Cognitive bias – understanding how we fool ourselves

A client of mine told me: ‘My customers are going to love the new service I’m launching.’

‘How can you be so sure’ I asked.

‘How could they not like it?’ was his confident reply.

Ok, his knowledge of his customers may well be extensive, but does he know what they really want? Has he asked them? His ‘How could they not like it?’ gave away the fact that his own enthusiasm for the service was playing a big part in convincing him that it would be a success.

It’s a common mistake when doing sales projections. We are so determined to succeed that we become prone to false optimism, unrealistic targets suddenly seem achievable. This skewed thinking is an example of what psychologists call cognitive bias.

Unfortunately, cognitive bias takes many forms. Even if my client had done some research, he might well have succumbed to confirmation bias – the tendency to search for and interpret information in a way that confirms what he already thinks. Added to this, he might not realise the power and influence of his own enthusiasm for the new service. Psychologists refer here to the empathy gap – our inability to fully understand the role of our emotions in decision making. Research also suggests that even if he had received some negative feedback from customers, he might well have succumbed to conservatism bias –  the tendency to revise plans insufficiently in the face of unfavourable evidence.

When he finally managed to tailor a service to suit his customers, he would still have to decide on a price, and here would face other hazards. The IKEA effect is the tendency to over-value things that we have made ourselves, regardless of their attributes. And once this is done, it’s easy to fall into the trap of the endowment effect, the tendency to demand a higher price for something than people are willing to pay.

If you’re feeling smug at this point, thinking ‘Huh, I don’t do that sort of thing’, be warned. In its many forms, cognitive bias can affect us all. There’s even a name for the skewed thinking that leads to our smugness, it’s called bias blind spot – the tendency to see ourselves as less biased than other people.

As a coach, part of my role is to listen out for cognitive bias. If I hear it, I ask questions like ‘How do you know?’, or ‘What makes you think that?’ I provide a more detached perspective, and my clients get an opportunity to talk through and reflect on their thoughts, feelings, plans and desires.

You will find a list of cognitive biases here.

You will find more information on coaching here.

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