Comm Arts 575 Exam 1

Why decision making is increasingly hard (Winning Decisions

information overload, quick change happening in world, rising uncertainty, few historical precedents, more frequent decisions, more important decisions, conflicting goals, more opportunities for miscommunication, less opportunities to correct mistakes, higher stakes

3 things that affect decision outcomes

deciding— thinking and decision process

doing— implementation and other factors under your control

chance— uncontrollable factors, luck

4 stages of decision-making

1. framing- determines viewpoint you look at the issue from, sets parameters for which parts of issue are important

2. gathering intelligence- seek knowable facts and opinions and make reasonable evaluations of “unknowables”, avoid overconfidence and confirmation bias

3. coming to conclusions- take systematic approach

4. learning from experience

what people spend most and least time doing in decision-making process

most time gathering intelligence and coming to conclusions, least time framing (should do more framing)

metadecision/metaquestions

preliminary assessment before step 1 (framing)- evaluate nature of decision, how much time for each stage, devise plan for managing decision, think about actual crux of decision, etc. 

ask 2 questions:

1. which stage is crux of the difficulty? 

2. Are there past cases you could learn from?

Frames

Mental structures that simplify and guide our understanding of a more complex reality

dangers of frames

they filter what you see- force you to see world from limited perspective

they are hard to see

they appear complete

they’re exclusive

they can be hard to change

how to avoid framing biases

awareness- of your frames and those of the people you work with

• you often have the same dominant frames in most situations

tools to identify yours and others’ frames:

• frame audit- look at individual parts of frame

• compare your frames to others

• learn about your organization from other points of view

• look at metaphors

• appreciate newly emerging frames

mental models

what we organize our understanding of world into— network of concepts and relationships that capture essence of concrete objects and abstract constructs

• have them of certain things

• frames are the core and are triggered automatically

paradigm

widely shared mental model large groups use to define their reality

3 steps to a winning frame

1. awareness

2. evaluate fit

3. if needed, find/build better frame

strategies for evaluating fit of frame

• observe symptoms of frame misfit- poor results, unexpected outcomes, inconsistencies, difficulty communicating with others

• evaluate quality of assumptions- are they appropriate, realistic? are other assumptions possible?

• question your boundaries and reference points

• seek other opinions

• roleplay your adversaries and stakeholders

• compare old frames to new realities

• challenge yourself

Strategies to finding/building better frame

• Tailor to fit- borrow broadly applicable frame but customize it to your specific situation

• Use outsiders to get different viewpoints

• Use subgroups (ex. give 2 different groups same task and combine different things they notice)

• adopt multiple frames

• shift metaphors

• think via analogy

strategies to modify other people’s frames

stretch existing frame

challenge yardsticks and reference points

How to make new frame with others for new situation

Create shared frame- begin by asking “what should our goals be/what should we consider?”

frame alignment

applying your message to listeners’ frames to help sell your message

What to do if you don’t have much time to make frame

• What are the 3, 5, etc. most important objectives?

• What are the reference points and boundaries inherent in the frame? How might someone in another organization approach them?

• Do I have a balanced, sound perspective? What biases might my frame entail and how can I broaden/refocus frame to bring in other perspectives?

• If you have enough time, get another opinion

emphasis framing

deciding what to emphasize and framing appropriately- what attributes will be in frame

more in journalism

4 schools of decision-making

rational

naturalistic

heuristics

non-conscious Type I decision-making

1st mistake in DM

adopting frame before thinking about decision (don’t ask metaquestions)

bounded awareness

you’re only aware of information within your boundaries of frame, even with information that’s readily available

should ask yourself “what do I wish I knew?” instead of “What do I know?”

Problem of frames

helps to seek disconfirming information- combat confirmation bias- ask “what if I’m wrong?” “What will prove me wrong?”

Reference points

what we use to compare options

who/what you’re comparing self/success to

Yardstick

What we use to measure success— time, money, opportunity costs, percent, or absolute values

What is in frame analysis worksheet?

