Hammond, Keeney, Raiffa (1998)

Question 1

Traps: framing

Answer 1

the way a problem is framed can influence the choice made
o People are risk averse when a problem is posed in terms of gain, risk seeing when the problem is stated as avoiding losses
o Reference points framing, starting from 0% or 50%
 Avoiding: don’t automatically accept the initial frame, try to reframe
 Try different reference points, neutral redundant
 Examine how others frame it

Question 2

traps: Status Quo

Answer 2

favoring alternatives that perpetuate (continue) the existing situation
o E.g. a merger stumbles because the acquiring company avoids imposing a new management structure on the acquired company
 Avoiding: ask if the status quo servers your objectives
 Ask if you’d choose it if it weren’t the status quo
 Downplay the effort or cost of switching from status quo

Question 3

traps: estimating and forecasting

Answer 3

being over influenced by vivid memories
o Overconfidence: overly confident about accuracy of own estimates
o Prudence: over-cautiousness, when faced with high-stake decision
o Recallability: based predictions on future events on memory of past events
o Anything that distorts your ability to recall events in a balanced way will distort your probability assessments
 Avoiding: be disciplined in forecasting
 Start by considering extremes and then challenge them
 Get actual statistics and carefully examine assumptions

Question 4

traps: anchoring

Answer 4

giving disproportionate weight to the first information.
o E.g. future product sales by only looking at past sales figures
 Avoiding: pursue other lines of thought
 Seek information from different people and sources

Question 5

Traps: confirming evidence

Answer 5

seeking information that confirms existing point of view
 Avoiding: check whether you’re examining all evidence with equal rigor
 Ask a respect colleague to argue against your decision
 Avoid ‘yes-men’

Question 6

Traps: sunk costs

Answer 6

making choices in a way that justifies past, flawed choices
 Avoiding: get views of people who were not previously involved
 Remind yourself that everyone makes mistakes
 Don’t encourage failure-fearing

Question 7

Key Message

Answer 7

Where do bad decisions come from?
- Mostly from distortions and biases, a series of mental flaws that sabotage our reasoning. They are phycological traps as they are unconscious
- We cannot get rid of them, but we can learn to be alert to them and compensate
o Monitoring our decision making