You have probably had the following experience or something like it.
It’s the end of a long day. Someone asks “What do you want for dinner?” Or “Where should we eat?”
Your answer is something like: “I’m all out of decisions. It doesn’t matter. Let’s do something easy.”
The experience is common because decision fatigue is so common. It gets harder to make decisions as the day wears on. The brain literally gets tired.
It’s risky to make important decisions with a tired brain. There is an increased chance of making a low-quality decision, or even an outright bad decision.
Mental fatigue creates a desire to simplify. This is why nobody likes thinking about dinner choices, or anything at all perhaps, when their brain is tired.
After a long day, the goal is to avoid thinking as much as possible. The default maneuver is to go towards whatever is simple — whatever requires a minimal amount of thought.
When it comes to dinner choices, this is mostly fine. In the big scheme of things, it doesn’t really matter whether you default to your favorite take-out restaurant or whatever is in the fridge.
But when it comes to making decisions about investments or important life choices, that’s another story. A bad decision on that front — through a tendency to default toward what’s easy — can be costly.
But just how serious is this tired brain effect? A study from a decade ago shows the dangers.
In 2009, a joint study was conducted by researchers at Ben Gurion University in Israel and Columbia University in the U.S. The study followed 1,000 rulings of eight Israeli judges over the course of about 10 months. The rulings were decisions on convict parole requests — whether to release a prisoner from jail for good behavior.
The study uncovered an astonishing pattern. At the beginning of the day, the odds of a successful parole request were 65 percent. Hours into the day, the odds were slim into none before spiking again in the afternoon simply based on time-of-day differences.
Prisoners were effectively rolling the dice. If their case was considered first thing in the morning, that was the jackpot. But late morning or late afternoon? Snake eyes.
Here is how Jonathan Levav, a co-author of the paper and associate professor of business at Columbia University, described the findings: “You are anywhere between two and six times as likely to be released if you’re one of the first three prisoners considered versus the last three prisoners considered.”
The study’s co-authors considered statistical control factors like the number of times a prisoner had been to jail, whether or not the prisoner had been to rehab, severity of the crime, and gender and ethnicity.
They found that only two factors — the number of times the prisoner had been to jail and whether they’d been to rehab — had an impact on the likelihood of parole.
But even with those and all other factors accounted for, the statistical bias still existed: Prisoners had their best odds by far in the morning, and the worst odds by far right before lunch (and again at the tail end of the day).
There is an interesting side note to the study, which made a splash when the results were reported in 2011. The common assumption was that a lack of food was the biggest factor in shaping the judges’ behavior.
The idea was that, after hours without food, blood-sugar levels had fallen, which in turn would make it harder to think and easier to be cranky. And so, if food was the biggest driver, the lesson might be, “Don’t make decisions on an empty stomach.”
But this is not quite right. Because a closer look at the study results suggest it was fatigue from mental exercise — the challenge of having to make one complex decision after another, for hours on end — that caused a change in the judges’ rulings as their brains got tired.
As it turned out, the average unfavorable decision — where parole was turned down — took 5.2 minutes, with 47 words of written explanation.
Meanwhile the average favorable decision took 7.4 minutes and 90 words of written explanation — a substantial increase on both counts.
From a time and energy standpoint, this suggests the favorable decision was more complex and simply required more effort and nuanced thought.
If you compare the decision-making time and written explanation averages, it took 33% longer and required 91% more explanatory power to explain a parole-granting decision, versus the easier call of going with the status quo and letting the prisoner stay in jail.
And so, when the brain is tired, it’s easier to say “meh,” and default towards the simpler call.
If the tired brain effect can dramatically impact the behavior of judges — who take their jobs very seriously as they weigh decisions with serious consequences on people’s lives — it can certainly impact you and me.
Whether it’s low blood sugar or just tiredness from a long string of decisions made one after the other — or a combination of both — it’s important to guard against the tired brain effect, particularly when it comes to investments.
Many investors who consider their holdings at the end of a long day (or week) will default to the “easy call” of just keeping a stock in the portfolio — because it’s already there — if they don’t have a fresh brain at the ready and a good decision-making process already established.
This is also an area where decision-making tools can provide a strong advantage in taking some of the stress off a tired brain. The more rules and system-based behaviors you have in place, the fewer decisions you have to make in the first place.
There are three ways to guard against the tired brain effect.
First, get in the habit of thinking with a fresh brain when it comes to important decisions; don’t make them at the end of a long day.
Second, develop good decision-making habits in advance when it comes to important areas like investing.
And third, use decision-making tools to take some of the strain off your brain, thus making the decision process easier.
An example of the above would be using the tools in TradeStops to set up alerts according to criteria your “fresh brain” has decided on ahead of time. It’s then much easier to habitually act in the appropriate manner, because you’ve predetermined your course of action.
It would be interesting to see a follow-up study of those eight judges, 10 years later, to see how their decision-making process was impacted by the 2009 study and the worldwide press it received.
They surely started giving more thought to the parole cases in late morning and late afternoons (a demonstration of data having measurable impact).
And perhaps those judges are now using case study software to augment the quality of the human decision-making process. If they aren’t, they should be — just as smart investors should be, too.
Richard Smith, PhD
CEO & Founder, TradeSmith