• issue frame addresses

• what boundaries do I put on the question?/What aspects of the situation do I leave out?

• What yardsticks do I use to measure success?

• What metaphors do I think about?

• What does the frame emphasize?

• What does the frame minimize?

• Do other people in the industry think around the question different than how we do?

• Summarize your frame in a slogan

sunk costs

You calculate the money/resources already spent into your decision, feel the need to justify your costs so you continue with a potentially bad path of action

Involve framing

rational economics idea is that you should take them and put them outside your frame, assess decision on its own without considering sunk costs

Staw- NBA playing time study

Higher cost players got more playing time but weren’t necessarily better players, compared to lower-cost players who played equally well

Staw main study

Group most likely to invest more (make a second resource allocation): Sunk costs with negative initial feedback towards business unit

Least likely to invest more: No sunk costs and negative initial feedback towards business unit

thinking frame

frame that you apply automatically

equivalence framing

two things are mathematically the same, but you can say them different ways— different from emphasis framing

often with math stuff (ex. 90% fat free vs. 10% fat)

prospect theory— you can nudge people to have different types of decisions based on it

biases in gathering intelligence

undue optimism and false efficiency

make us think we know more than we do

undue optimism

holding your beliefs with utter conviction without considering whether available information justifies it

inflated sense of knowledge and ability

Lake Wobegon Effect

human tendency to overestimate our knowledge and abilities 

type of overconfidence

easier to see other people’s than your own

two things good decision making depends on

metaknowledge and primary knowledge

metaknowledge

awareness of what you do and don’t know

primary knowledge

data, facts, expertise, and subject knowledge we carry around

when is overconfidence good?

implementation of decision

people are more likely to accept advice of overconfident person

giving people hope, motivating

wishful thinking

view preferred outcome as more likely to happen

when preferences are just forming, you may interpret new objective data to align with these preferences

overconfidence study asking managers about company’s future liabilities compared to current liabilities

if just had to circle “greater than” or “less than” and say how confident in that, they said they’d be right 72% of the time but really it was only 54% of the time— 18% overconfident

if had to circle them and say main reason why their answer might be wrong, they estimated 73% correct but really 62%— just 11% overconfident

dangerous shortcuts for efficiency

availability bias

anchoring

availability bias

basing judgements on evidence that comes most easily to mind

can be most recent info (recency effect)

ex. study where engineers were presented with complaints and had to assign a probability for each cause, assigned higher probability to actual causes they’d recently handled

can also be most vivid/memorable information (vividness bias)

AKA focusing illusion

tend to ignore base rates (amount an event occurs in general population) AKA base rate neglect

how to overcome availability bias

use representative data

modify procedures to compensate information biases

home value anchor study

anchors in form of high vs. low listing prices caused differences in “independent” appraisals of home’s value

how to combat anchoring bias

be aware of anchoring effect, warn people

provide a range first, not singular point value

work with multiple anchors

avoid considering only incremental solutions

• don’t choose between two alternatives that differ only slightly

remain open to new information

use alternate starting points

think about the problem before consulting others

seek information from a variety of people

avoid anchoring your advisors and consultants

be especially wary of anchors in negotiations, and try to be the first to suggest an anchor

key to intelligence gathering under fire

identify basic intelligence you need

get it as quickly as possible

don’t distort it

ask 2 questions:

• what’s the most important piece of information that will let me assess decision options? how can I get it most easily? Does it already exist in someone’s files/head?

• What’s the biggest disconfirming question I can think of, that would completely change my decision? How can I get it answered most easily?

study found successful executives were better at:

routinely gathering feedback on personal and organizational performance

interpreting information they got in constructive ways

using information they got to adjust personal behavior and improve operational results

helping others recognize and use lessons of experience to improve personal and organizational performance

study of psychologists and their secretaries

both were right 2/3 of the time, even though the psychologists had experience— because they hadn’t turned their experience into improved knowledge (hadn’t learned from experience)

