Power and Poor Decision-Making

A recent study sheds light on how power can fuel the overconfidence that causes people in leadership positions to make bad decisions.

The study was conducted by USC Marshall assistant professor of management and organization. Nathanael Fast and co-authors, Niro Sivanathan of London Business School, Nicole D. Mayer of the University of Illinois, Chicago, and Adam Galinsky of the Kellogg School of Management at Northwestern University.

The researchers point to a fundamental truth in the world of business: unconstrained power can hinder decision-making. It is a truism that can be extended to political leaders as well.

According to Nathanael Fast:

"The aim of this research was to help power holders become conscious of one of the pitfalls leaders often fall prey to “The overall sense of control that comes with power tends to make people feel overconfident in their ability to make good decisions."

The researchers conducted a number of experiments to explore this tendency. In one experiment, subjects were asked to bet money on the accuracy of their own knowledge. But first, participants were put in touch with feelings of either power or powerlessness by being asked to recall and write down accounts in some detail of a specific experience when they either had, or did not have, power over other people. Then the subjects were asked to answer six factual questions and to set a "confidence boundary" on how well they thought they had performed.

Nathanel Fast commented:

"What we found across the studies is that power leads to over-precision, which is the tendency to overestimate the accuracy of personal knowledge."

The study found that subjects who were primed to feel powerful actually lost money betting on their knowledge while, those who did not feel powerful made less risky bets and did not lose money.

According to Nathanel Fast:

"This was one piece of puzzle, the idea that a subjective feeling of power leads to over-precision."

The research team hypothesized that overconfidence among high-power individuals could be limited through blocking their subjective sense of power by directing attention to the limits of their personal competence. They tested this by allocating subjects to high-power or low-power roles. But subjects' feelings of competence were also manipulated by asking them a series of yes/no "leadership aptitude" questions. The subjects were then randomly given a false score - ranging from "poor" to "excellent" - through a computer and told that their scores reflected their aptitude for leadership. Participants with "low" scores were advised that they "may not be as competent as others."

7. After being given their results, the subjects were asked to bet money on how well they would answer six trivia questions.

Yet again, the 'powerful' subjects lost more money but participants who had been led to doubt their own competence did not. Put another way, when subjects felt subjectively powerful they were at their most vulnerable to overconfident decision-making.

Nathanael Fast considers that the best decision-makers can find ways to avoid this vulnerability:

"The most effective leaders bring people around them who critique them. As a power holder, the smartest thing you might ever do is bring people together who will inspect your thinking and who aren't afraid to challenge your ideas." But, ironically, the study shows that the more powerful they become, the less help leaders think they need.

Adam Galinsky concluded:

"Power is an elixir, a self-esteem enhancing drug that surges through the brain telling you how great your ideas are. This leaves the powerful vulnerable to making overconfident decisions that lead them to dead-end alleys."

"Power and Overconfident Decision-making" by Nathanael Fast, Niro Sivanathan, Nicole D. Mayer and Adam Galinsky is in press at Organizational Behavior and Human Decision Processes.

Gut Feelings

Research from Leeds University Business School published in the British Journal of Psychology throws new light on "gut feelings" arguing that they are real psychological phenomena that should be taken seriously.

Researchers explain that intuition represents one of the ways our brains store, process and retrieve information. The value of instinctive hunches has frequently been disregarded but there are numerous recorded examples where relying on intuition prevented catastrophes or resulted in remarkable recoveries. The researchers analyzed a wide range of previous studies and concluded that intuition - a feeling that something is right or wrong - is the brain drawing on past experiences and current external cues to make a decision; a process so rapid that the reaction is subconscious.

Lead researcher Professor Gerard Hodgkinson said:

"People usually experience true intuition when they are under severe time pressure or in a situation of information overload or acute danger, where conscious analysis of the situation may be difficult or impossible."

One example is a Formula One driver who braked sharply when nearing a hairpin bend; avoiding hitting an unseen pile-up ahead and thereby saving his life.

Gerard Hodgkinson explained:

"The driver couldn't explain why he felt he should stop, but the urge was much stronger than his desire to win the race. The driver underwent forensic analysis by psychologists afterwards, where he was shown a video to mentally relive the event. In hindsight he realised that the crowd, which would have normally been cheering him on, wasn't looking at him coming up to the bend but was looking the other way in a static, frozen way. That was the cue. He didn't consciously process this, but he knew something was wrong and stopped in time."

