The oil rig Deepwater Horizon exploded in 2010 causing deaths and a massive oil spill in the Gulf of Mexico. The rig was operated by British Petroleum. BP's CEO, Tony Hayward, issued an apology immediately after the accident saying, "We're sorry for the massive disruption it's caused... There's no one who wants this over more than I do. I'd like my life back." This after 11 men lost their lives in the accident, mothers lost sons, children lost fathers. Hayward was forced to resign a few weeks after the incident due in part to his feeble apology. A month after oil spill, BP's market capitalization had dropped in half, losing $105 billion in value.
Even the most enthusiastic capitalist gets a small pleasure seeing a CEO apologize after some egregious mistake. Those greedy bastards! We knew it all time. It feels wrong that CEOs of large corporations earn outrageous salaries. They have to be cheating to boost profits.
The feeling that something just ain't right has been called a "somatic marker" by neuroscientist Antonio Damasio. It's genius mathematician's Isaac Newton's euphoria that told him to invest in the South Sea bubble. It's the certainty one feels that Florida State will win the Rose Bowl. And, it is almost always completely wrong.
The brain adapts to changes in the environment at millisecond frequency. Electrical signals relay this information to the heart, gut, back, and even your toes. The plethora of changes in somatic states means that some will necessarily correlate with events in the world. Voilà, the body is telling you what you should do.
Actually not. It is just a numbers game.
Stacking up correlations is exactly how sports betting scams work. During the first week of a season, scammers send out "confidential picks" identifying in advance which teams will win six games to a million people. There is a 1.6% chance that the scammers will get six out of six correct using their "secret system." This means that 15,625 people received perfectly accurate predictions. These 15,625 people then get picks for the following week. A total of 244 of them will get a perfect prediction for week two wins. In week three, the scammers ask you to pay them for their picks since they have proven their perfect record. Some people do.
The brain desperately seeks patterns in the world, correlating body signals to stacks of similar outcomes. Newton's euphoria, was not predictive of anything, but it does sometimes correlate with market moves. The technical term for this is confirmation bias; because Soros' back hurt a couple of times when the market moved, he has convinced himself that the signal is predictive.
My research lab put gut instinct to the test in a recent peer-reviewed publication. We asked people to watch eight videos of CEOs apologizing for mistakes their companies had made. In one-half of the videos, the problems had been fixed; in the other half, the problems persisted. Could study participants identify which CEOs were sincere? The analysis compared conscious evaluations with unconscious responses. Conscious appraisals were captured by giving participants a chance to bet after each video. If they believed the problem in the apology had been fixed and it was, they doubled their money. If their bet was wrong, the money was lost. Unconscious responses were measured using neural signals.
The conscious bets were completely unpredictive of outcomes consistent with most psychology research. But, unconscious neural responses associated with low psychological safety were a statistically significant predictor of which CEOs were lying. Watching the CEO apologize produced subtle signals of deception. The gut knew, but the brain layered this information with memories and biases. This muddied the neural waters so much that conscious predictions were useless. This is exactly why brain states need to be measured directly.