Why people fail to learn

The world conspires against learning outside the classroom— demands and pace make learning hard

experience sometimes doesn’t provide clear feedback

mental biases

• our need to feel competent, consistent, in control, and comfortable sets a boundary around our willingness to learn and change

things that stop you from learning from experience:

limited/ambiguous information about decision results

not enough time to make sense of the information available

no opportunity to test conclusions in new decisions

anxiety about appearing as a poor performer

inability to see how observed outcomes might be interpreted differently

tendency to jump to conclusions

ignored/distorted feedback

difficulty separating skill from luck

biases that make learning hard

illusion of control

self-serving rationalizations

hindsight bias

illusion of control

claiming credit when things end up well

destroys chance to get objective feedback

makes you overestimate odds of success

makes you repeat actions that came before success in the past, even if there’s no reason to believe the actions caused the success

self-serving rationalizations

underestimating responsibility when things go badly

may distort memory of what you said or did, blame failure on others or circumstance, say your original prediction was misunderstood, or change current preferences so failure seems less important

bad because you can only learn from mistakes if you acknowledge them

usually from a desire to protect your ego

instead you should be as objective as possible, acknowledge some mistakes as inevitable

How to not have self-serving rationalizations

unambiguously define success beforehand, then measure it

accept accountability, recognize limitations— ask what you could’ve done differently, how much influence you really had, etc.

ask others for feedback

hindsight bias

you think you predicted/could have predicted the eventual outcome all along

because we want to make sense of the world, and the way we process information— we edit it in our minds, synthesize new information into old knowledge

not done on purpose

RAFT- Reconstruction After the Fact and Take the best- if you find real answer, don’t need your original estimation anymore so forget about it

study— asked students to assign probability to different outcomes, then later in hindsight they had to assess likelihood of the probabilities and remember/reconstruct original probabilities

• the more time passed, closer they thought they were to the truth— by 4-8 months later, 84% thought they’d predicted the truth

how to prevent hindsight bias

use decision diary to examine your predictions

regularly record what you’ve learned

when introducing people to new information, ask them to predict what you’ve found before you tell them so they can’t say they knew it already

write down agreements

systematic learning analyses

ask “what have I learned, and what should I be learning, from recent experience?”

escalation of commitment

you face increasingly negative outcomes from decision, action, or investment but still continue behavior instead of altering course

often because of sunk costs

need to escalate resources is linked to expectancy theory

then self justification and rationalization

prospect theory related

attribution theory related

often take further risk in attempt to avoid further problems

groupthink could contribute

3 elements of escalation of commitment

the situation has costly amount of resources (time, money, people, etc.) invested in it

past behavior leads to apex in time where project hasn’t met expectations or could be in cautious state of decline

the above problems all force you to make choices that include options of continuing to pursue project until completion by adding more costs, or cancelling project altogether

expectancy theory

expectancy of attaining goal by putting more into the project

self-justification theory

when you enter cognitive dissonance, you tend to justify the behavior and deny negative feedback associated with it

prospect theory

people tend to be risk-averse when stakes are high and risk-accepting when stakes are low

how levels of resources affect how a decision is made

if negative downfall in stakes that will affect project outcome, may add more resources to assure them they’ll succeed

theory of frames, looks at how people feel- their psychological perception when they gain vs. lose something

people choose a reference point for their decisions, and frame situations as a gain and loss frame from this point

• loss frame (when feel like you’re losing resources)- risk seeking

• gain frame (when feel like you’re gaining resources)- risk averse

in psychological value, slope for a loss is steep, slope for a similar gain is not as steep

attribution theory

people attribute events to factors inside their control (internal) or outside it (external)

social identity theory

self-concept from group membership, how you view outgroup, etc. 

things with positive relationships with escalation of commitment

sunk costs, time investment, decision maker experience, self efficacy and confidence, personal responsibility for original decision, ego threat, proximity to project completion

saving people from disease equivalence framing study

most people picked option A (200/600 people saved from disease) compared to option B (2/3 chance 600/600 people saved, 1/3 chance no one saved)

other version- most people picked option D (1/3 chance no one dies, 2/3 chance 600 people die) compared to option C (400 people die)

loss aversion

losses feel 2.5 times worse than gains

prospect theory money example

people pick A if option A is sure gain of $800, option B 85% chance get $1000 15% chance get $0 (even tho B on average many times would get you $850)

