You’re About to Make a Terrible Mistake | Olivier Sibony

Summary of: You’re About to Make a Terrible Mistake: How Biases Distort Decision-Making and What You Can Do to Fight Them
By: Olivier Sibony

Introduction

Embark on a journey with Olivier Sibony as he unravels the intricate workings of biases and their impact on decision-making in ‘You’re About to Make a Terrible Mistake’. This comprehensive guide will provide you with the tools to recognize and thwart your own instincts, reducing flawed judgments in both personal and professional contexts. Discover the strategies employed by organizations, like NASA, to diminish biases and enhance their decision-making processes. Learn from cautionary tales of confirmation bias, attribution error, and overconfidence bias that have crippled businesses and uncover how you can use collaboration and process to improve your organization’s strategic choices.

Bias in Business

The book argues that, while it’s impossible to eliminate bias entirely, it’s essential to recognize it and reduce its impact within organizations. The author cites poor business decisions resulting from subjective judgment calls and emphasizes that a bias can be countered by establishing collective processes that counteract individual biases. Becoming a decision architect, rather than a decision-maker, is the most effective way to diminish the impact of bias within a company.

The Danger of Confirmation Bias

In the 1970s, Elf Aquitaine, a French oil company, fell victim to two con artists who claimed to have developed a device that could detect oil from the air. The scam worked because the leaders of Elf Aquitaine were victims of confirmation bias. They wanted to believe it was legitimate, so they actively sought out evidence that supported their belief while ignoring evidence that contradicted it. This bias cost Elf Aquitaine roughly 1 billion francs. The same thing happened in California in 2004 with investors and oil-sniffing planes. Confirmation bias is dangerous, and it knows no boundaries or time periods.

The Attribution Error in Business

The mistaken attribution of a company’s success to one individual or practice, known as the attribution error, can be detrimental to businesses. While leaders tend to emulate the practices of successful companies, it’s difficult to identify which ones lead to success. We also tend to overlook the contributions of supporting employees and environmental factors that contribute to a company’s achievement. To avoid this error, it is more useful to analyze and learn from the failures of other companies rather than focusing on anomalous success stories.

Intuition in Strategic Decision Making

In a high-validity environment, intuition can be a reliable resource for making strategic decisions. However, most strategic business decisions are made in low-validity environments where intuition cannot be relied upon. Psychologists recommend asking oneself whether the environment is high-validity and if sufficient practice has been gained before making a strategic decision based on intuition. Even experts in low-validity environments have predictions that are less accurate than random answers. William Smithburg’s purchase of Snapple serves as a warning of the dangers of relying solely on intuition in strategic decision making.

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