Written by Anthony Demangone
If you study any disaster or failure, you'll usually see a series of unfortunate events that led to the ultimate collapse of the credit union, bank, insurance company, or Wall Street firm.
How could they do that? How did they miss all the warning signs?
Well, it turns out that we humans have a great capacity for missing signs. For ignoring warnings. For convincing ourselves that everything is just peachy, just as we are entering the danger zone.
This human quality/frailty is discussed in this wonderful article - Deadly Mind Traps (Psychology Today).
The article outlines six ways in which we unwittingly march headfirst into disaster.
- The Domino Effect
- Situational Blindness
- Double or Nothing
- Bending the Map
Here's a snippet that centers on "Double or Nothing."
4: Double or Nothing
In February 2003, a group of foreign tourists visiting northern California prepared to watch a hot-air balloon take off at the Domaine Chandon vineyard near Yountville. Shortly before 8 a.m., the ground crew were untethering the inflated balloon when one of the tourists, a 33-year-old Scot named Brian Stevenson, grabbed hold of the basket, apparently in an attempt to help. The pilot lit the propane burners, and with a roar of gas and flame the balloon began to rise.
Stevenson held on, despite a chorus of shouts from the ground urging him to let go. The balloon rose quickly: 10 feet, 20, 40, 100. The empty air below Stevenson's dangling feet stretched to a horrifying distance. At 300 feet, he could hold on no longer. His fellow tourists watched helplessly as their companion's body plummeted fatally to the earth.
If a balloon unexpectedly begins to rise, a person hanging on can follow a deadly logic: When he's only been lifted a foot or two into the air, he may think, Oh, that's no big deal, I can just step down if I need to. Then suddenly he's at six feet, and thinks, I could twist an ankle, I'd better hang on and wait until it gets lower. Before he knows it, he's at 25 feet, realizing that a jump would cause serious injury at best.
To avoid this predicament, balloon ground-handling crews are trained always to observe an inviolable rule: Never let both feet leave the ground.
The runaway-balloon problem is a manifestation of our irrational assessment of risks and rewards. As Daniel Kahneman and Amos Tversky first pointed out back in 1979, we tend to avoid risk when contemplating potential gains but seek risk to avoid losses. For instance, if you offer people a choice between a certain loss of $1,000 and a 50-50 chance of losing $2,500, the majority will opt for the riskier option, to avoid a definite financial hit. From the perspective of someone dangling 20 feet in the air, the gamble that they might be able to ride the gondola safely back down to the ground seems preferable to a guaranteed pair of broken legs. But in the moment, they can't factor in the price they'll pay if they lose.
The author does a wonderful job tying the piece together at the end. All of the mind traps, he explains, are variations of confirmation bias. In his words...
Such errors of overconfidence are due to a phenomenon psychologists call confirmation bias. "When trying to solve a problem or troubleshoot a problem, we get fixated on a specific option or hypothesis," explains Kring, "and ignore contradictory evidence and other information that could help us make a better decision."
A vast collective error of confirmation bias unfolded in the past decade as investors, analysts, and financial advisers all managed to convince themselves that legions of financial derivatives based on subprime mortgages were all fundamentally sound. There was plenty of evidence to the contrary, and many commentators pointed out the facts. But the money was so good that too many found it easier to believe. They kept convincing themselves right up until the roof caved in.
How can you avoid confirmation bias? You can employ some of the same strategies for sidestepping other mind traps. Take yourself off autopilot. Become aware of your environment. Make a habit of skepticism, including skepticism toward your own assumptions and gut feelings. "Don't use your intuition to convince yourself that things are going right, use it to alert you to potential problems," says Jeff Haack, search-and-rescue specialist for Emergency Management British Columbia. "Listen to those niggling doubts."
Have a great week, guys. And watch out for those mind traps.
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