US president Joe Biden’s reluctance to step aside from the US presidential race on the basis of his belief that he was the only candidate who could defeat Donald Trump is a classic case of someone trapped by a cognitive bias.
It’s a common problem. Consider Muhammad Ali’s decision to stay in the ring well best his prime and the disastrous consequences it had for his mental and physical health, or Tiger Woods, who now puts in underwhelming performances in golf tournaments after enduring career-threatening injuries.
Not knowing when to quit is just one example of the traps or cognitive biases that trip people up, especially those in positions in power. It’s an interesting subject ranged over by Irish-born author and former senior executive in global investment banking Nuala Walsh in her well-crafted book Tune In: How to Make Smarter Decisions in a Noisy World.
According to Walsh, the most underestimated risk facing modern society is not economic, political, technological or even climate-related. Instead, it’s human-decision risk, triggered by our tendency to tune out what really matters.
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A substantial body of research attributes disasters to human error, she notes. It accounts for 94 per cent of road accidents, 88 per cent of cyberattacks and 80 per cent of aviation accidents, while medical misdiagnosis is the fourth leading cause of death in the US. Human error, she adds underpins cult followings, scams, scandals, miscarriages of justice and more.
Walsh packs a lot of scientific research into her book and has identified at least 75 biases. To make her core ideas more digestible, she uses the mnemonic PERIMETERS to describe 10.
Power involves your elevation of idols, authorities and experts; Ego is about your commitment to your ideas above others; Risk concerns your appetite for thrills and intolerance of doubt; Identity is your craving to curate image and impress while Memory is your ability to accurately recall data.
Then there’s Ethics, your ability to resist temptation and wrongdoing; Time, your tendency to live in the past, present or future; Emotion, your aptitude to regulate impulses and excess; Relationship, your predisposition to follow the crowd and finally Story, your readiness to accepted stated narratives as fact.
“When you label something, it makes it easier to interpret and analyse. If people can understand their sources of misjudgment themselves, they could avoid a lot of predictable error.
“Once you understand human behaviour you have an unrivalled insight into people, why they make decisions and why they get it right and why they get it wrong. You are also able to explain yesterday’s worst mistakes in order to prevent tomorrow’s,” she tells The Irish Times.
While all of us are subject to bias, the decisions made by those in positions of power have much more far-reaching consequences. “Who pays the price of your success or failure, you or other people? The more power you have, the more other people pay the price for your misjudgment.”
Walsh completed a masters in business at UCD, following a degree in Trinity and, after an assignment with the World Bank, embarked on a 30-year career in financial services.
Recognised among the 100 Most Influential Women in Finance, her 30-year global investments career spanned BlackRock, Merrill Lynch and Standard Life Aberdeen, where she served as chief marketing officer.
She stepped off the corporate ladder a few years ago for a portfolio career as a behavioural scientist, lecturer, business consultant, non-executive board member and speaker, undertaking a fresh masters along the way. Among her interesting roles, she serves on the board of the British and Irish Lions and is on the inclusion advisory board of the English Football Association.
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Her corporate career gave her some strong personal insights that have informed her work. The rules of the game change when you reach the C-suite, was a valuable piece of advice a chief executive officer gave her along the way, something that was borne out through her own experience.
“You see the machinations, the Machiavellism and the narcissism. People have more to lose and nobody wants to give it up. They will go to extreme levels to hang on to power. And don’t expect fairness when you are reaching for a title or a promotion. We are hopeful creatures and no employee wants to think they are a number, and that the company doesn’t have their best interest at heart, but there’s a lot of wishful thinking in that.”
She has seen many of the biases she describes in the book played when it comes to mergers and acquisitions in the corporate world. These include deal fever, belief bias, confirmation bias and groupthink, as well as chief executives under pressure to get a result and inadequate due diligence.
“People tune out common sense in mergers. They tune in to ego, familiarity, convenience and tune out the voice of dissenters. Anyone who is different is explained away. Who’s going to go against that over-excited CEO? He’s just sold the deal to the board. Failure is often attributable to the human factor rather than the earnings factor. Companies don’t plan for human risk, they plan for financial risk. They don’t judge human compatibility to be as important as market or product complementarity. Under pressure, people often make wrong judgment calls.”
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While much has been written about the macho culture that may have driven poor decisions, especially in the 2008 financial crisis, the need to exert power is not gender-specific, she says. “We are all subject to misjudgment and there are as many women as men who are power-hungry and desperate to get to the top for many reasons.”
Decoding bias, Walsh says, isn’t a question of intelligence and personality but it does require becoming intentional. In our hyper-fast, distraction-filled world, we need to slow down, organise our attention, consider alternative arguments and take time out to reflect on important decisions.
Important questions that should be asked are: what biases might hinder interpretation?; what did I hear that sounded odd or wrong?; what aspects should I probe further; and what did I not hear that I should have?
Tune In: How to Make Smarter Decisions in a Noisy World is published by Harriman House
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