Category Archives: Psychology

Get a Second Opinion Before You Succumb to the Planning Fallacy: List of Biases in Judgment and Decision-Making, Part 4

I know that I said that I was going to be talking about a new bias in judgment and decision-making every Monday and I know that today is Tuesday. To be honest — I underestimated how long it would take me to prepare for my seminar in International Relations. Aside: if you want to challenge yourself, take a course in a subject which you know very little about and be amazed at how much you feel like you’ve been dropped into the ocean and told to swim! It can be a little unnerving at first, but if you’re into exploring and open to new experiences, it can be quite satisfying. Anyway, so today yesterday I’d planned to talk about the framing effect, but since I so conveniently demonstrated the planning fallacy, I thought I’d talk about it.

The consequence of this post being written/published today is directly related to my falling into the trap of the planning fallacy. I planned for the preparation for my International Relations class to take a certain amount of time. When that time lasted longer than I had anticipated, I had no time left to write about a bias in judgment and decision-making. The planning fallacy is our tendency to underestimate how long we’ll need to complete a task — especially when we’ve had experiences where we’ve underestimated similar tasks.

This is something that even the best of us fall prey to. In fact, one of the biggest names in cognitive biases Daniel Kahneman (Nobel Prize in economics, but a PhD in psychology!) has said that even he still has a hard time with the planning fallacy. Of course, this doesn’t make it permissible for us not to try to prevent the effects of the planning fallacy.

Before we get into ways for avoiding the planning fallacy, I want to share an excerpt from an oft-cited study when discussing the planning fallacy [emphasis added]:

Participants were provided with a series of specific confidence levels and were asked to indicate the completion time corresponding to each confidence level. In this manner, the participants indicated times by which they were 50% certain they would finish their projects (and 50% certain they would not), 75% certain they would finish, and 99% certain they would finish. When we examined the proportion of subjects who finished by each of these forecasted times, we found evidence of overconfidence. Consider the academic projects: only 12.8% of the subjects finished their academic projects by the time they reported as their 50% probability level, only 19.2% finished by the time of their 75% probability level, and only 44.7% finished by the time of their 99% probability level. The results for the 99% probability level are especially striking: even when they make a highly conservative forecast, a prediction that they feel virtually certain that they will fulfill, people’s confidence far exceeds their accomplishments.

There were a lot of numbers/percentages offered in the excerpt, so I’ve also included a visual representation of the data in a graph below. This graph comes from a book chapter by a couple of the same authors, but it is about the data in the preceding excerpt.

 

 

 

 

 

Ways for Avoiding the Planning Fallacy

With the first three biases I talked about, awareness was a key step in overcoming the bias. While you could make that argument for the planning fallacy, one of the hallmarks of [the fallacy] is that people know they’ve erred in the past and still make the mistake of underestimating. So, we’ll need to move beyond awareness to help us defend against this bias.

1) Data is your friend

No, I don’t mean Data from Star Trek (though Data would probably be quite helpful in planning), but now that I think about it, Data (the character) might be a good way to position this ‘way for avoiding the planning fallacy.’ For those of you not familiar, Data is a human-like android. In thinking about this way for avoiding the planning fallacy, think about how Data might estimate the length of time it would take to complete a project. It would be very precise and data-driven. Data would likely look at past projects and how long it took for those to be finished to decide the length of time needed for this new project. To put it more broadly, if you have statistics on past projects (that were similar) absolutely use them in estimating the completion time of the new project.

2) Get a second opinion

When we think about the project completion time of one project in relation to another project, we often think about the nuances that make this project different from that project — and by extension — why this project won’t take as long as that project. Planning fallacy. If you can, ask someone who has experience in project completion in the area for which you’re estimating. When you ask this person, be sure not to tell them all the “various ways why this project is different,” because it probably isn’t and it’s only going to cloud the predictive ability of the person you’re asking. You’re probably going to hear an estimate that’s larger than you thought, but I bet you that it’s probably a lot closer to the real project completion time than the estimate you made based on thinking about the ways that this project was going to be different than all the other projects like it.

If you liked this post, you might like the first three posts in this series:

The Endowment Effect – Yours Isn’t Always Better: List of Biases in Judgment and Decision-Making, Part 3

Two weeks ago, I wrote about the pitfalls of the sunk cost fallacy. Last week I alerted you to the bias of loss aversion. Since I mentioned the endowment effect last week, I thought it’d be good to cover it sooner rather than later, so this week, we’ll look at the endowment effect.

