Thursday, August 11, 2016
Debiasing Decisions
Debiasing Decisions
By Philip Meissner et alGood managers — even great ones — can make spectacularly bad choices. Some of them result from bad luck or poor timing, but a large body of research suggests that many are caused by cognitive and behavioural biases. While techniques to ‘debias’ decision making do exist, it’s often difficult for executives, whose own biases may be part of the problem, to know when they are worth applying.
Our early research suggests that is the case roughly 75% of the time. Two particular types of bias weigh heavily on the decisions of large corporations — confirmation bias and overconfidence bias. The former describes our unconscious tendency to attach more weight than we should to information that is consistent with our beliefs and hypotheses, and to discount information that contradicts them.
Overconfidence bias frequently makes executives misjudge their own abilities, as well as the competencies of the business.
It leads them to take risks they should not take, in the mistaken belief that they will be able to control outcomes. The combination of misreading the environment and overestimating skill and control can lead to dire consequences.
Fortunately, debiasing techniques can help organisations overcome such biases. These techniques aim to limit the effects of overconfidence by forcing the decision-maker to consider downside risks that may have been overlooked.
(From: Are You Ready to Decide?)
ET Citings 15 July 2016
Labels: Citings
“Success and Luck: Good Fortune and the Myth of Meritocracy” by Robert Frank
ET CITING
In some unknown proportion, genetic and environmental factors largely explain whether someone gets up in the morning feeling eager to begin work. If you’re such a person, you’re fortunate. Similarly, your genes and your environment determine how smart you are. If you’re smart, you’re more likely to perform well at the tasks rewarded lavishly by society, so there, too, you’re lucky.
As the economist Alan Krueger has noted, the correlation between parents’ income and their children’s income in the US is a remarkably high 0.5 — about the same as the correlation between parents’ height and their children’s. So, if you want to be highly energetic, the most important step you could take is to choose the right parents. But if you have such qualities, on what theory would it make sense for you to claim moral credit for them?
You didn’t choose your parents, nor did you have much control over the environment in which you were raised. You were just lucky. Many people don’t like to work hard and have limited endowments of cognitive abilities and other traits highly valued in the marketplace. In the competitive environments most of us inhabit, those people are unlucky.
In short, even if talent and hard work alone were enough to ensure material success — which they are not — luck would remain an essential part of the story. People with a lot of talent and an inclination to work hard are very fortunate.
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