Do you make rational, logical decisions? Most of us think we do. You might want to reconsider your opinion.
Let me give you two names: Hillary Clinton & Donald Trump. We are in the home stretch of a Presidential election campaign here in the US. I don’t know how it’s going to turn out but I do think each of the candidates has demonstrated a basic fallacy of human thinking. That is, while we like to think of ourselves as logical, rational creatures, we aren’t.
Let me just offer one example for each candidate ( if you want to wallow in misery read: Complete List – Top 10 Donald Trump Failures or What Was Hilary Thinking). Donald Trump chose to engage in a war of words with Gold Star Parents who lost their son in Iraq. Hillary Clinton chose to use a personal email server as Secretary of State, despite that fact that it is an unsecure way to communicate state secrets. They are both intelligent, successful people. But when you look at some of their actions from the outside you may be tempted to ask “what were they thinking”? The thing is, that despite being intelligent and successful, they are no different from you and I in at least one regard. We all make bad decisions.
Sometimes the bad decision is a small one. Like signing up with the wrong cell phone carrier or buying that shirt that looks great in the store but never comes out of your closet. Other times the bad decision can cost millions of dollars or end up getting people killed. We’re not as logical as you might imagine – or hope.
As Anais Nin said “We don’t see the world the way it is, we see it the way we are.” All our decisions are made within the context of our own paradigms. The way we see the world affects what we see and what we focus on. When we make a decision it’s made with all of our emotions and biases operating beneath the surface in the subconscious, so much of the time we make less than rational, less than optimal, decisions. As it is unfolding, we probably aren’t even aware how the decision traps hardwired into our perceptual and cognitive systems may be leading us down the wrong path.
Here are 5 ways we can end up making the wrong decision.
1) We Tend To Form Opinions Based On Our Beliefs And Then Look For Data That Supports Them.
Let’s stay with the election cycle. Hillary supporters tend to look for information that paints her in a positive light. Trump supporters do the same. And both groups look for information that portrays the other candidate in a negative light. When we fall into that pattern we only look for and remember data that supports our position. That limits our objectivity and we often miss important information. It’s called confirmation bias.
By not seeking out objective facts, interpreting information in a way that only supports our existing beliefs, and only remembering details that uphold our beliefs, we often miss important information that might have otherwise influenced our decision on which candidate to support.
2) We Can Totally Misread The Likelihood Of An Event Occurring
The decision trap is called Gamblers Fallacy or the Monte Carlo Fallacy because on August 18, 1913, at the casino in Monte Carlo, black came up a record twenty-six times in a row on the roulette wheel. After the fifteenth time, players started doubling and tripling their bets on red because they believed that there was not a chance in the world of another black coming up. They were wrong because they failed to understand statistical independence: Two events are statistically independent when the occurrence of one has no statistical effect upon the occurrence of the other. For example: It would be statistically very rare to flip a coin 15 times and have it come up heads all 15 times. But each time I flip the coin I do have a 50% chance of it coming up heads.
Gambler’s Fallacy doesn’t only affect our chances of getting rich at roulette. It affects many of the decisions that we make. According to Daniel Chen and his colleagues about 9 % of loan applications are subject to this type of bias. Let’s say a bank officer is reviewing loan application and approves 7 in a row. Subconsciously they may change how they look at the next application. They may start to feel that they are becoming too lax in their criteria and they may very well focus on something in the next application to exclude it. So if you are applying for a loan, that means you may have about a 1 in 10 chance of having it rejected because of the cognitive bias of the loan officer.
3) We May Be Hardwired To View Events And People Through A Negative Filter
We seem to process and weigh information in an asymmetrical way. Our brains seem to be hardwired – from an evolutionary perspective – to pay more attention to what’s wrong, rather than what’s right. Our brains have evolved to be fearful.
We probably developed that way to be able to quickly identify potential threats, but we don’t live in the same type of world in which we evolved. In today’s world, that negativity trap causes us to react more intensely to what we perceive as being wrong in a situation and to think of people and issues through the same type of filter. We can end up making an irrational decision to avoid the potential losses rather than for the potential benefits.
Think about how it affects your relationships. If you are a manager or leader, you are probably much more inclined to notice what people do wrong rather than what they do right. That may affect how you assign work, how you complete a direct report’s performance appraisal and it will certainly have an impact on how you relate to them. Outside of work it can have a tremendous impact on how we decide to interact with the people in our lives.
4) We Tend To See Our Kind As Better
We tend to evaluate and see the group we identify with more favorably than other groups. That could be white versus black, Democrat versus Republican, Philadelphia eagle fan versus NY Giants fan, you get the drift, right? It’s an intergroup bias decision trap. Think about the impact of that bias on how we interact with others: Prejudice, Stereotyping, Discrimination, Wars.
Increasingly, what we do at work requires interdepartmental collaboration and integration. We have to work across functional boundaries to access other’s knowledge and acumen to generate innovative solutions for difficult challenges. The Us versus Them mentality that accompanies intergroup bias can make that very difficult. Innovation and synergy require differences. When we reject those differences, because we see our side as better, we limit our organizational effectiveness.
5) We Often Feel Compelled To Throw Good Time, Money And Effort After Bad.
When is enough, enough? We can have a hard time recognizing that it is time to pull the plug on a project, or a relationship for that matter. We can experience an Escalation of Commitment.
Our original decision to start a project, or to get involved in a relationship, may have been well thought out and rational. But the more we invest in it, the harder it is to extricate our self. Our sense of self-worth gets caught up in the issue and we rationalize and justify our decision to continue to invest in it.
Robert Campeau is a self-made made man who worked his way up from an eighth grade education to being a multimillionaire real estate developer. His accomplishments took intelligence, hard work and good thinking. Back in the late 80’s he got involved in a highly public bidding war with Macy’s over Federated Department Stores – the parent company of Bloomingdale’s. It turned out to be the largest and most visible retail merger in history at the time. By March 25th, The Wall Street Journal (3/25/88) observed that ‘we’re not dealing in price anymore but egos. What’s been offered is top dollar, and beyond what anyone expected’. On March 31st, with Macy’s on the verge of winning the bidding war, Campeau approached Macy’s with an eleventh-hour compromise. Macey’s refused, so Campeau escalated. He topped Macy’s offer by $500 million. He won the battle but lost the war. He ended up making the deal, but because of the debt service, those department stores – which had been very profitable – had to declare bankruptcy.
Those are examples of just five decision traps. Behavioral scientists have identified well over a hundred other biases and distortions that can affect our ability to make good decisions. I know some of you are thinking, “that’s interesting but those biases don’t affect my thinking”. There’s actually a decision trap that leads you to think that way. It’s called illusory superiority. If you ask 100 people to rate their driving ability 90% are likely to rate themselves above average.
So, the bottom line is that we have some potential holes in our thinking. But the good news is that we can do something about them. Despite all of the distortions and biases we can learn to think better. Critical Thinking is a skill, like driving a car, playing golf or dancing. By understanding where the potential decision traps lie we can see things as they really are, more accurately evaluate issues and draw better conclusions.