In a fascinating recent lecture at the LSE, Swiss writer and entrepreneur Rolf Dobelli (author of The Art of Thinking Clearly), talks about the various common "thinking errors" that we committ. Here are a couple of them:
Sunk Cost Fallacy
If by mistake - in the same week - you have paid a non-refundable prices to vacation in two different cities, Paris (which is your favorite city where you are sure to enjoy yourself the most) and Rome.If you have paid $4,000 for the Rome trip and $1,000 for the Paris trip, where will you go?
Answer: Go to Paris!
"If it's non-recoverable then it should not have any bearing on our decision. It is irrational," Dobelly says. In a business context, this error causes good money to be thrown after bad. Eg: the Concorde aircraft was kept alive well even after it became clear it wasn't going to make money just because too many millions had been spent in developing it.
But avoiding this error might not be too easy in familial settings as the author himself relates: "The weather and setting at our Swiss home was beautiful and I thought I would like to just watch the sunset and relax. But my wife has bought expensive movie tickets and said we should go. I told her: "Honey, that is a thinking error". She 'loves' it when I say that."
Authority Bias
People tend to over value/follow blindly/not challenge someone who is seen as an authority. "Whenever we are in presence of an authority figure, we stop thinking clearly." This can be dangerous for example, if a junior co-pilot, who even when he notices the Captain make a mistake, does not point it out. In 1977, 600 people died when two 747s crashed in to each other owing to such an error. As a result of this, the airline industry has "trained away" authority bias by insisting that, as part of each pre-flight briefing, the Captain will say to the co-pilot, "I'm not the Pope; I'm not infallible; I will make mistakes. If you see me make a mistake, please speak up." (Download the full podcast from here)
While the founders of the news aggregation software Pulse (that was acquired recently by LinkedIn) were not specifically referring to the dangers of authority bias, their practice of asking their employees to speak up about any concerns in their Friday all hand meetings - titled "Ask Absolutely Anything of Akshay and Ankit (AAAAA)" - seemed like a good way for startups to achieve this. "It's better to have small quakes (than a big blowup)," they put it in their Stanford e-corner interaction. The employees can bring anything in the forum as long it starts with "I Like" or "I Wish" or "I Wonder". (Download the full podcast here).
Sunk Cost Fallacy
If by mistake - in the same week - you have paid a non-refundable prices to vacation in two different cities, Paris (which is your favorite city where you are sure to enjoy yourself the most) and Rome.If you have paid $4,000 for the Rome trip and $1,000 for the Paris trip, where will you go?
Answer: Go to Paris!
"If it's non-recoverable then it should not have any bearing on our decision. It is irrational," Dobelly says. In a business context, this error causes good money to be thrown after bad. Eg: the Concorde aircraft was kept alive well even after it became clear it wasn't going to make money just because too many millions had been spent in developing it.
But avoiding this error might not be too easy in familial settings as the author himself relates: "The weather and setting at our Swiss home was beautiful and I thought I would like to just watch the sunset and relax. But my wife has bought expensive movie tickets and said we should go. I told her: "Honey, that is a thinking error". She 'loves' it when I say that."
Authority Bias
People tend to over value/follow blindly/not challenge someone who is seen as an authority. "Whenever we are in presence of an authority figure, we stop thinking clearly." This can be dangerous for example, if a junior co-pilot, who even when he notices the Captain make a mistake, does not point it out. In 1977, 600 people died when two 747s crashed in to each other owing to such an error. As a result of this, the airline industry has "trained away" authority bias by insisting that, as part of each pre-flight briefing, the Captain will say to the co-pilot, "I'm not the Pope; I'm not infallible; I will make mistakes. If you see me make a mistake, please speak up." (Download the full podcast from here)
While the founders of the news aggregation software Pulse (that was acquired recently by LinkedIn) were not specifically referring to the dangers of authority bias, their practice of asking their employees to speak up about any concerns in their Friday all hand meetings - titled "Ask Absolutely Anything of Akshay and Ankit (AAAAA)" - seemed like a good way for startups to achieve this. "It's better to have small quakes (than a big blowup)," they put it in their Stanford e-corner interaction. The employees can bring anything in the forum as long it starts with "I Like" or "I Wish" or "I Wonder". (Download the full podcast here).
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