People pick B if option A is sure loss of $800, Option B 85% chance lose 1000 15% chance lose $0

endowment effect

we value something more if we own it

stems from loss frame and loss aversion

ex. wendys ad

tv study- people sell more TVs when commission is prepaid because don’t want to give back $10 (even though they’ll make $12)

our level of ownership is because of gain and loss reference point

why 30 day money back guarantee stuff works

sadness and disgust lessen its effects

stronger in Western cultures

candy and mug higher price on objects they were given

basketball tickets study- people who got tickets in lottery put higher price on them than people who didn’t said they’d pay, and each side only reasoned about their side of the transaction and why it made sense to them (keep ticket vs. keep money)

study showing contrast effect

offered people a pen and a mug for the same price, then added a bad quality bic pen- originally people were split on choosing pen or mug but when bic pen was added they were more likely to pick nicer pen than mug

Kahneman anchoring study

judges read description of shoplifter, then rolled die that either rolled 3 or 9, then had to sentence her to a certain amount of time in prison— if rolled a 9 said 8 months, if rolled a 3 said 5 months

anchoring

mind gives disproportionate weight to first information it receives- initial data, estimates, etc. 

helps frame the problem

why we’re influenced by anchoring

we don’t adjust sufficiently enough

priming effect

status quo bias

having something as current choice/default option increases the value of it

people tend to accept status quo as default instead of making active change

taking action against status quo means taking responsibility for failure

status quo is comfortable

if you’re a choice architect and want people to accept a certain option, should make it the status quo

ex. Save More Tomorrow program

how to combat status quo bias

ask yourself if you’d choose status quo if it weren’t status quo

never think status quo is the only alternative

force yourself to choose- don’t accept it to avoid making a decision

manager should take steps to reward action- because in business the status quo is usually rewarded by sins of commission (action) being punished more than sins of omission (doing nothing)

how to challenge/change your frame

diversity

brainstorming

appoint devil’s advocate

get other opinions

consider other metaphors

bounded rationality

do something rational but bounded within the limits of our capacity, satisfice, cognitively limited so use heuristics because shortcuts generally lead to good enough decision

hot/cold empathy gaps

inability to account for our future feelings when we make decisions

underestimate resilience- so make lots of plans to prevent stuff

tend to equate future feeling with how you currently feel

intensity bias- ex. if you feel full you think it’ll be easy to diet

overestimate amount of variety you’ll want

want self: what do you want to do? -hot state

should self: what you should do- cold state

people think they’ll act on should self in ethical dilemma, but often want self takes over

fix by having your cold self reign in your hot self

psychological variables in escalation of commitment

need for closure

optimism

need to feel like you didn’t make bad decision- cognitive dissonance

sunk costs

organizational variables in escalation of commitment

want to appear good at job

may be able to buy time and switch jobs

want to be seen as hero

need inertia to stop project- hard to immediately stop

project tied to organizational identity

how to prevent escalation of commitment

separate implementers from deciders

error management culture: make culture where it’s safe to fail

overconfidence

there’s a gap between what you know and what you think you know, you overestimate your knowledge

strategies to help see cause of future problems and opportunities, avoid seeing your preferred outcome as more likely, and incorporate uncertainty into decision-making process

pro/con reasoning- ensures intellectual honesty and balanced view

prospective hindsight

fault trees

scenario planning

prospective hindsight

using ability to explain events in hindsight to better anticipate possibilities ahead

gives you more insight

ex. pretend it’s the future and your project has failed, explain possible reasons why

fault tree

hierarchical diagram to identify all paths to a specific problem

but must be complete, otherwise availability bias could limit possible things that you see could happen

have branches with major categories of potential problems, and also have subgroups of causes of those bigger causes— include “all other” as a subgroup

scenario planning

imagining possible futures, focus on joint effect of many overlapping causes (contrary to fault tree)

divide your knowledge into things you believe you know something about (trends), and elements you consider uncertain/unknowable

should include many viewpoints

could start with existing scenarios

when is scenario planning especially good?

