The Neurobiology and Psychology of Making Decisions

Making decisions is one of the most important activities leaders engage in. While good decisions can yield productive outcome, bad decisions can potentially have major negative consequences. Decisions can be made rationally, nonrationally, or irrationally. They can be based on tacit or explicit assumptions that correlate with unconscious or conscious brain processing. And they can be emotional or analytical. On a day-to-day basis, we rarely think about how we make decisions; some happen unconsciously even though they could have a big impact on our lives.⁷ For instance, while conducting his doctoral research, one of us (Prasad) made an unconscious decision one day not to go back to the physics laboratory to check whether the lights were turned off, and that led to a freak accident in the laboratory and eighteen months of extra work to complete his dissertation.

In our time, the idea that people make decisions primarily by using logic and reason has been in the ascendant. Alan Mulally, CEO of Ford, and Narayana Murthy, cofounder of Infosys, have said repeatedly in interviews that decisions have to be made based on data.⁸ It is important to remember, though, that these leaders do not use just any data, but spend a lot of time and energy to make sure that their data are accurate, bias free, and current. Then they consciously choose to look at the context, their own and company values, and other factors before they make decisions for themselves and their organizations.

Recent research in psychology and neuropsychology shows that other factors such as emotions, biases, and discrimination capability, or Viveka—that is, the ability to see and make fine distinctions as well as notice and value quality—are equally involved in making decisions and can heavily influence the quality of decisions that are made.⁹

According to brain research, the dorsolateral prefrontal cortex (DLPFC), different regions of the frontal cortex (orbitofrontal, anterior prefrontal, and ventromedial frontal), and the anterior cingulate cortex (ACC) in our brain are all involved in decision making.¹⁰ Previously the frontal lobe of the brain, the most recently evolved part of the brain, was thought to be hard-wired for making logical decisions. However, recent studies have shown that many of these same regions (e.g., the ACC and DLPFC) that are involved in logical decisions are also involved in emotion perception, self-regulation, and decision making—parts of decision making that are called “hot executive functions.” That is, emotion and thinking are not as separate as is commonly thought.¹¹ In fact, more recent studies have divided decision-making processes into components: the representation of value, response selection (including intertemporal choice and cognitive control), associative learning, and affective and social aspects.¹²

In addition, the amygdala also affects the quality of our decisions. This part of the brain is the seat of our emotional memory: it not only stores all our experiences but also assigns an emotional tone to each. That means that if we felt angry while making a particular decision, each time we execute that decision, we may feel angry. And because we then need to contend with the negative emotion of anger, we end up losing our commitment to executing that decision. Positive emotions like empathy, compassion, or even openness experienced when making a decision potentially increase the quality of our commitment to execution. Recent studies show that positive emotions do in fact increase motivation and creativity and that our overall well-being and happiness are enhanced when we are angry in appropriate situations (e.g., confrontations) instead of suppressing negative emotions.¹³ These new insights into the neurobiology of emotion and decision making align with an age-old lesson: we have to watch out for our emotional attachments to a particular outcome because these can affect the quality of our decisions through (to use a phrase that borrows from neurobiology) “amygdala attacks.”¹⁴

In addition to logic and emotions, our biases and our conditioning affect the quality of our decision making. When a leader makes decisions of high quality, with her own biases acknowledged and taken into account, one may say that she has good judgment or discernment. Discernment is defined as “the act or process of exhibiting keen insight and good judgment.”¹⁵ A discerning individual perceives and recognizes the underlying truth in the not-so-obvious and changing context and is thus considered to be wise.¹⁶

A fourth element involved in decision making is discrimination, that is, the ability to subtly differentiate or distinguish one set of data (or context) from a similar-seeming other set. Discrimination is a necessary precursor to discernment: it allows us to differentiate or distinguish accurately among stimuli; discernment allows us to judge the value of what we find.¹⁷ Thus, in a decision-making context, discrimination refers to the cognitive process by which we differentiate among similar but different stimuli, leading to distinct decisions and actions.¹⁸ It is important for leaders to develop a discriminating intellect in order to make good decisions and to learn to use their discriminating abilities properly (i.e., not in the service of prejudice or bias, another meaning for discrimination). When leaders decide with discernment after proper discrimination, they are exhibiting a quality of ethical clarity aligning with swadharma: their authentic and personal ethic and its noble purpose of being fair and just to one and all. Their decisions are aligned with what is ethical—in the context of the situation in which decisions are being made and also in a larger context—which in turn signals and ensures that these decisions are aligned with a noble purpose.

All of these factors—logic, emotion, bias and conditioning, discernment, and discrimination—collectively inform what we call decision logic, which we define as the system, process, and principles of reasoning used in making important decisions. Each leader possesses his own decision logic, and generally, the decision logic of leaders who usually operate in the blue zone is very different from that of leaders in the red zone.