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How We Decide

The history of Western thought is so full of paeans to the virtues of rationality that people have neglected
to fully consider its limitations. The prefrontal cortex, it turns out, is easy to hoodwink. All it takes is a few
additional digits or a slightly bigger candy scoop, and this rational brain region will start making irrational
decisions.

A few years ago, a group of MIT economists led by Dan Ariely decided to conduct an auction with their
business-school graduate students. (The experiment was later conducted on executives and managers at
the MIT Executive Education Program, with similar results.) The researchers were selling a motley group
of items, from a fancy bottle of French wine to a cordless keyboard to a box of chocolate truffles. The
auction, however, came with a twist: before the students could bid, they were asked to write down the last
two digits of their Social Security numbers. Then they were supposed to say whether or not they would be
willing to pay that numerical amount for each of the products. For instance, if the last two digits of the
number were 55, then the student would have to decide whether the bottle of wine or the cordless keyboard
was worth $55. Finally, the students were instructed to write down the maximum amount they were willing
to pay for the various items.

If people were perfectly rational agents, if the brain weren’t so bounded, then writing down the last two digits
of their Social Security numbers should have no effect on their auction bids. In other words, a student whose
Social Security number ended with a low-value figure (such as 10) should be willing to pay roughly the
same price as someone with a high-value figure (such as 90). But that's not what happened. For instance,
look at the bidding for the cordless keyboard. Students with the highest-ending Social Security numbers
(80-99) made an average bid of fifty-six dollars. In contrast, students with the lowest-ending numbers (1-
20) made an average bid of a paltry sixteen dollars. A similar trend held for every single item. On average,
students with higher numbers were willing to spend 300 percent more than those with low numbers. All of
the business students realized, of course, that the last two digits of their Social Security numbers were
completely irrelevant. Such a thing shouldn't influence their bids. And yet, it clearly did.

This is known as the anchoring effect, since a meaningless anchor-in this case, a random number can
have a strong impact on subsequent decisions. * While it's easy to mock the irrational bids of the business
students, the anchoring effect is actually a common consumer mistake. Consider the price tags in a car
dealership. Nobody actually pays the prices listed in bold black ink on the windows. The inflated sticker is
merely an anchor that allows the car salesperson to make the real price of the car seem like a better deal.
When a person is offered the inevitable discount, the prefrontal cortex is convinced that the car is a bargain.
In essence, the anchoring effect is about the brain's spectacular inability to dismiss the irrelevant
information. Car shoppers should ignore the manufacturers' suggested retail prices, just as MIT grad
students should ignore their Social Security numbers. The problem is that the rational brain isn't good at
disregarding facts, even when it knows those facts are useless. And so, if someone is looking at a car, the
sticker price serves as a point of comparison, even though it's merely a gimmick. And when a person in the
MIT experiment is making a bid on a cordless keyboard, she can't help but tender an offer that takes her
Social Security number into account, simply because that number has already been placed into the
pertinent decision-making ledger. The random digits are stuck in her prefrontal cortex, occupying valuable
cognitive space. As a result, they become a starting point when she thinks about how much she's willing to
pay for a computer accessory. "You know you're not supposed to think about these meaningless numbers,"
Ariely says. "But you just can't help it."

*Daniel Kahneman first demonstrated the anchoring effect in an experiment known as the United Nations game. He
asked people to estimate the percentage of African countries in the United Nations. Before they guessed, a random
number was generated-directly in front of the participants - by spinning a roulette wheel. As you might imagine, people
who saw higher numbers on the roulette wheel generated significantly higher guesses for the percentage of African
countries in the United Nations than those who saw lower numbers.

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The fragility of the prefrontal cortex means that we all have to be extremely vigilant about not paying
attention to unnecessary information. The anchoring effect demonstrates how a single additional fact can
systematically distort the reasoning process. Instead of focusing on the important variable - how much is
that cordless keyboard really worth? - we get distracted by some meaningless numbers. And then we spend
too much money.

This cortical flaw has been exacerbated by modernity. We live in a culture that's awash in information; it's
the age of Google, cable news, and free online encyclopedias. We get anxious whenever we are cut off
from all this knowledge as if it's impossible for anyone to make a decision without a search engine. But this
abundance comes with some hidden costs. The main problem is that the human brain wasn't designed to
deal with such a surfeit of data. As a result, we are constantly exceeding the capacity of our prefront al
cortices, feeding them more facts and figures that they can handle. It's like trying to run a new computer
program on an old machine; the antique microchips try to keep up, but eventually, they fizzle out.

