The Hindu Business Line : Sleep over your decision

Sometime ago, my friend and I had met a professional trader. He explained to us that playing billiards and watching Ice Hockey matches everyday kept him occupied during market hours and helped him with his trading decisions! His behaviour is not uncommon. It is called “deliberation without attention”. What is it?

Take a break

Recollect your days as a student. All of us have had at least one chapter, if not a subject, that we found extremely difficult and boring in any exam. When we struggled with that chapter, our parents always advised us to take a break. Getting back to the chapter after a break was, indeed, refreshing.

Or think about times that you spent an entire day trying to solve a problem. You would have got the solution as soon as you woke up the next day morning. The reason is that we make better decisions when we “sleep over a problem”.

To test this behaviour, researchers divided people into two groups. Both groups were asked to choose the best car from a list that weighed 12 factors such as fuel efficiency and leg-room. The first group, which deliberated on the choice, was less successful than the second group that was allowed to sleep on the decision. The first group was, however, more successful when the list contained only four factors.

Deliberate over decisions

These studies have led the researchers to conclude that we make good decisions when we deliberate on simple choices. Add complexity and we are better off letting the problem lie for a while in our unconscious mind. That explains why we understand difficult subjects better after we take a short break during our exam-study time.

Now you may appreciate the professional trader’s behaviour. By playing billiards, he was essentially letting his unconscious mind do the thinking. As you will agree, more time we spend deliberating the purchase of a stock, more unhappy we are likely to be after the purchase! The professional trader understood this human behaviour well.

(The author is a Chennai-based financial analyst.)

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