Your Business
Some years ago I learned the hard way not to offer an opinion or make a decision unless it could be backed up with some rational explanation. Saying and doing what one believes intuitively to be right is simply not enough.
I was an impecunious freshman at a place 1,500 miles away from my hometown, showing up for the first time at a college I had never seen, in a distant state I knew nothing about. Fortunately, the four years spent there would turn out to be a valuable learning experience both inside and—even more important—outside the classroom.
Since most of my friends back home had felt much the same way, I was accustomed to expressing opinions without being challenged. When we talked with one another, we generally agreed. But my new college fraternity brothers were different. They had their own well-thought-out beliefs, and much of what I offered was questioned. As a result, I learned a lot about humility while trying to explain myself.
That fraternity also had a tradition of meeting behind closed doors periodically to hear an oral presentation from each member. When my turn came, I offered what I thought would be a brilliant display of intellectual and literary ability, only to be savagely ripped apart by my bored buddies. The sad part of it was that they were right: too much opinion and not enough corroboration. It was an embarrassing but useful learning experience.
That brings us to Daniel Kahneman, a psychologist and economist who won the 2002 Nobel Prize in Economics and who writes extensively about forming opinions and making decisions. Business executives would find his bestseller “Thinking Fast and Slow” interesting.
In a recent interview with Investor’s Business Daily, Kahneman told journalist Curt Schleier that most people allow groupthink as well as poor processes and confusion to muddle their judgment, that poor decision making is prevalent in business, that overconfidence in forecasting is systemic and that business is rife with bad calls.
He told IBD that meetings are often flawed because the first person to speak steers the outcome. To avoid groupthink, Kahneman recommends that that each participant form an opinion in advance and pass that along to the leader, who then would ask for discussion of the separate opinions before a final decision is reached. “The idea is to get people to reach conclusions in a more disciplined way,” he said.
According to Kahneman, first impressions when hiring personnel often lead to wrong decisions. Identical questions, carefully designed to discover each candidate’s ability to handle specific job requirements, should be asked of all candidates in the same order. And, if there is more than one interviewer, each should make their recommendations independently without group discussion.
He also pointed out that “people are overconfident in their judgments.”
“They make mistakes,” Kahneman said, “because they are generally overly optimistic when they make plans and absolutely believe those plans will come through.
“The confidence people have in their beliefs is not a measure of the quality of evidence, but of the coherence of the story the mind has managed to construct. We think, each of us, that we’re much more rational than we are.”
Kahneman certainly gives us a lot to consider.
Jack Goodhue, management coach, can be reached at goodhue@aol.com