Hidden Traps That Can Affect Decision Making – Part 2

As we continue hidden traps that affect decision making, it is important to continue with the other traps affecting decision making by individuals and corporates.

The Status -Quo Trap

Often, we believe our decisions are rational and objective. Let me say we often than not carry biases which influences the choices we make.

For example, each of us are often will prefer to maintain past investment or financial decisions as the status quo, which might be an inherent part of our thinking. Deep within our psyches, they find the status quo comfortable and would not want any action to be disruptive to it. We always look for reasons to maintaining or sticking to it. Those in this category are usually referred to as self-protective and risk aversive.

In business, where sins of commission tend to be punished more severely than sins of omission, the status quo holds a particular fame hold of family position or taboo in taking an opportunistic action.

Surprising way of thinking about it.

The position to maintain the status quo just because it is comfortable. It is true if the decision turns out to be the genuinely best choice. By becoming aware of the status-quo trap, you can lessen its pull by:

• Reminding oneself of the objectives and examining how they would be served by the status quo.
• Having in mind that there are other alternatives and not only the status quo. Important to Identify other options and to use them as a counterbalancing method.
• To Ask oneself if it would be nice to choose the status quo if it were not so.
• Having to remember how desirable it is to maintain the status quo which will change over time.
• Where alternatives exist and are superior to the status quo; attention should not be concentrated only on status quo while choosing the best alternative. Let’s force ourselves to choose the best of the alternatives.

The Sunk-Cost Trap

It highlights the deep-seated bias is our tendency to make choices in ways that justify past decisions, even when those past actions or choices no longer seem valid. We know that sunk costs are irrelevant to present decisions, but they nevertheless prey on our minds and lead to inappropriate choices.

This frequently occurs when we are unwilling, consciously, or not, to admit a mistake. Acknowledging a poor business decision is a very public matter, inviting criticism from colleagues and bosses. It is psychologically safer to justify past decisions, make allowances and continue a tenuous course, even when we know the outcome is risky.

 Surprising way of thinking about It.

Having to make a conscious effort to set aside any sunk costs — the psychological or economic —that will muddy your thinking. Try these techniques:

• Seek out, and listen carefully to, the views of people who were uninvolved in the earlier decision.
• Examine why admitting a past mistake distresses you. Even the best and most experienced managers are not immune to errors in judgment. Remember the wise words of Warren Buffett: “When you find yourself in a hole, the best thing you can do is stop digging.”
• Be on the lookout for the influence of sunk-cost biases in subordinates’ decisions and recommendations. Reassign responsibilities where necessary.
• Don’t cultivate a failure-fearing culture that leads employees to perpetuate and cover up mistakes. However, when rewarding individuals, look out for the quality of their decision making and not just the quality of the outcomes.

The Confirming-Evidence Trap

As business leaders, who sometimes seek out information that supports their existing instinct or point of view, while avoiding information that contradicts it. This trap affects where we go to collect evidence, as well as how we interpret it. Having to give too much weight to supporting information while too little attention on conflicting information.

Surprising way of thinking about It.

Do not disregard the choice to which we are subconsciously drawn to but must make sure it is the smart one. Here is how to put it to the test:

• Check whether you are examining all evidence with equal rigor.
• Ask someone you respect to play devil’s advocate and argue against the decisions you are contemplating.
• Be honest with yourself about your motives. Are you really gathering information to help you make a smart choice — or are you looking for evidence that confirms what you already think and want to do?
• When seeking others’ advice, do not ask leading questions that invite confirming evidence — and do not surround yourself with “yes” people.

The Framing Trap

The first step in making a decision is to frame the question. It is also one of the most dangerous steps, as how you frame a problem can profoundly influence your choices.

Surprising way of thinking about It.

A poorly framed problem can undermine even the best-considered decision. You can limit adverse effects by employing the following guidelines:

• Do not automatically accept the initial frame, whether it was formulated by you or someone else. Always try to reframe the problem in various ways. Look for distortions caused by the way it is framed.
• Try posing problems in neutral, redundant ways that combine gains and losses or embrace different reference points.
• Think hard throughout your decision-making process about how your problem is framed.
• When others recommend decisions, examine the way they framed the problem. Challenge them with different frames.

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