#lovework Review: The Dangers Of Decision Fatigue by The Economist

#lovework Notes

This Economist article explores the concept of decision fatigue and its negative impact on productivity and well-being, and provides insights into how individuals and organizations can mitigate the effects of decision fatigue.

ARTICLE EXCERPT BELOW

In a new paper for Royal Society Open Finance, “Quantifying the cost of decision fatigue: suboptimal risk decisions in finance”, Tobias Baer and Simone Schnall examine the credit decisions of loan officers at a leading bank over the course of their working day. The academics write that decision fatigue “typically involves a tendency to revert to the ‘default’ option, namely whatever choice involves relatively little mental effort”. In other words, as you become tired, you get mentally lazy.

The study looked at proposals to restructure loans, with each credit officer analysing 46 requests per day. The approval rate was around 40%, so the default decision was rejection. Officers tended to start work between 8am and 10am, took lunch between 1pm and 3pm, and tended to leave at 6pm.

The researchers found that the approval rate declined significantly between 11am and 2pm, as lunch approached, then picked up again after 3pm before declining in the last two hours of work. The applications were distributed to credit officers by the bank’s automated system, so they were in effect
allocated randomly. There is no sign that the loans assessed at lunchtime were of a different quality from those in the rest of the day.

What makes this study ingenious is that the authors were able to see whether or not the loans were subsequently paid back. They found that rejecting a restructuring request made it less likely that the loan would be repaid. So they calculated that decision fatigue, by causing more rejections, actually cost the bank money; around $500,000 over the course of a single month.

Similar patterns have been seen in other situations. A much-cited study of Israeli judges found they were less likely to grant parole as lunch approached, but became more lenient once their stomachs were full again. Other research found that doctors grew steadily more likely to prescribe antibiotics, even when these might not be necessary, over the course of their shift. In some areas of work, breaks are seen as a vital matter of safety. In the EU, lorry drivers are expected to take a 45-minute break after 4 hours 30 minutes behind the wheel.

Mental activity can result in physical exhaustion, as anyone who has spent a day in successive meetings can attest. In the middle of a business trip, nothing can seem more enticing than the solitary silence of a hotel room, with no clients to amuse or placate in sight. Breaks can also boost creativity. It is easy for the brain to develop tunnel vision when it is working hard. There are times when the mind needs to roam free. Kevin Cashman of Korn Ferry, a consultancy, and author of a book, “The Pause Principle”, reports that executives say their best ideas often come when exercising, taking a shower or commuting.

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The full article was written by The Economist originally posted here.