Decision making is an art. Dexterous decision making requires polished skills. Psychological Bias are the common problem makers, which prevents effective decision making. Let us examine what are the common psychological biases and how to overcome these problem makers. Better decisions are required for business success and better life.

1. Why People Don't
Think Rationally
Babu Appat

2. Many of us take pride in our
ability to think clearly and
rationally at work.

3. However, from time to time, we
can all make subtle psychological
mistakes, and these can distort
our decisions.

4. So, in this slide-show, I look at how
to avoid psychological bias. (This
has nothing to do with conventional
forms of bias.)

5. Also in this show, I would like to explore how
to overcome two other unhelpful thinking
patterns: self-sabotage and fear of failure.

6. Just knowing about these things can
help you beat them.

7. Avoiding Psychological Bias in
Decision Making

8. How to Make Objective
Decisions?

9. Imagine that you're researching a
potential product.

10. You think that the market is growing, and, as
part of your research, you find information
that supports this belief.

11. As a result, you decide that the
product will do well, and you
launch it, backed by a major
marketing campaign.

12. However, the product fails.
The market hasn't expanded, so
there are fewer customers than
you expected

13. You can't sell enough of your
products to cover their costs, and
you make a loss.

14. Avoiding Psychological Bias in
Decision Making
Psychological bias can lead you to
make a wrong decision.

15. In this scenario, your decision
was affected by confirmation bias

16. With this, you interpret market
information in a way that confirms
your preconceptions - instead of
seeing it objectively - and you
make wrong decisions as a result.

17. Confirmation bias is one of several
psychological biases that we're all
susceptible to when we make
decisions.

18. In this session, we'll look at
common types of bias, and we'll
outline what you can do to avoid
them

19. What is Psychological Bias?

20. Psychologists Daniel Kahneman,
Paul Slovic, and Amos Tversky
introduced the concept of
psychological bias in the early
1970s.

21. They published their findings in their
1982 book, "Judgement Under
Uncertainty."
They explained that psychological bias also known as cognitive bias - is the
tendency to make decisions or take
action in an illogical way.

22. For example, you might
subconsciously make selective
use of data, or you might feel
pressured to make a decision by
powerful colleagues.

23. Psychological bias is the opposite
of common sense and clear,
measured judgement.

24. It can lead to missed opportunities
and poor decision making.

25. Common Psychological Biases

26. Look at these five psychological
biases that are common in
business decision making

27. Please also look at how you can
overcome them, and thereby make
better decisions

28. 1. Confirmation Bias
As you saw above, confirmation bias happens
when you look for information that supports your
existing beliefs, and reject data that go against
what you believe.
This can lead you to make biased decisions,
because you don't factor in all of the relevant
information

29. A 2013 study found that
confirmation bias can affect the
way that people view statistics

30. Its authors report that people have a
tendency to infer information from
statistics that supports their existing
beliefs, even when the data support
an opposing view.

31. That makes confirmation bias a
potentially serious problem to
overcome when you need to make a
statistics-based decision

32. How to Avoid
Confirmation Bias?
Look for ways to challenge what you
think you see. Seek out information
from a range of sources, and use an
approach to consider situations from
multiple perspectives.

33. Alternatively, discuss your
thoughts with others.

34. Surround yourself with a diverse
group of people, and don't be
afraid to listen to dissenting views

35. You can also seek out people and
information that challenge your
opinions, or assign someone on
your team to play "devil's
advocate" for major decisions.

36. 2. Anchoring
This bias is the tendency to jump to
conclusions - that is, to base your
final judgement on information
gained early on in the decisionmaking process.

37. First Impression Bias
Think of this as a "first impression"
bias. Once you form an initial picture
of a situation, it can be hard to see
other possibilities

38. How to Avoid Anchoring
Anchoring may happen if you feel
under pressure to make a quick
decision, or if you have a general
tendency to act hastily.

39. Decision-making history
So, to avoid it, reflect on your
decision-making history, and think
about whether you've rushed to
judgement in the past

40. Decision-making Under Pressure
Then, make time to make decisions
slowly, and be ready to ask for longer
if you feel under pressure to make a
quick decision.

41. Pushing against your
interests?
(If someone is pressing aggressively
for a decision, this can be a sign that
the thing they're pushing for is
against your best interests.)

42. Ladder of interference
Read an article on the Ladder of
Inference to find out more about the
stages of thinking that people tend to
go through when they make good
decisions.

43. Well-considered decisions
This can help you ensure that you've
made a thorough, well-considered
decision

44. 3. Overconfidence Bias
(Complacency)
This happens when you place too
much faith in your own knowledge
and opinions.

