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Five Errors of Judgement

So much of our society is based on the idea that we are rational creatures, able to assess the available information and reach a decision that best serves our interests. The whole notion of democracy is predicated on that idea/assumption.

Wrong, so very wrong.

The human brain is a marvel in many many ways. But on the flip side it is also deeply flawed because it is so easily influenced and – by less than ethical individuals or organisations – influenced in malign ways potentially. Looking at you social media!

There are five key ways in which our decision making abilities and can warped:

Survivor bias: the logical error of over concentrating on the people or things that “survived” a process or event and inadvertently overlooking those that did not because of their lack of visibility. This leads to false conclusions as to what is the “right” action to ensure your own survival or success.

Loss aversion:  this refers to our deep seated tendency where the desire to avoid a loss is greater than the desire  to acquiring equivalent gains: it is worse to lose one’s jacket than to find one or finding a tenner may put a slight spring in your step for a bit but losing a tenner can ruin your day. Several studies have suggested that losses are twice as powerful, psychologically, as gains.

The availability heuristic:  is a mental shortcut that over relies on immediate examples that come to mind. When you are trying to make a decision, a number of related events or situations might immediately spring to the forefront of your thoughts. As a result, you might judge that those events are more frequent and possible than others. You give greater credence to this information and tend to overestimate the probability and likelihood of similar things happening in the future.

Anchoring: Closely related to the availability heuristic, anchoring or focalism is a cognitive bias that describes the common tendency to rely too heavily on the first piece of information offered (the “anchor”) when making decisions. During decision making, anchoring occurs when someone use an initial piece of information to make subsequent judgments.

Confirmation bias: Confirmation bias is the tendency to search for, interpret and recall information in a way that confirms one’s pre-existing beliefs or assumptions, while giving disproportionately less consideration to alternative possibilities. An individual can indulge in confirmation bias or a whole team when it leads to “group think” where consensus over rides facts.

It is the only one on this list that has entered the mainstream because it is something that afflicts many boardrooms and leadership teams. The best decisions come from a plurality of views based on diversity of personal and professional experiences. Recent surveys of organisations found the most diverse organisations produced higher profits (15-19% depending on which survey)

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