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A Language to Discuss Biases

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A Language to Discuss Biases Pattern-recognition biases A language lead us to recognize patterns even where there are none. to discuss biases Confirmation bias. The over- Power of storytelling. The Psychologists and behavioral economists have identified dozens of cognitive weighting of evidence consistent with tendency to remember and to believe biases. The typology we present here is not meant to be exhaustive but rather a favored belief, underweighting more easily a set of facts when they to focus on those biases that occur most frequently and that have the largest of evidence against a favored belief, are presented as part of a coherent impact on business decisions. As these groupings make clear, one of the insidious or failure to search impartially for story. things about cognitive biases is their close relationship with the rules of thumb evidence. and mind-sets that often serve managers well. For example, many a seasoned Champion bias. The tendency executive rightly prides herself on pattern-recognition skills cultivated over Management by example. to evaluate a plan or proposal based This bias typology was the years. Similarly, seeking consensus when making a decision is often not a Generalizing based on examples that on the track record of the person prepared by Dan Lovallo failing but a condition of success. And valuing stability rather than “rocking are particularly recent or memorable. presenting it, more than on the facts and Olivier Sibony. the boat” or “fixing what ain’t broke” is a sound management precept. supporting it. False analogies—especially, misleading experiences. Action-oriented biases Relying on comparisons with situations drive us to take action less thoughtfully than we should. that are not directly comparable. Excessive optimism. The tendency Overconfidence. Overestimating for people to be overoptimistic our skill level relative to others’, leading Stability biases about the outcome of planned actions, us to overestimate our ability to create a tendency toward inertia in the presence of uncertainty. to overestimate the likelihood of affect future outcomes, take credit for positive events, and to underestimate past outcomes, and neglect the role the likelihood of negative ones. of chance. Anchoring and insufficient Sunk-cost fallacy. Paying adjustment. Rooting oneself to an attention to historical costs that are Competitor neglect. The tendency initial value, leading to insufficient not recoverable when considering to plan without factoring in competi- adjustments of subsequent estimates. future courses of action. tive responses, as if one is playing tennis against a wall, not a live opponent. Loss aversion. The tendency to feel Status quo bias. Preference losses more acutely than gains of for the status quo in the absence of Interest biases the same amount, making us more risk- pressure to change it. arise in the presence of conflicting incentives, including nonmonetary averse than a rational calculation and even purely emotional ones. would suggest. Misaligned individual Inappropriate attachments. Social biases incentives. Incentives for individuals Emotional attachment of individuals arise from the preference for harmony over conflict. in organizations to adopt views or to people or elements of the business to seek outcomes favorable to their unit (such as legacy products or brands), or themselves, at the expense of creating a misalignment of interests.1 Groupthink. Striving for consensus Sunflower management. the overall interest of the company. at the cost of a realistic appraisal of Tendency for groups to align with These self-serving views are often held Misaligned perception of alternative courses of action. the views of their leaders, genuinely, not cynically. corporate goals. Disagreements whether expressed or assumed. (often unspoken) about the hierarchy or relative weight of objectives pursued by the organization and about the trade- offs between them. To listen to the authors narrate a more comprehensive presentation of 1 Sydney Finkelstein, Jo Whitehead, and Andrew Campbell, Think Again: Why Good these biases and the ways they can combine to create dysfunctional patterns Leaders Make Bad Decisions and How to Keep It fromHappening to You, Boston: Harvard in corporate cultures, visit mckinseyquarterly.com. Business Press, 2008..
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