The endowment effect can be tricky in that if it’s not described in the right way, it’s likely to be misinterpreted. In short, it means that people want more money for something than they’d be willing to pay for it. Put differently: we overvalue that which we own. You could think of a simple example of this through the course of a negotiation. When negotiation with someone, we’ll probably overvalue what we bring to the table. Someone may offer you $50 for your 25-year old keyboard (piano), but you think it’s worth at least $75. Barring any outside appraisal, the endowment effect is likely at play here.

Now here’s where it might get a little confusing, so bear with me: one of the possible explanations for the endowment effect is that humans are loss-averse. Remember loss aversion from last week? The idea that we’d rather avoid losses than reap rewards. If we apply this knowledge to our example above, let’s say that the piano is actually worth $35, but you want $75, and you’re being offered $50. Because humans are loss-averse, it’s causing you to suffer from the endowment effect, which is causing you to overestimate the value of the piano. As a result, you’re forgoing a $15 gain, given the current value of the piano and the price you’re being offered.

Let’s look at another example, this time, from sports. Often times, general managers have their eye on certain players. They believe this player is going to fill the void that their team has and if they could only sign that one player, all of their troubles would be solved. Throughout the courtship of said player, the general manager is already imagining that the player is part of their team. In so doing, this general manager is likely to end up overpaying for the player. Why? Because of the endowment effect. The general manager feels that the player they’re about to acquire is already theirs and so not acquiring the player would be like losing the player. And because they already imagine the player to be on their team, they’re going to overvalue the player as a result of the endowment effect.

Though this example comes from sports, we can see the skeleton of it and apply it to just about any situation where someone “wants” something and has already imagined it as their own.

Before we get into some ways of avoiding the endowment effect, I want to make sure that I convey the point that the endowment effect applies to more than just things. Another way of looking at it is your customers (if you own a business). It’s never easy to fire a customer, but we’ve learned — sometimes — it must be done. As you might imagine, it can be quite hard to fire a customer because — among other reasons — we tend to overvalue that customer.

Ways for Avoiding the Endowment Effect

1) Am I emotional?

A seemingly obvious way to avoid the endowment effect is assessing whether our emotions are involved. Don’t get me wrong, emotions are a good thing, but they are a surefire way to overvaluing things that you own. That is, if you find yourself overly connected to something, your emotions might be getting in the way.

2) Independent Evaluation

This dovetails nicely with the idea of being unemotional. To guard against succumbing to the endowment effect, be sure to have an independent appraisal of whatever it is that you’re looking to sell of yours. While you’ll still have the final say on what you sell and how much you sell it for, having a second pair of eyes look at your side of the “deal” might help you determine if you’re judgment’s clouded.

3) Empathy

I wasn’t going to include this initially, but after reading the research, it certainly fits. Before I go on, I should say that folks might be confused in that I just suggested asking whether one is emotional and now I’m saying to practice empathy? For those wondering, being emotional is not the same thing as being empathetic. Back to empathy and the endowment effect. In situations where we’re selling something, researchers found there to be an empathy deficit when the endowment effect was present. So, to counter this, you should try to empathize with whom you’re negotiating.

 

Loss Aversion and the Big Picture: List of Biases in Judgment and Decision-Making, Part 2

I think I’m going to make a habit of posting something new to my series on biases in judgment and decision-making every Monday. Last Monday, we looked at sunk costs. Today, we’re going to look at loss aversion.

As much as I can, I’m trying to write about the different biases by themselves. Sunk costs are closely associated with loss aversion, so I could have included it in the first post. Similarly, the endowment effect is closely associated with loss aversion, so I could have wrote about it here. Learning about the biases one at a time may make it easier to focus on that bias for that week. So, without further adieu: loss aversion.

Loss aversion is the idea that we’d rather avoid losses than reap rewards. Put more simply: we’d prefer to not lose something than acquire something. Like we did with the sunk cost fallacy, let’s look at some examples of loss aversion to give us a better understanding of this bias. The implication of loss aversion is that someone who loses $100 or $1000 will lose more satisfaction (or be unhappier) than someone who gains $100 or $1000 will gain satisfaction (or be happier). If we think about a continuum where both of the people in the above example start at 0, the person who loses money will have an higher absolute number (with regard to their satisfaction) than the other person. This is a rather basic example, so let’s look at something a little juicier: golf.

In golf, the difference between winning and losing is sometimes one stroke (or one putt). A short excerpt from Kahneman’s book, Thinking Fast and Slow:

Every stroke counts in golf, and in professional golf every stroke counts a lot. Failing to make par is a loss, but missing a birdies putt is a foregone gain, not a loss. Pope and Schweitzer reasoned from loss aversion that players would try a little harder when putting for par (to avoid a bogey) than when putting for a birdie. They analyzed more than 2.5 million putts in exquisite detail to test that prediction.