In the late 1980s, the psychologist Paul Andreassen conducted a simple experiment on MIT business
students. (Those poor students at MIT's Sloan School of Management are very popular research subjects.
As one scientist joked, "They're like the fruit fly of behavioral economics.") First, Andreassen let each of the
students select a portfolio of stock investments. Then he divided the students into two groups. The first
group could see only the changes in the prices of their stocks. They had no idea why the share prices rose
or fell and had to make their trading decisions based on an extremely limited amount of data. In contrast,
the second group was given access to a steady stream of financial information They could watch CNBC,
read the Wall Street Journal, and consult experts for the latest analysis of market trends.

So which group did better? To Andreassen’ s surprise, the group with less information ended up earning
more than twice as much as the well-informed group. Being exposed to extra news was distracting, and the
high-information students quickly became focused on the latest rumors and insider gossip. (Herbert Simon
said it best: "A wealth of information creates a poverty of attention." As a result of all the extra input, these
students engaged in far more buying and selling than the low-information group. They were convinced that
all their knowledge allowed them to anticipate the market. But they were wrong.

The dangers of too much information aren't confined to investors. In another study, college counselors were
given a vast amount of information about a group of high school students. The counselors were then asked
to predict the grades of these kids during their freshman year in college. The counselors had access to high
school transcripts, test scores, the results of personality and vocational tests, and application essays from
the students. They were even granted personal interviews so that they could judge the "academic talents"
of the students in person. With access to all of this information, the counselors were extremely confident
that their judgments were accurate.

The counselors were competing against a rudimentary mathematical formula composed of only two
variables: the high school grade point average of the student and his or her score on a single standardized
test. Everything else was deliberately ignored. Needless to say, the predictions made by the formula were
far more accurate than the predictions made by the counselors. The human experts had looked at so many
facts that they lost track of which facts were actually important. They subscribed to illusory co rrelations
("She wrote a good college essay, so she'll write good essays in college") and were swayed by irrelevant
details ("He had such a nice smile"). While the extra information considered by the counselors made them
extremely confident, it actually led to worse predictions. Knowledge has diminishing returns, right up until it
has negative returns.

This is a counterintuitive idea. When making decisions, people almost always assume that more information
is better. Modern corporations are especially beholden to this idea and spend a fortune trying to create
"analytic workspaces” that "maximize the informational potential of their decision-makers." Thes e
managerial clichés, plucked from the sales brochures of companies such as Oracle and Unisys, are
predicated on the assumptions that executives perform better when they have access to more facts and
figures and that bad decisions are a result of ignorance.

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But it's important to know the limitations of this approach, which are rooted in the limitations of the brain.
The prefrontal cortex can handle only so much information at any one time, so when a person gives it too
many facts and then asks it to make a decision based on the facts that seem important, that person is
asking for trouble. He is going to buy the wrong items at WalMart and pick the wrong stocks. We all need
to know about the innate frailties of the prefrontal cortex so that we don't under- mine our decisions.

BACKPAIN is a medical epidemic. The numbers are sobering: there's a 70 percent chance that at some
point in your life, you'll suffer from it. There's a 30 percent chance that you've suffered from severe back
pain in the last thirty days. At any given time, about 1 percent of working-age Americans are completely
incapacitated by their lower lumbar regions. Treatment is expensive (more than $26 billion a year) and
currently accounts for about 3 percent of total health-care spending. If workers' compensation and disability
payments are taken into account, the costs are far higher.

When doctors first started to encounter a surge in patients with back pain - the beginning of the epidemic
is generally dated to the late 1960s - they had few answers. The lower back is an exquisitely complicated
body area, full of tiny bones, ligaments, spinal discs, and minor muscles. And then there's the spinal cord
itself, a thick sheath of sensitive nerves that can be easily upset. There are so many moving parts in the
back that doctors had difficulty figuring out what exactly was responsible for the pain. Without a definitive
explanation, doctors typically sent patients home with a prescription for bed rest.

