Avoiding five critical-thinking killers

- Would you say that your organization is slow-paced? If so, you're

in rare company. Your fast pace probably means that sometimes
you feel too busy to think. It's about getting stuff done. Fast-paced
business can be a critical thinking killer, but it's not one of the top
five. Here are the top five and ways to avoid them. 

The first one is over reliance on authority. We see this in

hierarchical organizations where the boss is the source of beliefs
and knowledge. Critical thinking requires questioning, but it doesn't
work if you can't question the boss. As an expert, you're a legitimate
source of opinion, but critical thinking values evidence over
authority. Empower your team to weigh evidence, challenge
assumptions and propose different conclusions, even if they're at
odds with your own.
 
Number two, black-and-white thinking. The tendency to place
things in absolute either, or categories. You're with us or against
us. This ignores complexity and nuance. Not good for critical
thinking. Recognize the difference between negatives, hot, not hot,
and opposites, hot, cold. With negatives it's either, or. With
opposites, the truth of one, hot, doesn't necessarily disprove the
other, cold. Both could be true, both could be false. Thinking about
negatives versus opposites helped our client Rachel move her team
away from black-and-white thinking toward critical thinking. This
was instrumental in the decision to proceed with a merger. Rachel's
team recognize the difference between merge now, not now versus
merge now, later. New and better options like to stage the merger
became clearer.

 Number three, hasty moral judgments. Quick evaluations of

someone or something as good or bad. Ever heard something
like, "Just met her, doesn't look the part." Yep. Hasty moral
judgment. Now it's okay to have moral beliefs. It's the hasty part
that's the problem. Hastiness is a reaction from cultural
conditioning that blocks critical thinking. Relegate moral
judgments to after thoughtful deliberation. This reduces their
negative influence on critical thinking. 
Four, labels. We can't communicate without them. She's a doctor,
he's a politician, but an over reliance on labels can kill critical
thinking. Labels cause us to lump things together, miss differences
and justify our assessments when we should use more relevant
evidence. Nathan's label was millennial. His boss, Wendy, ignored
Nathan's research suggesting that working from home reduces
attrition. Instead of challenging the label and using critical thinking
to assess the evidence, Wendy said, "Nathan would say that working
from home is better "because he's a millennial." Challenge
labels. Question there meaning. Establish new labels. Resist altering
evidence to fit the label. Sure, Nathan was a millennial. He was also
an accomplished data scientist. 

Number five, resistance to change. Reacting immediately and

negatively to ideas, beliefs and attitudes that challenge our
own. This reflects resistance to change. The ability to change your
mind is a requirement for critical thinking. Set aside immediate
reactions and emotional responses. Show your team that with
robust, relevant evidence, you won't resist change. Look out for
these critical thinking killers and use these strategies to avoid
them. That's the first step toward improving your judgments and
decisions.

Seven ways to think about thinking

- Thinking is tricky. Left to its own devices, thinking can be biased,
distorted, and uninformed. Mine? Maybe even yours. Your success
as a leader and the success of your business depends heavily on the
quality of your thinking. Here's the good news. Like most problems,
thinking problems are best solved by dissecting, taking thinking
apart. Let's do that. According to critical thinking author experts
Linda Elder and Richard Paul, there are common elements in all
thinking. Now we'll define each of the seven common elements of
thinking and ask the corresponding MVQ, most valuable
question, to uncover potential thinking problems and provide
solutions. 
Number one, purpose, what you're trying to make happen, the
goal. The MVQ is, why are we doing this? Let's say the purpose is to
increase market share by 20%. Why? Why again? Thinking problems
often stem from unclear, contradictory, or unrealistic purpose or
goals. Make purpose clear. 
Number two, questions, what you're trying to answer or
solve. The MVQ, what are the best questions to ask? For
example, asking whether a potential customer likes your product is
very different than asking what would make them buy it right
now. Pause to evaluate the right questions to ask. 
Number three, assumptions, things that are accepted as true or
certain without proof. The MVQ, what can we safely assume? For
example, how long can you safely assume that the market for your
product will continue to grow? Thinking problems hide where
assumptions are buried. Unbury them. 
Number four, perspective, point of view or frame of
reference. The MVQ, are we using insights from the wisest points of
view? Existing customers or potential customers? Chief engineer or
head of sales? Thinking problems lurk when we ignore the impact of
perspective, including our own. Consider where points of view may
be too narrow, misguided, or missing.
Number five, information, evidence that supports
reasoning. The MVQ, how strongly is our reasoning supported by
relevant information? Our overwhelming access to information can
make thinking problems worse. Are we successful because we
exceeded growth projections? What if growth data is less
relevant than dwindling cashflow? Determine what information is
most relevant. 
Number six, concepts, or systems of meaning. For example, the
concept of business success. The MVQ, are we all agreeing on the
meaning of this idea or concept? Concepts are human-made. They
may have defects, and the exact meaning isn't always clear from
human to human. This lack of clarity causes thinking problems. For
example, make sure you all mean the same thing when you talk
about business success. Make concepts clear.
And number seven, conclusions, interpreting and giving
meaning to information. The MVQ, of all the ways to interpret this
information, what's the best way? For example, an increase in
negative customer reviews may mean that you've shipped a faulty
batch of widgets or that a better competitive product has entered
the market, or something else. Challenge conclusions. When judging
a major proposal, solving a challenging problem, or analyzing a big
decision, help your team dissect thinking into each part to uncover
and capitalize on opportunities to improve it.

Conditions to think beneath the surface

- It's one thing to talk about critical thinking in theory, but without
the right conditions, it becomes almost academic and seems less
business practical. Let's make sure you have the two necessary
critical thinking conditions in place. The first condition, the ability
to change your mind. This ability is to critical thinking what
electricity is to a Tesla. You can't run your critical thinking engine
without it. It may be easier to think about how to change other
people's minds, but that's not one of the conditions. We humans
love being right and hate being wrong. But as John Stuart Mill
said, "He who knows only his own side of the case "knows little of
that." Use this scenario and practice this technique with your
team. Let's say your company is booming and one again you need
more space to grow the business. Break decisions into different
options. For example, to move now, move later, remodel the existing
place, or randomly assign options to members of your team and
then have each person argue their position. Then switch sides and
argue for opposing positions. This trusting debate technique
works. The second condition, reflective skepticism. There are 10
types of questions you can use to help your team embrace reflective
skepticism and shift into critical thinking mode. Let's get back to
that scenario where you need more space to grow the
business. You've debated different sides, but there's still a lot to
consider. Use this scenario and go through each of these types of
questions yourself or with your team. After each question, pause
and discuss how each statement may reflect a critical thinking error. 
Question one. Is this a fact? Like, the new parking lot would
accommodate 63 cars. Or, a value claim, like a new parking
lot would have plenty of parking. The new office space would have
great views. 
Question two. How relevant is this information, claim, or
reason? Prices should be low because they can see rates are higher
than ever. 
Question three. Is this statement factually accurate? According
to our broker, the vacancy rates are going down. Question four. Is
this source credible? It's a great time to sell our building and buy a
new one. 
Question five. Are these claims or arguments ambiguous? Our
growth will continue at the same rate. 
Question six. Are we uncovering assumptions? Gen Zers need
space for their ping pong tables. 
Question seven. Are we detecting bias? Last time we waited too
long to move, three of our best engineers quit. 
Question eight. Are we spotting logical fallacies? Private spaces
are best, but we don't want to eliminate the open office concept. 
Question nine. Are there inconsistencies in this line of
reasoning? The 3rd quarter is the least disruptive time to move.
Question 10. How strong is this argument or claim? Use these
questions to explore a decision you're grappling with. Model for
your team that changing your mind is okay and often necessary
when making decisions and you'll lock down the conditions
necessary for critical thinking.
A Nobel Prize-winning way to think about thinking
- From 1971 to 1979, psychologists Kahneman and Tversky
published mindblowing studies that busted our assumptions about
judgment and decision-making. This field, behavioral
economics, revealed that how we think isn't as rational as we
thought. Kahneman, the winner of the Nobel Prize in
Economics, described two systems that drive the way we
think. System 1 and System 2.
 System 1 is fast, automatic, efficient, and often
unconscious. It's also prone to misleading biases and judgment
errors. Your intuition? Yep, System 1 thinking. For example, when
you see my face, as angry. When you see this one plus one and a
number comes to mind or when you have an immediate bad
feeling about the proposal Lesley just made, that's System 1
thinking.
 System 2 is slow, effortful and controlled. When you see 27
times 19, you're using System 2 thinking to come up with
513. When you search your memory, "What's that surprising
sound?" When you monitor your own behavior in a meeting or
when you look for a financial discrepancy, you're attentive and
conscious of the process. That's the hint. It's System 2
thinking. The important point, different situations require different
types of thinking. But this isn't as natural or as obvious as it
sounds. Match the appropriate type of thinking to the situation and
you'll reduce judgment errors. Both types of thinking are
important, but poor judgment results when the type doesn't match
the situation. This is usually the result of using System 1
thinking when System 2 thinking would be better. For Roger, a
director of investments, his favorite time to judge deals was on his
drive home, when he could clear his mind, tapping his
intuition. However, this wasn't working for his team. The problem,
intuition is System 1 thinking and judging deals requires System 2
thinking, a mismatch. Here's what Roger did and what you can do in
System 2 situations.
Number one, stop multitasking. Fine to get ideas while driving or
walking, but afterward, challenge judgments and assumptions with
analysis. When you're not doing anything else.
 Number two, turn off notifications during meetings. Roger and
his team did this during deal-analysis meetings. No more suspicious
delays during conference calls hinting that someone's working on
something else. The result, an increase in the quality of deal
analysis and in the quality of deals closed. 
Number three, get sleep. Science is clear, when you're
tired, judging big decisions that require System 2 thinking, makes
you more likely to rely on System 1. 
Number four, don't judge on an empty stomach. Researchers
even found that hungry judges fell back on the easier default
position of denying requests for parole. 
Number five, avoid situations that deplete self control. Long
meetings, conflict, and complex information. System 2 requires self
control. Roger started providing required reading
background information for each deal, days before the analysis
meeting. Wiser analyses resulted from less emotion and greater
reliance on evidence. Match the type of thinking to the
situation. You'll avoid judgment errors that result from thinking fast
when you should be thinking slow.

