Why people don't think rationally

Views:
 
Category: Education
     
 

Presentation Description

Decision making is an art. Dexterous decision making requires polished skills. Psychological Bias are the common problem makers, which prevents effective decision making. Let us examine what are the common psychological biases and how to overcome these problem makers. Better decisions are required for business success and better life.

Comments

Presentation Transcript

Why People Don't Think Rationally:

Why People Don't Think Rationally Babu Appat

Many of us take pride in our ability to think clearly and rationally at work.:

Many of us take pride in our ability to think clearly and rationally at work.

However, from time to time, we can all make subtle psychological mistakes, and these can distort our decisions.:

However, from time to time, we can all make subtle psychological mistakes, and these can distort our decisions.

So, in this slide-show, I look at how to avoid psychological bias. (This has nothing to do with conventional forms of bias.):

So, in this slide-show, I look at how to avoid psychological bias. (This has nothing to do with conventional forms of bias.)

Also in this show, I would like to explore how to overcome two other unhelpful thinking patterns: self-sabotage and fear of failure.:

Also in this show, I would like to explore how to overcome two other unhelpful thinking patterns: self-sabotage and fear of failure.

Just knowing about these things can help you beat them.:

Just knowing about these things can help you beat them.

Avoiding Psychological Bias in Decision Making:

Avoiding Psychological Bias in Decision Making

How to Make Objective Decisions?:

How to Make Objective Decisions?

Imagine that you're researching a potential product.:

Imagine that you're researching a potential product.

You think that the market is growing, and, as part of your research, you find information that supports this belief.:

You think that the market is growing, and, as part of your research, you find information that supports this belief.

As a result, you decide that the product will do well, and you launch it, backed by a major marketing campaign.:

As a result, you decide that the product will do well, and you launch it, backed by a major marketing campaign.

However, the product fails. The market hasn't expanded, so there are fewer customers than you expected:

However, the product fails. The market hasn't expanded, so there are fewer customers than you expected

You can't sell enough of your products to cover their costs, and you make a loss.:

You can't sell enough of your products to cover their costs, and you make a loss.

Avoiding Psychological Bias in Decision Making Psychological bias can lead you to make a wrong decision.:

Avoiding Psychological Bias in Decision Making Psychological bias can lead you to make a wrong decision.

In this scenario, your decision was affected by confirmation bias:

In this scenario, your decision was affected by confirmation bias

With this, you interpret market information in a way that confirms your preconceptions - instead of seeing it objectively - and you make wrong decisions as a result.:

With this, you interpret market information in a way that confirms your preconceptions - instead of seeing it objectively - and you make wrong decisions as a result.

Confirmation bias is one of several psychological biases that we're all susceptible to when we make decisions.:

Confirmation bias is one of several psychological biases that we're all susceptible to when we make decisions.

In this session, we'll look at common types of bias, and we'll outline what you can do to avoid them:

In this session, we'll look at common types of bias, and we'll outline what you can do to avoid them

What is Psychological Bias?:

What is Psychological Bias?

Psychologists Daniel Kahneman, Paul Slovic, and Amos Tversky introduced the concept of psychological bias in the early 1970s.:

Psychologists Daniel Kahneman, Paul Slovic, and Amos Tversky introduced the concept of psychological bias in the early 1970s.

They published their findings in their 1982 book, "Judgement Under Uncertainty." They explained that psychological bias - also known as cognitive bias - is the tendency to make decisions or take action in an illogical way. :

They published their findings in their 1982 book, "Judgement Under Uncertainty." They explained that psychological bias - also known as cognitive bias - is the tendency to make decisions or take action in an illogical way.

For example, you might subconsciously make selective use of data, or you might feel pressured to make a decision by powerful colleagues.:

For example, you might subconsciously make selective use of data, or you might feel pressured to make a decision by powerful colleagues.

Psychological bias is the opposite of common sense and clear, measured judgement.:

Psychological bias is the opposite of common sense and clear, measured judgement.

It can lead to missed opportunities and poor decision making.:

It can lead to missed opportunities and poor decision making.

