Your brain is your heart

Question: In this age of digital banking where people transfer funds from one bank to another, a mere P10 difference in transfer fees can already raise a howl. However, people will not fuss about the unnecessary things they buy online. Can you explain why that is?

Answer: The brain is the organ that serves as the center of the nervous system in all vertebrate and most invertebrate animals. That is why it is only logical for it to be in the driver’s seat, in the head where it is close to the sensory organs for senses of vision, hearing, taste and smell. The brain is actually the most complex organ in a vertebrate’s body. And in reality, it is the brain and not the heart that controls emotions in humans.

There is a concept in behavioral economics that might help your conundrum and it is called loss aversion, which states that losses hurt more than gains please. Another concept is mental accounting, which states that humans value money differently depending on where money comes from, how it is kept and how it is spent.

Case in point: I dropped off my wife at a mall and decided to circle the driveway as she said she would not take too long. I figured that it was not worth the P20 fee to park and then exit right away. But because I eventually felt I had circled the driveway one too many times, I decided to finally enter the underground parking. Lo and behold, as I was descending into the parking garage, I caught a glimpse of my wife exiting the mall. One can just imagine the frustration I felt.

The brain amazingly puts everything into context to the point that sometimes the original decision made looks nonsensical when viewed objectively. Ordinarily, I would not make a fuss over being given a gift of P20. To some, it may not even be considered a gift, just a small token. And yet, I felt a lot of frustration in having to spend the P20 unnecessarily on parking. Objectively, it is the same P20. But the intensity of the pain was greater when the P20 flowed out of my store of wealth as compared with the intensity of the joy if the same P20 would flow in.

Now, let us turbocharge the example. Whenever I ask people which of the following is easier to spend: P10,000 coming from an office reimbursement or a P10,000 bonus, most of the time, the answer is the bonus. This time around, the brain values money differently depending on where it comes from. Basically, a bonus is not yet treated as part of what the brain calls its store of wealth and as such, bears not much attachment to it.

Now here is the dangerous part. Many times, the brain does this contextualization subconsciously, automatically. If a person does not pay close attention, especially with the way he decides with his money, he may soon find himself too poor to even pay attention.

Much of the contextualization humans do have been ingrained as heuristics (i.e. rules of thumb, educated guesses, intuitive judgements and common sense). These heuristics are effective for daily living. But their overuse is what can lead to negative consequences.

The trick is to be able to know when another set of heuristics is needed for a particular situation, especially when the task can lead to either better or poorer money management.

Remember that your brain is your heart and the brain wants what it wants. And the brain will use whatever reasoning there is to justify what it wants. INQ

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