Decision Making / 1 / 1.5 / 1.5.4

1.5.4 Cognitive Failure

Here we are concerned with complex environments wherein there is always a threat, as our story is meant to suggest, that decision makers might apply flawed mental models or inappropriate heuristics to the problems they face. Decision makers, like all humans, can suffer from various forms of cognitive failure, failure to observe accurately and react appropriately to the world in which they are immersed. Bias is just one form of cognitive failure. Khaneman, et al., (1982) and Barnes (1984) note the roles of the following in cognitive bias:

• Availability. People judge that an event is likely if instances of it can be recalled easily, despite evidence of occurrences being quite rare. In a sense, we are observing here that those easy-to-understand things are easy to remember, and things that are easy to remember are seen as occurring frequently.
• Hindsight. Knowledge of an event’s occurrence increases the perception of that event’s inevitability. So, we are not surprised about what happened in the past.
• Misunderstanding the sampling process. We tend to attach too much credibility to sparse occurrences of events, and place too much reliance when building theories on too few data points.
• Judgements of correlation and causality. Too often, we tend to attribute causes to un-correlated events. See Section 1.5.5.
• Representativeness. This failure stems from our failure to ask the question… ‘how representative is this of the underlying process?’

Powell (1995) observes that there is a common overweighting of the heuristic process:

‘… if it is based in experience then we believe it to be true. Direct experience is unduly weighted in decisions… [one consequence of this is that] as managers we tend to be very wary of probabilistic measures, and seek certainty from our advisors where none can exist. We distrust any opinion with an associated probability, possibly because we seek the specious certainty of expressed knowledge. The comforting illusion of control over an uncontrollable world is a powerful one (Powell, 1995: 36)’.