More thoughts on our thinking

- rational conveys an image of greater deliberation, more calculation & less warmth; with a person's beliefs and preferences being reasonable

- yet non-psychologists, especially economists, look at rationality as being internally consistent rather than reasonable

- humans are not irrational but need help to make more accurate judgements and better decisions

- people act in ways that seem odd, ie not in their long-term interest, but they could have a good reason to do so, ie people choosing not to save for old age or exposing themselves to addictive substances

- to be rational requires more effort

. Not understanding the way most people learn. Based on a Chinese proverb, ie

"...Tell me, I'll forget; show me, I'll remember; involve me, I'll understand..."

i) Tell me, I'll forget..... hearing and listening are not one of the stronger senses in brain and nervous systems.

ii) Show me, I'll remember...seeing is one of the strongest senses in the central nervous system. [brain].

iii) Involve me, I'll understand...this would include all of the senses possible....skin, hearing, seeing, feeling, touching, smelling, taste and etc....also involvement means in most cases experiential learning. Which indeed translates to: Involve me, I'll understand.

. Not understanding cognitive bias in decision-making. The entire way the brain processes information is through a series of approximations, ie cognitive biases. Thus it is critical that we understand our biases, ie the way we distort & interpret the signals we receive. We need to focus more on imperfections in judgment (cognitive bias) rather than errors in measurement. We all have cognitive biases such as

- Confirmation bias (focus on evidence that supports our point of view, beliefs, etc)

- Anchoring (too much weight on 1 piece of information)

- Heuristic effect (for a preferred option, we minimise risks while exaggerating its benefits; do opposite for something we dislike; this applies especially when under pressure)

- Motivated errors (involves intentional deception, self-deception, ie decisions are biased in direction of self-interest)

- Salient analogies or survivorship (do not properly assess mistakes & focus on repeating past successes &/or most recent experiences)

- Hindsight or intuition (too much confidence on in past experience; habit; rewriting the past ; routine thinking; gut feeling)

- Halo effect (over-simplify a story plus link results to personalities; sequence matters, ie first impression dominates; good/bad people do good/bad things)

- Stereo-typing (a typical personality description for a group of people, ie classifying them all as the same)

- Automation (too much faith in accuracy of output from machines & computers)

(Fiona Carruthers2011; Gokce Sargut et al, 2011)

. Not taking into account individual's cognitive biases, ie mental filters that are self-serving (Michael Watkins et al, 2003). There is a tendency to see the world as we'd like it to be rather than as it truly is. The human mind is a notoriously imperfect instrument. For example, we ignore or underestimate approaching problems, such as

- harbouring illusions that things are better than they really are. It is assumed that potential problems will not actually occur and/or the consequences will not be severe enough to merit preventive measures, ie we'll get by. A good example is how the attitude to climate change has changed very quickly.

- giving a greater weight to evidence that supports our pre-conceptions and discount evidence that calls those pre-conceptions into question

- paying little heed to what other people are doing. This means overlooking vulnerabilities to predictable surprises resulting from others' decisions and actions

- prefer to be creatures of the present, ie maintain status quo while downplaying the importance of the future. This undermines motivation and courage to act now to prevent some distant disaster, ie avoid a little pain today then incurring a lot of pain tomorrow

- not feeling compelled to prevent a problem that is not personally experienced or is not perceived to be real. In other words, acting only after experience of significant harm to ourselves or those close to us. Furthermore, self-serving bias can be particularly destructive when there are conflicts of interest.

. Managers not being mindful of their unconscious biases (source: Mahzarin Banaji et al, 2003). They need to keep in mind that their intuition is prone to

- implicit prejudice which will strongly favour dominant and well-liked groups

- in-group favoritism which will favour people in their own group

- over-claiming credit (over-rating individual contribution) which will favour your own efforts

- conflict of interest which will favour people whose interests affect your own

Mega-projects can suffer from cognitive bias with many projects having their economic benefits substantially reduced by running behind schedule, over budget, etc.. The bigger the project like airports, dams, IT networks, high-speed trains, etc, the greater the chance of this happening, ie it is estimated that 70 - 90% of mega projects have cost blowouts. Some examples include

- London's Jubilee Line Underground extension was 80% over budget in real terms

- Denver International airport (200%)

- Canadian Firearms Register (590%)

- Sydney Opera House (1,400%)

- Boston's Big Dig (200%) (Bent Flyvberg, 2017)

This occurs in both the private and public sector projects irrespective location.

This is linked with poor planning, ie business cases with inadequate forecasts, poor front-end planning, cost-benefit analysis, social and environmental impact assessments, decision-making, etc.

