Emotions Run The Economy.

If you want to excel at work, be the master of your emotions

In 1776, Adam Smith introduced the Rational Choice Theory in economics: we are rational actors operating in our own self-interest in every transaction we make. This theory has not only permeated the study and work of economists since then, but we have all come to believe it because we like to think of ourselves as rational. Being called irrational, in fact, implies being called emotional. And being emotional, in our minds, is akin to being called childish or dumb. We cannot tolerate it.

Well, I’m sorry to tell you—you are not rational. Don’t take it personally. Neither am I. I am going to prove it to you in one line:

Do you have the cheapest smartphone? Does it really have to be "smart"?

I’m sure you will come up with arguments to rationalize your purchase. That’s what we all do! You might argue that you are more productive because this phone is faster and has more features. That’s a positive. But what about the costs? How much time do you spend mindlessly scrolling? How many interruptions does it cause in your work?

Tell me you have never bought something impulsively in a supermarket. Or that you own just one pair of shoes to rationally solve the walking problem. Or that you have never traveled for pleasure.

The Rational Choice Theory was put to the test in the 1980s. Daniel Kahneman, a psychologist, demonstrated in a series of experiments that the utility we expect from a purchase, the utility we experience, and the utility we remember are three separate things. In fact, when we judge an experience, we tend to focus primarily on the end of it. A good salesperson can use this to trick us into believing that the experience or service they just sold us was better than it actually was, by making the end the best part.

Kahneman used a colonoscopy as an example. A rather unpleasant and painful experience is remembered as less unpleasant if the doctor, upon finishing, leaves the scope inside for three more minutes without moving it. The discomfort at the end is lower. This trick even increases the chances that the patient will return for the next colonoscopy.

It makes no sense, does it? We would all opt for a shorter colonoscopy beforehand. But we come back if they are longer.

We tend to remember an experience based on its peak or its end. And this is just one type of irrational judgment.

Humans display more than 175 different types of cognitive biases, which are deviations from rational judgment. If you think you are immune to them, think again.

We don’t spend our money to maximize our economic utility. We are not rational creatures. We are primarily driven by emotional impulses and then use rationality to justify them: projecting social status, gaining power, belonging to a group, gaining a sense of control, being accepted, feeling secure...

Every purchase and business interaction has a larger emotional component than a rational one. Understanding the emotions and biases that drive us and our counterparts is invaluable at work.

To gain greater control over your future, you should start studying yourself. Analyzing your actions and their underlying emotions will provide insights into your motivations, hopes, and fears. From there, you will be able to change and align your actions with your goals. Eventually, you will change your future and get where you want to be.

You can rationalize your path to success and put a plan on paper, but you will never achieve it until your emotions align with your plan. If everything were purely rational, all diets and New Year's resolutions would always succeed.

There is no success without emotional work. That’s why psychology is central to business.

Carmen López. Business Psychology

#emotions #businesspsychology #carmenlopez