But this simple treatment plan was extremely effective. Even when nothing was done to the lower back,
about 90 percent of patients with back pain managed to get better within seven weeks. The body healed
itself, the inflammation subsided, the nerves relaxed. These patients went back to work and pledged to
avoid the sort of physical triggers that had caused the pain in the first place.

Over the next few decades, this hands-off approach to back pain remained the standard medical treatment.
Although the vast majority of patients didn't receive a specific diagnosis of what caused the pain - the
suffering was typically parceled into a vague category such as "lower lumbar strain" - they still managed to
experience significant improvements within a short period of time. "It was a classic case of medicine doing
best by doing least," says Dr. Eugene Carragee, a professor of orthopedic surgery at Stanford. "People got
better without real medical interventions because doctors didn't know how to intervene."

That all changed with the introduction of magnetic resonance imaging (MRI) in the late 1980s. Within a
few years, the MRI machine became a crucial medical tool. It allowed doctors to look, for the first time, at
stunningly accurate images of the interior of the body. MRI machines use powerful magnets to make
protons in the flesh shift ever so slightly. Different tissues react in slightly different ways to this atomic
manipulation; a computer then translates the resulting contrasts into high-resolution images. Thanks to the
precise pictures produced by the machine, doctors no longer needed to imagine the layers of matter
underneath the skin. They could see everything.

The medical profession hoped that the MRI would revolutionize the treatment of lower back pain. Since
doctors could finally image the spine and surrounding soft tissue in lucid detail, they figured they'd be able
to offer precise diagnoses of what was causing the pain, locating the aggravated nerves and structural
problems. This, in turn, would lead to better medical care.

Unfortunately, MRIs haven't solved the problem of back pain. In fact, the new technology has probably
made the problem worse. The machine simply sees too much. Doctors are overwhelmed with information
and struggle to distinguish the significant from the irrelevant. Take, for example, spinal disc abnormalities .
While x-rays can reveal only tumors and problems with the vertebral bones, MRIs can image spinal discs -
the supple buffers between the vertebrae - in meticulous detail. After the imaging machines were first
introduced, the diagnoses of various disc abnormalities began to skyrocket. The MRI pictures certainly
looked bleak: people with pain seemed to have seriously degenerated discs, which everyone assumed
caused inflammation of the local nerves. Doctors began administering epidurals to quiet the pain, and if the
pain persisted, they would surgically remove the apparently offending disc tissue.

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The vivid images, however, were misleading. Those disc abnormalities are seldom the cause of chronic
back pain. In a 1994 study published in the New England Journal of Medicine, a group of researchers
imaged the spinal regions of ninety-eight people who had no back pain or back-related problems. The
pictures were then sent to doctors who didn't know that the patients weren't in pain. The result was shocking:
the doctors re-ported that two-thirds of these normal patients exhibited "serious problems" such as bulging,
protruding, or herniated discs. In 38 percent of these patients, the MRI revealed multiple damaged discs.
Nearly 90 percent of these patients exhibited some form of "disc degeneration." These structural
abnormalities are often used to justify surgery, and yet nobody would advocate surgery for people without
pain. The study concluded that, in most cases, "The discovery by MRI of bulges or protrusions in people
with low back pain may be coincidental."

In other words, seeing everything made it harder for the doctors to know what they should be looking at.
The very advantage of MRI - its ability to detect tiny defects in tissue - turned out to be a liability, since
many of the so-called defects were actually normal parts of the aging process. "A lot of what I do is educate
people about what their MRIs are showing," says Dr. Sean Mackey, a professor at the Stanford School of
Medicine and associate director of the hospital's pain-management division. "Doctors and patients get so
fixated on these slight disc problems, and then they stop thinking about other possible causes for the pain.
I always remind my patients that the only perfectly healthy spine is the spine of an eighteen-year-old. Forget
about your MRI. What it's showing you is probably not important."

The mistaken explanations for back pain triggered by MRIs inevitably led to an outbreak of bad decisions.
A large study published in the Journal of the American Medical Association (JAMA) randomly assigned 380
patients with back pain to undergo two different types of diagnostic analysis. One group received x-rays.
The other group got diagnosed using MRIs, which gave the doctors much more information about the
underlying anatomy.