They were right. Whether the putt was easy or hard, at every distance from the hole, the players were more successful when putting for par than for a birdie. The difference in their rate of success when going for par (to avoid a bogey) or for a birdie was 3.6%. This difference is not trivial. Tiger Woods was one of the “participants” in their study. If in his best years Tiger Woods had managed to putt as well for birdies as he did for par, his average tournament score would have improved by one stroke and his earnings by almost $1 million per season. [Emphasis added]

That’s an incredible statistic. With the only difference between putting for par and putting for birdie the fact that one would “lose” a stroke and professional golfers are 3.6% better at putting for par? Wow! As the excerpt said, that accounted for $1 million per season for Tiger Woods in his best years.

Ways for Avoiding Loss Aversion

As with the sunk cost fallacy, one of the most important ways to avoid loss aversion is to recognize it. That is, to know that humans have a tendency for loss aversion is an important first step in not falling into the trap of loss aversion.

1) What’s the big picture?

In our example of golf, that might mean knowing where you are in relation to the other players your competing with in the tournament (rather than where your ball is relation to the hole and what specific stroke you’re about to hit). In business, one might examine a decision about one business unit in relation to the entire company (rather than looking myopically at the one business unit).

2) Am I afraid of losing something?

This may seem like an obvious solution, but it’s pretty important. If before making a decision you can think to yourself (or have your team ask itself), “am I afraid to lose something here?” You might find that you are and it could serve to help you or your company avoid falling into the trap of loss aversion.

3) Do you really expect to never lose anything — ever?

Loss is inevitable. Sometimes, you won’t make that par putt (or that birdie putt). Sometimes, when you negotiate a deal, you won’t get the best deal. Sometimes, the decision to sell that business unit might result in losses somewhere else. If you can come to grips with the fact that every decision you make won’t be perfect and that sometimes you will lose, you may begin to shift your expectations about loss.

Conscientiousness in the Classroom, Conscientiousness in Completion

I teach organizational behavior (OB) at the undergraduate level. Well, to be more specific, I’m a TA for OB at the undergraduate level, but because of the structure of the class, students rarely see the professor for the class and spend most of their time interacting with me as the person at the front of the classroom.

This past week we talked about individual differences — personality. Naturally, we spoke about the Big 5. In reviewing the dimensions of personality we read through some scenarios together and had to identify which personality dimension was implicated. In one of those scenarios, we read about someone faced with a dilemma:

It’s Friday and her friends have invited her out to a concert and she also has plans for Saturday/Sunday. However, she has assignments that are due on Monday.

For folks that know about the Big 5, this example is clearly implicating the Conscientiousness dimension of the Big 5. Why am I telling you all of this? Well, because this happened to me this weekend. It’s not completely surprising that this would happen to me because I usually score very high on conscientiousness, but I thought it was rather coincidental that it happened the same week that we were discussing this concept in class.

Both of the classes I have this semester occur on Monday (afternoon and evening). For both of these classes, I’ve got quite a bit of reading to do, which is okay, but since these classes are outside my field of expertise, some of the reading takes longer (as I have to look up words — from time-to-time — to contextualize my understanding).

If I think back to my days an undergrad, I’d often find myself reading on Sunday night/evening, to make sure I was prepared for class on Monday morning. This weekend, something different happened: I spent most of the day Friday and most of the day Saturday working — really hard. As a result, when I sat down to dinner on Saturday evening, I felt relaxed because I knew I had very little work to complete on Sunday. This feeling… is wonderful.

Ignore Sunk Costs: List of Biases in Judgment and Decision-Making, Part 1

It can be really fun to write a series of posts on a particular topic. By my count, I’ve done this at least seven times so far. Today, I’d like to start what I hope will be an oft-read series on biases in judgment and decision-making (to some, cognitive biases). Because of my background in psychology and my interest in decision-making, I thought it would be wise to share with you the things that I’ve learned either through the classes I’ve taken (the classes I’ve taught!) or the research I’ve read. With each bias, my goal is to explain the bias and offer some possible avenues for not falling into the trap of the bias. Today, we start with one of the big ones: the sunk cost fallacy.

