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What have We learned from Our Mistakes? - Coggle Diagram
What have We learned from Our Mistakes?
Good Decision Making
Process requires us to make tradeoffs, sort through tough scenarios, hunt for good idea, estimate the odds of future states, and answer voice inside your head
Requires you to define the problem and set the goals
Gather information and identify options, normative theories suggest you should keep on collecting info till the costs > benefits. Best way to find the fight option is to have lots of them!
Evaluate the information and the options - ask yourself what really matters to me?
Make a choice, based on goals and objectives may be criteon such as max profit, max satisfaction eg
Kahneman and Tversky theory
3 Heuristics initially - Availability, representatives, and anchoring and adjustment
Availability states, people assess the probability of an event based on the degree to which instances come to mind (recent experiences etc)
Representativeness - people consider the degree to which specific information represents a relevant category or population
Anchoring and adjustment - people make probability judgements by starting with a number that easily comes to mind and adjusting with additional information.
More recent heuristics and biases (2002) were based on the first 2 - availability and representatives. these can be replaced by attribution substitution - if target attribute is inaccessible they replace it with something that easily comes to mind.
Define the problem and set the goal
When the same choices are presented in different frames people have varied preferences - eg sounds better if you advertise the beef to be 75% lean rather than 25% fat
Unless decision makers are able to think about a problem from different perspectives, they may be framed by the information as it appears
When gathering information many times we do not know what we need to know and often gain attention on evidence that confirms our beliefs
Confimration bias, tendency to gather information that supports our hypothesis has been attributed. Overconfidence is the tendency to be more confident in ones beliefs.
overconfidence leads to ppl often perceiving themselves to be better than others in most desirable traits
self serving biases can also influence perceptions of fairness in distribution of scarce resources - eg spliiting of money between two partners
when we are overconfident we think we are better than others, and when we are too optimistic, we don't gather enough information when making decisions.
if we allow contextual effects and order effects to affect us we may not make the best decisions.
Make a choice
Different problems can occur - eg - ignore options, outcomes, info or values. May base it off the fact they think a certain unfortunate event will not happen, may base their choices on immediate emotional reactions that may differ from their true beliefs and values
many ppl let the status quo bias affect decisions (emotional bias) or possibly sunk costs
Implement the choice and monitor results
Escalation of commitment (Staw 1976) is the tendency to continue investing in a suboptimal choice. Decision makers more likely to do this when (1) they are personally responsible for the initial investment (2) initial investment is failing (3) they have publicly announced their position.
The hindsight bias is the tendency to misremember the degree to which one accurately forecasted an outcome. Rmbr being more accurate than we acc were, find it difficult to ignore the outcome that occured
Minimizing mistakes
Combining frames - combine multiple frames into a single choice, allows a more useful way of presenting multiple reference points assessing more stable and robust preferences
Frequency formats - they seem to be easier work with thean probability for most ppl
Disclosure - Conflicts of interest when personal interests clash with professional interests. Common procedure for constraining self interests is closure. Recent studies (Cain Loewenstein and Moore (2005)) suggests that disclosure might fail the conflict of interests problem and possibly make them worse. May be due to that if they disclose their self interests they are less liable to clients.
Accountability - research shows this can be helpful in some situations. However in situations like when they were with an unknown audience may be affected by status quo bias
Most studies show incentives have little effects on performance
Calibration training - Lots of ppl can be overconfident even when it is in best interest to be well calibrated. Feedback can help with calibration