Rational and objective: that is how business people like to see themselves, believing there is no room for emotion in their decision making. Yet whenever human beings find themselves in the grip of intense feelings, such as greed or fear, it is these, rather than rational thoughts, that influence the choices they make.

Whatever we think, emotions always play a part in our decisions. Understanding this can help businesspeople make better choices and achieve better results – particularly in the uncertain world of financial markets.

Feelings can be a useful guide to making decisions. Optimism, for ex­ample, is necessary, but too much can mean crucial realities are ignored. Desire to succeed can be so powerful as to repress the risks involved. Fear is appropriate when caution is called for, and excitement is necessary to motivate staff and move business on.

It is how such feelings are managed that ultimately determines if one is hijacked by them or uses them as a guide. In the former case, the result may be financial loss, paralysis or burnout, whereas the latter can help in making more reasoned choices.

For one middle-aged man with more than 25 years’ experience in trading for an international bank, it was an overwhelming desire to be seen as the “top guy” and to gain the acknowledgment of being right, rather than the financial rewards, that drove his decisions on the trading floor. This resulted in his failing to think through certain crucial management and trading decisions, which ultimately led to a substantial financial loss.

He explains: “I wanted to take the existing revenue stream and push the platform to the next level. I upped the risk profile and got it massively wrong. I blinded myself because I was eager – it’s a huge ego boost when you’re in that position that people have to come to you.

(read the full article at the FT)