This paper examines the psychological and cognitive factors that impair decision-making, even among intelligent individuals. Drawing on Michael Mauboussin's analysis of smart people making poor choices, as well as research by Kahneman and Tversky, the paper argues that the human brain evolved for conditions vastly different from the modern world, making it ill-suited for today's rapid, complex environment. The paper explores how confirmation bias, reliance on prior experience, and an inability to "think outside the box" further hinder sound judgment. It also offers practical suggestions for strengthening cognitive flexibility, including embracing novel experiences and challenging mental routines.
Within any organization or process, decision making plays a purposeful role: it is the result of taking in stimuli, choosing from alternatives, and arriving at a final course of action — or deliberate inaction. This is true in the small business world, multinational corporations, individual life, and even government. Another way of looking at decision making is that it is ingrained within the human psychological perspective. From a cognitive standpoint, any decision-making process must be continuous and evolving as the individual or organization reacts to the environment and the stimuli it receives. From a normative perspective, there is a logic and rationality involved in this ongoing process. We may or may not agree with that logic, but for the individual or group making the decision, the process is always present (Kahneman & Tversky, 2000).
Michael Mauboussin, in his article "Smart People, Dumb Decisions," analyzes how genuinely bright — and sometimes brilliant — people face two major obstacles that affect the way they make decisions. First, the human brain evolved over millions of years to make decisions that have absolutely nothing to do with modern life. Second, the world we live in, with its speed, complexity, and technological evolution, changes so rapidly and unpredictably that it is difficult to keep pace (Mauboussin, 2010). This combination of biology and environment often makes it difficult to exercise sound judgment that is both workable and cognitively wise.
It is somewhat ironic that we can evaluate the judgments of others far more accurately than we can evaluate our own. Research confirms that we tend to validate views based on our personal experience and prior knowledge, while limiting or downplaying information that contradicts our pre-existing worldview or hypothesis. Many describe this as a confirmation bias or a self-fulfilling prophecy. It is clear that the way we tend to make and justify our own decisions stems from our difficulty in stepping outside the boundaries of our own experience and entertaining genuinely different sets of judgments (Binazir, 2010; Mauboussin, p. 27).
"Black Swan model illustrates need for open thinking"
"Practical strategies for building cognitive flexibility"
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