Business

When stakes are high, think hard, go slow

Reading Time: 3 minutes

entrepreneurWe humans predictably err as our rationality is bounded. Within the bound we behave well and at time our behaviour seems Irrational due to certain economic and social forces.

Our brains are lazy so people love doing nothing and due to this fact choice design plays a pivotal role in our lives.

We seldom change default settings of our phone, TV or life as we are marred by status-quo bias, which we commonly call as inertia.

So in order to take advantage of this, give people simple decisions to make and make a default choice for them… chances are they will stick with the same.

Even if we intend to change, that’s only a bit, we opt for a path of least resistance, and later our brain tells us stories to build coherence with our actions in self-support.

Thus our forecasts about change and impact are flawed and biased.

Most of our plans that we make to work on a project has something called “planning fallacy”, that tells us that we have a systemic tendency towards unrealistic-optimism about the time it’ll take to complete a project…. strangely enough this will happen to you even if you know about planning fallacy!

Simple economic theory suggests, incentives are the key drivers of economic forces, but we human are also subjected to social forces, so in addition of responding to incentives humans also get influenced by nudges.

Thus context is much more powerful than cognition. People make good choices in context in which they have, (a) experience (b) good information (c) prompt feedback.

Whatever we experience is essentially a smart-aggregation of our memory over time.

We don’t remember or recall everything in a particular experience. What matters most in any experience is: (a) priming: how the experience started (b) peaks: what were the high-points in that experience (c) end-point: how did the experience ended?

Because prime-peak-end points are the ones that matter most hence, it is important to bring certain break or reset points to make the experience less prolonged and more memorable.

Also normally we have duration-neglect to it to have good-experiences in smaller packages, rather than a very good bigger experience ending on a low note thus spoiling the whole fun with no regards for the time, we had fun for long.

That’s a bit unfair but so is the life

Similarly, we are prone to perceptual as well as cognitive illusions and we do get befooled by them quite occasionally.

In nutshell, irrationality is part and parcel of life, if we observe it ourselves, there is nothing wrong with us, but it does mean that our understanding of human behaviour can be improved by appreciating how people systematically go wrong.

So when stakes are high… Think hard, go slow.

shekhar

Shekhar Chandra is an IIT-Delhi alumnus.He has over a decade of entrepreneurial experience and leadership excellence. He is also a member of Big Wire team. Reach him at YouLEAD)

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  1. Pingback: How to avoid mistakes in decision making? - BigWire

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