Republished from The Decision Lab. The Decision Lab is a behavioural science consultancy dedicated to creating social good by helping individuals, organisations, and governments make better decisions. I am a Staff Columnist for The Decision Lab. Subscribe here for the applied behavioural insights newsletter.
I'm convinced that to truly understand the depths of human decision-making, you need to experience a big travel fiasco. All possible contextual factors come into play: money, time, sunk cost, unfamiliar environment, social norms of other travelers, regret aversion, scarcity.
In case you haven’t guessed already, I was in a bit of a muddle recently. A flight of mine was canceled minutes before boarding. I was left in limbo for a few hours, with a toddler in tow, not knowing how I was going to get back home. I had options, of course:
I could wait patiently for the airline to do something about it, but it came with the uncertainty of not knowing when it would happen. This was hard, given that I was traveling with a baby.
I could take action, change my booking to another flight (not the same airline since I don't trust it anymore), pay for everything again and then fight for refunds from the original airline.
After 24 hours of waiting for any semblance of news, handling an increasingly annoyed toddler, mingling with a crowd of irritated travelers who wanted to be anywhere other than where they were at the moment, staring at the bland interiors of an airport hotel room, my tired cognitively exhausted mind succumbed. I went rogue and bought my own ticket. Only to get booked on the same flight by the airline an hour after I spent a bucket load of money!
Was I Rational or Irrational?
A week later, the behavioral scientist in me is asking me some hard questions that are seriously undermining my ability to think rationally:
Why were you not more patient? What was the urgency?
Why were you influenced by those who were impatient and not by those who were patient?
Why did you have to take any action at all?
Now that you have spent twice the original ticket, on a scale of 1 to 10, how much do you regret your decision?
Did you learn nothing at all from being a behavioral scientist for so many years?
And most importantly: were you irrational?
My single line answer to all questions is: It’s all contextual.
Or in other words: You weren’t there; you don’t know how hard it was!
The most important thing I learned was how complex human decision-making is. All of my theoretical knowledge about how social norms, scarcity, and time pressure can influence decision-making went out the window because, at that moment, I believed that this was the most rational decision.
However, here's the thing: We are not just rational or irrational. We are rational depending on the context. Let me explain this further.
The Different Types of Rationality
While we love to debate between a binary of rationality and irrationality, the reality is far more accommodating of our lived experiences.
I'm glad I learned from my travel fiasco, but it's still painful to think about the financial hit I'm going to take on my next credit card bill. So, let's change the subject.
Let's say I’m looking to buy a watch for my partner. I want it to have a clear dial, two hands, a strap, and accurately tell time. It should also have a good warranty. So far, so good. I have a lot of options. I could pick any of them and be happy. I pick Watch A. It's all rational.
But my partner likes blue, so I need to find a blue dial. And my budget is $50. It can't cost more than that. Given the number of options, these constraints could help me narrow down my choice.
Bounded Rationality
But this is turning out to be a bit more difficult than I thought. The option that matched all my criteria – and was a perfect logical buy a few seconds earlier – is now no longer fitting the bill. I am also in a hurry and need to decide quickly. I am exhausted already, so I pick the first option, satisfying my new constraints. I am justifying my new choice (Watch B) as the best choice, given all my constraints. So this is now bounded rationality. I am still rational, but within constraints.
Ecological Rationality
I look around and see a brand I am familiar with. This is a reputable brand. It’s always in my price range. If I buy this brand, I won’t have to worry about going through features and specifics. Watch C it is then!
I also use price as a signal. If a watch is this expensive, it will surely be of high quality. This is ecological rationality. I’m still rational, but I’m using heuristics and shortcuts that have been proven to be effective in certain contexts.2
Social Rationality
I was about to buy Watch C, but then I saw that one particular watch had a 4.9 star rating from a few thousand users. I figured that if so many people liked it, it would be good. Then, I saw someone I admire wearing the same watch. That sealed the deal for Watch D. If my partner wore this watch, he would fit in with the in-crowd. This is called social rationality. We sometimes make decisions based on social norms and the desire to conform to the needs of others.3
Adaptive Rationality
When I finally decided on the watch I wanted to buy, you can see the range of different decision contexts I went through: rational factors, ecological and contextual factors, and social factors. And eventually, I arrived at a decision to buy a watch. This is called adaptive rationality. It emphasizes that rationality is context-dependent. What is considered rational can vary from situation to situation, depending on the context.3
The Role of Goals in Rationality
The goals we’re pursuing are also a factor in how we decide to be rational.4
Am I looking to maximize accuracy? I’ll buy Watch A to serves the purpose and solve the brief. I will look for the right features at the right price. That will be a rational decision.
Am I looking to minimize emotional strain? I’ll buy Watch B to keep my partner happy. I might spend more, but it is rational in this circumstance because it succeeds in minimizing my emotional strain.
Am I looking to maximize transparency? I’ll buy Watch C, the one that’s easy to explain to my partner. I will pick a watch from a well-known brand with a strong reputation. I am using an ecological signal – and that’s still rational.
Am I looking to minimize effort? I’ll buy Watch D using the least decision-making possible. I’ll simply pick what everyone else is buying. It will still be a rational decision because I am using social signals to reduce my efforts.
Viewing rationality as adaptive helps to explain our decision-making. We are not rational or irrational as binary constructs. We are adaptively rational, depending on the situation.
I’m Rational and I Know It
All this to say that I’ve now justified to myself that my decision to pay a flabbergasting amount of money for my flight tickets instead of waiting patiently was not an irrational decision. My goal was minimizing emotional strain. The situation demanded this decision – and I’m almost glad I made it.
Okay, that’s an exaggeration. But at least I can live with it, while I fight for my refund and hope to get it in this lifetime. Wish me luck!
References
Gigerenzer, G., & Selten, R. (Eds.). (2002). Bounded rationality: The adaptive toolbox. MIT press.
Artinger, F., Petersen, M., Gigerenzer, G. & Weibler, J. (2015). Heuristics as adaptive decision strategies in management. Journal of Organizational Behavior, 36, 33-52
Haselton, M. G., Bryant, G. A., Wilke, A., Frederick, D. A., Galperin, A., Frankenhuis, W. E., & Moore, T. (2009). Adaptive rationality: An evolutionary perspective on cognitive bias. Social Cognition, 27(5), 733-763.
Payne, J. W., Bettman, J. R., & Johnson, E. J. (1993). The adaptive decision maker. Cambridge University Press.