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To Make Better Business Decisions, Consider Your Temper

We like to think we are objective, but the research says not so much.

Key points

  • Daniel Kahneman's recent book shows that we're not the rational decision-makers we like to believe.
  • A good mood makes us more susceptible to bias, and more gullible, weakening our ability to make smart decisions.
  • For major decisions, wait long enough for your mood to change or seek counsel from someone with a different perspective.
Craig Adderley / Pexels
Source: Craig Adderley / Pexels

There’s more bad news for the many people among us convinced they’re rational thinkers.

Daniel Kahneman, the Nobel Prize-winning psychologist, continues to offer us challenging findings about how irrational our brains are. In his recent book, Noise: A Flaw in Human Judgment, co-authored with Oliver Sibony and Cass Sunstein, Kahneman reviews research on how our moods affect the way we make decisions.

There are two big takeaways: First, moods affect our decisions much more than we imagine. We like to think we are objective decision-makers, but the research says—not so much. Second, being in a good mood is more dangerous than we think when it comes to making good decisions.

Why Good Moods Are Bad News for Business Decisions

Here are two of the key findings the book puts forth:

  1. Being in a good mood makes us more confident in our first impressions of others. This is a big deal because it can make us more susceptible to unconscious biases.
  2. A good mood makes us more gullible. We’re more likely to accept nonsensical generalities and less likely to detect deception or misleading information.

Yikes. These kinds of distortions based on our mood can lead to some unfortunate decision-making. So what can we do about it? Awareness is the key. When making an important decision, pay attention to your mood.

If possible, take time to consider the decision because your mood may change, and you’ll see it differently. And if you can’t swing into a bad mood, consult with others who may be in a different state of mind. The Wall Street Journal reports that 60 percent of people who speak with an executive coach say the counsel improved their decision-making.

The key takeaway is humility. None of us is a thinking machine. We need to be mindful of the irrelevant factors that affect our decisions and do our best to separate the “signals,” the objective facts of the situation, from what Kahneman calls the “noise,” which is all the other stuff that gets in the way.

Great leaders make great decisions.

More from Gail Golden MBA, Ph.D.
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