Can you spot these cognitive biases?

- We all have cognitive biases. Isn't this a bad thing? Yes. And
no. cognitive biases aren't totally bad because their mental simplifier
helping us process things quickly and easily, like detecting hostility
in your boss's voice. The bad reputation of cognitive biases comes
from when they go undetected and leave us susceptible to poor
judgment. Let's reduce the chances of this happening. 
First, we'll identify common cognitive biases and tips for spotting
them. Then we'll look at scenarios to see if you can spot them. 
As we go through these biases, if what comes immediately to mind
are examples of other people's biases instead of your
own. That's a hint that you've spotted the blind spot bias in
yourself. The blind spot bias makes spotting biases and others
easier and more likely than spotting biases in ourselves. 
You may have heard of the confirmation bias. It's in the news a lot
lately. It makes us seek evidence that confirms our pre-existing
beliefs and reject evidence that does not. Regardless of the quality
of the evidence. If you rarely hear good arguments from people that
you disagree with, that may be a hint that your confirmation bias is
afoot. 
Affect heuristic makes us rely on our emotional feelings
good or bad to make decisions that should optimally be
evaluated more analytically. Look out for sneaky substitutions like
thinking that Tesla is a good company to invest in because you like
Teslas.
False consensus bias makes us overestimate how much others
agree with us. Look out for dismissing people who disagree as
being defective in their thinking.
 The clustering illusion makes us seek patterns in random events
and misrepresent correlation with cause. Look out for relying too
heavily on trends and stories that seemed to make sense, for
example, thinking that Dylane's promotion caused the recent drop
in sales because she's no longer motivated to work hard. 
The availability heuristic makes us overestimate the likelihood
of events that come easily to mind. Look out for thinking things
are more likely to happen like plane crashes or divorce after seeing
lots of articles about them.

Now, see if you can spot the bias in each of these five scenarios. Feel
free to pause after each scenario to see if you guess right.

Number one, I like their product. We should invest in

them. (Upbeat music) If you guessed Affect Heuristic, you're right.
 
Number two, we look For and found plenty of evidence that the
tool recreated is the most effective. That's confirmation bias. 
Number three, I just read a report about people who've been
run over in parking lots while looking at their phones. The
likelihood of being run over in parking lots has gone up. Could this
be availability heuristic? Four, Susan's last six proposals were
quickly adopted. I bet on Susan's proposal because she's on a
streak. Did you spot the clustering illusion?

 Number five, Bruce knew that nobody wanted to hear Tyrell's

presentation. You spotted it, false consensus bias. Now that you've
played with these scenarios, create scenarios with your team to
practice spotting these cognitive biases.
The REF method: Your intuition referee
- How much do you trust your intuition? Research indicates that
people trust their intuition a lot, even when they shouldn't. Intuition
is thinking you know something without relying on conscious
reasoning. Since critical thinking is conscious reasoning, this makes
intuition tricky as a reliable, critical thinking tool. When making
decisions, how do you know when to trust your intuition? According
to behavioral economists, Kahneman and Klein, intuition is sneaky
because it arises with or without the three conditions required for it
to actually be reliable. The three conditions are REF, regularity,
exposure, and feedback. Use REF like you're personal intuition
referee to assess whether or not to trust your intuition. Let's say
you're deciding who to hire, how best to announce a
reorganization, or whether to move manufacturing to a different
country. A lot of things go into these decisions, but should one of
them be your intuition? If the regularity, exposure, and feedback are
in place, yes. If not, no. Your situation must have regularity, like a
chess game or if you're a seasoned leader announcing the annual
reorganization at the quarterly all-company meeting, or if you're
judging your boss's mood during your daily call, not if you meet the
job candidate in the gym while on vacation, not when interviewing a
candidate for a newly created job, not when all-company meetings
are rare, and not when reorganizations are rare. You also need a lot
of exposure to the regular situation, like a chess master's exposure
to chess, or if you're a seasoned leader who presents at company
meetings all the time, or you're an experienced HR
professional interviewing a candidate for a job, not like an
inexperienced HR associate interviewing potential hires, not if you're
a new leader presenting at the annual meeting for the first time, not
a person new to chess. There's just not enough exposure in these
situations. Feedback, you must have a short time between your
intuition or guess and feedback, like after a chess move, or when
you get a huge laugh after making a joke at the company
meeting or hear gasps after announcing a reorganization. The
feedback on most important decisions takes too long and this
means you probably don't want to rely on intuition for important
decisions. For example, if it's revealed that moving manufacturing to
Vietnam last year was profitable this year, that's not a tight enough
feedback loop. Pro tip, what's not one of the three
conditions, confidence. Your confidence and your intuition doesn't
make it reliable. If you're thinking that there are many types of
decisions where intuition should not be relied on, you're right. So,
when you have decisions to make, use your intuition REF. Assess
whether it involves a regular situation with which you've had a lot of
exposure, that has provided rapid feedback to indicate whether
you're past intuitions were right or wrong. If so, trust your
intuition. If not, don't.
Using counterfactual thinking
- What's the point in thinking about what could've been or what
might've happened? What's done is done. We've heard this. We've
probably fought this. But don't drown your sorrows or celebrate too
soon because this counterfactual thinking is how important insights
are revealed that will improve your decision quality. Counterfactual
thinking is systematically uncovering possible alternatives to
outcomes from past events. It involves modifying what happened
along the path to an actual outcome, assessing the consequences of
the modification, and generating a counterfactual, alternative, event
or outcome. Upward counterfactuals are ones with better alternative
outcomes like if we hadn't launched after our competitor, we would
now have 80% of the market share. Downward counterfactuals are
alternative outcomes that are worse than what actually
happened like if I hadn't taken that LinkedIn Learning course, I
wouldn't have gotten that promotion. 
There are five steps to counterfactual thinking. One, identifying
a prior event with an unexpected outcome.
 Two, identifying factors along the path to the outcome.
 Three, selecting one factor at a time to modify. 
Four, assessing consequences of each modification, and five,
generating a counterfactual. Let's start with identifying an event with
an unexpected outcome. 
Maybe your product launch wasn't as successful as you
planned, your presentation was a bust, or your negotiation didn't
play out in your favor. Unexpected positive outcomes count
too. Maybe you didn't expect to get that promotion so soon. You
didn't think that the launch would be so successful or you didn't
expect to negotiate such favorable terms. We'll borrow ane example
from Isaiah whose negotiation with his supplier, Stan, didn't have
the outcome he expected. Isaiah was shocked and
disappointed when Stan shortened Isaiah's payment terms from net-
45 to net-30. What happened? Identify the factors along the path to
the outcome. Include internal factors you controlled and external
factors you didn't control. Including external factors helps you
consider the impact of less predictable events in your decisions. For
Isaiah, here are the internal factors he controlled. The first time
Isaiah ever talked to Stan was during the negotiation. Isaiah asked
to go from net-45 to net-90 day terms. Isaiah stressed how
valuable the supplier was to their organization. Isaiah didn't control
these external factors. Stan had just landed a huge contract with
another company. New tariffs had impacted Stan's costs. Next,
select one factor to modify. What if Isaiah had met with or talked to
Stan prior to negotiating? Assess the consequences of the modified
factor. If Isaiah had met with Stan, he might've learned about
external factors impacting Stan's business that could've informed his
negotiation. Generate a counterfactual, upward or downward, like
Isaiah successfully negotiating 60-day terms. That's better than the
net-30 terms that Stan did offer, an upward counterfactual. Repeat
the process choosing different factors to modify. Remember, actual
is not all that's possible. When generating your counterfactual, use
questions like what could've happened? How might we have
felt? How might we have reacted? Use counterfactual thinking
exercises to uncover possibilities for next time. Conduct these
exercises with your team and witness and improvement in decision
quality.

