Hidden Traps in Decision Making

Topics: Decision making Pages: 19 (6765 words) Published: March 1, 2012


In making decisions, your own mind may be your worst enemy.

most important job of any executive. It's also t h e toughest and the riskiest. Bad decisions can damage a business and a career, sometimes irreparably. So where do bad decisions come from? In many cases, they can be traced back to the way the decisions were m a d e - t b e alternatives were not clearly defined, the right information was not collected, the costs and benefits were not accurately weighed. But sometimes the fault lies not in tbe decision-making process but rather in tbe mind of the decision maker. The way the human brain works can sabotage our decisions. Researchers have been studying the way our minds function in making decisions for half a century. This research, in the laboratory and in the field, has revealed that we use unconscious routines to cope with tbe complexity inherent in most decisions. These routines, known as heuristics, serve us well in most situations. In judging distance, for example, our minds frequently rely on a heuristic that equates clarity with proximity. The clearer an object appears, the closer we judge it to be. The fuzzier it appears, the farther away we assume it must be. This simple mental sbortcut helps us to make the continuous stream of distance judgments required to navigate the world. Yet, like most heuristics, it is not foolproof. On days that are hazier



than normal, our eyes will tend to trick our minds into thinking that things are more distant tban tbey actually are. Because the resulting distortion poses few dangers for most of us, we can safely ignore it. For airline pilots, though, tbe distortion can be catastrophic. Tbat's why pilots are

by ]ohn S. Hammond, Ralph L Keeney, and Howard Raiffa
S. Hammond is a consultant on decision making and a former professor at the Harvard Business School in Boston, Massachusetts. Ralph L. Keeney is a professor at the Marshall School of Business and the School of Engineering at the University of Southern California in Los Angeles. Howard Raiffa is the Frank Plumpton Ramsey Professor of Managerial Economics Emeritus at the Harvard Business School. Their book. Smart Choices: A Practical Guide to Making Better Decisions, will be published in October by the Harvard Business School Press.

trained to use objective measures of distance in addition to their vision. Researchers have identified a whole series of sucb flaws in the way we think in making decisions. Some, like the heuristic for clarity, are sensory misperceptions. Others take the form of hiases. Others appear simply as irrational anomalies in our thinking. What makes all these traps so dangerous is their invisibility. Because they are hardwired into our thinking process, we fail to recognize them-even as we fall right into them. For executives, whose success hinges on the many day-to-day decisions they make or approve, the psychological traps are especially dangerous. They ean undermine everything from newproduet development to acquisition and divestiture strategy to succession planning. While no one can rid his or her mind of these ingrained flaws, anyone ean follow the lead of airline pilots and learn to understand the traps and compensate for them. In this article, we examine a number of well-documented psychological traps that are particularly likely to undermine business decisions. In addition to reviewing the causes and manifestations of these traps, we offer some specific ways managers can guard against them. It's important to remember, tbough, that the hest defense is always awareness. Executives who attempt to familiarize themselves with these traps and tbe diverse forms they take will be better able to ensure that tbe decisions they make are


September-October 1998



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