I like to think I’m rational. To a degree, I am; to a larger degree, I’m not. Neither is anyone else.
It took me a long time to realize this. It’s scary how slow I am to learn certain things. It makes me think I’m stupider than I like to think. I suppose no one likes to think they’re stupid. Indeed, studies reveal the vast majority of us think we’re above average. The fact of the matter is, for most of us our brains don’t have to work overtime to fool us. We are much better at rationalizing our decisions than making rational decisions.
When I worked at Bridgewater College, I had a vice president tell me I was the most rational person that person had known. I didn’t say it, but I thought to myself, how ironic? My decision to accept the offer of the board to become their president was one of the most irrational decisions I’d ever made. Perhaps I seemed rational because college campuses are some of the most irrational places in our culture. There, sentimentality reigns.
My list of irrational decisions would be long. I’m not proud of it; in fact, it’s embarrassing. They expose me for what I am: a bundle of emotions, biases, preconceptions, and self-delusions.
If you want to understand the psychological explanations for all this irrationality, I suggest you begin by reading Thinking, Fast and Slow by Daniel Kahneman. There is a lot of other research on the subject. Suffice it to say that, the more you read, the less confident you will be in your own rational capabilities. And the more concerned we’d be with people who claim to make decisions from their gut or by intuition.
Irrationality is a major impediment to being a good investor. In the current phase of my life, I spend quite a bit of time studying investments and making related decisions. Warren Buffett’s partner, Charlie Munger (like me, a lawyer by trade), has said his goal is to become the most rational person possible. Since taking over responsibility for my own investments, I can understand his point more fully. It’s not easy being completely rational. We bring so many preconceptions and biases to the table that get in the way.
Of course, there is no way to become completely rational. Humans aren’t constructed for total rationality. Inside our thought processes are embedded all kinds of experiences that, for better or for worse, we extrapolate and generalize. And inside our DNA is embedded millennial of survival biases and mental shortcuts. Unfortunately, some of these are more pertinent to years long gone; they don’t necessarily translate well to 21st-century living.
I also wonder if irrationality is a defense against what might otherwise seem to be a sense of purposeless and insignificance. Most of us desire to find meaning in life. Most of us don’t like to think of ourselves as being insignificant. Yet perhaps that’s where rationality would take us. Perhaps it’s too disquieting a place to live for most of us.
But perhaps we expect too much.
Sometimes I think the main contribution of religion is the concept that none of us is the center. Despite what we might say we believe, we do in fact view the world from our center. But how rational is that? Not so much I suspect.
I wonder what the world would look like if rationality reigned. Not that it’s ever gone to happen. It won’t. Or at least not in my lifetime.
As Kahneman’s work and its progeny have persuasively shown, we make irrational decisions even when we’re aware of the internal biases and predispositions that pull us from rational thought. So, knowledge and self-awareness are not antidotes for what ails us. I wonder how the academics who think education is the be-all and end-all of everything wrap their heads around that.
Yet I can’t help but think knowledge and self-awareness help. But is such thinking grounded in reality or my own self-delusional tendencies?
Accepting the fact I’ll never be completely rational yields at least three byproducts, I suppose. First, it undermines one’s confidence, which, if I’m honest with myself, is probably a good thing.
I tend to be overconfident — too smug about the soundness of my judgment and decisions. A little less confidence is probably a good thing.
Second, a realization of my own irrationality engenders a healthy dose of humility. I could use more humility.
Finally, it makes one less impulsive and more contemplative, slower to make decisions. Decisions made in haste tend to be flawed. Some have to be made quickly. Others don’t. Taking one’s time is probably a good thing.
I don’t know what my life would have been if I’d been as rational as I thought I was. It would have been different, that much is sure. Better or more interesting? That is far from certain.
What I do know is that I would have tried harder to see problems from a different perspective. I’d given more consideration to the perspectives and opinions of others. I’d been slower to reach conclusions. And I’d been less dismissive of others. I’d also be a better investor.
What else would I have realized at an earlier age?
- The power of propaganda – I minimized the power of propaganda earlier in my life. I had the misguided impression that humans were more rational than we are. The past 15 years have demonstrated the power of propaganda beyond anything I could have imaged during my naive young years. It’s one of the things that scares me. Where it could take us is anyone’s guess, but it’s not likely to be a good place. It rarely is.
- The threat posed by arrogance – People who don’t understand the limitations of the human mind are particularly dangerous. Their arrogance can lead people astray under the guise of decisiveness and strength. That’s one of the paradoxical aspects of humanity: our perceived strengths can sometimes be our greatest weaknesses.
- The power of rationalization – Rationalization usually appears as rationality. But they’re very different things. I realize that today. When younger, I would have said I knew it. But I truly didn’t. Perhaps I still don’t perceive the differences to the degree I should.
- The art of persuasion – My misconception about the power of rational thought limited my effectiveness in certain roles. If I’d better understood better the art of persuasion and the means to get people to think and act as you want them to, I’d been more effective and accomplished more. Every college student should read the books by Robert B. Cialdini. Unfortunately, most don’t. Why? Because most academics think the world is a more rational place than it really is.
So here I am, at the ripe age of 61, with the relatively new-found awareness of the depth of my own irrationality, determined to embrace Charlie Munger’s goal of becoming a rational person. Is it achievable? Not entirely. More completely? I don’t know. That’s the strange thing about the human mind: its power of deception is vast.
But I do think I’d have been a better decision maker. And a better CEO. And husband. And father.
If you want to be a good decision maker, Vera, be mindful of the illusion of understanding. Don’t fall for the idea that the world is more rational than it truly is.