Gerard Hodgkinson continued:

"Humans clearly need both conscious and non-conscious thought processes, but it's likely that neither is intrinsically 'better' than the other."

The study highlights the impact on business, where many managers claim to use intuition over deliberate analysis when a swift decision is required.

Gerard Hodgkinson concluded:

"We'd like to identify when business people choose to switch from one mode to the other and why - and also analyze when their decision is the correct one. By understanding this phenomenon, we could then help organizations to harness and hone intuitive skills in their executives and managers."

Gut Instinct Decisions

Research by Michigan State University environmental science and policy researcher Joseph Arvai and graduate student Robyn Wilson, of Ohio State University, has found that people usually follow emotional gut instinct rather than rational responses when making decisions about complex issues such as terrorism, troop surges or crime, even though the brain can simultaneously process both kinds of information.

Earlier this year, Joseph Arvai and four other scientists discussed decision-making and risk evaluation at a symposium entitled Numbers and Nerves: Affect and Meaning in Risk Information at the annual meeting of the American Association for the Advancement of Science.

Joseph Arvai said:

"People tend to have a hard time evaluating numbers, even when the numbers are clear and right in front of them. In contrast, the emotional responses that are conjured up by problems like terrorism and crime are so strong that most people don't factor in the empirical evidence when making decisions."

The researchers asked participants to prioritize which of two common scenarios in state parks merited more attention from risk managers. One involved crime such as vandalism and purse snatching and the other damage to property from white-tailed deer such as collisions with vehicles.

8. Joseph Arvai explained:

"The neat thing with crime and deer overpopulation is that both risks could be measured on the same scale, which made our jobs as researchers easier. But because crime incites such a negative emotional response from most people, it consistently received more attention, even when the numbers showed that the risks from deer were much worse. We had to ratchet up the deer damage until it was ridiculously high before people noticed that it was a higher risk than crime.

"The bigger problem we've uncovered is that this response isn't limited to crime and deer. We see it happening in other areas: terrorism, the war in Iraq and infectious diseases."

The study considered whether rational responses could gain precedence over emotional gut instinct.

Joseph Arvai commented:

"People can be given tools that help them to 'listen' more to the empirical side of their brains. But in our experiments, the effects of these tools tend to be relatively short term. We've been able to make people aware that they're letting their emotions guide them, and we've developed decision aids that help them strike a better balance between their emotions and the numbers. But people tend to revert to decisions guided by emotions once the experiment is over, and they leave the room."

Why Women Prefer Pink

A study by Newcastle University researchers Anya C. Hurlbert and Yazhu Ling published in Current Biology supports the popular notion that men and women differ when it comes to colour preference. Researchers found that women prefer pink "or at least a redder shade of blue" than men do.

Anya Hurlbert said:

"Although we expected to find sex differences, we were surprised at how robust they were, given the simplicity of our test".

Young men and women (171 British Caucasians) were asked to select, as rapidly as possible, their preferred colour from a series of paired rectangles. Overall, the differences were sufficiently clear to predict the sex of a participant. To investigate whether biology or culture was more influential, researchers also tested a small group of Chinese people. Results were similar, supporting the hypothesis that sex differences might have a biological component. Results indicated that the universal favourite colour was blue.

Anya Hurlbert speculated:

"Going back to our 'savannah' days, we would have a natural preference for a clear blue sky, because it signalled good weather. Clear blue also signals a good water source."

"On top of that, females have a preference for the red end of the red-green axis, and this shifts their colour preference slightly away from blue towards red, which tends to make pinks and lilacs the most preferred colours in comparison with others" she added.

Researchers suggest the explanation might go back to hunter-gatherer societies, when women as primary gatherers would have benefited from an ability to identify ripe, red fruits.

Anya Hurlbert commented:

"Evolution may have driven females to prefer reddish colours - reddish fruits, healthy, reddish faces. Culture may exploit and compound this natural female preference."

Researchers plan to modify the test for use in young babies to further investigate the respective roles of "nature versus nurture" in colour preference.