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The Power of Decision Making- Part III

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“If we can find short-term incentives that are consistent with our long-term objectives, it is much easier to make the right decisions in the moment.” – Tom Rath

Part III of The Power of Decision Making: What Influences Your Decisions?

Over the course of this series we have gone through the process of how you make decisions and what that means, conformity within groups as it relates to the decision process, and how you might cope with making a difficult or bad decision. We asked the questions: are you a risk seeker or risk adverser? How do you accept loss and what strategies can you put in place to help?  For our next discussion I would like to take a look at our personalities; our traits and attitudes and habits that most likely influence the power of making decision process.

Something that I believe we can all agree on is that emotions can be motivational and therefore can motivate action. Let’s move on and say that if emotions effect a person’s characteristic way of thinking and acting personality emerges. “Many agree that personality (established emotion-cognition-action patterns) produces individual differences in response to episodes of intense emotional feelings” (Lewis and Haviland-Jones, Handbook of Emotions, 2ed. P.261). What does this mean? It suggests that as individuals we feel emotion, think about it and then act on it. This pattern or personality type differs among us and therefore we see a difference in response to things that happen or in this case how a decision is made in relation to taking risk. Within your risk management decision makers do you see differences in personalities and how you work with coming to a final action or none action decision? Does having a “strong personality” change the way you make the final call over someone else within your decision making group? We will continue to discuss personality in more depth as we move forward in our series.

Let’s move on to some other influences that may change or make our decision process. Attitude! If you have ever watched the movie Facing the Giants they talk about this and I felt it was important to mention. In the movie coach asks one of the players to do the death crawl to check his attitude. He states “If you walk around defeated so will they“, talking about the other players on the team. He also states that “attitude is like the aroma of your heart”. Do you accept defeat? The idea behind attitude, just like we discussed briefly with personality, is does your attitude change the way you make decisions? In the movie, the players attitudes as well as the coach did play a role in how they treated each other, how they won or lost games and how they ultimately made decisions. So I ask then, how is your attitude? Does it change the way you talk or work with your decision making team? Does it affect the way you come to a risk management decision, follow strategies, etc. Does your attitude towards your decisions change when things don’t go your way? Think about this as it might just give you insight on how you make decisions.

Habit! “A usual way of behaving: something that a person does often in a regular and repeated way” (Merriam-Webster). Do you make specific trade decisions based on habit? Let’s look at this further and say “the prevailing disposition or character of a person’s thoughts and feelings or mental makeup” (Merriam-Webster) also as a definition of habit. Mike Elvin author of Financial Risk Taking: An Introduction to the Psychology of Trading and Behavioural Finance often mentioned during this series also talks about habit. Elvin describes one of his generic learning models to be bringing habits into awareness. We have talked before about awareness and taking steps to become aware of your emotions and how it relates to making decisions (31). Elvin goes on to explain how being aware of our counterproductive habits can be difficult and often involves psychological discomfort. Right? Most of us have a hard time accepting defeat or acknowledging a bad decision let alone having an unpleasant habit. Most of us when we think of having a bad habit might think of smoking. Those that smoke cigarettes state that it is a habit and often use that as an excuse to why they “can’t stop”. Smoking for example is something you do often and in a regular way. It brings comfort and stopping it would bring discomfort. How do habits relate to risk taking? By nature cattle feeders are “Risk Takers” so by habit you may be more inclined to make speculative decisions in futures rather than risk management decisions. Taking a habit head on and making change would ultimately mean looking outside of your own mental processes and attitude and looking out. Can bringing habits into awareness improve performance? Will it for you?

Take a look over the next month and I challenge you to start taking a look at your attitude. What are others saying? What insight do you have about your attitude and how it affects business and how you make decisions. Look at your habits, what are they? If they are bad, are you aware of it now? We will continue on our journey with The Power of Decision Making next time with the focus on Personality Traits and more influences that effect decision making.

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