Francesca Gino, the judgment and decision making expert discusses our inflated beliefs about ourselves and how to avoid 'perspective-taking failures'.
Most of us think we are better drivers, more honest and more intelligent than other people. You have found that such ‘inflated beliefs’ aren’t just inaccurate, they can lead to problems. How so?
Virtually all of us have something in common: we think too highly of our skills and abilities. On a wide range of dimensions, we rate ourselves higher than our peers, colleagues, or competitors—to an extent that can seem absurd.
A 1997 U.S. News and World Report survey, for example, asked 1,000 Americans a simple question: “Who do you think is most likely to get into heaven?” Overall, the respondents believed that then-president Bill Clinton had a 52 per cent chance, basketball superstar Michael Jordan had a 65 per cent chance, and Mother Teresa had a 79 per cent chance. Yet someone else ranked even higher: the person completing the survey! Respondents rated themselves as having an 87 per cent chance of passing through the pearly gates—and thus as being more divine, all things considered, than the sainted Mother Teresa.
These unjustifiably high views of our personal competence and abilities can lead us to hold excessively-positive expectations about our endeavours. In research studies, overconfidence has been linked to risky product introductions by managers, overly-risky investments by CEOs, and more-frequent trading by investors. If an entrepreneur believes she is savvier than the competition, she will make overly-risky business decisions that are likely to end in failure. And if CEOs believe they are smarter than other executives at their level, they will plunge ahead with ill-advised mergers and acquisitions.
You have also found that we often make the mistake of ignoring the advice of others. Why is this?
The inflated beliefs we have in our own competence, knowledge and perspective can lead us to pay too little attention to the perspective and knowledge that others have to offer, and this often has costly consequences. In many cases, we would have made higher quality decisions by listening to the opinions of others and by considering their point of view.
One particular area I studied is advice-taking. Managers and leaders rarely make critical decisions in isolation. Instead, they commonly receive input from advisors from both within and outside of their organizations. Like managers, most people consult others for their opinion before making a final commitment when facing a decision. Organizations, for their part, spend substantial amounts of money hiring consultants to provide advice on their complex business problems. Appropriately using advice has been shown to lead to better judgments and decisions. Nevertheless, my work in this area suggests that people often give more weight to their own opinions than to those of others.
On the other hand, when it comes to selecting investments, people have been found to pay too much attention to their financial advisors. Why is this?
My research in collaboration with Don Moore shows that people are open to the advice of others only when their own information is poor and their own opinions are weak—and they in fact recognize that this is the case. The problem is, people are insufficiently sensitive to the quality of the opinions they seek out in this state: they are too willing to listen to the opinions of others, who often have equally-poor information.
Research by Prof. Moore and others has shown that people believe themselves to be better than others on easy tasks and below average on difficult tasks. Based on this evidence, we argued and found that, since people believe themselves to be better than others on simple tasks, they should have little reason to listen to the opinions of others when engaged in simple tasks. On the other hand, on difficult tasks, since people believe that others are better than them, they should be more interested in what others have to say. Specifically, people weigh advice more when the task is difficult than when the task is easy. In fact, they weigh advice too much when the task is difficult and too little when the task is easy.
Our research suggests that when people are desperate for information, they will take whatever they can get, even if what they get is equally uninformative. Perhaps it is for this reason that so many ‘quacks’ and hucksters continue to exist, even in advanced economies with a well-educated citizenry. Sick people who have not found cures in the treatments offered by modern medicine often turn to faith healers and alternative therapies that provide some answers, even if there is little evidence in support of their truth or healing value; and businesses pay vast sums of money to consultants for their advice on complex business problems, even when there is little evidence that the consultants are any better at figuring out what will actually lead to success. More generally, our research sheds lights on situations in which people pay too much attention to the opinions of others like their financial advisors.
Describe the role of ‘incidental anger’ in hampering our decision making.
You believe that the best way to maintain high ethical standards is to keep them salient in our minds. Please explain.
[This article has been reprinted, with permission, from Rotman Management, the magazine of the University of Toronto's Rotman School of Management]