PMcom 2022 10 ConfrontingBiases

CONFRONTING
BIASES AND
ETHICAL NUDGES
Project HEADWAY Webinar Series
MARK MULLALY, PH.D., PMP

mark.mullaly@interthink.ca
@markmullaly
20 10 2022
Webinar Objectives
Explore The Challenges Of Making Good Decisions
Understand The Role And Influence Of Biases And Nudges
Proactively Identify Responsible Strategies For Guiding Decision Making
Confronting Biases and Ethical Nudges 20 OCTOBER 2022 3

Webinar Process – Things to Know
This Is A Zoom Webinar Presentation

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• Computer-based audio stream
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This Presentation Will Be Recorded for Future Reference

PDUs

Agenda
• Introduction
• Defining Our Terms
• Challenges Of Decision Making
• Biases, Nudges And Pokes, Oh My.
• Responsible Decision Making
• Question & Answer Session

DEFINING OUR TERMS
Bias / Nudge

Defining ‘Bias'
'Bias' Means:
• An inclination of temperament or outlook
• A personal and sometimes unreasoned judgment
• An instance of such prejudice
• Bent, tendency
• Deviation of the expected value of a statistical estimate from the quantity it
estimates
• Systematic error introduced into sampling or testing by selecting or encouraging
one outcome or answer over others
Source: merriam-webster.com
• Definition taken on 18 October 2022

Defining ‘Cognitive Bias'
'Cognitive Bias' Means:

• A systematic pattern of deviation from norm or rationality in judgment
• Individuals create their own "subjective reality" from their perception of the input
• An individual's construction of reality, not the objective input, may dictate their
behavior in the world
• Thus, cognitive biases may sometimes lead to perceptual distortion, inaccurate
judgment, illogical interpretation, or what is broadly called irrationality
Source: wikipedia.org

Defining ‘Nudge'
‘Nudge' Means:
• To touch or push gently
• To prod lightly; to urge into action
• Approach (as in a target)
Source: merriam-webster.com

Defining ‘Nudge Theory'
‘Nudge Theory' Means:

• Nudge theory is a concept in behavioral economics, decision making, behavioral
policy, social psychology, consumer behavior, and related behavioral sciences
• It proposes adaptive designs of the decision environment (choice architecture) as
ways to influence the behavior and decision-making of groups or individual
• Nudging contrasts with other ways to achieve compliance, such as:
• education
• legislation
• enforcement
Source: wikipedia.org

What Does The PMBOK Guide Have To Say?
On This Topic, Not A Great Deal

The Word “Bias” Appears In The Document Only Fifteen Times
Discussion Of Actual Biases Is Relatively Limited
• There is an introduction of confirmation bias, as the only cognitive bias that is
discussed
• Bias is largely referred to as a personal preference or perspective, whether conscious
or unconscious
• The only guidance on responding to bias is adopting attitudes of transparency and
integrity
The Word “Nudge” Appears Not At All
Even The Term “Decision” Appears Only Twenty-Seven Times
• Decisions are acknowledged as being required
• There is minimal guidance on the mechanics or explanation of the influences of how
decisions are actually made

CHALLENGES OF
DECISION MAKING

Defining Decision
Decision Is Typically Considered To Be:

• A specific commitment to action
• Usually involving the commitment of resources
Presumed To Be A Conscious Choice Between At Least Two Alternatives

• Can also be choice between doing something and doing nothing

Defining Decision Making
The Set Of Activities That Lead To A Decision

• Starting with identification of a stimulus to action
• Problem or opportunity
• Ending with a commitment to action
The Question Is How This Process Works

• Identification of the ends to be realized – objective
• Definition of the means of attainment – methods
Decision Making Can Be Considered:

• Problem solving
• Problem seeking
• Avoiding

When We Make Decisions
To Start
To Keep Going
To Solve Problems and Make Changes
To End
To Implement

