Module 1 Key Concepts

Four phases of decision-making

1) Framing, 2) Gathering Intelligence, 3) Coming to Conclusions, 4) Learning from Experience

Overconfidence

The belief that one's knowledge, skills, or judgments are more accurate than they actually are.

Types of overconfidence

1) Misestimation (incorrect predictions), 2) Misplacement (thinking you are better than others), 3) Misprecision (overestimating accuracy).

Decision frame

The perspective or mental structure that influences how a decision is perceived and approached.

Groupthink

A psychological phenomenon where the desire for harmony in a group suppresses dissenting viewpoints, leading to poor decision-making.

Availability heuristic

A mental shortcut where people judge the probability of an event based on how easily examples come to mind.

Regression to the mean

The tendency for extreme performances or outcomes to move closer to the average over time.

Importance of framing in decision-making

Frames shape what information is considered relevant and how options are evaluated.

Main issue with group decision-making

Groups may fall into premature consensus, groupthink, or conflict avoidance.

Improving learning from experience

By conducting structured postmortems, keeping failure resumes, and unlearning outdated beliefs.

Overconfidence and the Challenger disaster

Engineers were overconfident in the O-ring's performance, ignoring cold weather risks.

Example of framing in business

Viewing product development as 'poker' (betting) vs. 'gardening' (nurturing ideas).

Bay of Pigs invasion and groupthink

Kennedy's advisors suppressed dissent, leading to a flawed decision.

Optional phase of decision-making

Framing.

Heuristic explaining fear of plane crashes

Availability heuristic.

Failure to learn from experience

They ignore feedback, rationalize mistakes, and confuse luck with skill.

Avoiding groupthink

Encourage dissent, assign a devil's advocate, and gather anonymous feedback.

Difference between affect heuristic and availability heuristic

Affect heuristic is driven by emotions; availability heuristic is based on recallable examples.