Hiding in plain sight

Not so easy to see....

in a previous post "Cognitive bias Bingo" I confronted the unspoken obvious that we all are impacted by cognitive bias. These can subtly influence business decisions, often without our awareness. By identifying, understanding and counteracting them, leaders can improve their own and their team decision-making. So far so good! Here are some that you will most likely discover in the wild.

Confirmation Bias

Confirmation bias occurs when individuals favour information that confirms their preconceptions or hypotheses, regardless of whether the information is true. This one is easy to fall for. We have all been impacted by, or seen this in action. In business, this can result in decision-makers ignoring evidence that contradicts their existing beliefs, leading to calamitous strategic missteps. Beware, even our own choice of friends, newspapers, media feeds etc can themselves fuel confirmation bias as we consume coverage that aligns with our own views or preconceptions.

Anchoring Bias

This one can be used against you. It refers to a tendency for people to rely heavily on the first piece of information they encounter (the "anchor") when making decisions. For example, initial price points can unduly influence subsequent negotiations or even budgeting decisions. Beware the use of anchors in your discussions.

Overconfidence Bias

Overconfidence can lead to an exaggerated belief in one's own abilities or the predictability of events, which may cause businesses to take on too much risk or embark on ventures without sufficient due diligence. Due diligence and care are good partners to combat this bias.

Loss Aversion

This one is not the sole preserve of the dour, grey suited, humourless accountant. Loss aversion is the preference to avoid losses rather than acquire equivalent gains. It can cause business leaders to make conservative choices that stifle innovation or prevent the pursuit of potentially lucrative opportunities.

Halo Effect

In business its often said people buy from people. I believe that this is still true today. The halo effect occurs when, for example, a customer overestimates the value of a deal or offer because the people they dealt with were personable and friendly, rather than evaluating the deal on its own merits.

Optimistic Overconfidence

As much as we are intuitively negatively impacted by overly-cautious, risk-averse behaviour; we are happy to associate with overtly optimistic folk. However, overly optimistic predictions about future risks, costs or revenues can project a future aspiration that is impossible to attain. Decisions are then based on projections and assumptions against which reality will fall short. We have all done this one.

How do we counter or overcome Cognitive Bias?

Diversity of Perspectives

Promote a culture that values diverse viewpoints that can help challenge prevailing assumptions and reduce the risk of confirmation bias.

Clear Criteria for Decision-Making

Establish objective factual or realistic criteria for business decisions. This can help counteract the influence of anchoring and overconfidence biases.

Consider the Opposite - prove yourself wrong.

Actively seek out information that challenges your current plans and can provide a more balanced view and mitigate confirmation bias.

Perform Pre-Mortem Analysis

Imagining that a project has failed before it starts and then working backward to determine what could lead to its failure can help identify potential issues and reduce overconfidence.

The next time you make a decision or a choice - stop and think, because cognitive bias is ever present.