A Process Of Rational Decision Making
5.
2. 4. 6.
1. 3.
Evaluate
Search for Identify and Implement
Recognize Gather and Alternatives
Alternative Apply Preferred
and Define Analyze in Relation
Courses of Choice Course of
Problem Data to Choice
Action Criteria Action
Criteria
Source: Anthony Hopwood, Accounting & Human Behaviour

Principles Of Rational Decision Making
Search Is Comprehensive
• Look for all possible alternatives
Analysis Is Comprehensive & Simultaneous

• Evaluate pros and cons/costs and benefits of every option
Focus Is On Making The Best Choice

• The choice that maximizes benefits

Implications Of The Principles
5.
2. 4. 6.
1. 3.
Evaluate
Search for Identify and Implement
Recognize Gather and Alternatives
Alternative Apply Preferred
and Define Analyze in Relation
Courses of Choice Course of
Problem Data to Choice
Action Criteria Action
Criteria
Identify For Criteria Evaluate Select

every each emphasize all options the
possible alternative maximizing simultaneously BEST
alternative benefits alternative
Source: Anthony Hopwood, Accounting & Human Behaviour

Issues With Rational Decision Making
Rational Decision Making Assumes We:

• Can identify all possible choices
• Can understand the consequences of each choice
• Have the computing ability to evaluate each choice
• Have the time to evaluate each choice
• Actually analyze all possibilities before deciding
• Always focus on maximizing value
Other Than That, It Explains Things Pretty Well…

How We Tend To Make Decisions In Practice
Stated Desire Is For A Rational Process: The Majority Of Decisions Are Made
•Scorecards On Different Criteria:
•Decision Matrices But •Emotional
•Formalized Business Rules •Psychological
•Business Cases •Political
Even Where:
•Objective Criteria Exist
•They May Recommend A Contrary Outcome
Source: Tversky & Kahneman, 1986

BIASES, NUDGES AND
POKES, OH MY.

We Are Not Fully Rational When We Make Decisions
In Practice, We Exercise ‘Bounded Rationality’
‘Bounded Rationality’ Recognize That We Are Not Perfectly Rational

• We work within constraints
Constraints Are Defined By:

• What we can do
• What we know
• What we want
• How fast we want it

Principles Of Bounded Rationality
We Have Aspirational Goals

• There is a relative gauge of ‘satisfactory’ – but it’s fluid
We ‘Satisfice’
• We look for solutions that are good enough
We Engage In Sequential Search

• We look at one alternative at a time
• We don’t consider everything
We Are Cognitively Limited & Time Bound

• There are limits to what we can calculate and the time we can spend
• We don’t analyze everything, either

But It Gets Worse...
Satisficing Is About How We Search For Options

• Influenced by experience and aspiration
Achievement Drives Search Effort

• Failures increase search – a number of bad choices will induce more effort
• Successes decrease search – a number of reasonable choices will reduce effort
Aspiration Levels Change

• Repeated success raises our aspiration levels
• Repeated failure lowers our aspiration levels
• Our success compared to others changes our aspirations

Thinking About How We Make A Decision
Success Start
Levels Locally
Define Our Search For
Aspirations Options
Availability What We
of Options Know
Success Doesn’t
or Meet
Frustration Aspiration
Evaluate One At
Select Option
Options A Time
Meets
Aspiration

Exercise
Write Down Your Choices:
• 1. You are offered one of two raffle tickets:

• a) Prize of $900 (20% chance of winning)
• b) Prize of $600 (25% change of winning)
• 2. You are offered a second choice:

• a) Keep a ticket that could win $900 (80% chance of winning)
• b) Take $600 guaranteed
What Are Your Choices?

