Decision making under stress is a losing activity so avoid re-organizing your financial affairs when you are stressed. The decision is important and can affect a long time. Stress puts too much emphasis on immediate factors.
Giora Keinan in a 1987 article (Journal of Personality and Social Psychology 1987, Vol. 52, No. 3,639-644) on stress and decision making studied the proposition that, “Deficient decision making under stress is due, to a significant extent, to the individual’s failure to fulfill adequately an elementary requirement of the decision making process, that is, the systematic consideration of all relevant alternatives”
He found that those under stress showed “a significantly stronger tendency to a) offer solutions before all available alternatives had been considered, and b) to scan their alternatives in a non-systematic fashion”
Earlier studies had shown that stress causes “people to fail to weigh the utility and probability of all possible alternatives.” People tend to grab the first solution that promises immediate relief from the stress and that solution tends to be hasty, disorganized and incomplete.
Jumping to conclusions indicates stress.
We know the results of stress. Chemical reactions cause you to focus on the stress, and if the stress is large enough, to focus to the exclusion of all else. While that is good if you are being pursued by a tiger, the effect is physically the same if your favorite stock tanks.
In the stock situation fight or flight is not an appropriate response, but your body chemistry won’t know that.
Tigers in the bushes are uncommon today. In our modern world, the more common stresses are:
There are many more and the serious ones result from combinations of these. In work situations, tasks poorly delegated provide several sources of stress. Ambiguity, loss of control, no control of essential variables, inadequate rest, and other people’s deadlines. Stressed people provide weak results. These become the source of stress for others in the group.
Unlike the tiger in the bush situation, we have not fully evolved a solution to modern stresses. Fight or flight responses don’t work because the problems are too abstract. Unfortunately for us, the hormone response takes away higher brain functions first. The brain and body go on automatic pilot and that is a poor response in a complex world.
You can build processes to deal with abstract stresses once you know they exist. Some symptoms of too much stress include
What to do?
I don’t know what works for others, but I do know what works for me.
Do some research. A bigger and deeper survey of possible solutions. Involve others. Look for the opposite opinion to your first impression. Contrary thinking frequently opens new avenues.
In abstract stress situations, narrow focus and short times dramatically reduce effectiveness. Eventually the weak decision will be corrected but at the cost of lost time and resources. Better to avoid the problem.
For financial stresses a competent adviser can be helpful. “Talking you in off the ledge” should be part of their job description. Maybe we should develop airborne Valium and a dispenser that squirts it into the room at regular intervals. Sort of like the ones that dispense insecticide.
Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. firstname.lastname@example.org