Overcoming dangers of loss aversion

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- Which of these scenarios would you choose: A, you win $900 for
sure or B, you receive a 90% chance to win $1000? If you're like
most people, you chose A, the sure deal. How about this one: A, lose
$900 for sure or B, receive a 90% chance to lose $1000? If you're like
most people, you chose B, not the sure deal. This
experiment, borrowed from behaviorists Kahneman and
Tversky, highlights how we move to avoid losses more than to
achieve gains. Pain from losses impacts our decisions more than
pleasure from gains. This loss aversion can negatively impact the
quality of your decisions and suffocate your business. For example,
you might be less willing to support promising innovation
projects with perceived higher risk than consult and back
operational improvements. As a leader, you're expected to inspire
your team to focus on big ideas and growth. But according to
research, because of loss aversion, failed projects are considered
twice as bad as equivalent successful projects are considered
good. What do you do? 
The best technique for overcoming this decision glitch is to analyze
the quality of your decision process separate from the quality of
outcome. Use this decision process scorecard to avoid hyper-
focusing on potential losses and also enjoy the benefits of seeing
wise decisions even when they result in poor outcomes. Identify a
recent decision, like deciding whether or not to invest in an
innovative idea. Award one point for each question which you
answer yes. Number one, did we use our preexisting decision
framework? Unfortunately, if there's no framework there's no way to
get a point on this one. Add a framework, use it, and you're
guaranteed a point next time. Number two, did we gather relevant
information? Number three, did we gather irrelevant information? If
yes, you're more likely to consider what constitutes irrelevant
information and you'll know what to do with it. Number four, did we
list assumptions to challenge? If yes, you'll know what assumptions
to bust. Number five, did we make sure our sources are credible? If
you answer yes, you'll know where your information came
from. Number six, did we detect and eliminate biases? If yes, you'll
have already discounted emotion and intuition. Number seven, did
we include the right people? Number eight, did we identify at least
two alternatives? Number nine, did we weigh evidence supporting
the decision? Now if you answered yes to this one you better answer
yes to this next one. Did we weigh evidence rejecting the
decision? Number 11, did we choose between alternatives beyond
yes or no? A good decision process looks beyond yes and no for
options. Now score your decision process. If you've scored 11 to 10,
great decision process. Feel free to consider the outcome. 9 to 7,
good decision process. You're almost there. 4 to 6, okay decision
process. Add to your process. And 0 to 3, poor decision
process. Improve your process, otherwise you'll never know if your
outcomes are preventable mistakes or lucky breaks. For small
decisions, remember the mantra: You win a few, you lose a few. This
will help you control your emotional response 
Most common logical fallacies at work
- It may not seem like it, but wise, rationale conclusions can come
from disagreement. Logical fallacies are flaws in reasoning that
prevent this. Sometimes they're intentional, like
manipulation, sometimes unintentional, like mistakes. When you can
spot them you can separate fact from fiction, make better
arguments yourself, and set aside illogical arguments that others
make that could derail your decisions. Although the list of fallacies is
long we'll tackle four that commonly lurk at work. They're sneaky,
often going undetected. The first one is Post Hoc, Ergo Propter
Hoc. This is Latin for after that, therefore caused by it. You see this
fallacy when two events happen consecutively, and the claim is that
the former event caused the latter. Now Wednesday occurred
before Thursday, but we know that Wednesday didn't cause
Thursday. Here's how it works. We know that X happened before
Y. First Martin was hired as CEO to replace Janel, then our sales of
widgets dropped. We know Y happened and was caused by
something. Something caused our sales of widgets to
drop therefore we think, or argue, that X caused Y. Replacing Janel
with Martin caused our sales of widgets to drop. Watch out for
confusing correlation with causation.
Number two, an Ad Hominem fallacy occurs when you ignore
the logic, or content, of an argument and instead attack the
person making it. It works like this. Person one is claiming
X. Marcus claims the numbers for the proposed IT system don't add
up. Person two claims person one is an idiot. Sarah points out that
Marcus doesn't have an MBA nor is he even in finance, therefore X
isn't true, therefore the numbers do add up and we should invest in
the IT system. Watch out for dismissing valid evidence from people
you don't agree with.
Number three, a Straw Man fallacy occurs when you substitute
someone's actual position, or argument, with the distorted,
exaggerated, or misrepresented straw man version of it. It works
like this. Person one makes claim X. Monique suggests the job
should be open to candidates with less than five years
experience. Person two restates person one's claim in a distorted
way. Stan responds, so what you're saying Monique is that you think
we should eliminate all qualifications. Person two then attacks the
distorted version of the claim. Stan then attacks, no we're not going
to use Monique's no qualifications necessary standard. Look out for
sneaky argument substitutions.
Number four, hasty generalization is a fallacy where conclusions
are drawn from limited evidence. It works like this. Small
sample size X is taken from population P. For example, Mark
Zuckerberg, Bill Gates, and Oprah Winfrey were college
dropouts. Conclusion Z is drawn from small sample X and applied to
all population P. From sample X if you made the
statement, dropping out of college won't negatively impact your
career that would be a hasty generalization. Watch out for relying
too heavily on your own experience and jumping to
conclusions. Now that you know what to look for you'll spot fallacies
in people you disagree with. But if you want to take the true critical
thinking test, over the next month seek, find, and eliminate
fallacies in your own thinking.

Avoiding the planning fallacy

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- It does not do to leave a live dragon out of your calculations if you
live near one. That's great planning advice from J.R.R. Tolkien. But
the truth is revealed by Taylor Swift, who wisely warned, "Just
because you made a plan doesn't mean that's what's going to
happen." Our tendency to underestimate the amount of time a
project will take is one of our most common fallacies, or failures
of reasoning. It's the planning fallacy. It's a major cause of
forecasting errors, and it's very expensive. You'll use critical thinking
to avoid the planning fallacy. We'll get to that in a minute. This
fallacy is due to two things. Number one, we're overly
optimistic when it comes to forecasting how long things will
take. We fail to consider external factors, like an economic crisis
disrupting our project, and internal factors, like our team getting
sick. Plus, success is easier to imagine than failure, even though
there's often one correct outcome yet countless ways for our plan to
go awry. 
Number two, we fail to consider the data from similar cases. We
think our situations are unique. To avoid the planning
fallacy, use the outside view. This is different from the most
common way we plan, which is to use the inside view. Gathering
information, finding out how long each contributor thinks their part
will take, adding our own intelligence and projecting out. The
outside view looks at similar situations, to create a reference class
for providing a statistical basis for your plan. This means using data
on how long comparable projects took, and adjusting your overly
optimistic projections accordingly. You'll use critical thinking, setting
aside intuition, not attributing uniqueness to your plan, and
discounting anecdotal evidence. It's the most accurate way to
forecast. To take the outside view, ask and answer this
question. When others were in this situation, what
happened? Number one, identify a reference class for what you're
planning. If you're planning a major software upgrade, or building
remodel, product launch, or grand opening, your reference
class comes from past software upgrade projects,
remodels, launches, or grand openings. Our situations are not
unique. Focus on what's the same, not on what's different, and you'll
find your useful reference class. Number two, obtain statistics from
the reference class. Look for histories of plan versus
actual. Expenditures over budget. Actual time versus plan. Average
outcome, most common outcome. Cost of resources, percentage of
successes and failures. And be sure to note extreme successes or
failures that could overly influence your forecast. Number three,
make a prediction, or adjust your plan. Use your reference class data
to create your plan, and if you had created a plan using the inside
view, then use your outside view to estimate your chances of
success and failure, and adjust accordingly. And here's your pro
tip. The Green Book is a U.K. government tool that provides project
data. You might find your reference class stats there. Use the
outside view to overcome the planning fallacy and sharpen your
forecasts. I'll be curious to hear how it works for you.

