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Red alert! Monday, February 14 was Valentine's Day!

No matter how much I am exposed to Valentine's Day advertisements, yard decorations (really!?!), news stories and even the red lights adorning the tops of the buildings of Chicago's skyline, I seem to always find myself scrambling on February 13 or 14 to get a card, buy flowers and find a thoughtful present for the love of my life, my wife Adriane.

I have yet to figure out why I have this annual issue, so I decided that this will be my year to buck this risky last-minute, mad-scramble tradition. Therefore, as soon as I finish writing this column, I am going to call a local florist to pre-order flowers (what a concept!); stop at the store to pick up a romantic, yet simple, Valentine's Day card before they are all picked over; and finally, pick up an uber-thoughtful gift!

Speaking of love: What does love have to do with risk and strategy in business? I am not referring to the type of love where two co-workers become romantically involved. I'm referring to the type of love that develops between a person and an idea or strategy.

Merriam-Webster defines love as the emotion of strong affection and personal attachment. Have you ever "fallen in love" with an idea or strategy? (Hence, the term "pet project.") Are you in love with one right now?

If so, can this love cloud or affect our judgment and the subsequent decisions that we make in regards to an idea or strategy? The research says absolutely!

How? In the end, it seems to come down to chemistry and psychology.

From a chemistry perspective, people that are romantically in love with someone else, especially those newly in love (i.e., love struck), have been found to have higher levels of the neurotransmitter dopamine in their brains. Dopamine triggers an intense rush of pleasure and results in increased energy, less need for sleep or food, focused attention and exquisite delight in the smallest details of the new relationship.

In addition to dopamine, heightened levels of serotonin in the brain have also been linked to love. Doctors have discovered that the serotonin levels of new romantic lovers were comparable to those of people who suffer from obsessive-compulsive disorder, and they believe that this might explain why new lovers are constantly thinking about each other.

I am no scientist; however, I hypothesize that similar chemical activities also occurs in our brains when we fall in love with ideas or strategies.

From a behavioral psychology perspective, there are a number of cognitive biases that are associated with love. For example, the "halo effect" is the tendency for a person's positive (or negative) traits to "spill over" from one area of their personality to another in others' perceptions of them; i.e., people are more likely to believe and trust someone with a deep authoritative voice (positive trait) verses someone with a weak, crackly voice (negative trait) ... even if they are saying the exact same thing.

Confirmation bias is another cognitive bias that refers to our tendency to search for or interpret information in a way that confirms one's existing perceptions. For example, if we believe the strategy that we have fallen in love with is bound to be successful, then we will have a bias toward searching out and interpreting information in a way that confirms our existing belief. We will also disregard and ignore information that may counter our beliefs.

I know that I have had ideas and strategies that I have been excited about (arguably in love with) in the past that have led to "increased energy, less need for sleep or food, focused attention and exquisite delight in the smallest details" of the new idea or strategy, as well as led me to "constantly think about it." In addition, I am sure that I have been guilty of applying the "halo effect" and "confirmation bias" as I further researched, vetted and tested these ideas or strategies.

Now that we know that love can cloud our judgment, is there anything that we can do to guard against falling for the chemical and cognitive biases that seem to be working against good judgment?

The most basic answer to this question is to be aware of these biases and to check ourselves against them when we discover we are getting excited about and obsessed with an idea or strategy. This does not mean that excitement and obsession about an idea or strategy are signs of something bad. They can actually be extremely good and give us the drive and confidence to turn our ideas or strategies into reality (just like romantic love).

Rather, it means that these are the ideal moments to apply some of our risk management skills and colleagues to help us more objectively test and stress our ideas or strategy before charging full steam ahead.

Maybe we can even take a page from the increasingly popular online dating sites that use detailed behavioral, psychological and preference questionnaires to match partners who exhibit common compatibility characteristics. Not only are these sites becoming more and more prevalent, but they also are helping people looking for real love navigate some of the common biases discussed above by prescreening, filtering and identifying potential partners that best meet individuals' traits and preferences. These sites have successfully helped a number of people find love, including my newly engaged best friend.

Could we apply similar technologies and techniques to more formally screen and identify ideas, strategies and even team members in our own organizations?

In case you were curious, I bought my wife's Valentine's Day gifts on Saturday, Feb. 12 ... way in advance!

DAVID M. WONG is director of enterprise risk management at CME Group, the world's largest and most diverse derivatives exchange

February 15, 2011

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