Tools Of Decision Making
Outcome 1
0.20
A
0.80
Outcome 2
?
Outcome 3
0.35
B
0.65
Outcome 4

Where It Goes Wrong...
we are Outcome 1
incomplete in
0.20
our options
A
0.80
we are Outcome 2
inaccurate in
? our
probabilities
Outcome 3
0.35
B
we are
unrealistic in
0.65
our
outcomes Outcome 4

The First Choice...
win $900
0.20
A $180
0.80
win nothing
?
win $600
0.25
B
$150
0.75
win nothing

The Second Choice...
win $900
0.80
A’ $720
0.20
win nothing
?
B’
1.00
win $600 $600

In Other Words...
Decision 1:
.20 x U($900) > .25 x U($600)
U($900) .25 5
U($600) > .20 4
Decision 2:
.80 x U($900) < 1.00 x U($600)
U($900) 1.00 5
U($600) < .80 4
Another Brief Exercise...
A Major Disease Outbreak Is Projected To Have A Significant Impact.
Expected Mortality Is 600.
Two experimental treatments have been identified. Only one can be attempted:
• a) 200 people will be saved with 100% certainty
• b) 1/3 chance of 600 people being saved, but a 2/3 chance that no one is saved.

How We Make Decisions
When We Make Choices, We:

• Consider available assets
• Evaluate consequences
• Assess uncertainties by probability
• Balance probability with the anticipated value or satisfaction of the outcome
At Least In Theory...

Another Major Disease Outbreak Of An Unusual Disease Has Been Identified.
Mortality Is Projected At 600.
Two Experimental Treatment Options Have Been Presented. Only One Can Be
Chosen:
• a) There is a 100% chance that 400 people will die.
• b) There is a 1/3 chance that no one will die, but a 2/3 chance that all 600 will die.

1.00 200 people

A
are saved 200
? 600 people
0.33 are saved
B
200
0.66 no one is
saved

1.00 400 people

A
die 400
? no one
0.33 dies
B
400
0.66 600 people
die

RESPONSIBLE
DECISION MAKING

Prospect Theory Is An Essential Behavioural Model
We Set A Reference Point

• Often, but not always the status quo
We Group Gains And Losses

• We prefer multiple gains, and fewer losses
We Weight Decisions (But Not Well)

• 80/20 rule is alive and well
• Highly sensitive to extremely low/high probabilities
• Insensitive to intermediate probabilities
We Are Influenced By How Problems Are Framed

• We are risk averse about positive gains
• We are prone to take risks in the face of losses
We Are Averse To Losses

• Even if we have only just gained

Heuristic - Anchoring
Reliance Upon The First Piece Of Information We Receive

• ‘Anchors’ all subsequent judgments
• Reference point around which subsequent adjustments are made
• Influence even if unrelated
Based Upon A Process Of Simplification

• We accept the first thing we hear as true
• Evaluate subsequent information against that first item
• Adjustments from the anchor tend to be insufficient

Heuristic - Availability
Determination Of Probability Based Upon How Easy It Is To Think Of Examples

• If something can be recalled, it must be important
• The easier to recall, the more importance and weight is given
Based Upon Effort To Simplify Estimates Of Probability And Frequency

• Tied to our ability to remember similar situations
• Ability and ease of remembrance increases estimates

Bias – Confirmation Bias
Preference For Information That Confirms Our Beliefs

• Selective retention of information
• Interpretation of ambiguous information as supporting our position
Tendency To Look For/Interpret Information To Support Our Hypothesis

• Contributes to overconfidence and an unwillingness to hear or believe contrary
evidence

Essential Truths About Decision Making
Decision Making Is Hard

• Information is imperfect
• Managing the decision making process is difficult
• Anticipating possible outcomes is challenging
Be Clear About The Decision That Needs To Be Made

• What is the decision?
• Who has to make it?
• What information is required?
Do Your Due Diligence
Prepare For The Worst

Making Decisions
Recognize We Have Inherent Limitations

• Attention, focus, search and capacity for analysis
• Biases and short-cuts
• Responses to stress
Effective Decisions Explicitly Acknowledge And Consider These Factors

• Make aspiration levels explicit
• What is a good outcome in this decision?
• Be explicit about appropriate level of search and analysis
• Consider sources of bias and strategies to mitigate them
• Consciously assess levels of stress and control
Supporting Decisions
Be Aware Of Potential Framing Issues