Using framing to your advantage

- In 1974, memory researcher Elizabeth Loftus' groundbreaking
study revealed that how questions are framed influence
eyewitness testimony. Subjects witnessed a video of a car
accident. Then they were asked to estimate how fast the cars had
been going. Each subject was asked the same question. The only
difference was a swap of the framing word. How fast were the cars
going when they, a, contacted each other, b, hit each other, or c,
smashed each other. Can you guess which framing
words corresponded with faster times? (loud car crash) Yep, smash
was fastest, then hit, then contact. How questions are framed
matters, even in eyewitness testimony. How information is
presented or framed influences our judgment and decisions in
ways that defy reason. Let's dive into the techniques for using
framing to make more compelling arguments.

Number one, decide whether to use a negative or positive

frame. Let's say you want Acme enterprise's proposal to be
accepted over Titan enterprise's proposal. Acme should win is a
positive frame, Titan should lose is a negative frame. Is there a
difference? To facts, no. To our brains, yes. If you want the focus to
be on why Acme should win, they provide the best price, customer
support, latest technology, it's best to frame as the positive. If you
want the focus to be on why Titan should lose, too expensive,
outdated technology, frame as a negative.

 Number two, decide whether to frame your argument in terms

of a loss or gain. Would you take this coin toss gamble, tails you
lose $100, heads you win $150. If you're like most people, your
answer would be no, because it's psychologically harder to lose
$100 than to gain 150. Psychologically, but not entirely
rationally. Because of this loss aversion, more people will be
convinced to avoid a loss than to win a gain especially in
uncertain and stressful situations. Here's how to know whether to
use a gain or loss to frame. If the outcome of the message is
clear, gain-framed arguments can be more persuasive than loss-
framed. Here's an example of a clear gain frame. You'll get a favored
vendor status this year if you ship on time. If the outcome is
uncertain, loss frames are more persuasive than gain frames. An
example of a loss frame, if you don't ship on time, you won't get
favored vendor status this year. Gain frame, you'll live longer if you
stop texting while driving. Loss frame, you'll die sooner if you don't
stop texting while driving. 
Number three, match emotional frames to your objective. Think
about that eyewitness testimony experiment and the different
frames used for questioning, contacted, low emotion, hit, moderate
emotion, or smashed, high emotion frame. Use emotion frames to
enhance negative or positive framing. If you want the cars to be
perceived as faster, smash them, slower, hit, slower still, contact. If
not investing in a new technology will result in disruptions, will the
disruptions be annoying, substantial, or massive? Think about
framing your arguments to match your desired outcome. Also, be
on the lookout for others using frames and they'll be less likely to
sway your own judgments and decisions.

Questions that fuel curiosity

- When you think about your organization, what do you think your

leadership values most? 
A. Questions that can't be answered, 
or B. Answers that can't be questioned? If you answered A, you're
well positioned to help intellectual curiosity flourish. If you answered
B, spread this lesson around, because curiosity requires valuing
questions, and intellectual curiosity thrives when you're asking
better ones. To assess and improve the quality of your
questions, use two types of questions that fuel intellectual
curiosity, bucket, and interrogation questions. 

Bucket questions, help you assess your question assortment, so you

don't rely on asking the same type of question over and over
again. When Malik was assessing whether to expand his team's
video games into China, he used bucket questions to sort his team's
questions into three buckets. 
Number one, is it a knowledge question? One that requires
evidence to arrive at a correct answer. One of Malik's knowledge
questions, how many gaming consoles were sold in China last
year? Number two, is it an opinion question? One that can't
necessarily be assessed because it calls for a subjective
preference. Here Malik asked, are multiplayer games more fun than
single player games? 
Number three, is it a judgment question? One that requires
reasoning, critical thinking to arrive at better or worse
answers. One of Malik's judgment questions was, are Battle Royale
style games gaining or losing momentum? Sorting his team's
questions, Malik noticed that they were heavy on opinion
question, so he encouraged them to generate more knowledge and
judgment questions, improving their overall assortment of
questions. 
Next, we have interrogation questions. A. To evaluate whether
you're asking the right questions, and B. to improve question
quality. Ask yourself if the question is well stated, Malik's
question. How many gamers are there in China might be better
stated, what's the breakdown of gamers in China by platform. PC,
console, mobile. Ask yourself whether the question is biased. A
question like, what does our analysis show about the benefits of
expanding into China? May hint at Malik's confirmation bias, looking
for evidence to support his preexisting belief that they should
expand into China? A less biased question might be, what does the
data show about expanding video games into China? Ask yourself if
the expression of the question does justice to the complexity of the
issue. For example, Malik's question, what games does China
allow? Doesn't really reflect the complexity like the question, what
are the criteria by which the Chinese government determines
whether or not they will allow a game to be published in China? Just
seeing what games China allows, didn't reveal that China doesn't
allow games with supernatural or religious elements. Malik's zombie
game would not be allowed. Is the question relevant to the
issue? When Malik replaced the question, what's the average
disposable income of kids in China? With, what are the
demographics of the average gamer in China? He found the
demographic question more relevant, especially when it surfaced
that the average gamer in China was significantly older than they
had assumed. Bucket your questions to optimize your
assortment, and interrogate questions to ask better ones. You'll
experience something interesting, a virtuous circle where intellectual
curiosity, both fuels and requires better questions. The dividends,
better decisions, more trust and collaboration will be worth it.

Organizing a critical thinking workshop

- You know what you're thinking. But do you know how you're
thinking? Your critical thinking workshop will provide the time and
training to help your team do exactly this, think about how they
think! And, get better at it. A week before your workshop, give these
assignments to each participant. One, ask them to bring a song to
serve as their critical thinking trigger, and earbuds or something to
listen to it. Play the song, boom! Fast, intuitive thinking stops, and
slow, deliberate critical thinking starts. Two, have them prepare
answers to the following competency questions. A, what do I already
know about critical thinking? B, how closely does critical thinking
relate to something I already know? C, what questions should I have
about critical thinking? And D, what does the opposite of critical
thinking look like? There are hundreds of mental models to help you
think about how you think. But the three we'll cover are particularly
useful for jump-starting critical thinking. 
The circles of competence mental model creates an honest
assessment of what we know and what we don't know. Don't be
alarmed. It looks something like this for all of us. Warren Buffet uses
these circles to focus investors on only operating in areas they know
best. He explained, "You don't have to be an expert on every
company. You only have to be able to evaluate companies within
your circle of competence. The size of that circle isn't
important. Knowing its boundaries, however, is vital." Use answers to
the competency questions to help create circles of competence for
critical thinking. Later, you can use circles of competency to
assess your knowledge about other things. So how do I know what I
know about critical thinking becomes how do I know what I
know about design trends, for example. 
The next two mental models are inductive and deductive
reasoning. Inductive reasoning starts with an
observation, supports it with trends or patterns, and generalizes
to arrive at a theory. Examples, someone challenges my boss, he
gets angry, anger is a sign of stress, my boss is stressed out. My
team seems less engaged in meetings before lunch, I'm switching
meetings to later in the day, they'll be more engaged. From specific
to general. Deductive reasoning begins with a theory or set of
facts, supports it with an observation or a second set of
facts, and then arrives at an inference, like A = B and B =
C, therefore, A = C! From general to specific. Note how these
examples relate to the inductive reasoning examples. All anger is
a form of stress, my boss is angry, my boss has stress. Studies show
we can't concentrate in meetings when we're hungry, my team is
hungry before lunch, they can't concentrate in meetings before
lunch. Create examples for your team to match both types of
reasoning. Your reasoning improves when you understand both
types. Use inductive reasoning to come up with a theory, and then
deductive reasoning to determine if it's actually true. Setting aside
time and training for critical thinking will be incredibly valuable! Let
me know how your first workshop goes, and what trigger songs you
pick.
Bonus tip
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the video
- You know that saying, to someone with a hammer, everything
looks like a nail? Well, when you're armed with critical thinking
skills, the judgment and decision glitches, biases and fallacies
disappear like nails pounded into the woodwork. As you sharpen
your critical thinking skills, they'll become second nature, and you
might even take them for granted. Do you want to keep track of the
good things these skills do for you? Of course you do. That's your
bonus that you get for being here. Download the guide I provided
for you in the exercise files to create your decision notebook. Your
decision notebook can be a simple spiral binder or something
fancier. Use it to keep track of your decisions of consequence, big
and small, to document how you arrived at your decision, your
mood, how much sleep you had when you made your decision,
things like that. You'll also note specific biases, fallacies, and
judgment errors that you use your critical thinking skills to spot and
avoid. You'll see an improvement in the quality of how you
think. Reach out to me on LinkedIn, or at appliedcuriositylab.com
with any questions. I'm excited to hear about your progress.

