Perception is Reality
Perception is Reality
Photo by Michael Zagaris/San Francisco 49ers/Copyright© 2014 Getty Images
This article originally appeared in Amalgamate: A Mix of Ideas for Your Business, Summer 2015
Quality of decision making was a recurring theme during the conference. One decision trap went by various names: Framing, Bounded Reality, Relative Comparison.. but all of them share the same bias.
The decision making structure/frame we are given goes unexamined.
Here’s an example: Compare these two statements about an opportunity to purchase a competitor’s customer list.
(A.) “If we take advantage of this opportunity to buy Company X’s customer list for $100,000, we have an 80% chance of adding $400,000 in revenue this year but a 20% chance of losing the entire $100,000 investment.”
(B.) “If we miss this opportunity to purchase Company X’s customer list, we lose the opportunity to add $400,000 in revenue this year.”
Economists say we are risk averse when looking at gains and risk seeking when it comes to avoiding losses. The ability to sidestep this decision trap, to pause, step back from a given frame and confidently reframe the structure of the decision is rooted in self-esteem. Confidence.
A recent NFL defection illustrates this further. Chris Borland of the San Francisco 49ers retired from the NFL at the age of 24. Forgoing years of earnings that could have been in the tens of millions of dollars.
He may have been risk averse when that choice was framed as a gain: “You can earn tens of millions of dollars but there’s a strong chance that your quality of life will be severely degraded in middle age.”
He may have become risk seeking if his choice was framed to avoid loss: “We’re prepared to pay you millions of dollars. Dollars that will prevent your family from being doomed to poverty. But you should know there’s a chance you’ll be impaired by middle age.”
My point is that you can train your people to recognize this trap. When they hear something like “there are no other options.” Help them work around the trap. Give them the confidence to take the frame they are given and hold it up to closer scrutiny. When they hear “there are no other options,” they know that there are always other options. Avoid the trap. Check your perceptions and come up with alternatives or find a trusted advisor to help.