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How Four Cognitive Biases Deceive Analysts and Destroy Actionability


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How Four Cognitive Biases Deceive Analysts and Destroy Actionability

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How Four Cognitive Biases Deceive Analysts and Destroy Actionability

  1. 1. The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by How  Four  Cogni1ve  Biases   Deceive  Analysts  and   Destroy  Ac1onability A Complimentary Webinar from Aurora WDC 12:00 Noon Eastern /// Wednesday 28 September 2016 ~ featuring ~ Eric Garland Arik Johnson
  2. 2. The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by Eric  Garland  is  Execu)ve  Director  of  Compe11ve  Futures,  an  intelligence  consultancy  that  works  with   corpora)ons  and  government  agencies  around  the  world  on  strategic  and  tac)cal  insights.  He’s  the  author   of  Future,  Inc.:  How  Businesses  Can  An6cipate  and  Profit  from  What’s  NEXT,  and  How  to  Predict  the  Future… and  WIN!!!     Company:  www.compe))   Author:   Twi3er:  @ericgarland   Email:  eric.garland@compe))   The Intelligence Collaborative is the online learning and networking community powered by Aurora WDC, our clients, partners and other friends dedicated to exploring how to apply intelligence methods to solve real-world business problems. Apply for a free 30-day trial membership at or learn more about Aurora WDC at Eric Garland
  3. 3. The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by Use  the  Ques1ons  pane  on  your  GoToWebinar  control   panel  and  all  ques1ons  will  be  answered  in  the  second  half   of  the  hour.   You  are  welcome  to  tweet  any  comments  on  Twi3er  where   we  are  monitoring  the  hashtag  #IntelCollab  or  eavesdrop   via  h3p://   Slides  will  be  available  aOer  the  webinar  for  embedding   and  sharing  via  h3p://   To  view  the  recording  and  download  the  PPT  file,  please   register  for  a  trial  membership  at  h3p:// Ques)ons,  Commentary  &  Content α       α       α       α      
  4. 4. The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by How Four Cognitive Biases Deceive Analysts and Destroy Actionability How to use behavioral economics and psychological principles to recognize classic cognitive biases in individuals and organizations before they ruin our decisions Eric Garland
  5. 5. We have very smart Tools. Yet Our Decisions Frequently Suck. Why? The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by
  6. 6. The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by Stone Age Brain Tribal Social Hierarchies Complex Realities based on networks and constant Change Maybe we should be pleasantly surprised things aren’t dumber.
  7. 7. What is Cognitive Bias? The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by A systematic Pattern of deviation From Logical Norms Due to Tacit Social and Psychological Realities
  8. 8. Important! The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by Cognitive Bias is not stupidity. It occurs in highly intelligent people of significant influence and rank, as well as everyone, everywhere.
  9. 9. The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by Social Biases Memory BiasesDecision Biases Probability Biases
  10. 10. Where do We Include Cognitive Bias? Status Quo Bias Sunk Cost Fallacy Focusing EffectOutcome Bias The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by
  11. 11. Where do We Include Cognitive Bias? Self-Serving Bias The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by Ostrich Effect Recency Effect Not-Invented-Here Extreme Performance Bias
  12. 12. Good-ol-Dayism Where do We Include Cognitive Bias? Notational Bias Authority Bias Dunning-Kruger The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by
  13. 13. Social Biases The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by
  14. 14. The Dunning-Kruger Effect • Definition: The less the person knows about a subject the more confident they feel about their opinions on it • Key phrase: "I know as much as the so-called experts. Healthcare policy is just a matter of common sense." • Common sufferers: Accomplished people with large egos who think that their expertise carries over to all fields, mediocrities who have never developed expertise and downplay it reflexively, aspiring competitors for the Darwin Awards • Negative effects: Easily avoidable, catastrophic mistakes The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by
  15. 15. Status Quo Bias • Definition: Belief that the world is a certain way for a reason, that it represents statistical normalcy, and is likely to remain in stasis • Key phrase: "We're in a recovery and everything is getting back to normal. We've seen recessions like this before in the 80s and 90s. No big deal." • Common sufferers: Sunny optimists, people terrified by change, winners in the current system • Negative effects: Inability to improve an organization's position because executives fail to take a situation seriously enough The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by
