Bad business decisions can happen under the radar. They can happen when you assume that what you know is all there is to know, when research is biased, and when you see causal relationships that don't exist. These same psychological traps can explain why people are prone to believing conspiracy theories that may be harmful or untrue. Avoid these traps, and you'll have a better chance at growing your business.
It’s easy to make fun of conspiracy buffs, but I can relate. I was in college when the movie JFK came out, and I was enthralled. I had to know if Oswald really did it. I didn’t want to be fooled by an official account if it wasn’t true. And the detective work involved in “finding the truth” – well that’s plain exciting. It scratches the itch that comes with being intellectually and emotionally bored.
But I was in college, and papers were due, and there were exams, and I probably liked some guy, and my friends were likely going out that night… so I never got further than buying a book and putting it on my shelf.
And then I went to grad school, immersed myself in choice theory, institutional analysis, the laws of probability, and the scientific method, and my interest in conspiracy theories shifted from whether or not I should believe them to why they exist in the first place.
And now, having immersed myself in solving business problems for the past decade or so, I realize that the psychological mechanisms that propel harmful and untrue conspiracy theories can also explain why business decisions fail. Here are some biases and missteps that you need to avoid.
1. Assuming that what you remember is all there is (the availability heuristic). Some will say that, in the end, all you can trust is your gut. The gut stores your experiences, after all, and that’s not nothing. But unless all time offers you is a split second to make a decision, I whole-heartedly disagree. To work efficiently, our brains sift through mounds of information each day and store only some of it. But as our brains are sifting, they don’t know what information will be relevant in decisions that don’t exist yet. Research tells us that we are more likely to recall events that are emotionally charged, even if they’re unusual, or emotional only to us. Conspiracy buffs, being human, are more likely to recall information that is personally frightening or worrisome, but forget information that’s objective or boring – when the boring stuff might hold all the right answers. The rest of us are prone to this as well. Your “gut” recalls much less than half of all your experiences. The first step toward making the best decision is recognizing that what you remember isn’t all there is to know.
2. Cherry-picking information (confirmation bias). When I was interested in who shot JFK, I didn’t hunt down a book that explained how Oswald did it. I specifically chose a book that claimed he didn’t. If I’m honest, I’m not sure I cared about the truth at all. I just wanted a juicy narrative to capture my imagination. Business decisions are often made with the same mindset. I’ve more than once submitted hard data to stakeholders who rejected it because it didn’t line up with what they “already knew.” They would then base their decisions on a few juicy anecdotal stories that had been circulating through their company. Those business decisions didn’t pan out too well. I know because I also analyzed the performance data that said as much.
3. Seeing causal relationships that may not exist (the illusion of causality). It’s interesting to me when conspiracy proponents offer questions but not answers. Like: “There are way fewer 5G facilities in Africa than in other places. Wonder why the Coronavirus hasn’t hit there as hard?” They could come right out and say that 5G is linked to the spread of the virus, but they don’t. Instead, they pose a provocative question – one that urges readers to see causality where it may not exist. Our brains want to see causal connections; knowing the causes of things gives us a sense of control. But just because two events happen simultaneously (for example, you raise your service prices and fewer people buy, or site traffic goes down during a specific marketing campaign) doesn’t mean that one necessarily causes the other. You need more evidence to determine that. So before rapidly pivoting to your next move (which may be a worse move), make sure you’re not assuming a relationship that isn’t there.
These days, conspiracy theories are like prescription pain killers: more powerful and potentially damaging than ever before. They have vehicles of diffusion that didn’t previously exist, like 8kun and the dark web, but also plain old vanilla Twitter. And they’ve got advocates – many in positions of power – that douse gasoline on them to ensure their survival.
Bad business ideas are no different. Nascent ideas can travel through channels of communication so rapidly that they become reified before they hit puberty. And thanks to the illusion of expertise, we’re likely to assume that anyone who’s got a lot of social media followers, or who’s published a book, is automatically an authority whose ideas don’t need to be vetted.
It’s ok to doubt, question, and challenge. But if you’re going about it all wrong, you could be falling into a trap. You could be choosing an option that feels right over one that is right. And your business – including its employees and investors – could fall into that trap with you.
These things can happen to the best of us, and they happen under the radar. To learn more about how to gather the right information to make the best business decisions, reach out!