Sunk costs are those costs that have already happened and can’t be recovered. For instance, let’s say you buy an apple and bite into it. The money you used to buy that apple can’t be recovered — it’s a sunk cost. Now let’s say the apple doesn’t taste very good (maybe it’s inorganic). You might say, ‘well, I’ve already paid for the apple, so I might as well eat it.’ NO! That’s the sunk cost fallacy! Just because you’ve already bought the apple and paid for it, doesn’t mean you have to eat it. If it tastes bad, by golly, don’t eat it!

That’s a rather basic example of the sunk cost fallacy, so let’s look at one that might seem a bit more applicable. Sunk costs often come into the fray when they’re contrasted with future costs. Let’s say you’ve bought a subscription to a newspaper or a magazine. Because of your subscription, you get a discount when it’s time to renew your subscription. Now, let’s say that in that year of your subscription, you discovered that there was another newspaper/magazine that you preferred (maybe The Economist?). When it comes time to renew your subscription, you look at the two options to either subscribe to The Economist or continuing with your other subscription. You find out that the discounted price for your current newspaper/magazine will be the same price as The Economist. You say to yourself, “well, I’ve already subscribed to this newspaper and spent so much money on it, so I might as well keep subscribing to it.” NO! That’s the sunk cost fallacy. The money you’ve spent on the subscription for the other newspaper/magazine can’t be recovered! You can’t get it back. As a result, it shouldn’t affect the decision you make now about whether to choose it or The Economist. 

There’s one more quick example that I want to highlight: war. From a paper by a professor at Princeton:

The United States has invested much in attempting to achieve its objectives. In addition to the many millions of dollars that have been spent, many thousands of lives have been lost, and an even greater number of lives have been irreparably damaged. If the United States withdraws from Vietnam without achieving its objectives, then all of these undeniably significant sacrifices would be wasted. [Emphasis added]

Pay particular attention to that last sentence. That is the sunk cost fallacy in action.

Ways for Avoiding the Sunk Cost Fallacy

So, now that we’ve looked at the sunk cost fallacy, how can we avoid it? Well, the first step in avoiding the sunk cost fallacy is recognizing it. Hopefully, the above examples have given you an idea of how this bias can arise. There are a two other ways I want to highlight that you can use to avoid this trap.

1) What am I assuming?

The crux of the sunk cost fallacy is based on an assumption. That is, you’re assuming that because you’ve already spent money on X, that you should keep spending money on X. If you look at what it is that you’re assuming about a situation, you just might find that you’re about to step into the sunk cost trap.

2) Are there alternatives?

Related to the above example is alternatives. You’re not bound to a decision because you’ve made a similar decision in the past. Just because you bought the ticket to go to the movie, if another activity presents itself as more enticing, you’re allowed to choose that one instead. In fact, if when you sit down to watch the movie, it’s bad, you’re allowed to get up and walk out. Don’t fall into the sunk cost trap thinking that you have to stay because you paid for it. There are any number of things you could be doing: going for a walk, calling an old friend, etc.

Mind Lab: How Is Our Consciousness Connected to the World?

A little over a week ago, I was introduced to Mind Lab from Japan’s Science and Technology Agency. It. Is. Awesome! There are 4 lessons that take about 15 minutes each, so you could (theoretically), complete the lessons over your lunch break. There are some parts with sound (so you may want headphones), but theoretically, you could skip those parts and still get the gist of the lesson. If you want, you could also bookmark the page and come back to parts. So, if you only had 15 minutes, you could do the first lesson and then go back at a later time when you could finish another lesson (or all the lessons).

In the first lesson, we learn about blind spots, eye saccades, and apparent motion. In fact, you even get to measure the size of your blind spot. In the second lesson, we learn about 3D images in a 2D space, and how shadows effect our perception. In the third lesson, we learn about colors and the way that our brains can interpret the same image in two different ways. Lesson #3 is very intriguing. It reminds me of the those cognitive illusions you’ve probably seen in a psychology class. In the fourth lesson, we learn how contours effect how we perceive the existence of objects. There’s also something else during the last ‘slide’ of lesson #4 that I don’t want to spoil for you — but I really hope that you check it out.

In fact, after you’ve done lesson #4, be sure to come back and check out this link. The implications of what you’ll discover at the end of lesson #4 have been written about in that post.

I also wanted to mention that it’s been pointed out that the interactive nature of these lessons would likely eclipse any way in which they could be taught in the “old-fashioned” way.

The Psychology of Everything from Professor Paul Bloom

Here’s a great animated (!) 45-minute video from Professor Paul Bloom of Yale University explaining psychology through 3 case studies of compassion, racism, and sex. This video is fantastic in just how much you’ll learn about the different areas of psychology in less than 60 minutes. Take some time this Sunday to enlighten yourself about some of the important findings of psychology:

~

After having watched the video, what do you think? Any immediate thoughts or ideas? I’d love to hear about them in the comments below.

