Remember a decision you made that cost you dearly? In retrospect, you realize a different choice would have saved time, aggravation and perhaps a relationship. What if you found that your mind played tricks on you?
Perhaps you were relying on your “gut instincts” but were fooled by the unconscious decision-making traps we fall into when trying to figure out what we should do. Decision making expert Howard Raiffa, says we are destined to repeat the same faulty decision-making “ruts” and face more grief from the poor results if we don’t gain insights into these traps. He suggests that the fault often lies in how we view our choices. To avoid such self-sabotaging behavior, here’s the most common traps and what you can do differently next time.
The Routines of Decision-Making
We use unconscious routines, called heuristics, to cope with the complexity inherent in decision-making. These routines serve us well in most situations. For example, in judging distances, we equate clarity with proximity. The clearer an object appears, the closer we judge it to be. The fuzzier, the farther away we think it is.
Like most heuristics, this one is not foolproof. If the day is hazier than usual, our eyes tend to trick our minds into thinking things are more distant than they actually are. For airplane pilots, such a distortion could be catastrophic if they weren’t trained to use other truly objective measures and instruments. This decision-making flaw is based on sensory perception, but others are based on biases or on irrational anomalies in our thinking.
These anomalies are potentially dangerous because they are invisible to us. They are hardwired into our thinking, so we fail to even recognize we are using them.
In this and the next column, I will describe the most common decision-making traps and what you can do to overcome them.
Anchoring
How would you answer these two questions??
1. Is the population of Turkey greater than 35 million??
2. What’s your best estimate of Turkey’s population?
If you are like most people, the figure of 35 million in the first question (which researchers chose arbitrarily) influenced your answer to the second question. I’ve watched the behavioral scientists ask variations of these questions to groups of people many times over the past decade. In half the cases, 35 million was used in the first question; in the other half, 100 million. Without fail, the answers to the second question increase by millions when the larger figure is used as an “anchor” in the first question.
When considering a decision, the mind gives disproportionate weight to the first information it receives. Initial impressions, estimates, or other data anchor subsequent thoughts and judgments. The implications for influencing another’s perceptions are mind-boggling and can take many guises. A colleague’s comment or a statistic in the morning paper can influence your later decision-making on the same topic.
Other guises are as insidious as a stereotype about a person’s skin color, clothing, or accent. In business, one of the most frequent “anchors” is a past event or trend. In attempting to project sales of a product for the coming year, a marketer often begins by looking at the sales volumes for past years. This approach tends to put too much weight on past history and not enough weight on other factors.
Because such anchors can establish the terms on which a decision is made, they can be used as a bargaining tactic by savvy negotiators.
Reduce the impact of the effects of anchoring in these ways:
1. Be open minded. Seek information and opinions from a variety of people to widen your frame of reference, without dwelling disproportionately on what you heard first.
2. Offer objective information. In seeking advice from someone else, offer just the facts, without your opinion, so you don’t inadvertently anchor the person with your thoughts. Then you can benefit from hearing diverse views on the situation without those views being colored or anchored by yours.
3. Remember this. Whoever most vividly characterizes the situation usually anchors the other’s perception of it. That’s an immensely powerful ability. Others literally see and discuss the situation while anchored from that most memorably stated perspective. The vivid communicator has literally created the playing field on which the game will be played. Be especially wary of anchors in negotiations. Think through your position before any negotiation begins, so you can avoid being anchored by someone else’s proposal or position.
The Status Quo Trap
We instinctively stay with what seems familiar. Thus we look for decisions that involve the least change. For example, when a radically new product is introduced, it is made to look like an existing and familiar product. The first cars looked like horseless carriages. The first online newspapers and magazines had formats much like their print counterparts.
To protect our egos from damage, we avoid changing the status quo, even in the face of early predictions that change will be safer. We look for reasons to do nothing. For example, in one experiment, a group of people were randomly given one of two gifts of approximately the same value — half received a mug, the other half a large Swiss-chocolate bar. They were told they could easily exchange the gift they received for the other gift. Although you might expect about half to want the exchange, only one in ten actually did.
The power of status quo kicked in within minutes of receiving an object. Other experiments have shown that the more choices someone is given, the more pull the status quo has. Why? Because more choices involve more effort, and selecting the status quo avoids that effort.
In business, sins of commission (doing something) tend to be punished much more severely than sins of omission (doing nothing). In all parts of life, people want to avoid rocking the boat.
What can you do? Think first of your goals when preparing to make a decision. Then review how these goals are served by the status quo as compared to a change. Look at each possible change, one at a time, so as not to overwhelm yourself and instinctively want to stay “safe” and unchanged.
Never think of the status quo as your only alternative. Ask yourself whether you would choose the status quo if, in fact, it weren’t the status quo.
Avoid the natural tendency to exaggerate the effort or cost or emotional reaction of yourself or others if you change from the status quo.
Remember that the desirability of the status quo might change over time. When considering a change, look at possible future situations. If several alternatives are superior to the status quo, avoid the natural tendency to fall back on the status quo because you are having a hard time choosing among the other alternatives.
The Justify- Past-Actions Trap
The more actions you have already taken on behalf of a choice or direction, the more difficult you will find it to change direction or make a different choice. Whenever you invest time, money, or other resources, or whenever your personal reputation is at stake, you will find it more difficult to change your decision or course of action.
Suppose you pour a great deal of time and effort into offering a product to a new niche market. Because you have already used resources to be successful in that market, you will find it difficult to withdraw, even when the market clearly is not interested in your product.
If you have a once-close childhood friend who has not been supportive of you for years, you’ll be reluctant to acknowledge that change and will likely act as if you are still close. Banks used to continue to lend to businesses that had fallen back on payments, thus throwing good money after bad.
For all decisions with a history, make a conscious effort to set aside your “past actions” — investments of emotion, money or other resources — as you consider whether to change direction. Seek out and listen to people who were uninvolved with the earlier decisions. Examine why admitting an earlier mistake distresses you. If the problem lies in your wounded ego, deal with it straight-away. As Warren Buffet once said, “When you find yourself in a hole, the best thing you can do is stop digging.”
Don’t cultivate a failure-fearing culture in the people around you at home or at work. In such an atmosphere, others will perpetuate mistakes rather than admitting them to you and changing course. When you set an example of admitting mistakes in your choices and self-correcting, others will believe they can do likewise without penalties from you.
