THE HIDDEN TRAPS IN DECISION-MAKING

Bad decisions can often be traced back to the way the decisions were m ade-the alternatives were not clearly defined, the right information w as not collected, the costs and benefits were not accurately weighed. But sometimes the fault lies not in the decision-making process but ra ther in the mind of the decision maker. The way the human brain works can sabotage the choices we make. John Hammond, Ralph Keeney, and Howa rd Raiffa examine eight psychological traps that are particularly like ly to affect the way we make business decisions: The anchoring trap le ads us to give disproportionate weight to the first information we rec eive. The status-quo trap biases us toward maintaining the current sit uation - even when better alternatives exist. The sunk-cost trap incli nes us to perpetuate the mistakes of the past. The confirming-evidence trap leads us to seek out information supporting an existing predilec tion and to discount opposing information. The framing trap occurs whe n we misstate a problem, undermining the entire decision-malting proce ss. The overconfidence trap makes us overestimate the accuracy of our forecasts. The prudence trap leads us to be overcautious when we make estimates about uncertain events. And the recallability trap leads us to give undue weight to recent, dramatic events. The best way to avoid all the traps is awareness - forewarned is forearmed. But executives can also take other simple steps to protect themselves and their organ izations from the various kinds of mental lapses. The authors show how to take action to ensure that important business decisions are sound and reliable.