NB Garbage in, the garbage out

Many mega-projects can be technologically successful but financial failures

"...dams on average cost overrun of 96% combined with an average demand shortfall of 11%, and of the rail project an average cost overrun of 40% combines with an average demand shortfall of 34%......the Channel Tunnel, the longest underwater rail tunnel in Europe, connecting Britain and France...... capital costs were 80% over budget, and financing costs are 140%. Revenues started at a dismal 10% of those forecast, eventually growing to half the forecast. As a consequence, the project has proved financially non-viable, with an internal rate of return on investment that is negative, at - 14.5%, with a total loss to Britain of $US 17.8 billion......an economic and financial expost evaluation of the Channel Tunnel......concluded that the British economy would have been better off if the tunnel never been constructed..."

Bent Flyvberg, 2017

Large-scale ITC projects are very risky; 1 in 6 projects have cost overruns in excess of 200% in real terms

"...total project waste from failed and under-performing ICT projects for the United States alone has been estimated at US$ 55 billion annually by the Standish Group..."

Bent Flyvberg, 2017

Delays cause both cost overruns and benefit shortfalls. For example, delays in dams are on average 45%, eg if the dam was planned to take 10 years from decision to build until operation, it will take 14.5 years on average.

It has been estimated that a 12 month delay, or other extension of the implementation phase, has an increase in percentage cost overrun of around 5% (Bent Flyvberg, 2017), eg a 12 month delay for London's US$ 26 b. Crossrail project would cost another US$ 1.2 b. or $ 3.3 m per day.

"...many projects end up in the so-called debt trap where a combination of escalating construction costs, delays and increasing interest payments make it impossible for project revenue to cover costs, rendering projects non-viable. This is what happened to the Channel Tunnel and the Sydney Lane Cove Tunnel..."

Bent Flyvberg, 2017

Despite all the evidence about the problems with megaprojects, there are 4 reasons, or sublimes or cognitive biases, why decision-makers are attracted to mega-projects, ie

  1. i) technological sublime (engineer and technologists get a lot of satisfaction from building large and innovative projects and are pushing the boundaries of what technology can do, eg building the tallest building, the longest bridge, the fastest aircraft, the largest wind urban; they like to be first in anything)
  2. ii) political sublime (the satisfaction politicians obtain from building monuments to themselves and their causes; most mega-projects are media magnets and give the politicians publicity, media attention and visibility, ie help with re-election

"...Mega projects are manifest; they garner attention and lend an air of proactiveness to their promoters..."

Bent Flyvberg, 2017

iii) economic sublime (the delight different stakeholders get from making lots of money and creating jobs from mega-projects; these stakeholders include financiers, business people, trade union officials, contractors, engineers, architects, consultants, construction and transportation workers, bankers, investors, landowners, lawyers, developers, etc)

  1. iv) aesthetic sublime (the pleasure designers and people who appreciate good design get from building, using and looking at something that is very large, iconically beautiful, etc)

There is a need to expose managers to the unconscious mechanisms that underlie biased decision-making. Furthermore, managers need to expose themselves to images and social environments that challenge stereotypes

. We need to understand our prejudices (re gender, race, skin-colour, size, ethnicity, religion, age, weight, family, etc) can work against change. Our prejudices result in stereotyping. To test your prejudices, go to implicit.harvard.edu and click on demonstration. The best indicator of the test's validity is likely to be its predictions of behaviour, eg a white preference could mean sub-optimal treatment of non-whites in workplace, etc. Most people are not keen to express their biases openly. It is claimed by

"...Most of today's racial discrimination stems not from attempts to harm anyone from selective helping. We're each part of several groups, defined by race, gender, religion, family, alma-mater and so on, and when we go out of our way to help a group member, we don't see that as a bad thing. We're being "good"people. But such selective privileging reinforces the status quo..."

MahzarinBanaji et al, 2013

. Need to understand the difference between explicit and implicit learning. Explicit learning involves being informed beforehand, ie you are first taught how to do it and then deliberately practise it; while implicit means learning as you perform. Generally, implicit learning takes over from explicit once it is practised enough: you are performing without thinking. The basal ganglia is where implicit learning partially resides. When under stress, the explicit learning tends to dominate. This can lead to panicking when stress wipes out our short-term memory, ie thinking too little. On the other hand, choking occurs when thinking too much about something and involves loss of instinct.

. Not realizing that 4 different thought processes can be involved in decision-making, ie formal rational choice, random, strategic reasoning and spontaneous emotional response. Remember: what is rational for one a person may not be for another, ie rationality is not common knowledge. This is claimed to be the source of conflict between logic and intuition.

. Lack of acknowledgment of emotional chaos that will occur as relationships, organisational structure will change, etc

 

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