In 1956 George Miller published one of the most famous papers in the history of psychology titled The Magical Number Seven, Plus or Minus Two: Some Limits on our Capacity for Processing Information. In the paper, Dr. Miller described the phenomenon of us being able to only store 5-9 items of information in our working memory (or seven plus or minus two).

Working memory is our few temporarily active thoughts. It is the information of which you are immediately aware. It usually has a duration of about 10-15 seconds.

Our working memory differs from our long-term memory. “If long-term memory is like a vast library of printed tomes, working memory is a chalkboard on which we rapidly scrawl and erase information. The chalkboard, which provides continuity from one thought to the next, is also a place for quick-and-dirty calculations.” Source. Working memory is as much of a process, or activation system, as it is a mere store of memory.

Working memory is used in mental tasks such as:

• language comprehension (for example, retaining ideas from early in a sentence to be combined with ideas later on),
• problem solving (in arithmetic, carrying a digit from the ones to the tens column while remembering the numbers), and
• planning (determining the best order in which to visit the bank, library, and grocery). Source.

Similar to Dr. Miller’s conclusion, a 2005 study out of University of Queensland in Australia found that humans can only consider four variables at a time. Attempts to deal with five variables or more were not successful and participants in experiments experienced overload. Where we are exposed to too much complexity our brains tend to “revert to a simplified version of the task that does not take all aspects into account and therefore may make the wrong decision.”

This study determined that the reason we can only hold and consider a handful of variables in our working memory is because our thoughts occur due to the firing of some pathways in the brain and the suppression of other pathways which would give rise to other thoughts. It is the ability to suppress other thoughts that allows us to focus on the thought at hand in our working memory. As we put more information into our working memory “it becomes exponentially harder for the excited cluster to suppress the others from firing, resulting in pathways that are weak or barely there. Recalling seven items requires about 15 times the suppression needed to recall three. Ten items requires inhibitory powers that are 50 times stronger, and 20 or more items would require suppression hundreds of times stronger still.” Source.

A big takeaway for us is that it is important to recognize the limits of our working memory. Our working memory serves as a severe bottleneck to our ability to process complex information. We cannot juggle and consider many variables simultaneously. When presented with complexity, we tend to focus on one or just a few variables. This phenomenon may be what gives rise to the focusing illusion and why multitasking is not a thing that actually can occur.

Think about our limited working memory when you try to make sense of a complex situation like what the stock market is going to do. You cannot possibly consider more than a few variables at the same time.