How Human Emotion, Identity, and History Shape Decisions
Issue 224, August 7, 2025
It is human emotion, identity and history that shape our culture and inform our decisions. So, here’s a question that should keep every leader awake at night: In an era where data-driven decision-making and AI-powered analytics lead strategy, why do so many consequential business choices still get made in conference rooms based on gut feelings, unspoken fears, and organizational memories?
There appears to be an ongoing debate among business leaders about how to navigate change and transformation in times of market disruption, consumer unrest, and regulatory upheaval. Should leaders rely on rationalized approaches informed by extensive data and analytics? Or should they lean into the human factor with its emotion, cultural memory, and brand storytelling?
Does the belief that analytical decision-making is foolproof still hold water? Or in certain situations, do the messy, emotional dynamics of human nature actually outperform logical organizational and leadership systems?
The Myth We Tell Ourselves
We want to believe our organizations are rational entities, guided by strategy, facts, and clear-eyed judgment. We promote the benefits of leading by objectivity and critical thinking via this newsletter. But anyone who’s lived through a change or transformation effort knows the emotions of leaders, the workforce, and those comprising the organization’s culture can take center stage with a strong influence on the decisions being made.
Why? Decisions often aren’t made in spreadsheets. They’re made in conference rooms, hallways, Slack channels, and late-night calls. Organizational politics come into play: Leaders want to see their vision come to reality, teams prefer to work on fun, interesting projects, and a promising new project requires an uncomfortable cultural shift. As a result, what drives decisions isn’t always the data in front of us. It’s often something far more invisible: legacy stories, fears, cultural memory, and collective identity.
We Don’t Act in Spreadsheets. We Act in Stories.
Consider Mark Zuckerberg’s bet on the metaverse—a deeply personal vision that defied conventional wisdom about Meta’s core business. The jury’s still out on whether that investment will pay off, but so far it isn’t looking so good. Look at Amazon’s repeated struggles with physical retail, which go well beyond their “fail fast” philosophy. Barnes and Noble seems to have risen from the ashes and is once again expanding based on a visionary CEO. Or Ford’s recent pullback on EVs—is that a rational response to market conditions, or an emotional retreat from an ambiguous future? In our age of AI-powered analytics, we’re caught between wanting to fall back on objective decision-making and relying on fallible human instincts. But what if both have a role to play?
Legacy as a Force
There’s another powerful force shaping decisions that leaders rarely acknowledge: the unspoken motivation of protecting a legacy. Every executive operates with an unspoken narrative running in the background. It’s not “Will this work,” but rather “What will this say about me? About us? About what we stand for? What will our stakeholders think?”
What’s remembered in an organization often drives more decisions than what’s known through data. This isn’t just about individual ego (though that plays a role including, power plays). It’s about the collective organizational identity and culture that leaders often feel personally responsible for protecting or enhancing.
Consider Kodak’s digital photography dilemma in the early 2000s. The company actually invented the digital camera in 1975, but leadership consistently chose to protect their film legacy rather than cannibalize their core business. It wasn’t that they lacked data about digital’s potential—they had plenty. It was that embracing digital meant acknowledging that everything that made Kodak “Kodak” would become obsolete. The emotional weight of dismantling their own legacy paralyzed them until competitors made the choice for them.
Xerox faced a similar challenge. Xerox PARC, established in 1970, was a hub of innovation responsible for developing foundational technologies for modern computing, including the graphical user interface, the computer mouse, Ethernet, and laser printing. They sold their inventions for what would be pennies today to a technology company. Why? They felt it was outside of the scope of their core photocopier business. They never considered the necessity to evolve, nor did they foresee a different path.
Or look at Disney’s initial resistance to streaming. CEO Bob Iger later admitted that one of the biggest barriers wasn’t technological or financial—it was the fear of disrupting the carefully cultivated Disney “magic” that had been built around theatrical releases and cable partnerships. The data supported streaming; the legacy protection held them back for years.
The Legacy Trap in Action
Here’s a scenario we’ve witnessed repeatedly: A leadership team is evaluating a promising new digital service. The numbers are solid. The research is compelling. It aligns perfectly with their strategy. And yet…it gets rejected. The objections are tactical: “It’s just not us. Feels like a distraction. The market isn’t ready.” But the subtext of the underlying conversations is revealing:
- The CEO worries: “My predecessors built this organization maintaining, predictable high quality. What does it say about their legacy if I pivot to a risky new type of service?”