Welcome to critical thinking

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- Have you ever solved one problem, only to realize you created a bigger one? Have you ever
thought you solved a problem, but then discovered you only cured a symptom and didn't fix
the root cause? The reason these things happen is because you're not thinking
critically. Critical thinking is both a mindset and the application of some real, simple tools. I'm
Mike Figliuolo, and I've been applying and teaching critical thinking methods for
years. Across all different industries and business functions, I found these critical thinking
skills to be invaluable. In this course, I'll share critical thinking techniques like defining the real
problem, the five whys, the seven so whats, the 80-20 rule and how to conduct insightful
analysis. I'll discuss how you can apply these techniques to your daily work and how you can
build a culture of critical thinking within your team.

Welcome to critical thinking

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- Have you ever solved one problem, only to realize you created a bigger one? Have you ever
thought you solved a problem, but then discovered you only cured a symptom and didn't fix
the root cause? The reason these things happen is because you're not thinking
critically. Critical thinking is both a mindset and the application of some real, simple tools. I'm
Mike Figliuolo, and I've been applying and teaching critical thinking methods for
years. Across all different industries and business functions, I found these critical thinking
skills to be invaluable. In this course, I'll share critical thinking techniques like defining the real
problem, the five whys, the seven so whats, the 80-20 rule and how to conduct insightful
analysis. I'll discuss how you can apply these techniques to your daily work and how you can
build a culture of critical thinking within your team.

The importance of critical thinking

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- Let's look at the importance of critical thinking. So many times when people ask us can you
solve this problem, we rush off and start solving it without stopping to think before we
do. We're facing new demands that require extensive amounts of information before we can
make a decision. As part of your problem solving process, there are going to be multiple
stakeholders involved. This increases the complexity of trying to get to an answer. When you
do ultimately come up with a recommendation, those big decisions will involve numerous
trade-offs. Not everyone is going to be happy with what you recommend. There are going to
be long lag times in acquiring the required data to make your decision, and when you finally
do make the call, there's going to be high scrutiny over whether you are right or wrong, and
a bad call can have both business as well as personal and professional implications. Add to
this unforeseen bottlenecks in getting to that answer, multiply it by the number of
problems you're trying to solve every single day, and then divide by the limited amount of
time you have to get to an answer. The importance of stopping and thinking critically before
you rush off and undertake all these very comprehensive efforts is very high. That critical
thinking process is what's going to differentiate you and the solutions you develop versus
rushing off without any thought at all.

Distinguish causes vs. consequences

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- As you begin your critical thinking efforts I'd like you to think about causes and
consequences. One of the biggest challenges we're going to face with any problem solving is
that desire to rush off and get to an answer quickly, because we feel like we're being
responsive to our stakeholders when we do. But think about it, have you ever solved a
symptom only to find out there are other symptoms that arise after you solve it? Have you
ever put in place a recommendation only to find out you created new problems down the
road? When you're going through this critical thinking process, first consider causes. Look at
the symptom that is problematic, then figure out the real reason it's happening and come at
that possible symptom from multiple perspectives. Once you generate a
recommendation, stop and think critically. What new problems can you create if you
implement this recommendation? what are the new symptoms that will be caused? Think that
through before you implement your recommendation. Let me offer an example. I know of a
client situation where the organization was going to roll out a brand new website that would
be facing their customers. The problem was they continue to miss deadlines for rolling the
website out and going live. Now let's look at causes and consequences. What was the cause
of the website not rolling out? Well, the code wasn't ready. Yeah, but that's a symptom, that's
a symptom of a problem. Why wasn't the code ready? Well, the specifications weren't
done. Okay, well that's also a symptom. Why weren't the specs done? Well because they
didn't agree on the features and functionality of the new website. But let's not stop
there. Why was that symptom happening? Well, they weren't given clarity by
leadership around one aspect that was a major strategic decision in terms of how they would
roll the website out. That was the cause of all these issues and why the rollout wasn't
happening. Now let's think through once that strategic decision is made what are the
consequences of it? So leadership finally decided to make the website a closed
network. Therefore, new customers would have to call in to register instead of registering on
the website. That's then going to flood the call center with incremental calls. The
consequence of that is the staff in the call center is going to be overworked. And then a
consequence of that is current customers are going to experience service issues, they won't
get their calls answered as quickly. And then a consequence of that is we might lose current
customers. When you go out to solve a problem think backwards about the causes, think
forward about the consequences. Look at the causes, spend some time thinking about what's
really causing this issue. Continue to work backward until it's clear you're solving a problem
and not a symptom. Then once you've generated a recommendation, think through the
consequences. What are the new problems that could emerge if you implement your
recommendation? Think about a problem that you made a recommendation on where it
didn't go so well. Which of these two did you miss? Did you miss the real root cause? Did you
miss possible consequences of your recommendation? By spending this extra time thinking
about these aspects and putting in the critical thought, there's a much higher likelihood that
whatever recommendation you come up with is going to solve the true problem, and you're
going to account for some of the possible consequences down the road.

Define the problem statement

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- One of my favorite critical thinking and problem solving tools is a good problem
statement. You should never just take a problem and rush off in a general direction, thinking
you're going to come up with a solution that will satisfy the needs of your requester. If you
don't know the destination, you're going to get lost. It'll take you a long time to get
there. The corollary here is with your problem solving and critical thinking. You need to know
what that destination is. What is success for your problem solving? Your problem statement
defines that endpoint. Without a problem statement, you're going to spend a lot of wasted
hours, wasted work, and have excessive revisions, because your recommendation won't make
sense, because nobody knows what you're trying to solve for. When you put together a good
problem statement, it becomes your charter for your critical thinking efforts. It's going to
spell out your goals. It will lay out boundaries on the problem solving space. It will define
success criteria. Your problem statement should spell out the constraints you're going to
face. It should articulate your assumptions, who the stakeholders are, and any timelines that
you're going to face. I have one client organization where they didn't spend the time laying
out the problem statement. They ended up with major issues for their charter for a huge
technology project. Because the team was trying to solve all different problems, they didn't
have clarity on what the ultimate goal was, what the metrics were, who the stakeholders
needed to be, and what ultimately the boundaries were for the space they were trying to
solve in. This led the team to write a lot of code, have multiple revisions, multiple attempted
roll-outs. They couldn't solve the problem because they hadn't defined what the problem
was in the first place. Take a look at a problem you're trying to solve. Is it clear what the
problem statement is? Do you know what the goals are, what the boundaries, constraints,
and assumptions are? Do you know who the stakeholders are? The time you spend with this
type of critical thought is going to help you be more effective in solving the problems that
you face.

Understand the real question

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- So many times when we're asked to look into an issue, we just rush off and start solving
it without really thinking through what's causing the person to ask me this question in the
first place. Probe to understand why you're being asked to look at something. Once you have
a good understanding of why, you're more toward a cause, but don't stop there. Once you
have that understanding, ask why again. Really get that deep understanding of what's
causing concern on your stakeholder's part. By understanding the real question they
have, you can avoid solving symptoms and instead, come up with a recommendation that is
going to resonate for them and be something that they're excited about. The real question
opens up new answers, new ideas, and new opportunities. Let me offer an example. An
executive that I worked with, named Sue, was asked by her senior stakeholder, Kim, to look at
employee turnover data. Now Sue knew this data inside and out. It was very easy for her to
go into the information, pull out the data, and generate a report about turnover. And she
could have done that, but she didn't. She stopped and asked Kim why she wanted to
understand this issue, and it was really an issue of evaluating unit performance. Well, once
Sue understood this, other metrics made more sense than just the base turnover data. She
stopped though and asked Kim again why was she looking at unit performance, in
particular. Turns out what Kim really wanted to understand was did they have issues with
leadership or with processes that were causing a lot of churn and turnover of their
associates? It was now clear to Sue that she had to look at metrics and processes. By doing
so, she was able to generate ideas on how to fix some of the issues with leadership, as well as
some of the processes that should change. She generated a better solution. What I'd
encourage you to do is take a look at a problem you've been asked to solve. Go back to that
stakeholder and understand what's really driving that request. Why do they care about
this? When you get a better understanding of that, you'll find the solutions you come up
with are going to be bigger, better, and more exciting.

