As we continue last week’s series, recall judgment is assigning odds to a particular outcome, while decision making is taking action. We’re going to spend some time on each of these topics this week, but another factor to consider at the outset is when we assign the odds (think) and when we act.

I alluded to emotion on Friday, and our emotional state is a big, and often unaccounted for factor, both in our judgment and in our ability to make a sound decision. In Predictably Irrational, Dan Ariely described some experiments he did in this area.

In 2001, while I was visiting Berkeley for the year, my friend, academic hero, and longtime collaborator George Loewenstein and I invited a few bright students to help us understand the degree to which rational, intelligent people can predict how their attitudes will change when they are in an impassioned state. In order to make this study realistic, we needed to measure the participants’ responses while they were smack in the midst of such an emotional state. We could have made our participants feel angry or hungry, frustrated or annoyed. But we preferred to have them experience a pleasurable emotion.¹

We chose to study decision making under sexual arousal—not because we had kinky predilections ourselves, but because understanding the impact of arousal on behavior might help society grapple with some of its most difficult problems, such as teen pregnancy and the spread of HIV-AIDS. There are sexual motivations everywhere we look, and yet we understand very little about how these influence our decision making.²

Since I’m a bit of a prude, I’ll leave the details of their methodology to your imagination. This study had unambiguous results and demonstrated that we think and act differently when in “hot” and “cold” states. This is not hard to imagine, but invariably we also overestimate our ability to handle this transition.

What happens, then, when our irrational self comes alive in an emotional place that we think is familiar but in fact is unfamiliar? If we fail to really understand ourselves, is it possible to somehow predict how we or others will behave when “out of our heads”—when we’re really angry, hungry, frightened, or sexually aroused? Is it possible to do something about this?³

The answers to these questions are profound, for they indicate that we must be wary of situations in which our Mr. Hyde may take over. When the boss criticizes us publicly, we might be tempted to respond with a vehement e-mail. But wouldn’t we be better off putting our reply in the “draft” folder for a few days? When we are smitten by a sports car after a test-drive with the wind in our hair, shouldn’t we take a break—and discuss our spouse’s plan to buy a minivan—before signing a contract to buy the car?⁴

You have to account for Mr. Hyde, when you’re Dr. Jekyll. Don’t assume you’re smart enough to leave your car at the bar after a celebration with friends, take a cab to the bar and remove one risk. Decide when and why you’ll sell an investment before you make an investment. Get your disaster plan in place before The Big One hits.

This is not surprising, especially in retrospect, but how often do we actually put in the work? Probably not nearly often enough. Tomorrow we’ll talk about putting theory into practice.