Through our previous articles, we have extensively established the influence of cognitive biases on strategic decision making and drawing attention to the various types of cognitive biases prevalent. However in this piece, we want to highlight certain ways that can help mitigate the effects of cognitive biases.
Humans are often more complicated than a behavioral finance textbook makes them out to be, and the way we make decisions are a product of our life experiences, academic and professional learnings and our surroundings. The most important step in mitigating cognitive biases is to identify whether the bias is a cognitive one or not. Below listed are few questions to ask yourself to check if you are biased or not:
What sources of information do you tend to rely on when you make decisions? Are these fact-based, or are you relying on hunches?
Who else is involved in gathering information?
Has information been gathered systematically?
Is the information collected biased with a narrative or factual?
Is it truly in line with what you think is best, or are you positive about it because it feels familiar and safe?
Very often we build an impression at the get go due to our experience and overlook or withdraw from thorough investigation before making a decision. It is imperative to wear a critical hat and question the validity of our assumptions with opposing data and mindfully make a decision. There never is a perfect answer, and if you feel your decision is perfect, then you need to check with yourself, whether your decision is based on new and insightful information or your previous knowledge.
Alternatively, discuss your ideas with others. Surround yourself with a varied range of people and don't be scared to listen to opposing points of view. You can also seek out people and material that contradict your beliefs, or assign someone on your team to act as the "devil's advocate" for key choices. Constructive debate will help you break your own biases and make more informed decisions.
Cognitive biases are a more common occurrence than we would like to believe. By staying aware and actively participating to course correct oneself, one can effectively avoid falling into the loop. Engage in mindful collection of data, critiquing the data and assumptions and discussing with people with opposing viewpoints to seek out all your options before making a strategic decision that can have tremendous impact on your business.