15 July 2011
Successful Intentions Newsletter
Hi ,
Before you make that snap decision it might pay to take some advice!
We tend to think of decision-making as an individual in-the-moment act. But actually it’s more like a process, with many people contributing.
When you have to make a big decision with potential impacts on others, try this checklist:
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Who is promoting the decision? We all suffer from motivated errors, so whose motivated self-interests are being represented here?
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When evaluating something we like, we tend to minimize its risks and costs and exaggerate its benefits. This is known as the affect heuristic. Have you “fallen in love” with the decision you want to make?
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If your decision involves discussions with a group, beware groupthink. Groups tend to minimize conflict by converging on a decision because it appears to be gathering support. Look for dissenting opinions and review alternatives that may have been too quickly dismissed.
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Check for saliency bias. This is when your judgment is unduly influenced by a memorable success that was somewhat like the present decision. It’s important to rigorously examine the differences between then and now.
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Check for confirmation bias. It’s too easy to come up with one plausible decision and then seek only evidence that supports it. Have you considered other credible alternatives
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When we see all there is about a decision our intuitive mind constructs a coherent narrative based in the available evidence, making up for the holes. We tend to overlook what’s missing. This is called availability bias. Ask yourself, “if I had to make this decision again in a year, what information would I want, and can I get more of it now?”
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When you’re “running the numbers” on the decision, are you looking at facts or estimates? Because of anchoring bias we tend to remember the first numbers we see. If these are guesses or estimates extrapolated from history you may have introduced significant error into the decision-making process. Try re-anchoring with figures generated by other models or benchmarks.
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Beware the halo effect. This causes us to attribute our successes in one area of decision-making to another. “If I made it there, I can make it anywhere!” Ask yourself, “What is really comparable between my previous success and the present situation?”
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Are you overly attached to past decisions in making this decision? We are all subject to the sunk-cost fallacy: We tend to be influenced negatively by past expenditures that affect future costs or revenues. Ask yourself, “If I was starting from scratch, would I invest in this decision?”
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It’s easy to be overconfident about a decision, and correcting for optimistic biases is difficult. Try to take an “outside view” of the decision. Build scenarios, which remove certain assumptions or introduce underestimated challenges.
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Check for disaster neglect. Is the worst case bad enough? A useful technique is the “pre-mortem”. Project yourself into the future, imagine the worst has already happened, and make up a story about how it happened.
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When we contemplate risky decisions, we exhibit loss aversion: our wish to avoid losses is stronger than our desire for gains. Check whether you are being overly cautions about the decision. Reassess the risks involved or think of ways in which the risks can be modified.
What kind of risk-taker are you, ? For the first time in Australia you can find out about your risk personality in different areas of your life, and advise your clients on their risk personalities. Download the brochure here for more information.
And go to the Practice of Wisdom Psychology blog to follow wise conversations, book a session, or download papers and presentations on wisdom.
Keep your intentions clear,
Peter Webb
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