Perceptual Biases (Business Administration)

Only available on StudyMode
  • Download(s) : 667
  • Published : March 26, 2013
Open Document
Text Preview
1. Despite the difficulties of making predictions, many people confidently make assertions about what will happen in the future because of various types of biases, constraints, perceptions, and expectations. Each person has their own experiences, influences, tastes, personalities, attitudes, and much more, creating unique perspectives that influence perception, objectivity, and rationality. As such, perceptions are controlled by three factors: the perceiver, the object being perceived, and the context in which people perceive. People align these factors to their own standards and consequentially, they always think they are “right.” This results in an above-average affect, where people almost always believe they are above average. This affect causes people to confidently make assertions despite the level of objective difficulty.

2. There are various perceptual and decision-making errors that cloud the judgments of many intelligent and powerful people. For example, when Rick Wagoner predicted that bankruptcy would result in the “…liquidation of the company” (195), he may have used general impressions of bankruptcy to contaminate factual information. As such, he was a victim of the Halo Effect. His negative perceptions of bankruptcy clouded any positive indicators of its factual effectiveness.

When investment analyst Marc Farber incorrectly predicted a slowdown in the Chinese market, he was perhaps affected by a hindsight bias. Having experienced so many market slowdowns in the past, such as the various recessions in the United States in addition to international examples like Japan, he likely thought he was a better analyst than he actually was. The hindsight bias prevented him from learning from the past; he was likely less skeptical about his own predictive skills than he should have been.

When Vice President Joe Biden incorrectly predicted, “More people are going to be put to work this summer” (195), he was possibly a victim of an overconfidence...
tracking img