THE HIDDEN TRAPS IN DECISION MAKING
Research reveals a number of traps that affect how we make business decisions.
Though we can’t get rid of them, we can become more aware of them, monitoring our decision making.
Traps of Decision Making • • • •
Anchoring Status Quo Sunk Cost Confirming Evidence
• • • •
Framing Overconfidence Prudence Recallability
Anchoring
1
What we see or hear first feels most important. Which gives disproportionate weight to the information received.
WHAT TO DO ABOUT IT
The Anchoring Trap
• Take a different perspective • Think before asking • Seek input • Avoid anchoring others
Status Quo We prefer things to stay the same even when better alternatives exist.
2
WHAT TO DO ABOUT IT
The Status Quo Trap
• Consider your objectives • Know you have options • Don’t exaggerate switching costs • Don’t settle
Sunk Cost We make decisions that justify past choices even when they no longer seem valid.
3
WHAT TO DO ABOUT IT
The Sunk Cost Trap
• Involve outsiders
• Accept that mistakes happen • Allow room for failure
Confirming Evidence We seek information that supports our existing point of view and reject anything that doesn’t.
4
WHAT TO DO ABOUT IT
The Confirming Evidence Trap
• Consider all evidence • Find a devil’s advocate • Avoid people who don’t agree with you
Framing
5
The way we state the problem influences what we decide. We misstate a problem by defining a choice as a gain or a loss, even when it’s really neither one.
WHAT TO DO ABOUT IT
The Framing Trap
• Always reframe
• Think in neutral terms • Challenge other’s frames
Overconfidence We tend to trust our own estimates too much. We put too much trust in the accuracy of our forecasts.
6
WHAT TO DO ABOUT IT
The Confirming Evidence Trap
• Look at the extremes • Challenge those extremes • Question estimates
Prudence
7
We adjust estimates to be “on the safe side.� We often use excessive caution when we try to predict uncertain events.
WHAT TO DO ABOUT IT
The Prudence Trap
• Aim for accuracy
• Ask others to do the same
Recallability
8
We are overly influenced by our past experiences. Which prompts us to give undue weight to recent dramatic events.
WHAT TO DO ABOUT IT
The Confirming Evidence Trap
• Examine assumptions • Check the facts
Awareness Your Best Weapon The best protection against all psychological traps is awareness.
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