9 Traps in Decision Making
- The Storytelling Trap
“Storytelling makes us construct a coherent story from a selection of facts. But this is never the only possible story, and it can lead us into error.” (p. 35)
- The Imitation Trap
“Attribution error leads us to attribute success (or failure) to a single person, and to underestimate the role played by circumstances and chance. The success of the Apple Stores was attributed to Ron Johnson, not to Apple’s product introductions.” (p. 47) - The Intuition Trap
“Kahneman and Klein worked together to resolve their disagreement and identified the two necessary conditions for the development of real expertise: a high-validity (predictable) environment; and prolonged practice with quick, clear feedback. Expert intuition can thus be developed by firefighters, pilots, or chess players… …but not by psychiatrists, judges, or traders.” (p. 60) - The Overconfidence Trap
“We overestimate ourselves (relative to others or in the absolute).” (p. 75)
“We are too optimistic about our projects (planning fallacy)” (p. 75)
- The Inertia Trap
“Anchoring encourages us to base an estimate or forecast on a number that comes to mind, even if it is irrelevant to the matter at hand.” (p. 92)
“In general, it is easier not to decide than to decide: this is status quo bias.” (p. 92)
- The Risk Perception Trap
“Companies seem to take too few risks: They hoard cash, and their managers refuse to take on risky projects. At least three biases contribute to this.” (p. 107)
Loss Aversion, Uncertainty Aversion, Hindsight Bias. - Time Horizon Trap
“Short-termism doesn’t just mean putting shareholders’ interests ahead of other stakeholders’ interests; it’s also the preference for immediate profit at the expense of future profit (managerial myopia).” (p. 119)
- Groupthink Trap
“Groupthink can lead the best-informed participants to keep their doubts to themselves.” (p. 135)
“Groupthink is rational for the individual: partly because of social pressure, and partly because it is logical to take other people’s opinions into account.” (p. 135) - The Conflict of Interest Trap
““Agents” act in their own self-interest, at the expense of those they are representing (principal-agent model).” (p. 148)
“Beyond these effects, which we assume to be conscious and intentional, we are also influenced by our self-interest without realizing it.” (p. 148)