The Idea Dude


Friday, January 20, 2006

To be or not to be...

We easily make 50 to 100 decisions a day routinely without too much thinking. Whether it's what we are having for lunch, to what to wear, to whether we should pursue a company acquisition. Some consequences are less drastic than others but too often we look back with regret at something that is so painfully obvious after the fact wishing we took a different path.

Harvard Business Review publishes an excellent article on the subject of 'Why bad decisions happen to good managers.' I found it to be a terrific bootstrap for my own thinking. Firstly, we make a habit of placing more important on the first piece of information we receive. Don't think so? Think about how many times you picked the first color shown to you, or your first car, or your first crush at high school. Pretty unforgettable. Hence the saying, 'first impressions' count. We have to make sure that we balance our lines of thinking and not allow our emotions to give sway to the first source.

Human nature hates risk because it brings uncertainty. As a result it is easier for us to make decisions based on keeping status quo than favour the path less travelled. Here we have to separate the cost of moving away from our center of gravity with the benefits of being caught up in a totally different orbit. Making the right decision should not be based on the low cost of inertia but rather whether change is the path to achieving our long term objectives.

The one that we are all so guilty of is sunk costs. Too often, we have invested so much time, energy and money into a particular business strategy, we cannot emotionally detach ourselves from a death spiral. Instead, in panic, we pour increasingly more resources in the hope that we will somehow extricate ourselves from the hole what we dug ourselves into. It is both failure of our ego to admit that we had made flawed choices as well as a desperate attempt salvage a sinking ship.

We like to hear things that support our decisions so we actively seek evidence that adds credence to our line of thinking and at the same time suppress or ignore that which may call our judgement into question. Not only that, we also take our past experiences and use them incorrectly to forecast the future...incorrectly because either we have bad memories or the historical evidence, even if it true, is not really applicable.

It often takes a frank mentor or a bold colleague to stop us from perpetuating some of these flaws in our decision-making. I've learnt to cherish those who challenge my thinking (no matter how emotionally unsettling or painful it can get).

So the next time, you walk into a coffee shop and order the same latte and the cream donut, maybe you should think twice...


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