Before You Make That Big Decision Although biases in decision making are well recognized, that recognition

is not improving decisions. Daniel Kahneman (Princeton), Dan Lovallo (Univ of Sydney) and Oliver Sibony (McKinsey). Have proposed 12 questions that address different biases and improve decisions. Printed in Harvard Business Review, June 2011 (pp 51-60) 1. 2. 3. 4. Self-Interest: is there unrecognized self-interest? Is the proposal overly optimistic? Affect bias: is there too much emotional attachment? Group think: are there dissenting views? What are they? Have they been discussed? Saliency bias: is the diagnosis of the problem overly affected by organizational history/analogies/past successes? How comparable are the examples that the proposal is based on? Are they current? Look for other examples. Confirmation bias: are credible alternatives considered? What are they? When were they discarded and why? What evidence was used to disprove them? Availability bias: what information was desired but not available? Anchoring bias: what information is estimated and what was the basis for those estimates? Are estimates historically based? Will trends continue? What might disrupt the trends? Halo bias: are successes used to generate proposals generalizable? Is the situation comparable? How much of past success was due to chance? Do other examples exist? Sunk Cost Fallacy: if the organization had not invested originally, would it do so now? Overconfidence: consider external contingencies. What will competitor reactions look like? Disaster neglect: is the worst case bad enough? What is the source of the worst case? a. Pre-mortem: pretend the worst case happened, develop the story. How/why how would you mitigate effects? Loss aversion: fear of loss is stronger than attraction of gain. Change incentives to support risk.

5. 6. 7. 8. 9. 10. 11.

12.

It is important to balance consideration but avoid delay. Suggest putting process in place in advance of decisions to be made. Consider all components.