The Example of the Iowa Gambling Task

The field of neuroscience has been especially helpful in expanding our understanding of the role of emotions in decision-making. Research shows that while emotions are essential for decision-making, they can also lead us far astray in ways we may not anticipate. Antonio Damasio, one of the world’s leading researchers in neuroscience, helped design a seminal experiment that assessed the role of emotions in decision-making. It is known as the Iowa Gambling Task.

Participants are seated at a table on which four decks of cards have been placed. The players are given $2,000 in play money and told that the object of the task is to make money. Some cards, they are told, will give them a payout — as much as $100 — while others will signify penalties, sometimes several hundred dollars. They can choose cards from any pile.

What the players do not know is that the gains and losses from two decks – the bad decks – are negative, while those from the other decks – the good decks – are positive. Each deck has different cards, with different payouts and penalties. The bad decks, on average, offer higher payouts but even higher penalties. If a player were to pick ten cards in a row from a bad deck, he would expect payouts of $1,000 and penalties of $1,250, leaving a net loss of $250. If the player were to pick ten cards from a good deck, the payout would be $500 and the losses $250, giving a net gain of $250.

The players are hooked up to equipment that detects fluctuations in heart rate and skin-conductance, both good measures of emotional arousal. They are also asked to describe what they are thinking as they draw cards. At first, players draw cards, randomly noting the outcomes. However, as soon as a player draws a penalty card, his or her emotions are activated. After a few cards, it is possible to observe the increase in emotional activity when players are about to choose cards from the bad decks, even before the players make any comments about these decks. In fact, players start to prefer the good decks and avoid the bad decks before they are able to articulate what they are doing or why they are doing it. The explanation for their behavior usually comes 20 or so cards after their behavior starts to change, and as much as 30 cards after their emotions are signaling that they have concerns about the bad decks.

The order of their responses is as follows. First they exhibit an emotional response to the penalty cards. They then exhibit emotional responses whenever they draw from the bad decks. Then, they start to avoid the bad decks, without being aware that they are doing so. The process is clearly subconscious. In the next stage, they begin to articulate a preference for the good decks, without being able to say exactly why. They have a gut bias. Finally, players explain that they are avoiding the bad decks because the gains are consistently less than the penalties. From then on, they only draw from the good decks.

This experiment not only demonstrates that our emotions are part of our decision-making process, but also how powerfully our emotions can influence how we think. Indeed, emotions appear to lead the process, even in an exercise as unemotional as drawing cards from decks. The order of the decision-making process appears to be as follows. The process starts with inputs from the environment: the information from the cards. The next step is an unconscious emotional reaction. This is followed by behavioral change in line with the emotional reaction. Then we become conscious of the feelings that are driving the behavioral change. These are our gut feelings. Finally, we are able to make a decision by reasoning. Eventually, most players avoid the bad decks entirely and are able to give a rational explanation of the differences between the decks.

Source: How Emotional Tagging Can Push Leaders to Make Bad Decisions by Sydney Finkelstein and Jo Whitehead and Andrew Campbell | Ivey Business Journal, January/February 2009

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