Download - Cognitive biases

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Page 1: Cognitive biases
Page 2: Cognitive biases

A SHORT VIDEO TO GET US STARTED

HTTP://WWW.YOUTUBE.COM/WATCH?V=BSE_SAVX_2A

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WHEN WAS THE LAST TIME YOU HAD TO

MAKE A DECISION?

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We start making decisions from the moment we

wake up. These decisions vary in complexity.

Some are relatively simple, some are automatic,

while others demand a higher degree of

reflection and thinking.

Some of those decisions have serious

implications and consequences -

Good/bad/ugly

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AS MUCH AS YOU PLAN FOR A DESIRED

OUTCOME

The outcome will depend on the decisions you make and every

subsequent decision that follows.

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WE ARE CONSTANTLY EVALUATED ON OUR

JUDGEMENT & DECISION MAKING ABILITIES

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BY OUR EMPLOYER & COLLEAGUES

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FAMILY,

WIFE OR HUSBAND

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COGNITIVE BIAS

Is a mental error caused by our simplified information

processing.

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HEURISTICS

Psychological tendencies that cause the human brain to draw incorrect conclusions.

Mental shortcuts, rules of thumb, or gut-feeling that assist us to make quick

decisions without formal analysis.

Driving

Attacked by a bear/animal

About to get hit by a car

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WHY ARE THEY CRUCIAL & CAN BE

DANGEROUS?

We are not even aware we are committing them

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THE FUNCTION YOU OCCUPY OR THE ROLE

YOU PLAY DETERMINES THE IMPACT OF YOUR

DECISION

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Just like our physiological system. You need every organ to function properly and optimally.

From Janitor to CEO

We cannot disregard anyone.

EVERY FUNCTION/ROLE MATTERS

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Home/Family Community

Work Sport

EVERY ONE OF US IS PART OF AN ORGANIZATION IN

ONE WAY OR ANOTHER

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CIRCLE OF INFLUENCE

DON’T UNDERESTIMATE INFLUENCE

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COMPLEXITY THEORY & SYSTEM THINKING

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Automatic Associations Social &

Environmental influences

Relative comparisons

Mindset defense

Oversimplifications

Habits & Personality

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Confirmation

Anchoring

Framing

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Sunk Costs

Overconfidence

Recency Effect

MOUNT EVEREST 1996 DISASTER

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MENTAL MODELS & THE CONFIRMATION BIAS

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VISUAL SYSTEM & ASSOCIATIVE MEMORY

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VISUAL ILLUSIONS

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NEARBY COMPARISON AND CHOICE

First group could have either $10 or a

nice pen Second group could have $10, a nice pen, or an uglier pen

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LET’S EXPERIMENT

A bat and a ball cost $1.10. The bat is $1 more than the ball. How much is the ball?

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READ THE COLOR

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John is a quiet man, with a retiring personality. Is he more likely to be:

A librarian

A Salesman

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HERE IS ONE THAT SHOULD HELP YOU IN

NEGOTIATION

Is the height of the tallest redwood more or less than 1200 feet?

What is your best guess about the height of the tallest redwood?

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A study of a Campbell’s soup sales promotion was conducted when the product was

on sale for about 10% less than regular price. On some days a sign on the shelf said

“Limit of 12 per person” and on other days the sign said, “No limit per

person.” Shoppers purchased an average of 7 cans of soup when the limit was in

effect, double the amount that they purchased with no limit.

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WHAT IS THIS PARAGRAPH TALKING ABOUT?

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System 1

Intuitive

System 2

Reflective

THINKING FAST AND SLOW

TWO SYSTEMS

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Reasoning

Argument

Claims

Premises

Fallacies

Assumptions

Conclusion

CRITICAL THINKING

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It is a skill you can practice in order to master.

Once you master it, watch how you perceive others. Don’t make it affect you negatively by thinking less of others.

BECOME A CRITICAL THINKER

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RECOGNIZE QUALITY DECISIONS

A Decision framed within a context

Creative and well-thought of alternatives

Relevant & reliable information which to base the

decision upon, while incorporating inherent

uncertainty

Logical Reasoning & analysis that help draw

meaningful conclusions

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DECISION QUALITY QUESTIONS

Is there any reason to suspect motivated errors, or errors driven by the self-interest of the

recommending team?

Have the people making the recommendation fallen in love with it?

Were there dissenting opinions within the recommending team?

Could the diagnosis of the situation be overly influenced by salient analogies?

Have credible alternatives been considered?

If you had to make this decision again in a year, what information would you want, and can you get

more of it now?

Do you know where the numbers came from?

Can you see a halo effect?

Are the people making the recommendation overly attached to past decisions?

Is the base case overly optimistic?

Is the worst case bad enough?

Is the recommending team overly cautious?

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We are great at recognizing our physical limitations and we tend to do something about it. Are

willing to do the same with our Cognitive limitations?

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CREDIT GOES TO DR DAN ARIELY & STANDFORD UNIVERSITY – STRATEGIC DECISIONS GROUP

Thank you