This Is A Test - Just the Facts

I've often written in the past about decision-making biases. ALL OF US rely to some degree on decision-making approaches that yield suboptimum results. Most of those are unconscious. An example is the human tendency to use past experiences, even if statistically insufficient, to make critical decisions about the future. Another – confirmation bias – compels us to depend on evidence that conforms to our preconceptions and ignores evidence that contradicts our preconceptions. There are a lot more of these.

The discipline of Behavioral Economics examines the ways in which human psychology intersects with traditional economic theory. The concepts are easy to understand and still easier to apply TO OTHERS when we see examples. However, we rarely if ever, see evidence of those decision-making biases IN OURSELVES.

To illustrate and instruct, I often ask a group of executives to take a "test" that involves reading a simple three-paragraph story, and then answering twelve questions about what they read. That test follows. Read the instructions, and then answer the questions. At the conclusion, I'll ask you to consider the ways in which your preconceptions or biases may have affected your answers. I'll include the correct answers, but don't read ahead, or you'll be wasting your time.

JUST THE FACTS EXERCISE

Read the following story, and then respond to the statements that follow with True, False, or Unknown.

The supervisor yelled at the new recruit.

The young man waited until the supervisor was gone and poured sand into the machine, smiling and shaking his head.

Later that month, the boss discovered the problem and fired him.

TRUE, FALSE, OR UNKNOWN

I. After being yelled at, the young man poured something into the machine.

II. Two men are involved in this story.

III. If the supervisor had not yelled at the young man, he might not have ruined the machine.

IV. It took the supervisor one month to realize that the new recruit had ruined the machine.

V. Sand was put into the machine.

VI. One man yelled at another; the new recruit poured sand in a machine; someone was fired.

VII. The supervisor fired the new recruit.

VIII. The new recruit was a man.

IX. The new recruit got revenge on the supervisor, but the supervisor retaliated in the end.

X. No one was fired.

XI. The new recruit waited until the boss was gone before pouring sand in the machine.

XII. When the supervisor found that sand had been poured in the machine, he fired the young man.

It seems like a pretty easy exercise, but it's not. Its simplicity illustrates the point that even in routine situations, we frequently over-rely on our inner voice of experience, bias, or speculation when making decisions.

The correct answers: Number 5 is true; number 10 is false. All the rest are unknown. Go back and tabulate your score. If you got them all correct, you are in a VERY small minority. A few questions for those of you who DIDN'T get them all correct:

• What assumptions did you make where no facts were given?
  
• What preconceptions or biases might be the source of those assumptions?
  
• When confronted with more difficult decisions, how might your decision-making be clouded, and what might be the consequences of that?
  
• What formal decision-making structures and methods do you have in place to countervail legitimate or incomplete intuition, as well as biases and preconceptions? How well are those structures and methods serving you?

I help executives create formal structures for legitimate decision-making. Those honor experience and intuition, but recognize that ALL of us rely too heavily on arriving at the answers we WANT rather than those that we NEED.

Copyright 2016 Rand Golletz. All rights reserved.