Ask focusing questions

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- As you define your problem, you should ask and answer some focusing questions to help
you bound the solution space. You should ask things like, what's the real question? Specify
the objectives and timing that that stakeholder has asked of you. Ask, who are the
stakeholders or influencers who are involved in the decision? Who can support it and who
can derail it? You should articulate how you're going to measure success. Lay out what the
quantitative and qualitative measures are going to be. So you know on the backend if you've
really solved the problem. Ask the specific scope, what is or is not included in the space
you're looking at? And lastly, understand the constraints that you face. By answering all of
these questions and spending this time in critical thought, you're going to have a much more
clearly bounded problem space. Let me offer an example of how I use these focusing
questions to help bound a problem space. In my past, I worked for a credit card
company and I was responsible for some of our collections. The way we collected our money
back from consumers who owed us was we outsourced these activities to external
agencies. The problem we were asked to solve was to improve the performance of those
agencies. So first, we looked at the objectives. We wanted to reduce costs, increase our
collections, and make those changes by the end of the year. So we bounded the space in
terms of what success looked like. We then had to think through the influencers and
stakeholders. We looked at IT and finance because anything we did was going to require
technology changes and any changes in the commissions that we paid was going to impact
finance. We then looked at the cost per dollar collected, the commission rate, and we also
looked at some qualitative metrics of success. In terms of bounding the solution space, we
looked at specific lines of business. We had 10 business units. For this initial solution, we were
going to only focus on two of them. And we had to understand the constraints to that
space. There were legal and regulatory issues that we had to consider. We had time
constraints, remember, end of year, and we also had some budget constraints. We would
only be able to spend this much money on IT and this much on commissions. By asking and
answering these focusing questions, we had a better sense of what that box around our
problem looked like. So when we found a solution, there was a higher likelihood that we
would solve within that box which would then meet our stakeholders' needs. Take a look a
problem you're trying to solve. Ask and answer these focusing questions. The time you spend
in the critical thinking required to come up with these answers will help ensure that the
solution you come up with is going to meet your stakeholders' needs.

Examine past efforts

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- Another element of the critical thinking that goes into defining your problem is considering
past efforts. We shouldn't reinvent the wheel. Ask yourself, has this problem been considered
in the past? What did we learn? What's different now versus the last time we looked at
it? Were there challenges or issues last time this was addressed that we need to think
about as we try to solve it this time around? What are the ingoing assumptions that are
limiting our thinking? Who was involved in the problem solving last time? By learning from
experience, it's going to prevent you from wasted effort. You can identify and avoid prior
pitfalls and you can also involve some of the veterans to help push your thinking. Let me
show you how this showed up in a problem that I was solving. When we were trying to solve
that collections issue and improve our agency performance, we had looked at commissions
before. What's different this time around was we didn't have the measurement data the last
time, and last time we were working with a different set of agencies on a very different
technology platform. This time around new agencies, new data, new platform. Some of the
assumptions we had were that we couldn't measure everything we wanted. In terms of who
was involved last time, well, it was the Recoveries team from the last time, and the people
who were involved in that effort, most of them were still around, and could help us think
through the problem this time. By looking at prior efforts, we were able to understand what
our limitations were the last time and it helped us gain institutional knowledge that we could
apply this time around. As you're going through your critical thinking efforts to define
your problem, ask these questions about the past efforts and see how they can
inform your problem solving this time around.

Use new lenses to think critically

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- Another set of critical thinking tools for defining your problem is looking at the
problem through new lenses. Can you change the point of view? Can you change
context? And can you change reality? Let's look at what those mean. Changing point of
view. How is the problem defined from the perspective of the CEO, of the frontline staff, of
customers, of adjacent groups? They're all going to look at the problem in different
ways, and they'll define it differently depending upon their point of view. The problem will
look very different from 10,000 feet versus 50 feet. In terms of changing context, can you
reimagine the problem in new ways? We tend to come at the problem from our own
functional perspective. If I work in finance, well, it's going to be a finance problem. If
somebody works in IT, they'll look at the same thing and say, "No, it's an IT problem." So, can
you change the context in terms of how you're defining the problem? And can you change
reality? Ask yourself, "What if? What if I removed some of these constraints? What if I had
some of these resources? What if I was able to do this instead of that?" By changing reality,
you may find a different way to define the problem that enables you to pursue different
opportunities. By looking at the problem in new ways, you're going to get a clear sense of
direction around what the real issue is, such that you can generate some innovative and
insightful solutions. Let me tie back to a collections example, where we were solving the
problem and we saw it as an agency management issue. It was about relationship
management with our collections agencies, and that's how we were going to improve their
performance. Other people saw it as a strategy problem. Should we be outsourcing or
insourcing those activities? Other people saw the performance issue as a commission or
pricing problem. Were the commissions and incentives we were giving these agencies
correct? Or should we change them to improve performance? Other people saw it as a
training issue in terms of the frontline staff. Were we giving them the tools and techniques
and training that was required for them to perform effectively? So, looking at the
problem from very different points of view led us to other possible solutions. So, I want you
to take a problem you're looking at and ask, "Can I change my point of view?" And if you
struggle with this, if you're so tied into your functional area, go find somebody from another
group. Explain the problem to them, ask them how they would define the problem. Use their
perspective to generate that different point of view. Spending this critical thought around
looking at the problem from different angles and understanding what aspects of it can
change may help you uncover that one really big solution that you never would have
seen with your very limited scope. So, spend the time in this critical thought, stepping back
from the problem, and really asking, "Is there a different way to define it?"

Challenge how the business operates

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- When you go to generate new ideas to run things better, you need to think critically about
the way your business runs. I like to look at three things: a business model blowup, a revenue
blowup, and a cost blowup. On the business model blowup, fundamentally rethink about how
you go to market, even rethink what your market actually is. You're going to challenge the
entire business model for the way you deliver products and services. On the revenue blowup
side, how do you dramatically expand the products, your pricing, the geography, the reach of
your business? And on the cost blowup, how do you fundamentally eliminate drag from the
business, to become much more efficient? One company I hold up as an example of one that
fundamentally blew up the business, blew up the cost, blew up the revenues is Skybus
Airlines. If you think back several years ago, the way the airline industry
functioned, everybody was the same. Tickets were all bundled. They had a similar operational
model, and prices were pretty predictable. Along came Skybus and they said, "We're going to
blow up the way all of this works." From now on, all meals were going to be paid for it
individually. And people were going to stop subsidizing the meals of other passengers by
paying for a bundled ticket. They said, "Don't call us. We're not going to have a call
center." Call centers are very expensive to run. Skybus said, "We're going to do everything
online." It's a different customer service model. They said tickets aren't refundable. It costs a
lot of money to rebook passengers. They said, "Once you buy it, it's done." The impact of all
these changes Skybus made because they thought critically about the business model, was
pretty tremendous. They were able to sell tickets for $10 or $20 each way. Sure, some of the
tickets on the plane costs 200 as you got closer to the flight time, but their pricing model by
unbundling everything, and by reducing their overall cost structure, allowed them to
compete differently. I personally benefited. I took my entire family to California from Ohio for
$200 total, each way. In the past, those tickets would have cost me thousands. Now, these
changes that Skybus made were very radical and they were risky, and these risks won't always
play out well for you. One day, I was teaching a class on how innovative Skybus was and I was
talking about how great their business model was. When I got home that night, and I went to
book some new tickets on Skybus, I was greeted by a splash screen that said they were out of
business. Now, even though Skybus wasn't successful in the long-term, their critical
thinking and looking at the business differently, altered the landscape. I'm sure if you fly
today, you've noticed that pricing is unbundled. So, that critical thinking led to massive
changes in a huge industry. As you think about applying some of these critical thinking
tools, let me offer you some questions you can ask. On the business model blowup, ask
yourself, if we had to do over, what will we do differently? If we're starting this business again
today, what would we change? How would you double the size of whatever metric you care
the most about is, in two years? That's a huge goal. Doubling something? But it's going to
challenge you to look at your business differently. On the revenue blowup side, ask, who
could create more value with our customers than we can? Who does it better? That'll get you
to look outside of your own walls at different ways of doing things. How would you triple
your revenues or your profits within five years? Again, that big provocative number to get
you to remove some of the constraints that you currently face. For the cost blowup, how
would you run this business with 2/3 fewer people? Wow, new processes, new
technologies, new ways of doing things. By making a massive cut, it's going to force you to
look at your business differently. I love this one question. How would you eliminate your
job? That's pretty unnerving to say, I want to put myself out of a role, but by asking that
question, it forces you to think critically about the work that you do. What work should you
stop doing? What work should you delegate to other members of your team? What work can
you automate? And my last favorite question is, what's the most wasteful thing we do as an
organization? And what's stopping us from stopping that? Look at your business. We all
know where some of the waste is. Understanding what the waste is, and what the barriers are
to eliminating it, can create new solutions for making your business more efficient and more
effective. So, as you look at your organization, ask yourself, how can you blow up the
business model? How can you blow up the revenue side? How can you blow up the cost
side? And those answers to those critical questions will help you identify new
opportunities that can make your business much more competitive and much more effective.

