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- Effective in Unstable Times
We’ve all heard it: “Don’t make big decisions when you’re emotional.” It’s solid advice, but it hits different when your investments just took a nosedive. Today, I was reminded of this principle while reading the market news (and, yes, staring at some red graphs I’d rather not talk about). It turns out this isn’t just popular wisdom - it’s backed by Nobel Prize winners, Harvard psychologists, and decades of research. So let’s break down why emotional decisions often backfire, and what to do when your gut says “sell it all.”
[Side note: As you can imagine, I write these in advance. And as I’m about to hit send, the market has actually rebounded a bit. But I’m sticking with this topic because we are officially in unpredictable times, so this is a reminder we all need.]
Tip of the Week: When emotions rise, decision quality falls. Behavioral science encourages us to pause before making a costly move.
THE THEORY
Emotional brain overrides the rational brain. According to Daniel Goleman in Emotional Intelligence, when we’re flooded with emotion (grief, fear, panic) the amygdala takes control. This “amygdala hijack” shuts down the prefrontal cortex, the part of our brain responsible for planning, logic, and long-term thinking. As a consequence, we end up reacting before the rational part of our brain has time to take part of the decision.
Stress narrows decision-making to instinct. In Thinking, Fast and Slow, Nobel Prize-winning psychologist Daniel Kahneman explains how stress pushes us into “System 1” thinking, which is fast, emotional, and prone to error. This mode is helpful in emergencies, but not when deciding whether to move, change jobs, or sell your stocks during a dip. That kind of thinking leads to overreactions and tremendous exposure to biases.
Emotions are signals, not instructions. Harvard psychologist Susan David, in Emotional Agility, teaches us to create space between what we feel and what we do. Instead of identifying with an emotion (“I’m panicking”), we can name it more mindfully (“I’m noticing panic right now”). This subtle shift gives us just enough room to access reason, as we essentially delay our impulsive action.
MY PERSONAL THOUGHTS
A mentor of mine once shared a tip that builds on this: when I was deciding between two job offers, he told me to “choose” one by writing the acceptance email, but don't actually send it. "Send it to yourself but believe you already made the call and ping me on Monday." When Monday came, he asked me how my decision felt now. That moment of imagined commitment actually gave me surprising clarity. I later learned this technique is called "predecisional simulation," and it’s supported by research. It’s a great way to create emotional distance while testing your instincts. I consider it a practical version of the 10/10/10 Rule. I’ve used both methods and they actually work.
HOW TO PUT THIS INTO PRACTICE
Let’s use the current market volatility as an example (but these apply to anything from job changes to major relationship moves). If you're panicking, pause. Here’s how:
Name your emotion. Say it aloud or write it down: “I’m noticing I feel anxious and uncertain.” That simple act reduces its intensity.
Create a no-decision window. Give yourself 72 hours before making any move (especially irreversible ones).
Write your decision as if you made it. Draft the resignation letter. Write the “I’m selling all my stocks” email. But don’t send it - send it to yourself or save it. Then revisit it tomorrow (or Monday) and check how it feels with a clearer head.
Phone a grounded friend. Find someone who isn’t emotionally involved. Just talking it out can reset your perspective.
Apply the 10/10/10 rule. Ask: How will I feel about this decision in 10 minutes, 10 months, and 10 years?
So… should you sell your stocks? Quit your job because your annual raise is below inflation? Move to a cabin in the woods? The truth is, nobody knows. But here’s what Nobel Prize winners, Harvard psychologists, and decades of research do say: if you’re feeling emotional, just wait. Let the fog settle. Then decide.
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