Oh, Our Humanity!

The most dangerous bias is the bias denied.

I had an interesting conversation last week with an appraiser. I needed a fair market value estimate to evaluate an unsolicited offer.

The appraiser’s proposal was all in order except for a clause requiring a copy of the offer. The appraiser assured me that knowing the offer amount would not affect his estimate and I have no doubt he was sincere – but he was wrong.

The offer information will almost certainly result in a bias called “anchoring.” Said plainly, any information received prior to making an estimate will, consciously or unconsciously, influence that estimate. Even being aware of the anchoring bias doesn’t blunt its damaging influence (another well-established fact).

The “Not Me” Syndrome
This illustrates the most dangerous aspects of biases: the presumption that we are immune from bias (“I’m very objective”) and/or that awareness of a bias nullifies it (“Well, now that I know the danger…”).

Most of us have heard the statistic that eighty to ninety percent of people surveyed say they are above average drivers. But some researchers went one step further, educating subjects on the statistics and the biases that cause this error in judgment. Then they asked the question again.

We would expect that, armed with knowledge, people could now be more objective in assessing their skills… but we’d be wrong. Almost no one alters their perception of their driving skills… it’s others who must be self-deluded.

Those Most At Risk
We would expect that it’s the duller or more ignorant among us who are most susceptible to biases. Again, we’d be wrong. Over-confidence actually kicks into high gear as we go up the scale of intelligence, education, and professional success. For example:

  • Doctors deny that gifts and trips from drug companies influence their choice of prescriptions, but report they know it’s a problem with ‘other’ doctors.
  • Economists deny that client fees have ever influenced the conclusions of their commissioned reports, but report that ‘other’ economists are swayed.

As human beings, we just don’t naturally concede that we, ourselves, are vulnerable to biases. As such, we don’t investigate biases and how to effectively defend against them. Consequently, we make poorer decisions that cost us dearly.

A primer to begin equipping yourself or your team with the knowledge and tactics needed to defend against common biases is Predictably Irrational by Dan Ariely. If you want to improve decision quality, it starts with these basics.

© 2012 Verax Point

About Dave Wittenberg

I am all about equipping business teams to enjoy greater payoffs on their biggest bets. I bring a unique combination of evaluation expertise and behavioral insights developed over the course of more than 300 major strategic initiatives. Applying a highly effective, disciplined framework, teams unleash their full capabilities to generate better solutions, wring out hidden waste, and deliver superior returns. Specialties: Investment Evaluation, Decision Excellence, Strategic Analysis, Mergers and Acquisitions, Investor Relations, Leadership Development, Education & Training
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