Common Psychological Biases:

Common Psychological Biases

Look at these five psychological biases that are common in business decision making:

Look at these five psychological biases that are common in business decision making

Please also look at how you can overcome them, and thereby make better decisions:

Please also look at how you can overcome them, and thereby make better decisions

1. Confirmation Bias:

1. Confirmation Bias As you saw above, confirmation bias happens when you look for information that supports your existing beliefs, and reject data that go against what you believe. This can lead you to make biased decisions, because you don't factor in all of the relevant information

PowerPoint Presentation:

A 2013 study found that confirmation bias can affect the way that people view statistics

Its authors report that people have a tendency to infer information from statistics that supports their existing beliefs, even when the data support an opposing view. :

Its authors report that people have a tendency to infer information from statistics that supports their existing beliefs, even when the data support an opposing view.

That makes confirmation bias a potentially serious problem to overcome when you need to make a statistics-based decision:

That makes confirmation bias a potentially serious problem to overcome when you need to make a statistics-based decision

How to Avoid Confirmation Bias?:

How to Avoid Confirmation Bias? Look for ways to challenge what you think you see. Seek out information from a range of sources, and use an approach to consider situations from multiple perspectives.

Alternatively, discuss your thoughts with others.:

Alternatively, discuss your thoughts with others.

Surround yourself with a diverse group of people, and don't be afraid to listen to dissenting views:

Surround yourself with a diverse group of people, and don't be afraid to listen to dissenting views

You can also seek out people and information that challenge your opinions, or assign someone on your team to play "devil's advocate" for major decisions.:

You can also seek out people and information that challenge your opinions, or assign someone on your team to play "devil's advocate" for major decisions.

2. Anchoring:

2. Anchoring This bias is the tendency to jump to conclusions - that is, to base your final judgement on information gained early on in the decision-making process.

First Impression Bias:

First Impression Bias Think of this as a "first impression" bias. Once you form an initial picture of a situation, it can be hard to see other possibilities

How to Avoid Anchoring:

How to Avoid Anchoring Anchoring may happen if you feel under pressure to make a quick decision, or if you have a general tendency to act hastily.

Decision-making history:

Decision-making history So, to avoid it, reflect on your decision-making history, and think about whether you've rushed to judgement in the past

Decision-making Under Pressure:

Decision-making Under Pressure Then, make time to make decisions slowly, and be ready to ask for longer if you feel under pressure to make a quick decision.

Pushing against your interests?:

Pushing against your interests? (If someone is pressing aggressively for a decision, this can be a sign that the thing they're pushing for is against your best interests.)

Ladder of interference:

Ladder of interference Read an article on the Ladder of Inference to find out more about the stages of thinking that people tend to go through when they make good decisions.

Well-considered decisions:

Well-considered decisions This can help you ensure that you've made a thorough, well-considered decision

3. Overconfidence Bias (Complacency):

3. Overconfidence Bias (Complacency) This happens when you place too much faith in your own knowledge and opinions.

Valuable than actual?:

Valuable than actual? You may also believe that your contribution to a decision is more valuable than it actually is

Your Actual Ability:

Your Actual Ability You might combine this bias with anchoring, meaning that you act on hunches, because you have an unrealistic view of your own decision-making ability

Entrepreneurs' Complacency:

Entrepreneurs' Complacency In a 2000 study, researchers found that entrepreneurs are more likely to display the overconfidence bias than the general population.

Knowledge Limits:

Knowledge Limits They can fail to spot the limits of their knowledge, so they perceive less risk

Business Success:

Business Success Some succeed in their ventures, but many do not

How to Avoid Overconfidence Bias?:

How to Avoid Overconfidence Bias? Consider the following questions:

Ask unto Yourself:

Ask unto Yourself What sources of information do you tend to rely on when you make decisions? Are these fact-based, or do you rely on hunches? Who else is involved in gathering information? Has information been gathered systematically?

