What is the framing effect and how can it impact your strategic thinking?

This is also known as ‘loss aversion’. Most people are more concerned with preventing a loss than they are motivated to take calculated risks to gain big. This paradigm is an issue for founders in every stage of startup life - from cofounder cap table set up to M&A negotiations. Never Split The Difference by Chris Voss is great further reading.

Once at work, I was involved in a project where we had to decide whether to launch a new product or not. The product was innovative and had some unique features, but it also had some drawbacks and uncertainties. We had conducted extensive market research and analysis and had prepared a report with our findings and recommendations. However, when we presented the report to the senior management, we realized that we had framed the product negatively. We had focused on the challenges and limitations of the product and had downplayed its strengths and advantages. As a result, the senior management was skeptical and reluctant to approve the product launch.

It can help motivate people to take action by framing an issue in a way that emphasis the negative consequences of inaction you can make it more likely that people will take steps to address the problem

Negative framing mostly influence us when our thinking pattern follows negative but aggressive thoughts and lead through those feelings. In above gambling example, one might accept the second offer if his thinking is more aggressive towards getting a high gains risking the chances of loosing. It's not very common but can be happen due to high demand and low supply of some service or the money.

Completely agree the use of positive words, changes the brain, and motives and brings out the creative side. Taking time to understand your strengths and tapping into that

One thing I found helpful to overcome the framing effect was to reframe the product positively. I realized that we had unintentionally biased our report by using negative words and phrases, such as "problem", "risk", "issue", "barrier", "weakness", etc. I decided to rewrite the report by using positive words and phrases, such as "opportunity", "benefit", "solution", "advantage", "strength", etc.

I think we tend to focus on the framing effect a lot because we are searching shortcuts for problems where we don't know the exact knowhow to tackle them. We tend to rely on what the mind directs us rather than rationally thinking on that

You would find it useful to gain a proper understanding of the problem and its analytical formulation. Daniel Kahneman and Amos Tversky, prominent researchers in behavioral economics and Nobel laureates, pioneered the study of the framing effect and introduced the concept of prospect theory. This theory, expressed by V(x) = p(x) ? v(x), explains that individuals make decisions not solely based on the absolute value of outcomes but on how those outcomes are framed. Their research illustrated that people tend to be risk-averse when potential gains are emphasized (v(x)), and risk-seeking when potential losses are emphasized (v(x)). Understanding this concept can significantly enhance your grasp of decision-making processes.

I also made sure to highlight the unique value proposition of the product and how it could meet the needs and expectations of our target customers. I used examples and testimonials from our pilot testing and customer feedback to support our claims. Not only that, but I also addressed the potential concerns and objections of the senior management by providing evidence and data that showed how we could overcome or mitigate them. By reframing the product positively, I was able to change the perception and attitude of the senior management toward the product. They became more interested and enthusiastic about the product and agreed to proceed with the launch.

The conventional approach is to provide training and workshops to educate employees about the framing effect. This helps raise awareness and provides them with tools to recognize and mitigate its impact on strategic thinking. Another approach is to create clear decision-making guidelines that explicitly mention the framing effect. These guidelines can serve as a reference for employees when making strategic decisions. An innovative solution is to use a gamified learning platform. This platform would engage employees in interactive scenarios and challenges that illustrate the framing effect's impact on decision-making. By making the learning experience fun and interactive, it can be more memorable and effective.

If you want to make better decisions, you can try saying the problem in different ways, using different words, views, or scenarios. This can help you look at the problem from different sides and avoid being biased. Also, you should look for different information from different places, people, or experts. This can help you learn more and think of different options. Finally, you should get feedback and think about it from yourself or others to check your thinking and see if you made any mistakes or missed anything. This can help you grow from your outcomes and experiences.

Overcoming the framing effect can have many benefits, such as: 1. Making more rational and consistent decisions based on objective facts rather than subjective emotions. 2. Avoiding being manipulated by others who use framing techniques to persuade or influence us. 3. Reducing cognitive dissonance and mental stress caused by conflicting or contradictory information. 4. Enhancing our critical thinking and problem-solving skills by considering multiple perspectives and alternatives.

I would like to add that I'm very grateful for this opportunity to express myself and to learn from others. I think this is a wonderful platform for exchanging ideas and perspectives, and I hope to continue being part of this community. I have gained so much knowledge and inspiration from reading the contributions of other participants, and I hope that my input has been helpful and valuable as well. I'm always eager to hear feedback and suggestions on how to improve my writing and thinking skills, so please feel free to reach out to me anytime. Thank you for your time and attention, and I look forward to hearing from you soon!