The 10 Most Common Mistakes in Decision-Making
Decision-making is as complex as it is inevitable. And yet no one formally teaches us how to do it. In their latest book, Miguel Angel Ariño and Pablo Maella review the 10 most common errors that lead to bad decisions.
Are you too much of a perfectionist? Do you overestimate your abilities? Do you trust intuition too much? Are you overpowered by past decisions, even if they've been proven to be flawed?
Following the success of Iceberg Sighted: Decision-Making Techniques to Avoid Titanic Disasters, IESE's Miguel Angel Ariño and Pablo Maella have published a new book on the 10 most common errors in decision-making.
The book's authors offer an enjoyable analysis with many examples of the most common biases that lead to bad decisions. They home in on 10 mistakes we all make, so that we may learn to stop tripping over the same stones repeatedly.
1. Holding out for the perfect decision
Striving for perfection in our decisions adds unnecessary pressure and often leads to "analysis paralysis." No one likes to be wrong, but we must shake our fear and accept that decision-making means taking risks: sometimes we'll get it right, other times we won't. Mistakes are a part of learning.
"I've failed over and over and over again in my life. And that is why I succeed," boasts Michael Jordan, arguably the best basketball player of all time.
2. Failing to face reality
We tend to see things as we would like them to be, confusing wishful thinking with reality. For example, 75 percent of drivers think they are above average behind the wheel, which is statistically impossible.
Faced with a situation, we tend to take a stance and may fail to see beyond it, ignoring what might be better options out there. Furthermore, we tend to magnify the positive aspects of our stance and minimize the negative ones.
One good way to avoid this bias is to try and distinguish facts (objective) from opinions (subjective).
3. Falling for self-deceptions
The way we are presented with a situation, and the way we present it to ourselves, affects our final decisions. For example, when some cancer patients were told that the survival rate one year after a surgery was 68 percent, a significant percentage opted for that surgery. Meanwhile, when others were told that 32 percent of patients die within a year of the operation, no one elected to undergo it. The same information was given, just presented in a different way.
To avoid falling prey to self-deceptions, it is important to seek alternatives and consider them from different angles. Finally, sleep on it before making the decision.
4. Going with the flow
There is something worse than being wrong: being the only one who is wrong. Doing what everyone else does is easier and, more importantly, may save us from embarrassment. Hence our tendency to follow the herd, even if it is heading to a precipice.
We saw this with the dotcom bubble, for example. Everyone wanted to invest in tech companies when the bubble was inflating, even when most investors knew little about them.
The problem with imitation (and not thinking before deciding) is that we eliminate the possibility of finding wiser alternatives than what is fashionable.
5. Rushing and risking too much
Before deciding hastily, we should consider whether a decision is truly urgent. We tend to rush into things, crossing things off our list to feel accomplished. But all we're really doing in a rush is taking unnecessary risks.
For example, the Chernobyl disaster was caused by an unnecessary test that simulated a power-failure at the nuclear power plant. By going through the motions for security testing, the outcome was exactly what they sought to avoid: the reactor exploded. There was no urgent need to run that test, but it happened anyway, risking far too much.
6. Relying too heavily on intuition
Intuition can be an asset, but when we allow it to outweigh analytical thinking, it leads to mistakes. What's more, testing our hunches with low-cost experiments is important.
The authors offer Samsung chairman Lee Kun-hee as a cautionary tale. In the 1990s, he reportedly decided to get into automobile manufacturing because he "sensed" the market would take off in Asia. The project resulted in a loss of $2 billion and 50,000 layoffs.
7. Being married to our own ideas
It's hard for us to change a prior decision, even if keeping the status quo is clearly inefficient or harmful.
The year 2003 saw the grounding of the Concorde, a supersonic jet airliner that was never profitable. But it took a fatal accident, with over 100 fatalities, to put it into permanent retirement. Economically speaking, the right decision should have been made long before then, but that meant acknowledging a failure. And no one likes doing that.
8. Paying little heed to consequences
Sometimes we don't consider the consequences of a decision. Or we only consider the most direct and immediate ones, ignoring the side effects. And that can cause even bigger problems than the ones we were trying to solve in the first place.
That's what happened to those in charge of the Titanic, who wanted to arrive at their destination 24 hours ahead of schedule in order to silence critics who claimed their large ship would be slow. They ignored warnings about icebergs, warnings that should have slowed them down for safety's sake.
9. Overvaluing consensus
We often think group decisions are more effective, but that's not always true. Reaching consensus also has its drawbacks: it may take longer, accountability tends to be diluted, and people may not say what they really think due to peer pressure or the desire to be accepted.
The latter may have occurred with the Kennedy administration's botched Bay of Pigs invasion. What was supposed to be a surprise attack on Cuba turned out to be an open secret, the authors relate. Since no one wanted to appear to be a "dissident," no one dared question the orders — even when the most sensible thing to do was abort the mission.
To avoid such a situation, remember to consult with people who hold different views and are willing to question our arguments.
10. Not following through
The decision-making process does not end with the decision: implementation and the monitoring of it are essential, too. However, some resolutions are not put into practice due to our own personal limitations (e.g., lack of willpower, commitment or time) or external factors (e.g., lack of authority or support).
For example, a multinational decided to establish a corporate headquarters for southern Europe. But the idea was eventually discarded in order to avoid upsetting any of the managing directors of the three potential host countries — ultimately causing damage to the whole enterprise.
It is vital to consider the implementation of a decision. And that means assessing our own ability to commit to a particular course of action and accepting that others will have their own interests and needs.
If we consider these common mistakes, our decision-making abilities will improve substantially.