Question

Which psychological traps do you believe need to be watched for most in making smart decisions in the management area? Why? Is this different from personal life decisions?

Answer 1

Common Psychological traps during decision making in management

1. Anchoring: Decision making is strongly affected by the first information received.

2. Status –Quo Trap: We are strongly biased towards alternatives which perpetuate the status quo and existing conditions

3. Sunk –Cost Trap: While making personal decisions, we frequently make decisions that justify past choices, even if the past choices are seemingly no longer valid. We are reluctant to admit mistakes, and hence, we keep investing in our wrong choices in a hope that they will yield results. For example, one may realize that one has hired a wrong employee. But rather that firing the employee and making it obvious that the decision to hire was a mistake on his part, one keeps investing in the employees training, hoping that training will achieve the desired results

4. Confirming evidence trap: We seek out facts/information/proof that seeks to validate our initial observations and intuition and we disregard or undermine proofs which contradict them

5. Framing Trap: Our decision is influenced by the way the problem is framed, which is the first step of making any decision

6. Overconfidence trap: We tend to remember our success and forget our failures. Hence, we mostly overestimate our capabilities and strength and underestimate our weaknesses resulting into gross overconfidence

7. Prudence trap: This is evident when the stakes involved are very high. We always try to assume worst case scenario just to be on the safer trap

While these psychological traps are also applicable to personal decision making, personal decision making may suffer from many other kind of biases which may vary from person to person. The kind of biases are diverse and depend mostly on one’s background and past experiences. Moreover, personal decisions doesn’t require external validation by peers/management as often and hence we don’t make conscious attempts to look rational. Hence, personal biases are more subconscious in nature, shaped mostly by ones background.