Dear SPS Faculty,
In this blog entry I want to reflect a bit on the notion of risk and risk taking. I have been writing a book on women and negotiation and one area I have been researching is on risk. When we negotiate there are different levels of risk involved depending on several factors, one being how important the issues or items we are negotiating.
There was some research I found that differentiates whether we are high on risk taking or more averse to taking risks (Li, et al, 2017). One influencing characteristic is if we frame our negotiations as necessary because we have something to lose or something to gain. The research found that we take more risks and are even risk seeking when there is potential for loss and we are more risk averse when there is potential for gains.
This relates very much to how we frame the negotiation and potential outcomes because the framing itself biases us towards a particular type of risk behavior. This is separate from any actual outcomes initially, because our perception of what is at stake leads us to how we frame it. Their findings also show that it is not whether choices based on emotions or reason are at play, but rather how engaged we are cognitively during the framing.
This is rather heavy reading for me for what should be light novels on the beach in summer, but nonetheless it is fascinating when considering how we use our brains and that we can influence how much of them we use at any given time. One of the outcomes of this study is that they reframe what is used during the decision making process. It is not a matter of emotions vs. reasoning, rather how much effort we put into our cognitive processes.
Tversky and Kahneman (1981) have been studying our cognitive processes and what can be characterized as Type 1 or Type 2 thinking. Type 1 is more immediate and has less cognitive involvement, which also leads to more inconsistent decision making patterns. Type 2 thinking on the other hand, is more deliberate, takes more time, uses more cognitive effort, and has more consistent decision making patterns.
I was thinking about how this shows up in our lives and when it is preferable to engage in Type 1 or Type 2 thinking. I think engaging in Type 2 thinking at the supermarket checkout is probably a good thing to prevent against any impulse buying. Of course, you will also risk holding up the line as you engage in buy it/don’t buy it negotiations with yourself. Enjoy your summer!
Li, R., Smith, D. V., Clithero, J. A., Venkatraman, V., Carter, R. M., and Huettel, S. A. (2017). Reason’s enemy is not emotion: Engagemet of cognitive control networks explains biases in gain/loss framing. The Journal of Neuroscience, March 29, 2017. 37(13):3588-3598.
Tversky, A., and Kahneman, D. (1981). The framing of decisions and the psychology of choice. Science 211:453–458.