Remember heuristics? They’re the rules of thumb that allow us to make snap judgments, using System 1, our fast, automatic, and ever-on thinking system. They can also lead us into errors. According to psychologists there are least 17 errors that we commonly make. In previous articles, I’ve written about seven of them (click here and here). Let’s look at four more today.
Association — word association games are a lot of fun. (Actually, words are a lot of fun). But making associations and then drawing conclusions from them can get you into trouble. You say tomato and I think of the time I ate a tomato salad and got sick. I’m not going to do that again. That’s not good hygiene or good logic. The upside is that word associations can lead you to some creative thinking. You can make connections that you might otherwise have missed. And, as we all know, connections are the foundation of innovation. Just be careful about drawing conclusions.
Power differential — did you ever work for a boss with a powerful personality? Then you know something about this heuristic. Socially and politically, it may be easier to accept an argument made by a “superior authority” than it is to oppose it. It’s natural. We tend to defer to those who have more power or prestige than we do. Indeed, there’s an upside here as well. It’s called group harmony. Sometimes you do need to accept your spouse’s preferences even if they differ from yours. The trick is to recognize when preferences are merely a matter of taste versus preferences that can have significant negative results. As Thomas Jefferson said, “On matters of style, swim with the current. On matters of principle, stand like a rock”.
Illusion of control — how much control do you really have over processes and people at your office? It’s probably a lot less than you think. I’ve worked with executives who think they’ve solved a problem just because they’ve given one good speech. A good speech can help but it’s usually just one step in a long chain of activities. Here’s a tip for spotting other people who have an illusion of control. They say I much more often than we. It’s poor communication and one of the worst mistakes you can make in a job interview. (Click here for more).
Loss and risk aversion — let’s just keep doing what we’re doing. Let’s not change things … we might be worse off. Why take risks? It happens that risk aversion has a much bigger influence on economic decisions than we once thought. In Thinking Fast and Slow, Daniel Kahneman writes about our unbalanced logic when considering gain versus loss — we fear loss more than we’re attracted by gain. In general terms, the pain of a loss is about double the pleasure of a gain. So, emotionally, it takes a $200 gain to balance a $100 loss. Making 2-to-1 decisions may be good for your nerves but it often means that you’ll pass up good economic opportunities.