How to Make More Rational and Compassionate Financial Decisions
Meditators make more rational, less emotional business decisions.
Posted May 15, 2011
Imagine that you and a stranger are participating in a psychology study. The experimenter gives the stranger $20. "Divide this money between you and you partner," the experimenter tells the stranger. "You can keep any amount for yourself, and give any amount to your partner. But your partner gets to decide whether or not to accept the deal. If your partner refuses the offer, nobody gets any money, and the game is over."
This is the set-up of the Ultimatum Game, a classic test of decision-making. Imagine that the stranger suggests that he keep $12, and offers you $8. Would you accept? What if the split were $15/$5? Or $19/$1?
Rationally, any offer is better than no offer, so people should be motivated to accept any deal. But in reality, most people are offended by obviously unfair splits. If they deem the offer too stingy, they will reject the offer to punish their partner for being selfish. It may not make sense economically, but it sure feels good.
Neuroscientists have even observed what happens in the brain during the ultimatum task. When people receive unfair offers, the brain reacts to it like a punch in the gut. The brain systems that register physical pain, disgust, and anger become activated. The stronger this brain response, the more likely a person is to reject an offer. Economists consider this a perfect example of how emotions interfere with rational economic self-interest. We prefer the feeling of vengence over the financial reward.
A new study has found that one group of people respond much more rationally in the Ultimatum Task than the typical human.This group accepts unfair offers ($5 or less) more than 50% of the time, compared with the more typical norm of 25%. This group doesn't let the sting of unfairness drive them to make a financially foolish decision. As a group, they end up making much more money overall because they don't let their anger dictate their actions.
Who are these cool, calculating decision-makers? Not stock brokers, not investment bankers, not accountants, but meditators.
According to a report in the journal Frontiers in Neuroscience, people who regularly meditate (experience of 6 months or more) react very differently to the Ultimatum Task than non-meditator. More specifically, their brains process unfair offers differently. Meditators show less activation in regions associated with pain, disgust, and anger. This is one reason they are more likely to accept less-than-ideal payoffs.
But the researchers also compared the brains responses of meditators with a subset of highly rational non-meditators (people who also accepted a high % of unfair offers). Rational non-meditators showed increased activation in the dorsolateral prefrontal cortex, a region of the brain associated with self-control. It's as if their brains were fighting to control their emotions, so they could make economically self-interested choices.
In contrast, meditators' brains showed increased activation in regions associated with theory of mind, empathy, and compassion. It was as if they were trying to understand the mindset of the person making the unfair offer.
Both these response styles led to rational decisions and making more money, but they reflect very different approaches to the task. The non-meditators were cooling down their anger so they could narrow in on economic self-interest; the meditators' were broadening their perspective and maximizing the gain for both themselves and the person making the offer.
I love this study for two reasons. It demonstrates one more way that meditation can help us make good decisions. But it also shows that there is more than one way to maximize one's own rewards in life. Both rational non-meditators and meditators made a lot more money than the typical, anger-driven participant. But while the non-meditators were actively squelching their anger and exerting willpower, the meditators were able to view the decision from the big picture, and choose the most beneficial solution for everyone involved.
If you want to practice a meditation that might help you make wise choices, try this 15-min breath focus meditation I recorded for my Science of Meditation students.
* Important note about study design: In this study, participants received thirty different offers from thirty different strangers. Importantly, they were told that each offer had been made in advance, and once the participants made their decisions, they would never receive another offer from that stranger. Without this set-up, participants might reasonably reject an unfair offer in the hopes of "teaching" their partner that they need to make a more generous offer. In this study, the only effect that rejecting an offer would have is punishing the person who made it.
Study cited: Kirk, Downar, & Montague. Interoception Drives Increased Rational Decision-Making in Meditators Playing the Ultimatum Game. Front Neurosci. 2011; 5: 49.Published online 2011 April 18. doi: 10.3389/fnins.2011.00049.