Use the five whys of critical thinking

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- One of the most effective critical thinking tools I've ever come across is the five whys. When
I was a young analyst as a consultant, I was at a client engagement, and I was responsible for
doing a lot of analysis. One morning I did a bunch of analysis around some things that my
client was purchasing. And when I went to lunch with my project manager, he said, "What
have you been doing today?" And I said, "Well, I was doing the analysis on this one category
of spend." And he said, "Okay, what'd you learn?" I said, "Well, I think this is happening." And
he said, "Okay, well why?" "What do you mean, why?" "Well, why is that happening? Why do
you think that's happening?" I said, "I don't know, maybe it's this." And he said, "Okay, well
why?" "What do you mean why?" "Well, why would that be happening?" And I stopped and I
thought, and I said, "Well, it might be this." And he said, "Well, why?" And I said, "Oh my
gosh, what's with the whys?" And he said, "Mike, our job is to come to insights for our
client. We can't be satisfied with that first answer. We need to ask why and really understand
cause. And by the time you ask the fourth or the fifth why, that's where the real insight
is. That's why it's the five whys." And I took that away from that day, and any time I was
working on analysis from that point forward, I would ask why. Why am I seeing the numbers
do this? And why is that happening? And why is that happening? Asking those five whys will
lead you to insight. Let me offer an example. Let's say you're working with a senior
executive, and that senior executive says, "Hey, our stock price just plummeted." "Okay, well
why, why did that happen?" "Well, we missed our earnings." "Okay, well, why did that
happen?" "Well, because we were discounting our prices too much." "Okay, well, why were
we doing that?" "Well, because we wanted to retain our customers, so we were offering
bigger discounts." "Okay, well, why are we trying to retain customers with discounts?" "Well,
because we want to grow market share." "Okay, well, why do we want to grow market
share?" "Well, because that's what the incentive plan is tied to for all our managers and
business unit presidents. The bigger the share, the bigger the bonus they get." "Well, what
happens if we change the incentive plan?" If we had just stopped at, "Hey, the stock price
fell, and it's because we missed earnings because we were discounting," there's no real
insight there. When we keep asking why and peeling it back, we can identify what that true
root cause is. Then we can solve it, then we can have an impact on the organization. The fifth
why is where that real insight resides. As you look at a problem you're dealing with, when you
see that issue, ask yourself why it's happening, and ask why again, and again, and again. And
by the time you get to that fourth or fifth why, hopefully a new insight will pop out and you'll
be able to start solving the real problem that will have a true impact on the organization.

Answer the seven so-whats?

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- Good critical thinking processes don't just look at causes, they look at consequences as
well. A great tool for thinking through the consequences of an action is the Seven So
Whats. The Seven So Whats force you to go from an early answer to think through all the
possible implications and future consequences of your action. Let me offer an example. Let's
say we have a situation where we're going to change our incentive and bonus plan. And we
say, "That's the recommendation." Okay, so what? If we change that, what happens? So
what? Well, if we need to change it, we don't know how. I mean, if we knew how, we would
have already changed it. Okay, so what? If we don't know how, what's the implication of
that? Well, we need to find someone who does know how to do it. Okay, so what? What are
the implications of that? Well, that means I need to start a search for a vice president of
compensation. Okay, so if we start that search, so what? What's the implication of that? Well,
I need to deprioritize other searches for other roles so that I can focus on getting this person
in. Okay, well, so what? What happens if we deprioritize those other recruiting efforts? Well,
that means I'm going to have to reduce my search for somebody in supply chain and focus
on this VP of compensation. Okay, well, so what? Well, that means I probably need to
change my supply-chain goals for the year. This all started with our business plan is
broken, or our incentive model is broken. And now, we're looking at goals for supply chain. If
we didn't think this through, we may have caused huge problems for the organization by
making that one change to the incentive plan without thinking through the
consequences. When you're looking at making a recommendation, ask yourself, "So
what?" And ask seven times. And the lens you should have on that is what is the
consequence of this action? What's going to happen to our business? What will happen in
the marketplace? What will happen with our associates? What are the reactions we're going
to see? And if that reaction happens, so what? What happens next? By thinking forward, by
thinking about consequences, what you're going to do is be able to see new opportunities as
well as avoid problems you might unknowingly cause. Take a look at a recommendation
you're working on right now. Do you know the consequences? Do you know the real
downstream impacts of the change that you're proposing? Have you stopped and thought
critically about the implications of your recommendation? Invest that time because it's
going to help you avoid future problems that were caused by the recommendation you
made.

Use the 80/20 rule to think critically

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- Critical thinking doesn't only apply to coming up with recommendations. You need to think
critically about the way you're going to spend your time and energy. Those things are
limited. You have too many problems to solve and not enough time. I encourage people to
follow the 80/20 rule, also known as the Pareto principle. The Pareto principle was coined by
Vilfredo Pareto, and he noticed in Italy, 80% of the land was owned by 20% of the
population. He was also a gardener, and he noticed 80% of the peas coming out of his
garden came from 20% of the pods. And he said, "That's interesting, "Two totally different
realms "demonstrating the same principle." 20% led to 80% of the impact, and that's the 80
20 rule. 20% of the drivers will drive 80% of the results. You need to think about your work
the same way. You can't focus on that 80% that only drives 20% of the results. Focus your
efforts on the meaningful. Let me offer an example. I have a client that creates capital
equipment. They're a manufacturer, and they were having a whole bunch of service issues in
the field. Customers were calling up with a variety of complaints. And at first, this client was
going out and trying to solve every single issue out there. But then they said, "Wait. "Maybe
there are certain issues that are causing "more of our problems than others, "and we only
have limited resources that we can spend "going out and fixing these issues, "so let's do an
analysis." And when they conducted that analysis, they found out that of all the service
issues they had had reported, two issues were driving 80% of the complaints. One was about
their software crashing and one was about the motors breaking down. What this client was
then able to do was take all of their resources, focus them on these two issues, and solving
those two issues would solve upwards of 80% of the complaints from their customers. That's
not to say the other complaints weren't as important, but in terms of focusing their
resources, they thought critically about what the problem is and where they were going to
spend their time. This has implications for you. When you think about a problem that you're
trying to solve, think through, what are the major drivers of impact? If you're running a
business unit at a high level and you're trying to grow your profits, you can either look at
revenues or costs. In revenues, you can look at volume or price. In volume, you can look at
current customers and prospective customers. And within those, you can look at geographic
regions. And let's say we said, "Hey, this is going to be a revenue issue." You can't look at the
entire country. What you're probably going to want to do is focus on those couple of
geographic regions that can drive the most impact for the metric you're trying to
increase. So, look at whatever problem you're trying to solve, understand what the drivers
are, and understand how much each driver contributes to the overall impact you're trying to
have. Spend your time solving for those issues, the ones that have a disproportionate
impact on the metric you're trying to move. It'll be a much more efficient use of your
time, and you're going to solve the biggest problems your organization faces first.