45. Valuable than actual?
You may also believe that your
contribution to a decision is
more valuable than it actually is

46. Your Actual Ability
You might combine this bias with
anchoring, meaning that you act on
hunches, because you have an
unrealistic view of your own
decision-making ability

47. Entrepreneurs'
Complacency
In a 2000 study, researchers found
that entrepreneurs are more likely to
display the overconfidence bias than
the general population.

48. Knowledge Limits
They can fail to spot the limits of their
knowledge, so they perceive less risk

49. Business Success
Some succeed in their ventures, but
many do not

50. How to Avoid
Overconfidence Bias?
Consider the following
questions:

51. Ask unto Yourself
What sources of information do you tend
to rely on when you make decisions?
● Are these fact-based, or do you rely on
hunches?
● Who else is involved in gathering
information?
● Has information been gathered
systematically?
●

52. Objective Data
If you suspect that you might be
depending on potentially
unreliable information, think about
what you can do to gather more
objective data

53. 4. Gambler's Fallacy
With the gambler's fallacy, you
expect past events to influence
the future

54. Coin Toss
A classic example is a coin toss. If
you toss a coin and get heads
seven times consecutively, you
might intuitively assume that
there's a higher chance that you'll
toss tails the eighth time

55. Head V Tail
The longer the run of heads you
get, the stronger your belief can
be that things will change the
next time

56. Fifty-Fifty
However, in this example, the odds
are always 50/50.
The gambler's fallacy can be
dangerous in a business
environment

57. Suppose
For instance, imagine that you're an
investment analyst in a highly
volatile market

58. Success....Success....Success
Your four previous investments
did well, and you plan to make a
new, much larger one, because
you see a pattern of success

59. Unpredictable it's often
In fact, outcomes are highly
uncertain. The number of successes
that you've had previously has only
a small bearing on future outcomes

60. How to Avoid
Gambler's Fallacy?
A 2008 study reported that the
gambler's fallacy was less likely
to happen when decision makers
avoided looking at decisions
chronologically

61. Data Analysis
So, to avoid gambler's fallacy,
make sure that you look at trends
from a number of angles.
Drill deep into data using effective,
scientific data analysis tools

62. Economic circumstances
If you notice patterns in behaviour or
product success - for example, if several
projects fail unexpectedly - look for
trends in your environment, such as
changed customer preferences or
changes in wider economic
circumstances

63. Political, Economic, Social and
Technological analysis
(Tools such as PEST Analysis can
help here.)

64. 5. Fundamental
Attribution Error
This is the tendency to blame others
when things go wrong, instead of
looking objectively at the situation

65. Personality flaw
In particular, you may blame or
judge someone based on a
stereotype or a perceived
personality flaw

66. For example,
if you're in a car accident, and the
other driver is at fault, you're more
likely to assume that (s)he is a
bad driver than you are to
consider whether bad weather
played a role

67. Actor-observed Bias
Fundamental attribution error is
the opposite of actor-observed
bias, which happens when place
blame on external events rather
than yourself

68. Reaction Time
For example, if you have a car
accident that's your fault, you're
more likely to blame the brakes or
the wet road than your reaction time

69. How to Avoid Fundamental
Attribution Error?
It's essential to look at situations, and
the people involved in them,
non-judgmentally.

70. How to Avoid Fundamental
Attribution Error?
Use empathy and (if appropriate)
cultural intelligence, to understand
why people behave in the ways that
they do.

71. Emotional Intelligence
Also, build emotional intelligence,
so that you can reflect accurately
on your own behaviour

72. Note:
It's hard to spot psychological bias in
ourselves, because it often comes from
subconscious thinking

73. Consult
For this reason, it can often be
unwise to make major decisions
without consulting other people

74. Decisions- Group
process
Researchers Daniel Kahneman, Dan
Lovallo, and Olivier Sibony reflected
on this in a 2011 Harvard Business
Review article, in which they suggest
that you should make important
decisions as part of a group process

75. Key Points
Psychological bias is the
tendency to make decisions or
take action in an unknowingly
irrational way

76. Objectivity
To overcome it, look for ways to
introduce objectivity into your
decision making, and allow more
time for it

77. Tips
Use tools that help you assess
background information systematically,
● surround yourself with people who will
challenge your opinions,
● listen carefully and empathetically to their
views - even when they tell you
something you don't want to hear
●

78. A Final Note
When you think clearly and
objectively, you give yourself the best
chance to explore all of the
information and options available to
you.

79. Meet Your Goals
You make better decisions, and
you set yourself up to meet your
goals. You'll also increase your
self-esteem, and feel more
positive about your future

80. THANK
YOU
babuappat@gmail.com