How about you, are you good at making decisions?
It is difficult to find entrepreneurs or executives who believe that they do not know how to make decisions. However, some biases that make us systematically be wrong exist. What is worse, they prevent us from realizing our mistakes…
In the corporate environment, we executives like to think we are paid to make decisions. Truth be told, as we acquire more and more responsibilities, we actually do spend more time “thinking”, than “doing”.
Perhaps, it is because of this “homo-decisorum” assumption that makes it difficult, in business environments, to meet people who believe they do not know how to decide.
In their book, “Business Think”, authors Marcum, Smith and Khalsa describe a survey in which people were asked to rate their ‘decision-making ability’ from 1 to 10.
The lowest grade meant something like, “I’m a lousy decision maker, I really don’t understand how I still get paid to think.” The highest, “I’m a genius at making decisions. They should put a bust of me at the building entrance so that everyone can venerate it as they pass.” 91% assigned themselves a grade close to veneration.
Our own traps
Several elements influence the fact we believe we are better than average decision makers.
By modifying the way we tell ourselves stories, we can feel very good or very bad. And, in general, we seek to feel happier.
First of all, much research has found that most of us believe we are above average, not only in “decision making”, but in many other skills. This bias, called the “Lake Wobegon Effect” (or the “Better than the average effect”) began to be looked into based on a study carried out on motorists years ago in the United States, in which 93% of people reported having above-average driving skills.
By modifying the way we tell ourselves stories, we can feel very good or very bad. And, in general, we seek to feel happier (I know some people who seek the opposite). So, it’s normal for us to say to ourselves, “If we are where we are, it’s likely because we must have not made decisions so badly, right?”
The phrase is literally true: if we had the habit of making such bad decisions, we would not be where we are. We would probably find ourselves somewhere else. And perhaps, we would have the same reflection!
Indeed, the fact we are where we are today does not necessarily imply that we make good decisions. Who could guarantee that where we are today is the best place we could be? And, on the other hand, who could tell us that we are there as a result of the good decisions we have made?
Prejudiced, me?
There are various biases that influence us on a daily basis and are increasingly being documented and studied.
Biases involve reaching a judgment about the object, before determining the preponderance of the evidence (hence, also called “prejudice”). In particular, cognitive biases are distortions that affect the way in which humans perceive reality and with this, the way we decide.
The existence of these biases presents us with a new reason why we need greater humility to achieve better results, and better decision processes to help us correct our mistakes and guide us when we get stuck in false ideas.
He who is without biases…
Biases can occur in the search, interpretation, or retrieval of information. And in all cases, they lead us to the wrong conclusions.
Confirmation bias: A phenomenon where decision makers tend to give more weight to evidence that supports or confirms their preconceptions; and ignore or undervalue evidence that disproves the desired hypotheses, resulting in errors of interpretation of the world around them.
Hindsight bias: It occurs when, once known what has happened, there is a tendency to modify the memory of the opinion prior to the events, in favor of the final result.
Indeed, how many times have we heard someone assert, “I always knew this was going to happen”? This “I saw it coming” effect is the product of being biased by knowledge of what really happened when we assess our predictive ability. It is another mechanism by which we tend to believe that we are good decision makers.
Self-serving bias: It occurs when we attribute successes to our own ability, while failures are attributed to circumstances or bad luck.
For example, a student gets a good grade on a test and says, “I got a good grade because I’m smart and I studied hard!” Another, who has received a lower grade, mutters, “The teacher gave me a bad grade because he doesn’t like me!”
That said, do you think these biases do not apply to you?
It is possible this is the result of another well-studied bias: that of the blind spot. It teaches us that one is unaware of one’s own cognitive biases. We all tend to consider ourselves much less subject to the described biases than the average person!
In short, science offers us more and more evidence that it is necessary to pay attention to the way we decide. If the decisions we make define the future of our lives and the destiny of the organizations in which we work, perhaps we should pay attention to our decision-making processes.
Ernesto Weissmann
Partner at Tandem.
ew@tandemsd.com