Hindsight is indeed a wonderful thing. Picture the scene, it’s early 2000 and the great and good of Blockbuster are sat around the board table having been approached by a young start-up crew called Netflix. Their proposition is to join forces to create a new video-rental model, taking advantage of the latest internet technology. Blockbuster Execs decide to pass on the opportunity; the dot-com bubble has burst, high-speed internet connections are a thing of the future, as is streaming and if mail-order turns out to be what customers want, well then Blockbuster can run that themselves. Recent figures estimate Netflix to be worth in excess of $70 billion, Blockbuster disappeared from our highstreets in 2010.
Research suggests that corporate decisions are more often than not influenced by two particular biases; confirmation bias and overconfidence bias. In essence confirmation bias is our tendency to trust facts and information that already support our beliefs and, as a consequence, dismiss anything that contradicts them.
Overconfidence bias is quite simply a misjudgement of our own and/or our organisation’s abilities. Believing we’re capable of more than we are can lead to risks being taken that are beyond any control and without any real foundation.
According to neuroscientists, information that challenges an individual’s preference can be processed as irrelevant while information that supports an individual’s preference is processed more thoroughly. It’s a concept worth a closer look with social media allowing, even encouraging, us to be selective about the information we choose to take on board.
Safeguarding against bias
Rather than focus on each bias, which can be pointless as they are often ingrained in our psyche, challenging the processes used in decision making is a better option.
Are we working on assumptions or facts?
Are we being ambitious enough?
Do we have comparable data or experience?
Are there any side-effects to this decision?
Are their any potential internal or external changes that might impact the decision/outcome?
Have we looked beyond our organisation – who else has made similar decisions to this?
Emotional vs. Rational
Some might say that to make the best decisions you have to take emotion out of the equation. But according to Christian Jarrett the truth is quite different—‘effective decision making is not possible without the motivation and meaning provided by emotional input’.
In other words, without emotion we are biologically incapable of making decisions. Janet Crawford highlights how logic is often the last step in the process: ‘The conscious intellectual brain steps in to produce a rational backstory to justify impulses generated in the murky corners of the unconscious mind.’
When it comes to making decisions, we often act on feelings of trust, distrust, confidence, and will find ways to make the data confirm the felt experience.
Awareness = Power
Essentially by understanding how the brain makes decisions business leaders can use this knowledge to their advantage on an individual and organisational level; making those all-important connections between human interaction and effective leadership practices.
If you’ve got some questions, or want to explore how you might tackle some of this within your organisation, contact us to find out more.