Objective Data:

Objective Data If you suspect that you might be depending on potentially unreliable information, think about what you can do to gather more objective data

4. Gambler's Fallacy:

4. Gambler's Fallacy With the gambler's fallacy, you expect past events to influence the future

Coin Toss:

Coin Toss A classic example is a coin toss. If you toss a coin and get heads seven times consecutively, you might intuitively assume that there's a higher chance that you'll toss tails the eighth time

Head V Tail:

Head V Tail The longer the run of heads you get, the stronger your belief can be that things will change the next time

Fifty-Fifty:

Fifty-Fifty However, in this example, the odds are always 50/50. The gambler's fallacy can be dangerous in a business environment

Suppose:

Suppose For instance, imagine that you're an investment analyst in a highly volatile market

Success....Success....Success:

Success....Success.... Success Your four previous investments did well, and you plan to make a new, much larger one, because you see a pattern of success

Unpredictable it's often:

Unpredictable it's often In fact, outcomes are highly uncertain. The number of successes that you've had previously has only a small bearing on future outcomes

How to Avoid Gambler's Fallacy?:

How to Avoid Gambler's Fallacy? A 2008 study reported that the gambler's fallacy was less likely to happen when decision makers avoided looking at decisions chronologically

Data Analysis:

Data Analysis So, to avoid gambler's fallacy, make sure that you look at trends from a number of angles. Drill deep into data using effective, scientific data analysis tools

Economic circumstances:

Economic circumstances If you notice patterns in behaviour or product success - for example, if several projects fail unexpectedly - look for trends in your environment, such as changed customer preferences or changes in wider economic circumstances

Political, Economic, Social and Technological analysis:

Political, Economic, Social and Technological analysis (Tools such as PEST Analysis can help here.)

5. Fundamental Attribution Error:

5. Fundamental Attribution Error This is the tendency to blame others when things go wrong, instead of looking objectively at the situation

Personality flaw:

Personality flaw In particular, you may blame or judge someone based on a stereotype or a perceived personality flaw

For example,:

For example, if you're in a car accident, and the other driver is at fault, you're more likely to assume that (s)he is a bad driver than you are to consider whether bad weather played a role

Actor-observed Bias :

Actor-observed Bias Fundamental attribution error is the opposite of actor-observed bias, which happens when place blame on external events rather than yourself

Reaction Time:

Reaction Time For example, if you have a car accident that's your fault, you're more likely to blame the brakes or the wet road than your reaction time

How to Avoid Fundamental Attribution Error?:

How to Avoid Fundamental Attribution Error? It's essential to look at situations, and the people involved in them, non-judgmentally.

How to Avoid Fundamental Attribution Error?:

How to Avoid Fundamental Attribution Error? Use empathy and (if appropriate) cultural intelligence, to understand why people behave in the ways that they do.

Emotional Intelligence:

Emotional Intelligence Also, build emotional intelligence, so that you can reflect accurately on your own behaviour

Note::

Note: It's hard to spot psychological bias in ourselves, because it often comes from subconscious thinking

Consult:

Consult For this reason, it can often be unwise to make major decisions without consulting other people

Decisions- Group process:

Decisions- Group process Researchers Daniel Kahneman, Dan Lovallo, and Olivier Sibony reflected on this in a 2011 Harvard Business Review article, in which they suggest that you should make important decisions as part of a group process

Key Points:

Key Points Psychological bias is the tendency to make decisions or take action in an unknowingly irrational way

Objectivity:

Objectivity To overcome it, look for ways to introduce objectivity into your decision making, and allow more time for it

Tips:

Tips Use tools that help you assess background information systematically, surround yourself with people who will challenge your opinions, listen carefully and empathetically to their views - even when they tell you something you don't want to hear

A Final Note:

A Final Note When you think clearly and objectively, you give yourself the best chance to explore all of the information and options available to you.

Meet Your Goals:

Meet Your Goals You make better decisions, and you set yourself up to meet your goals. You'll also increase your self-esteem, and feel more positive about your future

THANK YOU:

THANK YOU babuappat@gmail.com

authorStream Live Help