E is for Ego Depletion

Ego Depletion occurs when we're forced into too many acts of self-control in a short period of time. No matter how strong-willed you are you'll be more likely to make poor choices or succumb to temptation after sustained periods of self-denial or decision making. Although, of course, "sustained" is a relative term.

Example

Rather worryingly, at least if you believe these results are transferable to other situations, a study of parole board decisions showed that the number of favorable rulings dropped from about two-thirds to zero over the course of a morning. Upon resumption in the afternoon, presumably after an alcohol free lunch, the approval rate jumped back to two-thirds. This is in-line with other research which indicates clearly that the more decisions we make the more likely we are to gravitate to default decisions.  Our mindful self-control has limits and can be depleted by too much use. 

Causes

There are plenty of arguments over causes - some studies suggest that this may be an effect of glucose depletion as the brain consumes energy as it makes decisions. Others suggest that it's something to do with the dopamine reward center of the brain, which gets fed up with not being pandered to and starts to demand attention. As usual there's not a lot of agreement over what's going on, although there are indications that as ego depletion occurs the brain tends to use more automatic modes of processing, which leads to either a failure to make decisions at all - procrastination - or a preference to fall back to the default position. Hence why a tired parole board opts to keep people in jail.

Mitigation

Making lots of decisions when in an emotional, tired or hungry state is likely to lead to ego depletion. It's simply another example of why investing should be done in slow-time and with conscious, mindful concentration. In fact there's even an argument that mindful meditation can reduce ego depletion, although personally I'd rather just have another energy bar.

And also: The Cherry Coke Effect
Read more: A Liberal Arts Investor's Reading List

The A to Z of Behavioral Bias