Which group fared better? Did better pictures lead to better treatments? There was no difference in patient
outcome: the vast majority of people in both groups got better. More information didn't lead to less pain.
But stark differences emerged when the study looked at how the different groups were treated. Nearly 50
percent of MRI patients were diagnosed with some sort of disc abnormality, and this diagnosis led to
intensive medical interventions. The MRI group had more doctor visits, more injections, more physical
therapy, and were more than twice as likely to undergo surgery. These additional treatments were very
expensive, and they had no measurable benefit.

This is the danger of too much information: it can actually interfere with understanding. When the prefront al
cortex is overwhelmed, a person can no longer make sense of the situation. Correlation is confused with
causation, and people make theories out of coincidences. They latch on to medical explanations, even
when the explanations don't make very much sense. MRIs make it easy for doctors to see all sorts of disc
"problems," and so they reasonably conclude that these structural abnormalities are causing the pain.
They're usually wrong.

Medical experts are now encouraging doctors not to order MRIs when evaluating back pain. A recent report
in the New England Journal of Medicine concluded that MRIs should be used to image the back only under
specific clinical circumstances, such as when doctors are examining “patients for whom there is a strong
clinical suggestion of underlying infection, cancer, or persistent neurologic deficit." In the latest clinical
guidelines issued by the American College of Physicians and the American Pain Society, doctors were
"strongly recommended ... not to obtain imaging or other diagnostic tests in patients with non-specific low
back pain." In too many cases, the expensive tests proved worse than useless. All of the extra detail just
got in the way. The doctors performed better with less information.

And yet, despite these clear medical recommendations, MRIs continue to be routinely prescribed by
physicians trying to diagnose causes of back pain. The addiction to information can be hard to break. A
2003 report in JAMA found that even when doctors were aware of medical studies criticizing the use of
MRI, they still believed that imaging was necessary for their own patients. They wanted to find a reason for
the pain so that the suffering could be given a clear anatomical cause, which could then be fixed with
surgery. It didn't seem to matter that these reasons weren't empirically valid, or that the disc problems seen

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by MRI machines don't actually cause most cases of lower back pain. More data was seen as an unqualified
good. The doctors thought it would be irresponsible not to conduct all of the relevant diagnostic tests. After
all, wasn't that the rational thing to do? And shouldn't doctors always try to make rational decisions?

The problem of diagnosing the origins of back pain is really just another version of the strawberry-jam
problem. In both cases, the rational methods of decision-making cause mistakes. Sometimes, more
information and analysis can actually constrict thinking, making people understand less about what's really
going on. Instead of focusing on the most pertinent variable - the percentage of patients who get better and
experience less pain - doctors got sidetracked by the irrelevant MRI pictures.

When it comes to treating back pain, this wrong-headed approach comes with serious costs. "What's going
on now is a disgrace," says Dr. John Sarno, a professor of clinical rehabilitation at New York Universit y
Medical Center. "You have well-meaning doctors making structural diagnoses despite a serious lack of
evidence that these abnormalities are really causing the chronic pain. But they have these MRI pictures
and the pictures seem so convincing. It's amazing how perfectly intelligent people will make foolish
decisions if you give them lots of irrelevant stuff to consider."

The powers of the Platonic charioteer are fragile. The pre-frontal cortex is a magnificent evolutionary
development, but it must be used carefully. It can monitor thoughts and help evaluate emotions, but it can
also paralyze, making a person forget the words to an aria or lose a trusty golf swing. When someone falls
into the trap of spending too much time thinking about fine-art posters or about the details of an MRI image,
the rational brain is being used in the wrong way. The prefrontal cortex can't handle so much complexity by
itself.

So far, this book has been about the brain's dueling systems. We've seen how both reason and feeling
have important strengths and weaknesses, and how, as a result, different situations require different
cognitive strategies. How we decide should depend on what we are deciding.

But before we learn how to take full advantage of our varied mental tools, we are going to explore a separat e
realm of decision-making. As it happens, some of our most important decisions are about how we treat
other people. The human being is a social animal, endowed with a brain that shapes social behavior. By
understanding how the brain makes these decisions, we can gain insight into one of most unique aspects
of human nature: morality.

Reference
Lehrer, J. (2009). Choking on Thought. In J. Lehrer, How We Decide (pp. 155-166). New York, New York,
USA: Houghton Mifflin Harcourt. Retrieved March 15, 2018, from
http://files.cnblogs.com/files/E-WALKER/HowWeDecide.pdf

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