Are We Crazier Than We Think?

Would you buy a stock just because its name was easy to say, knowing nothing else?  Sounds crazy, right?  What rational person would spend money that way? 

Princeton psychologists Adam Alter and Daniel Oppenheimer decided to find out.  They gave participants a bunch of (made-up) names and asked them which ones they thought would provide the most value for an investment.  Names like Jillman and Tanley were more favored than companies with names like Xagibdan and Mextskry.  But that was in the lab.  So they decided next to test what happened with real companies who had recently issued Initial Public Offerings (IPOs).  Using their actual names or their three-letter stock exchange ticker symbols, they found that more fluent, easy to pronounce names/symbols outperformed less fluent ones.  As they reported: “if you started with $1,000 and invested it in companies with the 10 most fluent names, you would earn $333 more than you would have had you invested in the 10 with the least fluent,” after one year.  Ease of pronunciation became a mental shortcut for assuming company quality, apparently encouraging people to buy and driving up the stock price.  The effect diminished over time as investors had access to information about company performance. 

This sort of irrationality is by no means restricted to investors. Two other scientists at Princeton took black and white head shots (no names or party designations) of the major party candidates in Senate and gubernatorial races and asked participants which person of each pair of opponents looked more “competent.”  Then they predicted the election outcome based solely on this evaluation.  The candidate who was judged more competent-looking won in 69% of the gubernatorial races and 72% of the Senate races: another mental shortcut with a profound impact.

One might expect, however, that when it comes to how we actually treat other people – our ethical behavior – we’d be much more conscious of what we’re doing. Not always.  Researchers working with Princeton University seminary students found that even those who had just been reflecting in class on the Gospel account of the Good Samaritan, were much less likely to stop and help someone “slumped in a doorway apparently in some sort of distress” if they had been told upon leaving class that they were late for their next class and needed to get there right away.

The ability of illogical factors to shape our “thinking” just shows that we’re human, not replicas of Star Trek’s Dr. Spock. In another experiment, researchers found that when they dropped papers outside a phone booth in a shopping mall they were more likely (6 times out of 7) to be helped by a person in picking them up if that person had just found a dime in the phone’s coin-return slot, compared to those who had not (1 of 25). The same study found students studying in a library were more likely to respond positively to another student’s request for help if they had been given cookies while studying.  In yet another study, subjects were much less likely to help someone who had dropped a pile of papers if the ambient noise level was 85 decibels than if it was just 65 decibels.

The view of “rational man,” in which we carefully and logically consider all relevant facts and make a decision based on reason alone is not how we work.  Our emotions always play a role, even when we’re not aware of them. In fact, that’s a good thing.  Research on people whose brains make it impossible for them to integrate emotions into their thinking are paralyzed or ineffective when they have to decide.

Our subconscious is also always at work, drawing on prior learning and experience to propel us to think in ways below our conscious awareness. This doesn’t mean we can never trust our thinking.  It just implies we ought to be more humble about how good a thinker we are and how much our conscious thinking drives our behavior.  The field of intellectual humility recognizes this and is at work trying to help us avoid the worst mistakes of our thinking. 

So, relax.  Take a break for lunch or dinner.  But while selecting what you’ll eat, you may want to know about a study by Martin Reiman in the University of Arizona’s cafeteria.  With one group of participants, a choice of two desserts (cake or fruit) was offered at the front of the lunch line. Nearly 70% of people who chose the lemon cheesecake chose healthier meals (vs. about a third of those who picked fresh fruit).  They also consumed about 250 fewer calories. Why?  Picking dessert as the first item on their tray made people feel a bit guilty, and either consciously or not they felt the need to eat well.  Those who picked fruit first perhaps congratulated themselves on their good habits but then “rewarded” themselves with higher-calorie foods as then went through the rest of the line.

Photo Credit: francisco gonzales @ wikimedia.commons.org