How to successfully conduct analysis

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- Critical thinking doesn't just apply to the analysis you do, it applies to the way you do
analysis. Choosing which analysis to do and how to handle the results that come out. I
encourage people to take the high road and the low road when they're thinking about
analysis. On the high road, always step up to the high level problem that you're trying to
solve and ask, how does the analysis I'm doing tied to that problem? What am I proving or
disproving with the data that I'm analyzing? Estimate the benefit of even doing the analysis
before you start pulling data. Is it going to be beneficial? Will this analysis help me
answer the ultimate question that I'm trying to solve? Use the 80/20 principle and back of the
envelope types of calculations to ask, will these numbers have any impact? If they will,
continue with the analysis, if they won't, don't do the analysis, you don't have the time. And
once you've completed the analysis, stay on that high road, test your thinking, ask, does this
answer I got from my analysis tie to the recommendation that I'm trying to make? Does it
support or does it refute the recommendation I'm making? When you think about the low
road, which is the deep analysis you're going to do, you should still be thoughtful about how
you approach it. First, only run the numbers you need to run. If you think about your scoped
problem statement, and you're only going to focus on two business units, and that's what
you've said is in scope for your solution. You should only be running analysis related to those
two business units. If you find yourself pulling data for five or six different business
units, you're wasting your time. Also, don't stay in the data too long. It's very easy to lose an
entire day or an entire week doing analysis. We can analyze data for extensive amounts of
time. And when you do that, you may be wasting effort. I always tell people when they're
doing deep analysis, don't polish dirt. And what I mean by that is, when you're in there doing
rough analysis and you're not sure what the answers ultimately going to be, but you're trying
to figure out, is it hundreds, thousands, or millions? Once you figure out that it's
thousands, you don't need to take it out several decimal points. You know it's 5,000 to
7,000, move on with life. You shouldn't get that refined answer if that refinement isn't going
to add value. Focus your attention on the answers that matter. That analytical time is
precious. It chews up a lot of your time and a lot of your team's time. So get back up to that
high road regularly and ask the implications of your analysis. These critical thought
processes should help you question everything you do in terms of solving problems. From
defining the problem, to generating recommendations, to doing your analysis, to figuring out
if you've actually solved the problem. And if you're more mindful about the way you spend
your time when you're doing analysis, you're going to be able to solve more problems more
effectively and more efficiently.
Consider the implications of answers
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- When you're trying to solve a problem, getting an answer isn't good enough. Think critically
about the results of your analysis and what's coming back as far as your recommendations
go. You should be looking for similarities or differences between the idea and the analytical
answers that come out and other situations that you've been in. Are there common themes
that you're seeing across multiple problems that you're trying to solve? Are some elements
similar to other problems you've solved in the past? You should be asking about the relative
size of the recommendation, once you've completed your analysis, does this even matter? If
we solve this problem, will it have a big enough impact on the business for us to even
care? And if not, even though it's a great idea, we should push it off to the side and focus on
things that are more meaningful. You should also explore connections to other problems that
you've had or other situations you've been in because that connection between two
things that are seemingly unrelated may unlock a tremendous insight and give you an
opportunity to take learnings from the past and apply them to a situation that seems very
different, but is actually quite similar. Let me offer an example. At one point, I did some
corporate strategy work and we were trying to figure out where should we take the business
for the next 10 years. We were looking at things like, what new products should we
launch? What new businesses should we enter? Which new market segments should we
pursue? Are there acquisitions we should be going after? And what we were able to do
through all of that analysis was come up with not just an answer to how we decided to
prioritize our efforts, but we also generated a process for thinking about how we were going
to prioritize our resources and how we were going to think about entering markets,
launching products, conducting acquisitions. Now, several years later, I was working with a
technology team and that technology team had the challenge of a lot of projects that were
all really great, but they didn't have the time or the resources to pursue all of them. And
when we dug into the problem, when we did the analysis and we found out they had 37
different projects that were rated high, and 54 that were medium, and 200 enhancements
that they were supposed to be doing. And when we really understood that the analysis was
telling us that we weren't good at prioritizing, a little light bulb went off and said, wait, this is
a prioritization problem. That strategy work I did in the past was also about prioritization of
scarce resources. Are there things that these problems have in common that I can take from
the strategy work and apply to the technology prioritization? And what was great was I was
able to just dust off my strategy process, think about how it could apply to the technology
portfolio, and then we not only prioritized the portfolio, but we put a new process in place to
prioritize future projects. By understanding the linkages between seemingly unrelated
problems, we were able to come up with a solution that we were able to apply very
quickly based upon those past learnings. So when you look at your answers that are coming
out of your problem solving processes, think critically about those answers. What
connections can you make to other situations? What can you learn from other problems
you've solved and how can you apply those learnings to the problem you're trying to solve
now? By thinking critically, you may unlock some great opportunities you never would have
considered before. That extra time to go one more step beyond the easy answer the analysis
gives you and ask what does this mean for the broader problem may help you create one of
the best opportunities out there that you get to very efficiently and very effectively.

Teach others how to think critically

- It's great if you start using more critical thinking skills. It's even better if you can get your
team to use them. There's some simple practices that you can put into place to help your
team think more critically. First, teach them these tools. Teach them the five whys, the seven
so what's, teach them about blowing up the business. Help them understand how to properly
scope a problem. The more effectively you convey these tools to them, the more they're
going to use them on a daily basis. Second, create opportunities for them to practice these
tools. Let them know if they're going out to solve a problem that you expect them to apply
these methods and come back to you with deliverables reflecting the use of these
tools. Third, you'll need to coach your people on how they're using these tools. Don't get too
focused on the analytical answers they come to you with. Yes, those are important, but also
talk to them about how they got to those answers. Were they using the 80/20? Were they
efficient in getting to those insights? Once they got those insights, did they come back up to
the high road? And forth, hold them accountable to using these methods. If somebody
comes to you with an analysis and they haven't thought through the consequences of the
recommendation, you need to send them away with the direction to go think through the
consequences and come back to you when they've thought it through. It's not always easy
holding people accountable to using new tools and methods, but the more you do so, the
more you're going to find they're thinking critically on their own. I learned these skills the
hard way. I had an engagement manager at one point who was really hard on me in terms of
critical thinking skills. Every time I went off and did an analysis and I went to talk to Dave
about it, he'd asked me, "Well, why did you do this analysis? "And how did you do the
analysis? "Why did you run those numbers you ran? "Why are you making this
recommendation? "How does this recommendation tie to your problem statement? "What
are the consequences of this recommendation "down the road?" And if I couldn't answer
those questions to his satisfaction, his direction was, "I want you to go think about
this, "come back this afternoon "when you've thought about it some more, "and then we'll
talk about it." Those weren't fun conversations for me, but in a very short period of time, and
I'm talking about two months of working with Dave every single day, my critical thinking skills
got so much better because he told me what I should be focusing on, not just generating the
answer, but about how I was doing my work. His ability to teach me these tools, create
opportunities for me to practice them, his coaching of me on these methods, and then
holding me accountable to using them every single day helped me build my skills very
rapidly. So as you think about trying to get your teams to think more critically, figure out,
when are you going to teach them these tools? What opportunities will you create in their
daily work for them to apply these methods? How are you going to remind yourself to coach
them on the methods, not just focus on the answer, but coach them on their application of
critical thinking skills. And how are you going to do the difficult thing of holding them
accountable when they're not applying these methods? You, as the leader, have to focus on
these things if you want to build your teams' critical thinking capabilities. And if you do focus
on it, you'll find they'll build their skills quite rapidly and you're going to get to better
answers much faster.

Common pitfalls when solving problems

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- During your critical thinking processes, there are several pitfalls you might fall into, but you
can avoid them. The most common pitfall is jumping to answers too quickly. You think
you know what the problem is and you rush off to solve it. Some of the tools you can
use to avoid that pitfall are first, defining your problem well, having that clear problem
statement. Why is your stakeholder asking you to solve this problem? And then you can ask
and answer focusing questions, evaluate prior efforts, look at the problem through new
lenses, and understand causality. By looking at all of those, it will prevent you from jumping
ahead to answers before you've really understood what the problem is. The second pitfall is
being unwilling to expand the problem space. Why would I want to make the problem any
worse than it is? Here's the problem, I can solve this. But that might be a symptom. You need
to think through what's really causing that issue. So tools like blowing up the business and
asking the five Whys can help you really define what the core issue is that you're trying to
solve. Sometimes you're going to focus on things that don't matter. You'll come up with a
recommendation, and even though it's insightful, it won't really change the performance of
your organization. The technique there is using the 80/20 principle and asking yourself, "If I
solve this, will it have a disproportionate impact on my organization?  Or am I solving for that
80% that drives 20% of the results that don't really matter?" The 80/20 rule will help you
focus on results that do. Another pitfall is taking the analytical results at face value and
just accepting. Well, the answer from the analysis was seven. Well, what does seven
mean? What are the implications of that? Techniques to use are getting to that high
road, getting out of the analysis and asking yourself, "What does this mean?" And then
looking for relationships between the answer from your analysis and other problems you're
trying to solve. Are there clusters? Are there similarities to problems you've faced in the
past? And the last pitfall you're going to face in your critical thinking processes is not
thinking through the future consequences of your answer. If you implement this, what's
going to happen? What are the knock-on effects of the recommendation? What will your
competitors do? What will happen in the organization? What are the new problems you're
going to cause? This is where the seven So Whats can be a very powerful tool to help
you understand and appreciate the consequences for the recommendation you're
making. So, understand that these are the common pitfalls, but the critical thinking tools and
techniques I've given you will help you avoid those pitfalls and come to better answers.

Apply critical thinking every day

- As you go to apply these critical thinking skills to your daily work, let me offer some
suggestions on how you can get started. First, identify a specific problem that you're working
on. Then break that big problem down into smaller, more solvable ones. Once you've done
that, document all those findings into a clear and compelling problem statement. You should
then look for new solutions. Once you have some solutions, focus on the meaningful. Then
go and do your analysis, but think critically about the results. You should also build these
approaches into your and your team's daily life. Don't just take an issue and run with
it. Understand that everybody on the team should stop at that moment when we've defined a
problem and really think through what are the implications of how we're defining it. Remove
constraints to your thinking. If you find yourself saying, "Well, that's the way we've always
done it," or "We can't do this because," those should be flags that you're locked in to your
current thought processes. That's when you should step back and challenge that thinking. If
you'd like some more information about these critical thinking skills, I encourage you to take
a look at a couple of my other courses. One is Solving Business Problems, where I get into
more of the tools related to the problem solving approach. Also, Decision-Making
Fundamentals, helping you think through how you make decisions and what the implications
of those decisions might be. Other resources that are available are my work on critical
thinking. I encourage you to take a look at our website, where I've got plenty of blog posts
and articles on some of these tools and how you can apply them, as well as information
about classroom courses that I teach on these methods. I'd like to thank you for your
time and I wish you the best of luck as you apply these critical thinking skills.