How to recognize classic cognitive biases in individuals and organizations before they ruin our decisions. For more check out https://www.competitivefutures.com

1. Why yOur Decisions Suck
How to recognize classic cognitive biases in individuals and organizations
before they ruin our decisions

2. In the world of executive decision making, great effort is made to collect
data and use sophistication analytical tools. Yet somehow, a lot of our
decisions suck. How could this be?
It turns out, humans have some ill-fitting cognitive patterns due to our
evolution. Every day in board rooms, Stone Age brains that developed in a
tribal social setting are being used for collaborative decisions in a complex
environment. Hilarity ensues, as you no doubt have witnessed first hand.
Here are a few classic cognitive failures that you should know, identify, and
fix so that your decisions suck less, therefore increasing success,
profitability, and all things holy. Because man is complex and amusing, this
is but a sample of those we identified.

3. Social Biases

4. The Dunning-Kruger Effect
• Definition: The less the person knows about a
subject the more confident they feel about their
opinions on it
• Key phrase:
"I know as much as the so-called experts.
Healthcare policy is just a matter of common
sense."
• Common sufferers: Accomplished people with
large egos who think that their expertise carries
over to all fields, mediocrities who have never
developed expertise and downplay it reflexively,
aspiring competitors for the Darwin Awards
• Negative effects: Easily avoidable,
catastrophic mistakes

5. Status Quo Bias
• Definition: Belief that the world is a
certain way for a reason, that it represents
statistical normalcy, and is likely to remain
in stasis
• Key phrase:
"We're in a recovery and everything is
getting back to normal. We've seen
recessions like this before in the 80s and
90s. No big deal."
• Common sufferers: Sunny optimists,
people terrified by change, winners in the
current system
• Negative effects: Inability to improve an
organization's position because
executives fail to take a situation seriously
enough

6. Memory Biases

7. Good Ol' Days Bias
• Definition: Assumption that the past was
easier and more positive than today
• Key phrase:
"It's so scary today. Everything is terrible
compared to when I was younger. (when
mortgage rates were 14%, unemployment was
8%, violence was 35% higher, and the
Russians had nukes trained on us.)”
• Common sufferers: People on the cusp of
retirement, people who watch too much cable
news, people who suck at history
• Negative effects: Inability to identify positive
opportunities for growth because focus is on
why the environment is hostile

8. Hindsight bias
• Definition: Tendency to filter past decisions
through current understanding, assuming greater
wisdom and analytical skill
• Key phrase:
"Of course we knew that Dot Com One was a
bubble on the verge of popping. Those stock
prices made no sense. (Despite the collapse being
something few people actually predicted.)”
• Common sufferers: Executives in highly political
environments where admitting a mistake is
considered weakness
• Negative effects: Insufficient desire to root out
current cognitive failures, because old failures are
rebranded as understanding

9. Decision Biases

10. Notational bias
• Definition: Tendency of metrics to include more
successes (or false successes) and fewer
negative experiences in metrics, therefore
skewing our understanding of how effective a
decision was
• Key phrase:
"We evaluated ourselves based on internal
metrics, and we're doing great. Since this
single, cherry-picked number looks OK, clearly
our whole strategy is awesome!"
• Common sufferers: "Scientific" managers who
trust numbers over intuition, unscrupulous CFOs
hoping to hide major business model flaws
• Negative effects: Overconfidence in harmful
decisions because "the numbers said it was the
right thing to do"

11. Short-term benefit bias
• Definition: Tendency to choose quicker,
inferior benefit without regard to probability of
both outcomes
• Key phrase:
“We just don’t have the money to invest in a
green building. We have limited budget and
prefer to spend it on wasting electricity and
water for 35 years rather than spend a little bit
more up front.”
• Common sufferers: Damn near everybody
except futurists and their very small number of
groupies
• Negative effects: Eventual bankruptcy, slowly
collapsing institutions, infrastructure built when
oil was $12 a barrel, ecological collapse, general
inconvenience

12. Semmelweis Reflex
• Definition: Tendency to reject or ignore all new
data if it contradicts existing theory
• Key phrase:
"What do you mean that we surgeons need to
wash our hands before operating! Dr.
Semmelweis, you're a lunatic!" (True story,
hence the name)
• Common sufferers: Practitioners of venerable
professions with large bodies of best practice,
people who just don't give a damn about
preventable infections.
• Negative effects: Significant blindspots in
decision making, dead patients

13. Want to learn more about how to make more
profitable decisions? This deck is from our
new course:
How to Avoid Mind Traps:
Improve the Effectiveness of Strategic
Initiatives by Understanding Fifty Years of
Getting the Future Wrong
Visit www.competitivefutures.com and contact
us for in-person executive retreats and training
sessions.
These can be customized for your organization
based on our Future Intelligence training
series, used by executives at Global 1000
corporations and government agencies on
four continents.