Thursday, May 27, 2010

Paying Attention To Feelings Versus Your Head

heart-head The question is: Is it better to pay attention to your reasoning skills or your feelings?  This is an old debate that just got some new insights. A researcher at the University of Toronto had his test subjects interact with an anonymous partner.

The subjects had two options from which to choose – they could treat the other person fairly or lie to them. If they lied, they would gain at the expense of their partners.

Before the subjects decided to be fair or to cheat, they were encouraged either to think rationally about the situation and to ignore their emotions or they were told to make their decision based on their gut feelings. Sixty-nine percent of those who were told to be rational decided to lie to their partners while those only 27% of those who were told to go with their gut feelings lied.

With the economic crisis we’ve all been going through, it seems that using our gut feelings got lost in the ‘rational’ thought of “everyone else is doing it so I should, too.” If I could buy a house by exaggerating my income, I may as well do it. If I knew the homeowner wasn’t qualified, but I could profit by giving him a loan anyway, I may as well do it. If I could bundle these useless securities so that no one would know that they were valueless and sell them, why not.

All of these were ‘rational’ thoughts and they almost created a depression! One person who was using her gut was a woman, Sheila Bair, head of the FDIC. In 2008, she was warning bankers that there was a huge problem with mortgages and that the banks should renegotiate entire categories of loans to avoid massive foreclosures.

So what did these rationally minded bankers do - they ignored her. So…maybe when the alarm bells in your gut go off, you’ll start to give them more credit and pay attention.

(Reported Fast Company July/August 2009)

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