Blog

image
Behavioral Economics 05-06-2018 0

Bias booby-traps

On occasion, it seems, our brains are fighting against us, rather than for us. This was first noticed by Plato, the famous Greek philosopher, who would very often get frustrated by his fellow Greeks, who acted mostly on impulse. He prompted them to examine their own lives, to think for themselves and be less trapped by doxa – the Greek word for common sense or popular opinion.

Today very few of us examine our own thoughts- we are limited by our experiences and beliefs. We leave the thinking to the innovators like Elon Musk and Sergey Brin because we believe that we are not capable of such enlightened thinking.

The truth is, these people are simply doing what we were supposed to be doing all along- thinking for ourselves. The problem is, we do it so little. This stigma affects our personal lives, our businesses and our mental health, so perhaps it’s time we start thinking more, more!

Intro to heuristics

As we have evolved our survival instinct has hard-wired mental short-cuts into our brains to ensure rational thinking. This predisposes us to taking the safe path through life, a path guided by past experiences and successes; because if something has worked before its bound to work again, right?

This phenomenon is deeply anchored within our mental psyche and has been relied upon by humankind since our days as hunter-gatherers. Not surprisingly, as it turns out, while these mind tricks we’ve developed are fantastic for survival in an environment that requires puma-dodging prowess, they are more a hindrance when it comes to a dynamic environment that depends largely on creative thinking for success.

These mental efficiencies have received a lot of attention from psychologists and behavioral economists in recent years and have been dubbed heuristics. Cognitive biases are the negative side-effect of heuristics that limit our independent thinking.

 

So, what’s the problem you might ask?

So, what’s the problem? You’ve been following your gut your whole life and look how you turned out- wise, wildly successful, a thought leader… Well, if you haven’t read some of our past blogs, here’s an update- things are starting to heat up and some outlandish things are happening in the world that contradict everything we’ve ever known.

In a world that bombards us with huge amounts of information, we resort to cognitive biases to make decisions quickly and, as you’re about to learn, ineffectively. This mentality limits us to a life where we pursue the least risk and the most secure, comfortable outcomes that prevent us from venturing into the unknown where, ultimately, true opportunity lies.

If you aren’t keeping your primitive habits in check it could lead to perceptual blindness ending up with you trying to solve the wrong problems whilst ignoring critical flaws, only to repeat the same patterns again in future. This can have profound effects on your life ranging from buying an unflattering outfit, getting married to the wrong person, making poor business decisions or declaring war (I’m looking at you Trump).

Seeing as I know nothing about marriage or politics, let’s focus on how biases can affect you and your business.

 

Divide and conquer

There are loads of identifiable biases (175 to be exact!) but for the sake of simplicity I have grouped these into 3 distinct categories.

Too much information

Our brain has an imbedded filtering capability that kicks in when we are overwhelmed by information. We tend to notice things that are fresh in our memory or repeated often. Bizarre or visually striking items tend to stick out while dull information is overlooked. We are also often drawn to details that confirm our own existing beliefs and quicker to spot flaws in the beliefs of others.

Here’s an example of a “too much information” bias called confirmation bias. Imagine a business is launching a new product and the head of product development holds a meeting to propose his idea that’s going to be “the next big thing”. Once the manager has sold his concept he directs his team to conduct a feasibility study.

This is a perfect example of biases at work. firstly, the manager is trying to use market research as confirmation of a preconceived idea, rather than letting the data do the talking. Secondly his team are going to be biased toward pleasing their boss and will subconsciously rig the research to provide a favorable conclusion.

While this is a hypothetical scenario it happens all too often.

Not enough meaning

We only end up experiencing a small percentage of what the world has to offer, yet we need to make sense of all of it to survive and appear vaguely intelligent. Our brain tends to process the fragmented information it receives by automatically connecting the dots and filling in the blanks (Called confabulation!). It has a knack for finding patterns and fabricating stories out of sparse data, making sense (or so we think) out of the incomprehensible. This is the reason why stereotypes and generalizations tend to cloud our judgement. The issue- our search for meaning can conjure illusions

A fantastic example of this bias is something called neglect of probability, which is the tendency to disregard probability when making decisions under uncertain conditions. Kodak comes to mind, when in 1975 they developed the very first digital camera, yet kept it quiet due to the potentially negative impact the technology could have on their business. In 2012 Kodak filed for bankruptcy, largely due to the advent of the digital camera.

Sometimes our search for meaning can conjure illusions.

The need to act fast

Decisions are always time sensitive, especially when it comes to business. In an accelerating world the need to act fast usually leads to lapses in judgement. To get things done we’re usually motivated to complete things we’re already invested in. We tend to favour options that appear simple over the more complex, ambiguous (yet more rewarding) options. Often, we favor instant gratification over delayed gratification and tend to accept the status quo rather than upset the apple cart.

Cryptocurrency springs to mind here, with a time-based bias called appeal to novelty. The rapid adoption of Bitcoin was a widespread mania, as people felt an overwhelming urge not to miss the boat. Regardless of whether or not they had done the necessary investigation, people were re-financing their homes and withdrawing their kid’s education funds to get a piece of the action.

No one wants to miss out on a good opportunity, but brash decisions usually end up in disappointment.

 

Check yourself

Falling prey to biases happens mostly when you are discussing new ideas, brain storming, conducting research, making assumptions or problem solving. Under these circumstances we try to be overly logical and, counterintuitively, end up killing all potential for creativity.

Look out for these phrases-

“That’s the way it’s always been done.”

“We KNOW X”

“My boss/my customers/my staff would never let that fly”

“That’s never worked before, why would it work now?”

 

Openly reflect on and discuss biases that you feel may be clouding your judgement, a different perspective doesn’t necessarily alter your viewpoint completely, instead it enables you to progress your thoughts and take them to new levels. Start being more conscious of your thought patterns and challenge you and your team when your brains jump to conclusions.

Plato said it best when he said – “The greatest victory is to win yourself”

 


By jonathon@icononline.co.za


Leave a Reply

Your email address will not be published. Required fields are marked *