Price of a Happy Ending May Be Bad Decisions
A new study using high-speed gambling experiments shows that, for a majority of us, the last experience we’ve had is the defining one when it comes to making a decision.
Our natural inclination towards a “happy ending” means that we often give greater value to experiences than they deserve, ignoring the value of other experiences we’ve accumulated over time, according to researchers at Cambridge University.
The study, published in the journal Proceedings of the Royal Society B, supports the idea that the “banker’s fallacy” — focusing on immediate growth at the expense of longer-term stability that would produce better results — is intuitive in the way many of us make quick decisions, according to the researchers.
The researchers explain that the computational demand to try and factor in all experiences equally would be vast, so our brain constantly updates its internal “logbook” as we go, with each new experience being ranked against the previous few for context. Then, a new experience only has to be judged against the running total.
However, a “temporal markdown” comes into play, meaning that the further back an experience, even if still quite recent, the less weight it carries in the next decision, the researchers note. That’s why the most immediate experiences carry more weight in decision-making than they should — meaning a recent “happy ending” has a hugely disproportionate influence, according to the researchers.
For the study, the researchers conducted an experiment with 41 participants who were trying to accumulate money by gambling between two sets of gold coins of varying sizes at high reaction times. This forced the participants to go on memory and instinct, the researchers explained.
The researchers did find that a small number of the participants — nine — were able to maintain an almost perfect capacity to recall previous experience accurately, without the markdown of past experiences, and make solid long-term decisions as a result — almost as if they were “looking down on time,” said lead author Dr. Martin Vestergaard of the university’s Department of Physiology, Development and Neuroscience.
“Most people we tested fall foul of the ‘banker’s fallacy,’ and make poor short-term decisions as a result,” he said. “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.
“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,” Vestergaard said.
The next stages of the research will be to use imaging techniques to look at whether this ability is linked to certain parts of the brain, or perhaps social conditioning, such as age and education, he noted.
Vestergaard added that he did question age and occupation for the initial study, but found no correlation between those who are older, or who have a more or less technical occupation, with the ability to flatten time. He did note that the current sample size is too small to draw conclusions.
Source: Cambridge University
Wood, J. (2015). Price of a Happy Ending May Be Bad Decisions. Psych Central. Retrieved on March 18, 2018, from https://psychcentral.com/news/2015/06/14/price-of-a-happy-ending-may-be-bad-decisions/85656.html