JULY 2015/ NO. 1
TAGS: MANAGEMENT, BIASES, GOOGLE, EXPERTS, MASTER CLASS

Management suffers from three crucial biases

“What human beings are best at doing, is interpreting all new information so that their prior conclusions remain intact”, Warren Buffett
“Too often management suffers from three crucial biases: confirmation bias, availability bias and hindsight bias. The aim of strategic intelligence is to challenge these biases and more.”
We are forced to establish beliefs about the world, our lives, the economy, investments, and our careers among others. We deal mostly in assumptions, and the more indistinct these are, the stronger the confirmation bias. The ‘confirmation bias’ is the mother of all misconceptions: It reflects our tendency to interpret new information so that it becomes compatible with our existing theories, beliefs and convictions. We filter out any new information that contradicts our existing views. In strategic intelligence we must overcome this by delivering ‘disconfirming evidence’!
Closely related to the confirmation bias is the ‘availability bias’. This refers to our creating a picture of the world using those examples that come most easily to mind. Take the example of doctors: they have their favorite treatments and they tend to practice what they know. Take the example of members of the board in companies who discuss what management has submitted to them, such as the quarterly results, instead of dealing with more important issues like future scenarios, strategic risks, and potential disruptive technologies. They prefer information that is easy to obtain. Most people still overestimate Google as a source of information. In addition, people prefer incorrect information to no information! Strategic intelligence delivers perspectives based on facts.
A third bias, which is closely related to the confirmation and availability biases, is the ‘hindsight bias’. In 2007, financial ‘experts’ painted a rosy picture for the coming years. However, in the fall of 2008 the financial markets imploded. Those same experts then explained the causes to us, namely Greenspan’s monetary expansion policy, rotten mortgages, corrupt rating-agencies, too low capital requirements at banks, and so on. In hindsight, the reasons for the financial crisis seem painfully obvious. Strategic intelligence is about creating better insight and future-based foresight based on pre-events, the timely identification of Grey Swans, and scenario planning.
If you wish to learn much more you might consider attending our two-day international master class on strategic intelligence, scheduled twice per year in the Netherlands, which is recognized in Europe as the leading training course in strategic intelligence.
“The availability bias caused banks to lose billions from 2007 to 2009. However, the key problem is that it is still ‘business as usual’ at those same banks”
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