uncertainty is high relative to your ability to predict/adjust

too many costly surprises have occurred in the past

company doesn’t perceive/generate new opportunities

quality of strategic thinking is too routine/bureaucratic

industry/field has experienced significant change or is about to

organization wants a common language and framework without stifling diversity

there are strong differences of opinion and multiple have merit

your competitors are using scenario planning

steps of scenario planning

1. define scope- time frame, scope of analysis

2. identify major stakeholders

3. identify basic trends

4. identify key uncertainties

5. construct initial scenario themes- cross biggest uncertainties and their outcomes in matrix

6. check for consistency and plausability

7. develop scenarios

8. identify research needs

9. develop quantitative models- numerically estimate impact of trends and uncertainties

10. evolve toward decision scenarios- converge toward 2-4 distinct scenarios and use them to test your strategies and generate new ideas

illusion of validity

your predictions are pretty much random guesses, but you continue to feel and act as if they are valid

when compelling impression of particular event clashes with general knowledge, the impression usually prevails

2 questions to ask to know if you can trust an intuitive judgement

is the environment regular enough to enable predictions from the available evidence?

do the professionals have adequate opportunity to learn the cues and regularities?

dialectical bootstrapping

one individual mind averages its own conflicting opinions, simulating the “wisdom of the crowd” 

different opinions are created and combined in the same mind

leads to more correct answers

pretend youre giving advice to yourself from different points of view then take the mean of this advice

calibrated (in terms of confidence)

your confidence level is equal to the probability of success for that decision

people who aren’t overconfident, have a good level of confidence have this

ex. doctors overconfident, weather forecasters calibrated

problems with overconfidence

failure to gather intelligence

lack of preparation

underestimate obstacles and risks

transfers to other domains

apply to situations of chance instead of skill

increased confirmation bias

how to reduce overconfidence

give confidence range instead of a point estimate- expands into lower levels of confidence

ask trick questions first, harder than they appear, and ask people to give confident estimate of answer- then give feedback to show how wrong they are

do training where people are given quick feedback on decisions and held accountable for their confidence levels

keep decision diary and check it for outcomes of decisions- put what you think outcome will be then check later

disconfirming questions- force you out of confirmation bias (which is a cause and effect of overconfidence)

seek advice

dialectical bootstrapping

prospective hindsight/crystal ball technique

awareness that overconfidence is “involuntary brain mechanism” that functions independent of reason

other ways from book- fault trees, etc. 

when you gather intelligence/make decision you should think realistically, but be overconfident when actually implementing decision

think like realist making decision and like optimist implementing it

WYSIATI (What You See Is All There Is)

tendency to make assumptions based on limited set of information

manifestations of overconfidence

planning fallacy

unrealistic comparative optimism

planning fallacy

people are unrealistic in their estimations of the time it’ll take them to do a task- overconfident in time frame

unrealistic comparative optimism

the idea that compared to others we are less likely to befall tragedies

ex. most people said they’d be less likely to have a heart attack

reasons for manifestations of overconfidence

tend to underweight past experience, fail to learn from negative feedback

tend to perceive future as more controllable

overconfidence in workplace

30-40% of people think they are in the top 5%

performance evaluations often clash with self-perception

people often avoid feedback that’ll give them accurate view of reality

regular and reliable feedback might help

• but feedback is usually infrequent, threatening, sugarcoated, and given too late

• could help by having mentor who gives informal feedback and doesn’t contribute to evaluations

solutions to overconfidence in workplace

more frequent feedback- but time consuming and managers may find it painful

360 degree feedback- but time consuming and expensive

forced bell curve- but controversial

built-in checks to prevent overconfidence- employees must follow procedures even if they think they know better

• standardized routines and cross checks

• best option

• benchmarks for what people are expected to meet, make them clear

360 degree feedback

circle where everyone gives you feedback