There are numerous biases and foibles that prompt us to make poor decisions. One of these is known as the ‘banker’s fallacy’, which suggests that we often focus on short-term growth at the expense of long-term stability.
A recent paper highlights how this initial buzz can often carry disproportionate weight in our minds when it comes to making future decisions.
Why we love a happy ending
As you know, we tend to love a happy ending in life. This prompts us to ascribe greater value to certain experiences than they really merit, especially if those experiences deliver a happy ending to us.
The authors draw an analogy of a three course meal. The starter is merely average, whilst the main course is perfectly serviceable. The dessert though, oh boy, the dessert is mind blowing.
That kind of meal is likely to be viewed much more kindly than a meal where the reverse is true (ie excellent starter, mediocre dessert).
Taxing the brain
The authors suggest that to actually treat all experiences equally would be hugely taxing for our brain, so it instead keeps a running logbook, with each new experience then ranked against what went before.
Alas, the further back an experience is in the queue, even if the experience was actually quite recent, the less weight it is given when making our next decision.
So, if we experienced a happy ending very recently, then this is given hugely disproportionate influence on our decision making process.
All of this, of course, results in a huge amount of knowledge and experience leaking out of our decision making process, which contributes no end to poor, often short-term decision making, despite us having experience that really should buffer us from such pig-headedness.
It doesn’t have to be this way
Interestingly however, roughly 25 percent of the participants in the study were able to take an almost elevated perspective on matters, thus recalling the true depth of their experiences, and therefore making sound long-term decisions.
“Most people we tested fall foul of the ‘banker’s fallacy’, and make poor short-term decisions as a result. This may be because they struggle to access historical experience, or give it the correct value, but we also think they become overly impressed with the moment to moment fluctuation of experiences,” the authors reveal.
“While the majority of participants made decisions based only on very or most recent events, a minority were able to maintain a seemingly perfect ability – at least within the parameters of the experiment – to see time on an equal footing, unconstrained by the myopia inherent in the decision-making of most,” they continued.
What causes this?
At this stage, the researchers are unclear on just what it is that separates these people from the rest of us, and they hope to delve into this in a follow-up study that will hopefully reveal whether there are neurological or social differences.
What did emerge however was that things such as age and livelihood had no apparent impact on our ability to rationalize decision making, but they did caution that a larger sample would be required to draw firmer conclusions on this.
