Beware… You Only See the Facts You Want to Believe

Psychologists Daniel Kahneman and Amos Tversky found that when we are aware of our own biases, we can reduce and counteract their effects.

The two, profiled in Michael Lewis’s book, The Undoing Project, were pioneers in discovering the decision-making mistakes people make under risk and uncertainty. Kahneman and Tversky proved that people often don’t make logical, rational decisions. Instead, decision makers are subject to many biases. Among the most common biases is confirmation bias, which is the tendency to see and remember information that confirms our pre-existing beliefs or hypotheses

In other words, we see the facts that confirm what we think to be true and tend to ignore other facts. Even people who pride themselves on using “just the facts” to make decisions fall prey to confirmation bias. We interpret ambiguous evidence as supporting our beliefs, subconsciously ignore or forget contradictory evidence, and selectively forget evidence that refutes our beliefs.

Confirmation bias is especially dangerous in fast-changing markets, because our beliefs about what will happen in the future are shaped mainly by what we’ve experienced in the past. When your business environment is changing fast, it’s very easy to see the evidence that you should keep doing what you’re doing, and to overlook evidence that difficult changes are needed.

You’re emotionally invested to your existing products, services, capabilities and brand, so you tend to see evidence that your historic sources of competitive advantage are still valuable. You tend to listen more carefully to the customers who still love you. You fail to notice new competitors, who look and behave differently than your traditional competitors. You find reasons to dislike or discount your competitors’ new offerings and approaches—saying things like “their product is missing important features that we offer,” or “they only cater to the low end of the market.”  This is dangerous.

Here’s an example: senior leaders of a manufacturing company that I once worked with believed strongly that their business-to-business customers would continue to favor domestic suppliers. “It’s the relationship,” they said, “customers value the fact that our technical support reps can be there within two hours when they call. They can’t afford to leave us for an offshore supplier.” Despite the evidence—the rising availability of less expensive imported product, the cancellation of important contracts, and the presence of overseas suppliers at trade shows—the company continued to believe it was “safe” from imports, until it was too late.

When the stakes are high, it’s crucial to combat your natural tendency to see what you expect to see.  Here are seven things you can do to mitigate the impact of confirmation bias:

1.     Insist on disagreement and debate. Assign a team to “disprove” the predominant theory or to refute the most popular views on what will happen next in your markets. 

2.     Hire people from other industries and diverse backgrounds. Involve them in strategic conversations and ask for their views. Resist the urge to convince them that your way of thinking is right. Instead, try to understand their perspectives. Feel what it feels like to believe what they believe, and to see what they see.

3.     Seek the advice of outsiders who you can count on to tell you the truth, rather than falling in line with the internal prevailing wisdom.

4.     When you encounter unexpected data, market information, or anecdotes from the field, identify three potential causes. This prevents jumping to a single conclusion, yet does not create so many potential causes that you don’t have time to thoroughly investigate each one to find the true cause. 

5.     Question the conclusions and validity of statistics and research. I’m taking currently an online data science course at UC Berkeley, and I’ve learned that the answer you get depends heavily on who’s asking the question, and how they framed that question. It’s very easy for even reasonably competent data scientists to draw errant conclusions, or to unintentionally explain their conclusions in a biased way.  Don’t accept everything they tell you.

6.     Question authority. Just because the boss, the market research, your own salespeople, your operations or R&D group tell you that the facts support their point of view doesn’t mean that they are right.

7.     Communicate to others (and believe in your own mind) that you are ready to accept that your “truths” and beliefs may be wrong. Look at all the facts, even the ones that make you uncomfortable.

Confirmation bias is dangerous, yet we all fall victim to it. I hope that these seven tips are helpful.

Are there any other methods that you use to stay objective when making important decisions?

Amanda Setili is president of strategy consulting firm Setili & Associates. She is author of Fearless Growth: The New Rules to Stay Competitive, Foster Innovation, and Dominate Your Markets, and The Agility Advantage, How to Identify and Act On Opportunities in a Fast-Changing World. 

For more strategies, videos and free materials, please visit www.setili.com. Or, contact Amanda to discuss how she works with companies to improve profits, performance and growth.