- The COO believes: “If this fails, I’ll be remembered as the person who led us away from what we do best into financial failure.”
- The board chair reflects: “We’ve been the industry experts for decades. Are we really going to become just another tech organization?”
Whether we like to admit it or not, these objections play out in ourselves and organizations in countless ways, regardless of the significance of the decision. Our very human nature is always the influencer, often to our and an organization’s folly.
The Psychology of Organizational Memory
What’s fascinating is how organizational legacy operates at multiple levels simultaneously. There’s personal legacy (how individual leaders want to be remembered), institutional legacy (preserving the “essence” of what made the organization successful), and cultural legacy (maintaining the shared story that gives employees meaning and identity).
These legacy concerns create what psychologists call “loss aversion,” the tendency to prefer avoiding a loss over acquiring an equivalent gain. In organizational terms, leaders often choose to protect an existing reputation over pursuing new opportunities, even when the data strongly favors change.
The most successful transformations we’ve observed acknowledge loss aversion directly. Instead of fighting it, leaders reframe the change as an evolution of the organizational legacy rather than an abandonment of its past. Going to the next level of any organization’s relevance and evolution is an imperative in today’s dynamically changing marketplace and business environment.
Amazon didn’t abandon being a bookstore; they evolved into “Earth’s most customer-centric company.” Apple didn’t abandon personal computers; they expanded the definition of what a personal computer could be. This isn’t irrationality or some mysterious pivot. It’s human nature operating at an organizational scale. And when leaders pretend the human factor doesn’t exist, it’s exactly what derails even the most data-driven transformation efforts.
Organizations Are Decision Engines Run by Humans
Here’s what we’ve learned from years of working with organizations in transformation: The dominant belief is that organizations are decision engines fueled by logic. The reality is that decisions are made by people, and people bring emotion, memory, and bias to every discussion, especially during uncertainty. Fear, anxiety, loss of power, unwillingness to take a risk or simply not wanting to work harder play out more decisively in times of uncertainty.
What gets called “strategy” is often emotional consensus built around comfort and status preservation. What gets labeled “risk” is frequently just unfamiliarity with a new narrative. This emotional undercurrent can either paralyze progress or infuse it with wisdom.
Four Emotional Red Flags
At 2040, we’ve identified four common patterns that consistently derail decision-making.
- Organizational Memory: Past traumas, former failures, or legacy successes create invisible boundaries around risk tolerance and openness to change. That “failed” product launch from 2018 still haunts every innovation discussion, even though market conditions, customer preferences or a regulatory environment have completely shifted.
- Group Identity: “This is who we are” becomes a wall that blocks uncomfortable transformation and eventual evolution. We’ve seen tech organizations refuse to embrace service models because “we’re a product company,” even as their customers demand integrated solutions.
- Emotional Climate: Fear, pride, resentment, and grief show up in strategy sessions but are rarely acknowledged or addressed. The Transformation Curve we discussed at length in “The Truth About Transformation” explains how every change, whether on a personal level or an organizational level, follows a curve across a range of emotions until acceptance.
- Sentimental Stories: Powerful folklore about “how things work here” often outweighs official policies or data-driven metrics. The story of the founder’s original vision becomes sacred text, even when that vision no longer serves the market. We have pounded this pavement so often with analyses on the perception of how things work or how things have always been which prevent an organization from improving its current system or transforming its system into something completely new. Regardless of technological promise, it’s the people who control the process, even when the process is no longer effective or efficient.
The Hidden Cost of Emotional Denial
When we pretend emotions don’t influence decisions, smart ideas get buried. Talented employees disengage when their insights challenge the dominant narrative. Innovation becomes window dressing instead of real capability. Cultural contradictions quietly erode trust and alignment, leaving organizations without shared purpose.
We’ve seen this pattern repeatedly: Organizations that deny the emotional dimension of decision-making become inauthentic. They lose their most insightful employees and struggle to build the kind of cultural momentum that drives sustainable transformation. A more honest approach is to decode the human factor. Leaders can’t afford to ignore the emotional landscape. Instead of fighting human nature, we need to surface it and make it relevant to the situation at hand. There are three practical strategies to uncover the hidden forces that shape decisions.
