Neuroscience and investing choices

It’s pretty obvious to most people who watch users act and react that they do a lot of what they do based on somewhat primal and/or emotionally driven impulses. And I’m sure there’s a lot of neuroscience stuff out there that explains how this works, but I haven’t encountered any until I read the article Mind Games in last week’s New Yorker.

Here are a couple of salient bits:

The first scenario [in the MRI study] corresponds to the theoretical ideal: investors facing a set of known risks. The second setup was more like the real world: the players knew something about what might happen, but not very much. As the researchers expected, the players’ brains reacted to the two scenarios differently. With less information to go on, the players exhibited substantially more activity in the amygdala and in the orbitofrontal cortex, which is believed to modulate activity in the amygdala. “The brain doesn’t like ambiguous situations,” Camerer said to me. “When it can’t figure out what is happening, the amygdala transmits fear to the orbitofrontal cortex.”

The results of the experiment suggested that when people are confronted with ambiguity their emotions can overpower their reasoning, leading them to reject risky propositions. This raises the intriguing possibility that people who are less fearful than others might make better investors . . .

Today, most economists agree that, left alone, people will act in their own best interest, and that the market will coördinate their actions to produce outcomes beneficial to all.

Neuroeconomics potentially challenges both parts of this argument. If emotional responses often trump reason, there can be no presumption that people act in their own best interest. And if markets reflect the decisions that people make when their limbic structures are particularly active, there is little reason to suppose that market outcomes can’t be improved upon.

Part of the article also describes how the researchers used oxytocin (a hormone generated during pleasurable and intimate activities) via nasal inhalers. I have to quote this too because it’s so fascinating.

Trust plays a key role in many economic transactions, from buying a secondhand car to choosing a college. In the simplest version of the trust game, one player gives some money to another player, who invests it on his behalf and then decides how much to return to him and how much to keep. The more the first player invests, the more he stands to gain, but the more he has to trust the second player. If the players trust each other, both will do well. If they don’t, neither will end up with much money.

Fehr and his collaborators divided a group of student volunteers into two groups. The members of one group were each given six puffs of the nasal spray Syntocinon, which contains oxytocin, a hormone that the brain produces during breast-feeding, sexual intercourse, and other intimate types of social bonding. The members of the other group were given a placebo spray.

Scientists believe that oxytocin is connected to stress reduction, enhanced sociability, and, possibly, falling in love. The researchers hypothesized that oxytocin would make people more trusting, and their results appear to support this claim. Of the twenty-nine students who were given oxytocin, thirteen invested the maximum money allowed, compared with just six out of twenty-nine in the control group. “That’s a pretty remarkable finding,” Camerer told me. “If you asked most economists how they would produce more trust in a game, they would say change the payoffs or get the participants to play the game repeatedly: those are the standard tools. If you said, ‘Try spraying oxytocin in the nostrils,’ they would say, ‘I don’t know what you’re talking about.’ You’re tricking the brain, and it seems to work.”

I wonder what this tells us about the focus we should be placing on the emotional response people have to what we’ve designed? Especially when it comes to systems they use to make important decisions about which they may have anxieties or confusion.

Also, I wonder what this means for information architecture specifically, since so much of our most basic daily work is about reducing semantic ambiguity — to what degree does the user’s emotional context affect their ability to reason through what we’re giving them? And, in a Heisenbergian twist, to what degree does the ambiguity of choice within the designed experience exacerbate the user’s context?

Author: Andrew Hinton

I use information to architect better places for humans. More at

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