Class 7 Flashcards
Decision Making, Underlying Assumption, and Causal Claims
Bounded Rationality
Limited thinking capacities, the information available to us, and limited time
Satisficing
Choosing the most acceptable solution to a problem rather than an optimal one
PADIL
A Problem solving framework (Problem, Alternatives, Decide, Implement, Learn)
Systemic approach
In organizations, there are elements “hanging together” like a system because they continually affect each other over time
Brainstorming
A group sit face to face around a table with a flip chart or whiteboard. No criticism/judgements. All alternatives are recorded for later discussion.
Problem with brainstorming
People aren’t able to defer judgement and don’t offer creative solutions
Brainwriting/nominal group technique
Generate ideas on their own, record them but not share. Participants’ ideas are shared anonymously. People can then build upon them.
Equifinality
Part of Decide on a solution. A condition in which different initial conditions lead to similar effects.
Weighted ranking table
Assigning a weight based on importance and then attributing a score, to get a more accurate rating.
Devil’s Advocate
To provide critique of the proposal
Learn and seek Feedback
Examine whether the decision was truly successful and continues to be the right solution.
Intuition
Represents decisions that are nonconscious and based on thoughts and preferences come to mind quickly.
Common for intuition to be influenced by unconscious biases
Fundamental attribution error
We often over-attribute others’ behaviour to internal rather than external causes.
Ex: Arriving late without offering an explanation. (Judging the character with a lack of concern for external factors)
Self-Serving Bias
We often attribute personal successes to internal causes and personal failures to external causes.
Ex: when getting an A, attribute your success to hard work; when getting a D, attribute your failure to confusing professors
Availability bias
Interpret readily available information as being more important or as occurring more frequently.
E.g., There are fewer homicides than suicides, but we tend to think the opposite.
Representativeness bias
Pay more attention to descriptors we believe to be more representative than the key base rate information (e.g., MBA student writing poetry must be fine arts major in undergrad and will go for an arts management job)
(Includes Gambler’s Fallacy and Hasty Generalization Fallacy)
Ex: Let’s say you’re going to a concert with your friend Sarah. She also invited her two friends, John and Adam, whom you’ve never met before. You know that one is a mathematician, while the other is a musician.
When you finally meet Sarah’s friends, you notice that John wears glasses and is a bit shy, while Adam is more outgoing and dressed in a band T-shirt and ripped jeans. Without asking, you assume that John must be the mathematician and Adam must be the musician.
Gambler’s Fallacy
Misconceptions of chance.
Ex: flipped 5 heads in a row so you are “due” to get tails on the next one… They are all statistically independent.
Anchoring and Adjustment Bias
The tendency to provide estimates based on the initial starting estimate, regardless of its accuracy.
E.g., Earrings you saw is $100, then found a necklace for $75, still over budget but you bought it
Confirmation Bias
Tendency to collect evidence that supports rather than disproves our intuition.
E.g., only search information supporting your hypothesis that playing memory games delay memory loss.
Overconfidence bias
The belief that we posses some unique trait or ability that allows us to defy odds.
E.g., stock market professionals were not more accurate in predicting stock performance than lay people
Escalation of commitment
A tendency to continue to invest additional resources in failing courses of action even though no foreseeable payoff is evident.
E.g., spent $950 on an old car and continue to invest $1500 for other repairs even though the money spent is irrelevant to the cost of new repairs
What are 3 ways to over coming judgement Biases?
Confidence estimates, Trial and error calibration, Healthy skepticism
Confidence estimates
State estimates in intervals rather than as a single point estimate
E.g., 14-22 on time pizza delivery rather than 18
Address overconfidence bias
Trial and error calibration
Improve your success rate and reduce your failure tomorrow, you must learn from your successes and failures today
E.g., weather forecast, adjust meteorological model
Address confirmation bias (keep track both confirming and disconfirming evidence)
