The Rational (Cognitive) Versus Emotional Side of the Brain

I listened to WNYC's hour long RadioLab on "Choice", and was so intrigued that I listened to it again. Two things that I most remember from this amusing show on how we make choices or don't make them is how the rational side of the brain can be overwhelmed so that we start making impulsive, emotional choices, and that without emotional, we can not make any choice at all, at least not easily.

Baba Shiv conducted an experiment on two groups. One group was asked to memorize two numbers, and then walk to another room to recite those two numbers. The second group did the same thing, but had to memorize seven numbers. Before they could reach the other room to recite their numbers, a lady stopped them and ask if they would like chocolate cake or a fruit salad as a reward for doing the experiment. 63% of the group that memorized seven numbers chose cake, while only 41% of the two number group chose cake. It is theorized that memorizing seven numbers dampened the rational side of the brain; thus allowing this group to make a more emotional, impulsive choice of cake. The two number group, however, made a more rational or healthy choice of fruit.

This may have some application in trading performance. If we flood our brain with too much data, such as seven different indicators, before making a trading decision, we may be exposing ourselves to a more emotional and impulsive trade decision than we realize. A more rational decision may be made with less data rather than more.

The RadioLab on Choice also demonstrated that without emotion, we can not make any decision at all. So, what we really need is a balance between our rational and emotional side of our brain to make good decisions. We do not want to totally suppress our emotions, and at the same time, we do not want to flood our brains with too much data. Less data is actually better for rational decisions.

Charles