  16. 16. Semmelweis Reflex • Definition: Tendency to reject or ignore all new data if it contradicts existing theory • Key phrase: "What do you mean that we surgeons need to wash our hands before operating! Dr. Semmelweis, you're a lunatic!" (True story, hence the name) • Common sufferers: Practitioners of venerable professions with large bodies of best practice, people who just don't give a damn about preventable infections. • Negative effects: Significant blindspots in decision making, dead patients The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by
  17. 17. Probability Biases The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by
  18. 18. Survivorship Bias • Definition: Tendency to focus on winning strategies, ignoring fate of losers who tried the same thing. (See Raynor’s The Strategy Paradox) • Key phrase: “You know what our secret was? Launching a good website and hiring good people.” • Common sufferers: People who have never experienced significant setbacks, those who devalue the role of luck and timing • Negative effects: Inability to assess likelihood of success of future initiatives because we failed to understand what really resulted in success. The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by
  19. 19. Extreme Performance Bias • Definition: Tendency to ignore statistical regression to the mean • Key phrase: “Housing bubble? Hardly! Yes, asset values are increasing 11% YoY for the first time in history…but it’s the New Normal, Baby!” • Common sufferers: Ben Bernanke, real estate brokers, sales managers, gamblers on stimulants, derivatives traders (redundant), pension fund managers • Negative effects: Assumption of unrealistic growth targets, inability to see bubbles, historic financial meltdowns The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by
  20. 20. Memory Biases The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by
  21. 21. Good Ol' Days Bias • Definition: Assumption that the past was easier and more positive than today • Key phrase: "It's so scary today. Everything is terrible compared to when I was younger. (when mortgage rates were 14%, unemployment was 8%, violence was 35% higher, and the Russians had nukes trained on us.)” • Common sufferers: People on the cusp of retirement, people who watch too much cable news, people who suck at history • Negative effects: Inability to identify positive opportunities for growth because focus is on why the environment is hostile The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by
  22. 22. Hindsight bias • Definition: Tendency to filter past decisions through current understanding, assuming greater wisdom and analytical skill • Key phrase: "Of course we knew that Dot Com One was a bubble on the verge of popping. Those stock prices made no sense. (Despite the collapse being something few people actually predicted.)” • Common sufferers: Executives in highly political environments where admitting a mistake is considered weakness • Negative effects: Insufficient desire to root out current cognitive failures, because old failures are rebranded as understanding The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by
  23. 23. Decision Biases The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by
  24. 24. Notational bias • Definition: Tendency of metrics to include more successes (or false successes) and fewer negative experiences in metrics, therefore skewing our understanding of how effective a decision was • Key phrase: "We evaluated ourselves based on internal metrics, and we're doing great. Since this single, cherry- picked number looks OK, clearly our whole strategy is awesome!" • Common sufferers: "Scientific" managers who trust numbers over intuition, unscrupulous CFOs hoping to hide major business model flaws • Negative effects: Overconfidence in harmful decisions because "the numbers said it was the right thing to do" The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by
  25. 25. Short-term benefit bias • Definition: Tendency to choose quicker, inferior benefit without regard to probability of both outcomes • Key phrase: “We just don’t have the money to invest in a green building. We have limited budget and prefer to spend it on wasting electricity and water for 35 years rather than spend a little bit more up front.” • Common sufferers: Damn near everybody except futurists and their very small number of groupies • Negative effects: Eventual bankruptcy, slowly collapsing institutions, infrastructure built when oil was $12 a barrel, ecological collapse, general inconvenience The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by
  26. 26. Want to learn more about how to make more profitable decisions? This deck is from our new course: How to Avoid Mind Traps: Improve the Effectiveness of Strategic Initiatives by Understanding Fifty Years of Getting the Future Wrong Visit and contact us for in-person executive retreats and training sessions. These can be customized for your organization based on our Future Intelligence training series, used by executives at Global 1000 corporations and government agencies on four continents. The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by
  27. 27. The  Intelligence  Collabora1ve   h3p://  #IntelCollab Powered  by Email:  eric.garland@compe))   Twi3er:  @ericgarland   Facebook:   The Intelligence Collaborative is the online learning and networking community powered by Aurora WDC, our clients, partners and other friends dedicated to exploring how to apply intelligence methods to solve real-world business problems. Apply for a free 30-day trial membership at or learn more about Aurora WDC at Thank  you!   Now  how  about  a  li3le  Q&A?