We make decisions all the time, and even if we are not trained to do so, we are supposed to do it right when seeking long-term success. However, if we are careful to study the processes that lead us to choose a given path, we will find there are a number of systematic traps affecting our behavior.

When talking about mistakes, we are not referring to negative outcomes (a possible outcome contemplated when making a decision) but about those faux pas we overlook when thinking about decisions. Even the smartest people may make terrible mistakes. There are cognitive traps associated with rigid ways of approaching, addressing, and solving problems that often lead us to make bad decisions.

When we hear of big companies like Ford, IBM, or FOX, our first thoughts are of success, of leading local and international markets. But we often forget that even the most celebrated entrepreneurs and executives have made mistakes and lost large amounts of money due to a given decision. If we learn to avoid falling into the traps that lead us to make those mistakes, our decisions will be much more effective.

Failing to accept an ever-changing world

When we reach the top, our wish to keep that prosperity and success might cause us to fail if we do not recognize and accept that our world is constantly changing. It is essential to identify those changes and – more importantly – to be able to adapt to them in order to take advantage of them.

There is a simple example to illustrate this trap: Henry Ford, the king of the car-making industry in the second decade of the 20th century, who refused to make changes to his Ford T when consultants told him consumers wanted those changes. Henry Ford took so long to meet those needs and create his Ford A that he lost his leading position in the industry. Ford was unable to recognize and accept new trends.

Sticking to our own, initial idea

On occasions, we may feel our first impression is so valuable we refuse to change our minds and insist on our first ideas or those offered initially to us, even if we do not realize we are doing it. So, our estimates start from that initial value that may – or may not – be related to what we need to foresee. And that’s where the risky trap lies.

Estimating our budget for the current year might be a good example. We unconsciously start from the previous year’s numbers, even when the country and market situation might be completely different. Our current estimate will only differ in whatever we regard as reasonable, which becomes an anchor to our decision.

A single worldview

We are used to seeing the world from a binary perspective: good or bad? for, or against? That “black or white” logic may lead us to interpret things in a way causing us to miss a great opportunity. Because in most situations, the actual palette is not plain black or white, but a mixture of shades of grey. This kind of trap sets limitations to the way we understand circumstances, and leads us to choose simple solutions when things should – on the contrary – be studied in depth.

In 1975, 20th Century Fox was in trouble, with financial problems. As a way out, they chose to sell the rights to a series enjoying popularity at the time, the sequel to M*A*S*H, a film that had premiered five years earlier. Years later that series became one of the most popular in history, generating huge profits to local TV companies. Had Fox been able to see beyond what was happening at that time, they would surely have considered another, intermediate solution, instead of either selling M*A*S*H as opposed to going broke.

Whenever we identify a problem, we usually perform a diagnosis in an automatic and rash mode. In general, the diagnosis is about what we want to see, and will be biased by our education, previous experiences, relations, etc. If we do not consciously take the time to do the necessary framing to see the big picture of the problem, we will be stuck in an understanding that prevents us from seeing other relevant sides of that problem, and our decisions will not be effective.

Assuming our worldview is shared by others

We sometimes assume, whether consciously or unconsciously, that other people will think and act the way we do. We forget we do not see things the way they are, but rather the way WE are. As a consequence, we often leave aside elements we feel are unimportant, though they might matter to others who will be affected by our decision.

In 1984, American actor and comedian William Henry ‘Bill’ Cosby Jr. talked with ABC TV to propose a comedy starred by a family of black people, all of them graduates and successful. The company thought it virtually impossible for the audience to accept such an unrealistic show. There were no studies involved. They simply discarded the idea of that show being successful because they would not understand someone might be interested. However, NBC thought the time had come to make changes to their usual type of content and placed their stakes on that show. It became a worldwide success.

Though it is true mistakes might be of value to help us learn, we should also be aware of the causes that lead us to make mistakes. Our error margin will be smaller.

Federico Esseiva
Partner at Tandem.
fe@tandemsd.com