it easy to use rationality to adjust the approach to your own circumstances. “Sometimes we need to take actions where good reasons are either hard to find or fail to account for complexity. In these situations, copying from success can be a better strategy than trying to analyze,” says Scott Young.

Beware of intuition. With every decision or judgement you make, there is a battle in your mind — a battle between intuition and logic. And your intuitive brain is a lot more powerful than you may think. According to researchers, emotions rule our decision-making so strongly that unhappy moods can affect stock performance.

“In order to have anything like a complete theory of human rationality, we have to understand what role emotion plays in it,” writes Nobel laureate Herbert Simon in his 1983 book Reason In Human Affairs . Delay decisions when possible. “Give yourself time to make decisions since research shows that emotions are short-lived and humans typically go back to “baseline states” after some time,” says Vivian Giang. Anything that gives you new knowledge offers you the opportunity to be more rational. Rationality generally result in better decisions and a better life but it takes practice. You can improve your ability to identify and avoid probably worse scenarios in your decision-making processes.

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