Published in the San Diego Union-Tribune, May 18, 2020
Well, like all of you I have been doing my sheltering in place, and leaving aside not getting my nails done, my hair cut, my teeth cleaned, or my accu-punctured. I also have not been able to bat the ball around with my psychoanalyst/shrink.
As many of my readers know, I have been seeing this fellow for almost 30 years. At this point in the relationship, when he periodically asks me for business advice, we just exchange chairs, and I give him my wisdom of the ages. Unfortunately, I do not get to send a bill for my time — is there no justice?
But, like all of us, he has been reaching out and touching his clients by sending occasional emails with advice for coping during the time of COVID-19. In my case, he made it a bit more personal, by first telling me to put all the sharp kitchen knives in a bag and bury them in the backyard.
His most recent missive is a collection of cognitive dissonances from Business Insider writers Samantha Lee and Shana Lebowitz. The title of their work is “Why it’s so hard to learn from our mistakes.” I must say, Doc, if you could give me that answer in an email, why did it take you so long to hit “send?” But, as he is wont to say, onward and upward. So here are a few common biases, offered in the spirit of improving our decision-making, which especially at this time is being significantly challenged.
Anchoring bias. We are often over-reliant on the first piece of information we hear. In a negotiation, it is often said the guy who speaks first loses. But, in fact, the truth is that the guy who speaks first sets the anchor, sets the baseline and starts the discussion at the place he wants. If you then mix this one with a high level of the overconfidence bias, where laypeople get confused about their own scientific expertise, you can end up with “It’s going to disappear. One day, it’s like a miracle, it will disappear.”
Availability heuristic. This one states that people overestimate the importance of the information that is available to them. This is the famous, we know what we know, and what we don’t know — well, who cares. What are you going to believe, the truth or your lying eyes? I am in a negotiation with a few venture capitalists on a significant financing. The company thinks it wants $25 million in equity. At one point in the discussion the CEO asks the venture capitalist if that is the right number. The answer was surprising. “If I were in your shoes, I would ask for more.” Huh, never occurred to ask.
Confirmation bias. This is one of the most famous. We often favor prior information over new evidence. It is hard to get someone to change their mind. You can see how this one ties in nicely with anchoring. I have my mind made up, and the last thing I want is new information — which if I accept it, requires me to unwind what I have already spent time putting in place and I now have to start over. And, who in their right mind ever wants to start over? (I suggest this bias does not apply in the realm of marriage and divorce).
Outcome bias. I love this one. Annie Duke, a famous woman poker player, wrote a book called “Thinking in Bets.” One of the key sections describes the confusion players have when they have made the correct bet, the mathematically, psychologically, economically correct bet — and they lose. This is called a “bad beat.” What Duke tells us is to not get confused by the outcome. The outcome and the proper bet do not always act in lockstep.
In the entrepreneurship game, that one is right there at the top of the heap. Remember that for every time you get whacked even though you did the right thing, there are a similar number of times that you did something incredibly stupid, and you lucked out. When that happens, do not get on the stage and tell the audience how brilliant you were. Rather, my suggestion is to bend your head modestly and say, sometimes you just get lucky.
Rule No. 659
“Always cut brisket on the bias.”
— ancient Jewish