Hidden Traps in Decision Making

Hidden Traps In Decision Making

Tori Jones

As an executive, making decisions is your most important job. It is important to understand how your mind works so you don’t fall into unconscious decision-making traps. Once you know what the traps are you can watch out for them and catch them before you have a judgment disaster on your hands.

The first trap mentioned is the anchoring trap. The article explains that when considering a decision, we give a disproportionate weight to the first information we receive. To lessen the effect of anchoring, it would be practical to view a problem from different perspectives or alternative starting points. Also, a person could think on their own before asking others so they do not become anchored to someone else’s idea. Essentially be open minded.

The second trap the article discusses is the status-quo trap. Choosing this trap saves energy. The status quo trap favors maintaining the current situation even when better alternatives exist. Research shows that people are more likely to choose the status quo when two alternatives are presented as opposed to one. To lessen the pull to default to what is, it is smart to always remind yourself of the objective, and ask yourself whether you would choose the status quo alternative, if in fact it was not the status quo.

The next trap is the sunk-cost trap. We tend to make choices that support our past decisions, even if those past decisions no longer seem valid. This trap highlights our habits to stick with previous choices because too much has already been invested. This bias shows up often in banking when a borrower's business runs into trouble. In this case, the initial lender will tend to advance funds more readily in the hope of confirming that the original decision was the right one. Banks have wised up to this and have introduced a policy that the loan is reassigned to another banker when problems appear or someone for whom the original decision is not worth saving. As...