- Narrative Mapping
Before major decisions, identify the key stories shaping your organization. What past wins are people protecting? What failures are they trying to avoid? What changes are they trying to prevent? These stories create invisible guardrails around what feels possible. Try this: In your next interaction with individuals across your team, preferably via one-on-one discussions, ask them to share the organizational story that most influences their thinking about the decision at hand. You’ll likely be surprised by what emerges.
- Emotion Audit
Discuss directly (and non-judgmentally) the emotional context of decisions. Who’s afraid of what? What unspoken loyalties are at play? What would success or failure mean for different people’s sense of identity in the organization? What change are they foreseeing that is influencing their own professional narrative and the value they contribute? The key question is: “If we moved forward with this decision, what would each of us gain or lose?” How can we redefine/restructure ourselves to continue to contribute?
- Identity Trap Detection
Notice when “who we are” becomes an excuse for avoiding “who we need to become.” The most dangerous phrase in any organization might be “That’s not us.” Remember Kodak and Xerox as two examples of self-destruction. Neither envisioned what they needed or could become; they only saw who they were. Watch out for any time someone deflects a new idea by referencing company culture, values, or “the way we do things here” without examining whether those beliefs still serve your mission.
The Path Forward: Integration, Not Elimination
The solution isn’t to eliminate emotion from decision-making—it’s to make it visible and positively intentional. Data matters, but so do memory, emotion, and identity. We wouldn’t focus so heavily on the human factor if we didn’t believe it was critical to organizational change and transformation. We recognize it as a powerful influence, as well as the fault in ourselves, and foundational to all organizations.
If we keep treating organizations purely as logical, technology-heavy machines, we’ll keep misdiagnosing why resistance, underestimating inertia, and misunderstanding are what actually motivate people. The most effective leaders are students of the hidden human factors and forces within their systems. They understand that change and transformation aren’t only about changing processes or technology, they are about helping people rewrite their stories in how they see themselves and their contributions — and about what’s possible.
As we’ve written extensively in The Truth About Transformation, the human factor remains the most overlooked part of the change equation. When we acknowledge and work with our emotional realities instead of against them, we unlock the kind of authentic change and transformation that actually sticks. Because in the end, we don’t make decisions in spreadsheets. We make them in stories.
What stories are shaping your organization’s biggest decisions right now? We’d love to hear your insights. Share your experiences with us on our Substack or join the conversation on our LinkedIn. For more insights on navigating transformation in today’s complex business environment, explore our archive of Ideas and Innovations newsletters or pick up a copy of The Truth About Transformation.
The Truth About Transformation: Why Most Change Initiatives Fail (And How Yours Can Succeed)
Why do 70% of organizational transformations fail?
The brutal truth: It’s not about strategy, technology, or resources. Organizations fail because they fundamentally misunderstand what drives change—the human factor.
While leaders obsess over digital tools, process improvements, and operational efficiency, they’re missing the most critical element: the psychological, behavioral, and cultural dynamics that actually determine whether transformation takes hold or crashes and burns.
The 2040 Framework reveals what really works:
- Why your workforce unconsciously sabotages change (and how to prevent it)
- The hidden biases that derail even the best-laid transformation plans
- How to build psychological safety that accelerates rather than impedes progress
- The difference between performative change and transformative change that sticks
This isn’t theory—it’s a battle-tested playbook. We’ve compiled real-world insights from organizations of all sizes, revealing the elements that comprise genuine change. Through provocative case studies, you’ll see exactly how transformations derail—and more importantly, how to ensure yours doesn’t.
What makes this different: While most change management books focus on process and tools, The Truth About Transformation tackles the messy, complex, utterly human reality of organizational change. You’ll discover why honoring, respecting, and acknowledging the human factor isn’t just nice—it’s the difference between transformation and expensive reorganization.
Perfect for: CEOs, change leaders, consultants, and anyone tired of watching transformation initiatives fizzle out despite massive investment.
Now available in paperback—because real transformation requires real understanding.
Ready to stop failing at change? Your organization’s future depends on getting this right.