The Psychology of the Petraeus Affair

I’ve had this link on my list of things to write about for a few days and even though it’s not the most compelling thing to write about right now, I wanted to make sure I wrote about it before it got to be too far away from the incident. The link is a panel discussing the motives behind the Petraeus affair.

The only thing I’ve written so far is my bafflement with Petraeus’ forced resignation “because of possible blackmail.” When I heard about this discussion, I thought I should also add something to the discussion. Some of the reasons that were discussed in the video/article:

  • Invincibility
  • Self-sabotage
  • “God made us this way”
  • “Men are simply no good”
  • Opportunity
  • Risk-seeking behavior (paired with the first one, invincibility)

While those are all plausible explanations, some carry more weight than others. Better yet, I think that there is an important one missing from this list: drive.

As the panelists tell us, this is not the first time that we’ve seen high-profile people and infidelity. In fact, this isn’t even something that’s limited to politicians — athletes do, too. Both Kobe Bryant and Tiger Woods come to mind as two very high-profile athletes who’ve publicly admitted to infidelity. (I say publicly admitted because who knows how many other accounts of infidelity there have been that the public has not been privy to.) In researching for this article, I came across a good summary of the literature on infidelity in a post about Tiger Woods:

The precursors to cheat could be summarized as:

  • Significant, ongoing, unresolved problems in the primary, long-term relationship or marriage
  • A significant difference in sex drive between the two partners
  • The older the primary relationship
  • A greater difference in personality than perhaps the partners realize
  • And to a far lesser extent, perhaps some theoretical, evolutionary remnants that may have reinforced multiple partners over monogamy (although this is just a hypothetical argument that would be difficult to disprove)

While these are some helpful (in understanding) precursors to cheating, there’s still one more I want to discuss — personality. Yes, personality is named in this list, but I don’t think that it adequately gets to the point I’d like to make.

File:Triangular Theory of Love.svg

Think about the kind of personality required to make it to the levels that Petraeus, Woods, and Bryant have. It takes quite a bit of discipline, dedication, and perseverance. These men didn’t just wake up one day at the pinnacle of their professions. They worked hard for it. While, of course, talent plays a big role in being able to make it to the upper-echelon, drive also plays a big part, too. It is this drive that I think plays a large part in infidelity. It’s almost as if we could theorize that there’s a triangle.

In fact, it reminds me of Sternberg’s triangular theory of love (pictured above-left). I would argue that drive is one of the vertices of a triangle, invincibility is another, and opportunity is the third. Without these three things present, one won’t necessarily cheat. Similarly, with these three vertices present, one won’t necessarily cheat. Though, when these three vertices are present, I would bet that the incidence of cheating is elevated.

The Marshmallow Study Revisited: Context Matters!

Have you heard of The Marshmallow Study? It’s a classic experiment in self-control. All kinds of longitudinal research was conducted on those who weren’t able to “control themselves” and wait for the second marshmallow. In fact, there was even a movie that adapted the crux of the marshmallow experiment and used it as part of the plot.

A little over a week ago, the University of Rochester published some research that ‘updates’ the marshmallow experiment. I have to say, I’m quite pleased with the findings. Previously, it was thought that the participant’s ability to control themselves from eating the marshmallow in front of them and hold out for the second marshmallow was an indication that the participant may be more likely to succeed in the future. With this updated addendum, if you will, it now seems that there is more to the experiment than simply self-control.

When juxtaposed, my interpretation of the results of the original experiment from 1972 and the one discussed in the video is, quite simply: context matters.

How To Get What You Want: Use the “As If” Principle

I don’t remember how many books I’ve included in the section that use the “As If” principle, but I do remember that Dooley’s books do ( and ). I’m a big proponent of Twitter as it’s where I get most of my news and updates on the topics that I’m interested in (, , , etc.).

I saw a this morning (from my psychology stream) of a psychologist in London, Richard Wiseman. The tweet included a video of the “As If” principle and the preview made it look like the video was going to be animated in the same way that the are animated (with a hand writing down words/pictures, etc.). This was part of the reason that I had bookmarked it to view later.

After having just watched the short (1+ minute) video, I felt compelled to write a quick note about it. Why? Well, I had forgotten that the “As If” principle started with William James (famous psychologist) from the late 1800s. Additionally, the narrator mentions that there is decades of research to support James’ “As If” principle.