When it comes to risk, financial or physical, the brain is less a powerful computer capable of careful conscious reason, and far more a survival machine whose job is not to get good grades and win Nobel Prizes, but to keep you alive.

Research in a number of fields has uncovered just what goes on behind the curtain of consciousness as we form our perceptions of risk. Saint Thomas Aquinas observed that “Most men seem to live according to sense rather than reason.” Here is where our sense of risk comes from.

Neuroscience has discovered that the circuitry and chemistry of the brain guarantee that when we receive some sort of stimulus, either from external senses or internal thoughts, that stimulus gets to the part of the brain where fear begins, called the amygdala, before it even gets to the outer cortex where we do our higher order thinking. If the amygdala senses danger in that stimulus, it doesn‘t wait for reasoned feedback from the cortex before sounding the alert and triggering a fight or flight response. Whether the stimulus is a snake on the ground or more uncertainty about the European fiscal situation, the brain is hard wired to feel first and think second. Then, as the risk response continues over time, between conscious purposeful reason and subconscious instinct and emotions, neural architecture and chemistry give emotions the upper hand. The brain is hard wired to feel more and think less.

 

• Psychology has discovered a long list of mental shortcuts that help us quickly and subconsciously turn a few initial facts into the judgments and decisions we have to make all the time, before we can get more information and carefully mull things over.  “Loss aversion”, “Representativeness”, “Availability” – what the academics call heuristics and biases are the heart of what has become known as behavioral economics. See Daniel Kahneman’s fabulous book “Thinking. Fast and Slow”, for the fascinating but also sobering details about how cognition works and the built-in limits to reason.

 

• Other psychological research has teased out more than a dozen ‘risk perception factors’, emotional characteristics that help the brain gauge whether a stimulus might mean danger.
  • • • We’re less afraid of risks when we think we have some control than when we feel powerless. 
      • We are less afraid of risks the greater the benefit that may come with them. 
      • We are less afraid of risks we take voluntarily than risks which are imposed on us.

Those are just three of the psychological factors that seduce managers into decisions that may feel right, but which turn out to be big mistakes because their decisions don’t match the evidence.  

Robust evidence makes an inarguable case that the way we respond to risk – whether we are a senior corporate risk manager making executive decisions or just John Doe thinking about some threat to our own health - is the product not simply of careful conscious cognition but, even more, of subconscious instincts and emotions. It’s a system that worked well to get us past the simpler threats along evolution’s challenging gauntlet, but which stumbles against the complex modern risks that really do require more careful objective consideration.

The bad news is, this innately subjective system gets us into trouble. We fear some things more than the evidence warrants, and some things less than the evidence warns, and those mistakes become risks in and of themselves, a phenomenon I label The Perception Gap. Fortunately, we are not doomed by these limits on reason. We have studied risk perception. We know why it is sometimes flawed. We can apply what we’ve learned toward the challenge of thinking about risk more carefully – giving the facts and reason a bit more of a say in our risk response – and hopefully making wiser and healthier choices. As Italian philosopher Nicholas Abbagnano advised “Reason itself is fallible, and this fallibility must find a place in our logic."

But the first step, and the hardest, will be to admit that, as Ambrose Bierce suggested in "The Devil’s Dictionary", the brain is only the organ with which we think we think.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.