How do you make your decisions? Some of us depend a lot on our intuition. This is the ‘gut-feel’, the ‘hunch’ based on knowledge and/or experience. It is the fast-track means to a quick and fast decision that is almost automatic and useful in survival situations. This is the fast thinking System 1 of Daniel Kahneman’s Thinking Fast and Slow. But this kind of thinking is unreliable and prone to errors and mistakes. Others have a system of thinking about it (the slow thinking System 2 of Kahneman) while seemingly based on logic is still flawed because of our many cognitive biases, which often leads us to fall into cognitive traps.
Indeed, trying to get the perfect decision in any situation is a tough call because of our cognitive biases. So how do we overcome all these biases and make quality decisions for the good of ourselves and our businesses?
The need to make quality decisions is especially important in situations when we are confronting risks, threats, and uncertainty. In such situations, our need to seek for closure to our arguments rather than explore all possibilities becomes rather strong. And this is calamitous in difficult times. Our thinking becomes dangerously narrowed, our vision of the future becomes clouded, and while our goals may be clear, how we achieve them may not be. Perhaps this can explain why so many SME’s failed and fall by the wayside.
Are we able to identify the various biases that often afflict us? If we can, can we outsmart ourselves and come out with better decisions. If we have the right tools, techniques and tricks, we may be able to broaden our thinking and make better choices. Let’s have a look at some ways we can use to overcome our cognitive biases.
First and foremost, when we think about the future, we often incorrectly assume that the future will be the outcome we desired or close to it. Often it is not. So how do you stop yourself from assuming that the future can only have one outcome? The outcome that you desire.
We can learn to make more than one estimate, for example when we forecast future demands as increasing by say 20%. Before we plan our work based on this one estimate, we can make 3 estimates, one high say 30%, one low say 10%, and one in between which is what we want. Or make 2 estimates, and take the average. In short, we have to learn to think twice or more about the same facts.
A great suggestion to overcome our biases is to do a premortem. A premortem is similar to a post-mortem except that you take a future perspective. Assuming that you are 5 or 10 years into the future, and suppose your project has failed by then, what would be the probable causes? Such a prospective hindsight can uncover problems which we would not otherwise be aware of.
There are many techniques that are situation specific to help us eliminate bias from our decision making. Two such techniques are “blinding” and the use of checklists. Blinding is useful when our choices are about people. By being blind to the persons involved and judging only on the merits of the case, our judgment tends to be unbiased. Or the use of checklists for situations involving complex skills can eliminate bias and errors in situations involving safety and complexity and making sure that all bases are covered.
An interesting way to avoid bias is to think about our objectives, and deciding on options using the “vanishing option” technique. If the preferred option is not available, what other choices do we have? This technique can help us to uncover other options which otherwise may not be considered.
In situations where we need to continue investing in a particular choice because of a future projected success, a “trip-wire” may be useful. This is especially so when we are dealing with a “sunk cost” situation, so that we may not slip into an “escalation of investment”. A trip-wire is always set beforehand, and simply at a point which we predetermined that when we reach that point and there is still no returns on investment, we need to cut losses and quit.
Most importantly is a view of our situation from outside. This outside view can avoid the bias of insider views which always assume a rosy picture. To take an outside view means that we have people whom we can trust to give us that objective and unbiased view.
When we seek advice from a trusted outside advisor, we fight motivational bias as well. Motivational bias are discrepancies which are conscious and due to your own personal circumstances. This is the bias where you want to give the answer you wanted. This is different from cognitive bias which is the way we process information and unconscious. In combating sunk cost for example, motivational bias may keep us re-setting our trip-wire and losing more money if we do not have an external view to check us.
In my work of advising SME owners, the above techniques are terribly important. Many SME’s failed because of the poor quality of their decision making which causes them to stumble at unanticipated problems and difficulties. I use these techniques to help them make quality decisions. In particular, I invite them to use the Mastermind within The Alpha Group meetings to help them get an outside view of their problems. Business owners who did so have a totally different perspective and were more confident moving forward.
One business owner who complained about the poor quality of her leads which she had bought from someone who sells lists of contacts, was amazed at how many ways there are for her to generate fresh and warm leads. She is now happily implementing them.
Another business owner who has difficulties with his staff uncover a number of issues with his organization which he was able to work on to deal with the true source of his problems instead of just trying to deal with the effects.
If uncovering the true cause of your difficulties is important to you and you wish to make good quality decisions to overcome the challenges you are facing, here is an invitation to you to check out The Alpha Group Mastermind.