Make Your Brain Work Better for You and Your Business?
Contrary to what most of us like to believe, human brains are designed to “satisfice” rather than “optimize”. Much of the time, we search for alternatives up to the point of an acceptable solution. We take short cuts. We employ heuristics and rules of thumb. Our cognitive limitations lead to errors in judgment, not because of lack of intelligence, but simply because we are human.
Here are three common decision making errors and ways to combat them.
Overconfidence Bias: We tend to be systematically overconfident in our judgments. We believe what we believe and our data is the right data. Of course, everyone else does to.
Sunk-cost effect: We tend to increase commitment to a course of action that we have made a substantial investment in. We throw “good money after bad.”
Availability effect: We tend to place too much emphasis on the information and evidence that is most readily available.
- Accept that just because you believe in something, does not make it so.
- Gather data from multiple sources.
- Hold to previously agreed upon rules.
- Look at the marginal costs and benefits of actions when they happen rather than primarily at what has been done so far.
- Remember what happen in 1996 on Mount Everest when 8 people perished because of overconfidence and not sticking to previously agreed upon safety protocols and common sense.
- Look back over the entire history of a particular matter.
- Look at the longer and bigger picture.
- Don’t fall blindly in love with a hot streak.