a) What are the pitfalls/mistakes in decision making ?
b) how to minimise them.
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Heuristic : rule of thumb/short cut
when evaluating, people have a tendency to use heuristic (rule of thumb) because it is easier to manage/decide based on this.
When making decisions or judgments, we often use mental shortcuts or "rules of thumb" known as heuristics. For every decision, we don't always have the time or resources to compare all the information before we make a choice, so we use heuristics to help us reach decisions quickly and efficiently. Sometimes these mental shortcuts can be helpful, but in other cases they can lead to errors or cognitive biases.
Eg : rule of thumb:
the fastest way to go from RP to City Hall
alternatives : by taxi, bus or train or walk.
rule of thumb : by taxi.
generally true, but what if there is bad jam in PIE/AYE, then this rule does not apply and thus is a bad decision.
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Know the 9 types of errors in decision making.
ATTRIBUTE FRAMING ERROR
usually for products/goods.
how we frame the features/benefits of a product/service can influence how people decide.
People tend to be risk averse for loss and risk seeking for gain.
ie how we frame the alternatives affect people decision,
so when we make decision , we need to be conscious of this.
EXAMPLE :
Program A using drug A : will save 200 people. (sound positive, safer)
Program B using drug B : will have 1/3 proability of saving 600 people. (sound negative)
both outcome are the same, and yet
there is tendency for people to decide for program A. (seem safer).
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GOAL FRAMING error .
How we frame the outcome (goal) influence people's decision, tendency for people to act when presented with disadvantage of doing something (negative) , rather than the advantage of doing another thing.(positive)
EXAMPLE :
Road Safety Campaign.
Message A : die if you don't wear safety belt.
Message B : will not die if wear seat belt.
People tend to pay more attention to Campaign A.
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REPRESENTATIVE ERROR.
tendency to decide/choose alternative based on how they resemble other /past events.
eg : have experience recruiting staff for a fast food restuarant.
now in your new job, you have to recruit staff for a dine in restuarant.
you used the same alternative/method as recruiting for a fast food.
because you think recruiting for dine in RESEMBLE OR IS SIMILAR to recruiting for fast food restaurant.(past event).
- STAKEHOLDER FRAMING.
DEFINITION :
- stakeholder : people who have interest in the outcome of decision we make.
- they tend to provide information to influence our decision that may benefit them.
- so they FRAME the information, so we will be influenced to make decision that benefit them.
Example :
You want to buy a penthouse, advertised for $4.5M.
But you can only afford $4.3M.
Buyer share with you that the next door penthouse was sold for $4.7 (information),
true not true?. maybe the next door penthouse has substantial renovation or better facing etc.
Buyer tell you not to worry because you can always borrow from bank. His good friend is a banker and he promised to help you get the loan.
(He wants to influence you to buy at $4.5M) and doesn't care or worry if you are over stretching.
Buyer : stakeholder
have vested interest.
frame his information
Decision maker : you
if you are not aware of how the other party tried to influence you, then you will be making error in the decision making.
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SOLUTION FOCUSED PROBLEM.
Tendency to want to solve a problem with existing solution without analysing the root cause of the problem.
because of this tendency (and impatience) we tend to make mistake in deciding which solutions/alternatives to choose or decide on the solution proposed.
Example :
Student X consult faci Y to discuss why she did not do well in UT1 despite studying hard, taking copious notes.
The faci asked the student to read 6P and revise worksheets. (solution focus, standard solution, based on past experience it helps other students).
Faci did not analyse the student's problem.
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ANCHORING HEURISTIC.
Tendency to decide based on the initial information provided by the other party, then make all subsequent decision around the information provided.
EXAMPLE :
One of your classmates wanted to planned a class out class
You suggested going to Universal Studio.
He then planned around going to Universal Studio - cost, when, how etc
without considering other type of activities. (eg go to the beach, BBQ)
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AVAILABILITY HEURISTIC .
Tendency to make decision based on whatever information is easily available.
This could be based on prior experience, what we can easily recall or what we can gather from friends etc.
We tend to make this mistakes when we have to make decision quickly, or too much effort to research for information or easily influenced by peers etc.
EXAMPLE :
For example, after seeing several news reports about car thefts, you might make a judgment that vehicle theft is much more common than it really is in your area. This type of availability heuristic can be helpful and important in decision-making. When faced with a choice, we often lack the time or resources to investigate in greater depth. Faced with the need to an immediate decision, the availability heuristic allows people to quickly arrive at a conclusion.
While it can be useful at times, the availability heuristic can lead to problems and errors. Reports of child abductions, airplane accidents, and train derailments often lead people to believe that such events are much more typical than they truly are.
Examples
- After seeing news reports about people losing their jobs, you might start to believe that you are in danger of being layed-off. You start lying awake in bed each night worrying that you are about to be fired.
- After seeing several television programs on shark attacks, you start to think that such incidences are relatively common. When you go on vacation, you refuse to swim in the ocean because you believe the probability of a shark attack is high.
- After reading an article about lottery winners, you start to overestimate your own likelihood of winning the jackpot. You start spending more money than you should each week on lottery tickets.
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CONFIRMATION BIAS.
Confirmation bias is a tendency for people to favor information that confirms their preconceptions (BELIEF)
regardless of whether the information is true. As a result, people gather evidence and recall information from memory selectively, and interpret it in a biased way. The biases appear in particular for emotionally significant issues and for established beliefs.
EXAMPLE :
Let's say that you are responsible for hiring a new employee for your company to fill a vacant role. You have come down to two choices: a friend of yours and someone you're not familiar with. In this situation, confirmation bias would emerge if you were to ignore the weak points of your friend's application, while harping on the weak points of the other applicant.
Humans are pattern-seeking animals. Once we have determined that a pattern exists, whether it actually does or does not, we tend to look for ways to confirm our suspicions. This is what is known as a confirmation bias. It can influence you in almost every area of your life; from school, to work, or even with the news or entertainment you may enjoy. However, recognizing that you have such biases is the first step in overcoming them and having a more objective view of the world.
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ESCALATION OF CONMITMENT BIAS.
Tendency to continue with something we are doing (from earlier decision) even when we have found out /told or discover the decision is wrong.
EXAMPLE :
Suppose you are a senior engineering manager in charge of new building new factories.
You have recommended to your management to build a factory in Woodland. Permission was given and budget allocated. The building of the factory just started and you were proud of the project and gave it lots of commitment/efforts and even miss watching world cup.
Last week, you were told the location is not suitable (for whatever reason). However, you press on and continue to put on resources to build the factory instead of stopping the project to review.
you escalate (ie put in more effort, energy, resources) though the commitment were bias (wrong decision.)