• Presenting positive ‘gains’ or negative ‘losses’
Identify Potential Biases

• Identification of alternatives and choices
• Estimates of costs and benefits
• How information is presented and structured
Present Range Of Alternatives

• Consider and present all viable (optimal, workable) alternatives
• Identify relative advantages and disadvantages of each option
Make Assumptions Explicit

• Define sources of data and rationale for estimates

Making The Best Decision Possible
Decisions Effectiveness Is Often Judged Retroactively
When The Results Are What Matter, Success Can Only Be Assessed Once Events
Have Played Out
There Is Only One Way To Know You Are Making A Good Decision In These
Circumstances:
A good decision is the one that you can live with

regardless of the consequences.

IN CONCLUSION…

In Conclusion…
We Make Decisions All The Time

• We tend to presume that we do it well, and make good decisions
• Our overall belief tends to be that our decisions are rational and objective
We Routinely Take Shortcuts In Our Decision Making
• This is normal, and actually entirely healthy in making day-to-day choices
• It can get in the way when the stakes are high and outcomes are critical
Cognitive Biases Are Unconscious Misinterpretations Of Objective Reality
• The are designed to help making decision making faster and more efficient
• When understood, there is a predictability to how they work
• That predictability can also be used to manipulate choices and outcomes
Overcoming Biases When It Matters Is About Taking Time To Analyze
• Questioning assumptions, probing for detail and taking the time to process
• Considering implications and consequences
• Evaluating from multiple perspectives and searching for other alternatives
When Outcomes Matter Most, The Best Choice Is The One You Can Ultimately Live With

Q&A
CONFRONTING BIASES &

ETHICAL NUDGES

In Conclusion…
Quick Review:
Process to Pose a Question
Questions?
Mark Mullaly, PhD, PMP Confronting Biases and Ethical Nudges 20 OCTOBER 2022 51
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Project HEADWAY
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Thursday, 17 November 2022

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THANK YOU
QUESTIONS FOR THE PRESENTER?
MARK MULLALY, PH.D., PMP

mark.mullaly@interthink.ca
@markmullaly

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CONFRONTING

MARK MULLALY, PH.D., PMP

Explore The Challenges Of Making Good Decisions

Understand The Role And Influence Of Biases And Nudges

Proactively Identify Responsible Strategies For Guiding Decision Making

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 3

This Is A Zoom Webinar Presentation

This Presentation Will Be Recorded for Future Reference

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 4

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 5

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 6

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 7

'Cognitive Bias' Means:

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 8

• To prod lightly; to urge into action

• Approach (as in a target)

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 9

‘Nudge Theory' Means:

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 10

On This Topic, Not A Great Deal

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 11

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 12

Decision Is Typically Considered To Be:

• Usually involving the commitment of resources

Presumed To Be A Conscious Choice Between At Least Two Alternatives

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 13

The Set Of Activities That Lead To A Decision

The Question Is How This Process Works

Decision Making Can Be Considered:

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 14

To Solve Problems and Make Changes

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 15

Source: Anthony Hopwood, Accounting & Human Behaviour

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 16

Analysis Is Comprehensive & Simultaneous

Focus Is On Making The Best Choice

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 17

Identify For Criteria Evaluate Select

Source: Anthony Hopwood, Accounting & Human Behaviour

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 18

Rational Decision Making Assumes We:

• Can understand the consequences of each choice

• Have the computing ability to evaluate each choice

• Have the time to evaluate each choice

• Actually analyze all possibilities before deciding

• Always focus on maximizing value

Other Than That, It Explains Things Pretty Well…

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 19

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 20

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 21

In Practice, We Exercise ‘Bounded Rationality’

‘Bounded Rationality’ Recognize That We Are Not Perfectly Rational

Constraints Are Defined By:

• How fast we want it

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 22

We Have Aspirational Goals

We Engage In Sequential Search

We Are Cognitively Limited & Time Bound

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 23

Satisficing Is About How We Search For Options

Achievement Drives Search Effort

Aspiration Levels Change

Confronting Biases and Ethical Nudges 20 OCTOBER 2022 24