We ride on our experience to make the right decisions. What if experience takes us for a ride?
Secure in the wisdom and insights gleaned from past experiences, we chart a course for the future. While that is common knowledge, what also emerges is that our trusted guide, experience, can mislead us too. We tend to view the past through numerous filters that distort our vision, and we continue to be in denial about our biased and self-serving interpretation of experience.
Biases primarily result from three filters. 1. The business environment that focuses on outcomes (especially successes) over the processes that lead to them. 2. The existence of so-called trusted group of advisers around us who manipulate information to suit their ends. 3.Our own limited critical reasoning capability (with inflated egos) that stops short of accepting the fallibility of our perception.
To improve decision-making, we must learn to turn these traps to tools in figuring out experiences’ underlying lessons.
While the outcomes of business decisions are both visible and available for us to judge, the details of the decision process elude us. What’s more, we play safe and continue to pursue a questionable strategy while rejecting or modifying a strategy that may still be worthwhile or pay off in the long run. We fool ourselves into thinking that we have more control over success than we actually do. A business environment that conceals or underplays failure actually shies away from the lessons it teaches. It tends to identify and reward the decision maker who solves a burning problem, ignoring the one who prevented such a problem to arise in the first place through astute decision-making and timely action.
In his paper ‘When Followers Become Toxic’ organizational psychologist Lynn Offermann opined that leaders run the danger of being “surrounded by followers who fool them with flattery and isolate them from uncomfortable realities.” Fearful of the consequences that they might invite, people also dither from providing honest unbiased feedback to the top bosses. They either dish out censored self-serving information, or conform so as not to ruffle feathers. While decision-makers are not always unaware of these biases, it can be difficult for them to think beyond immediately available information or shape their intuitions by the evidence – a tendency that cognitive scientists term availability bias.
Some of the blame lies within us as well. We often make large of the wrong lessons from our experience even when the right ones stare us in the face. We search for and use evidence that confirms our beliefs and hypotheses, conveniently glossing over information that contradicts or questions them. This tendency to selectively build on and interpret experience is called confirmation bias.
Even big data analysts are known to cherry-pick information to suit managers’ expectation and reconfirm their decision. Goes without saying, when misleading insights are ‘data-backed’, they are even harder to challenge.
However, we must learn to bolster our decision-making prowess by adopting the following means:
Share ‘failure stories’ – While it isn’t easy to share stories that sing aloud our failures, not conducting investigation and analyses of failed decisions is even worse. To share experiences and reasons behind failed initiatives that would otherwise remain in the dark, a group of entrepreneurs are known to organize a conference called FailCon. This is an effort in preventing people from making the same decision-making mistakes.
Don’t look the other way – Turning a blind eye to failure, or disguising it as a success (especially if had no palpable dire consequence) can be an alarming practice too.
Spot and report – Identifying or recognizing a potential problem accruing from erroneous decisions requires as much acumen and expertise as solving an actual one. Lower level managers who deal with daily operations often pick up signs of a blunder well before the senior management. Employees should be encouraged to report serious issues before they reach the point of no return.
Feel free to disagree – Highlighting the importance of disagreements before taking any major call, Ed Catmull, president of Pixar and Walt Disney Animation Studios wrote, “It’s far better to learn about problems from colleagues when there’s still time to fix them than from the audience after it’s too late.” Peter Drucker’s pronouncement was the same too, “The first rule of decision-making is that one does not make a decision unless there is disagreement.”
Think of disconfirming evidence – It helps to actively look for disconfirming evidence, as we continue to base our decisions on hunches, spurious correlations, or on reports of data analysts and consultants as they may simply tell us what we would want to hear.
Being open to the unexpected and embracing serendipity are also crucial for decision- making. In The Luck Factor psychologist Richard Wiseman shows that when people focus too much on an issue or a task, they inevitably miss out on unexpected opportunities.
We are on the right track if we draw from our experience, yet remain cautious of the filters. As late Hillel Einhorn, one of the fathers of behavioral decision theory aptly put it, “If we believe we can learn from experience, can we also learn that we can’t?”
October 2015
Based on Harvard Business Review South Asia May 2015 ‘Fooled by Experience’ by Emre Soyer, assistant professor at Ozyegin University, Istanbul and Robin M. Hogarth, emeritus professor Universitat Pompeu Fabra, Barcelona.