From Howard Raiffa’s “Smart Choices”
Psychological Traps
“By familiarizing yourself with them and the diverse forms they take, you’ll be better able to ensure that the decisions you make are sound and reliable. The best protection against these traps is awareness.” (p. 190)
Overrelying on First Thoughts: The Anchoring Trap
- “In considering a decision, the mind gives disproportionate weight to the first information it receives. Initial impressions, ideas, estimates, or data ‘‘anchor’’ subsequent thoughts.” (p. 191)
- “Always view a decision problem from different perspectives. Try using alternative starting points and approaches rather than seizing on and sticking with the first line of thought that occurs to you. After exploring various paths, reconcile any differences in their implications.” (p. 193)
- “Be careful to avoid anchoring other people from whom you solicit information and counsel. Tell them as little as possible about your own ideas, estimates, and tentative decisions. If you say too much, you may simply get back your own preconceptions (which have become your advisors’ anchors).” (p. 193)
- “Seek information and opinions from a variety of people to widen your frame of reference and push your mind in fresh directions. Be open-minded.” (p. 193)
Keeping on Keeping On: The Status Quo Trap
- “When faced with this situation, a surprising number of people hang on to the inherited shares. They find the status quo comfortable, and they avoid taking action that would upset it. ‘‘Maybe I’ll rethink it later,’’ they say. But later is always later.” (p. 193)
- “Always remind yourself of your objectives and examine how they would be served by the status quo. You may find that elements of the current situation are incompatible with those objectives.” (p. 194)
- “Ask yourself whether you would choose the status quo alternative if, in fact, it weren’t the status quo.” (p. 195)
Protecting Earlier Choices: The Sunk-Cost Trap:
- “we tend to make choices in a way that justifies past choices, even when the past choices no longer seem valid. Our past decisions create what economists term ‘‘sunk costs’’—old investments of time or money that are now unrecoverable. We know, rationally, that sunk costs are irrelevant to the present decision, but nevertheless they prey on our psyche, leading us to make wrong-headed decisions.” (p. 196)
- “Or we may have poured enormous effort into improving the performance of an employee whom we know we shouldn’t have hired in the first place. Remember, your decisions influence only the future, not the past.” (p 196)
- “Seek out and listen carefully to the views and arguments of people who weren’t involved with the earlier decisions and hence are unlikely to have a commitment to them.” (p. 197)
- “Examine why admitting to an earlier mistake distresses you. If the problem lies in your own wounded self-esteem, deal with it head on. Remind yourself that even smart choices can have bad consequences and that even the most experienced decision makers are not immune to errors in judgment.” (p 197)
Seeing What you Want to See: The Confirming-Evidence Trap
- “The confirming-evidence trap not only affects where we go to collect evidence, but also how we interpret the evidence we do receive, leading us to give too much weight to supporting information and too little to conflicting information.” (p. 198)
- “First is our tendency to subconsciously decide what we want to do before we figure out why we want to do it. Second is our tendency to be more engaged by things we like than by things we dislike—a tendency well documented even in babies. Naturally, then, we are drawn to information that confirms our subconscious leanings.” (p. 199)
- Get someone you respect to play devil’s advocate, to argue against the decision you’re contemplating. Better yet, build the counterarguments yourself. What’s the strongest reason to do something else? the second strongest reason? the third? Consider the position with an open mind.”
- Expose yourself to conflicting information. Always make sure that you examine all the evidence with equal rigor and understand its implications. And don’t be soft on the disconfirming evidence.
- In seeking the advice of others, don’t ask leading questions that invite confirming evidence.
Posing the Wrong Question: The Framing Trap
- “the way you ask a question can profoundly influence the answer you get. The same is true in decision making. If you frame your problem poorly, you’re unlikely to make a smart choice.” (p. 200)
- Framing as gains versus losses.
- Framing with different reference points.
- Don’t automatically accept the initial frame, whether it was formulated by you or by someone else. Always try to reframe the problem in different ways. Look for distortions caused by the frames.
- When your subordinates at work recommend decisions, examine the way they framed the problem. Challenge them with different frames.
Being Too Sure of Yourself: The Overconfidence Trap
- “If you underestimate the high end or overestimate the low end of a range of values for a crucial variable (such as potential sales) and you act accordingly, you may expose yourself to far greater risk than you realize—or you may miss out on wonderful opportunities. A major cause of overconfidence is anchoring. When you make an initial estimate about a variable, you naturally focus on midrange possibilities. This thinking then anchors your subsequent thinking about the variable, leading you to estimate an overly narrow range of possible values.” (p. 205)
- Avoid being anchored by an initial estimate. Consider the extremes (low and high) first when making a forecast or judging probabilities.
- Actively challenge your own extreme figures. Try hard to imagine circumstances in which the actual figure would fall below your low or above your high, and adjust accordingly. For example, if your forecast is 80 degrees and your high figure is 88, how might the high turn out to be 95?
Focusing on Dramatic Events: The Recallability Trap
- “Because human beings infer the chances of events from experience, from what we can remember, we can be overly influenced by dramatic events—those that leave a strong impression on our memory. We all, for example, exaggerate the probability of rare but catastrophic occurrences, such as plane crashes, because they get disproportionate attention in the media. A dramatic or traumatic event in your own life can also distort your thinking. You will assign a higher probability to traffic accidents if you’ve passed one on the way to work, and you will assign a higher chance to someone’s dying of cancer if a close family member or friend has died of the disease.” (p. 206)
- Each time you make a forecast or estimate, examine your assumptions so that you are not being unduly swayed by memorability distortions.
- Where possible, try to get statistics. Don’t rely on your memory if you don’t have to.
Neglecting Relevant Information: The Base-Rate Trap
- Donald Jones is either a librarian or a salesman. His personality can best be described as retiring. What are the odds that he is a librarian?
- Don’t ignore relevant data; make a point of considering base rates explicitly in your assessment.
- Don’t mix up one type of probability statement with another. (Don’t mix up the probability that a librarian will be retiring with the probability that a retiring person is a librarian.)
Slanting Probabilities and Estimates: The Prudence Trap
- •State your probabilities and give your estimates honestly.In communicating to others, state that your figures are not adjusted for prudence, or for any other reason.
- Document the information and reasoning used in arriving at your estimates, so others can understand them better.
- Emphasize to anyone supplying you with information the need for honest input.
- Vary each of the estimates over a range to assess its impact on the final decision. Think twice about the more sensitive estimates.
Seeing Patterns Where Non Exist: The Outguessing Randomness Trap
- “To avoid distortions in your thinking, you must curb your natural tendency to see patterns in random events. Be disciplined in your assessments of probability.” (p. 211)
Going Mystical about Coincidences: The Surprised-by-Surprises Trap
- “Many people think themselves truly anointed or gifted because they’ve won a succession of bets (or made a series of very successful investments). But we should not be impressed by these seemingly dramatic occurrences. Just by chance, someone will be lucky.” (p. 212)
- Some events that appear rare really aren’t. What’s the probability, for example, that you’ll find a pair of people with the same birthday (day and month) out of 24 randomly chosen people? The answer is more than 50 percent!