Improve Your Critical Thinking by Mitigating Cognitive Biases

By Strischek, Dev | The RMA Journal, March 2019 | Go to article overview

Improve Your Critical Thinking by Mitigating Cognitive Biases


Strischek, Dev, The RMA Journal


Many risk leaders believe that a capacity to think critically helps practitioners do a better job of thinking strategically and avoiding costly organizational mistakes. It's also been said that critical thinking will be crucial for future risk managers, who will ultimately have to rely on their own judgment as they process an increasingly complex stream of data fed by advanced models and artificial intelligence.

In this article, frequent RMA Journal contributor Dev Strischek suggests that the enemy of critical thinking is cognitive bias, and he offers exercises and outlooks to mitigate its various forms. Strischek will teach an RMA course on critical thinking in the spring.

"Assumptions are the termites of relationships."

--Henry Winkler, American actor, director, and writer

HOW OFTEN DO we feel we've made the right decision, only to discover we goofed? We ask ourselves where we went wrong, why we didn't see this, why we didn't do that. Well, hardwired into our brains are faulty ways of thinking called cognitive biases that cause us to misunderstand the past, misconstrue the present, and badly foresee the future.

We are all prone to cognitive biases that can cause us to make bad decisions. Writing in The Atlantic, Ben Yagoda reported that the number of cognitive biases is big--Wikipedia lists 185--ranging from the IKEA effect (the "tendency for people to place a disproportionately higher value on objects that partially assemble themselves") to the Zeigarnik effect ("uncompleted or interrupted tasks are remembered better than completed ones.") (1)

Meanwhile, the gambler's fallacy cons us into believing that if a coin has landed heads up five times in a row, it is more likely to land tails up the sixth time. In fact, statistics tell us that the sixth toss is still a 50-50 proposition. There are many more examples of cognitive biases, but we will concentrate on six that we are likely to encounter in our work environments.

The Halo Effect

The halo effect is a cognitive bias in which our impression of a person in one area influences opinion in another. This can result in unfounded judgments about a person's character or ability to perform certain tasks. Also known as the physical attractiveness stereotype and the "what is beautiful is good" principle, at its most basic level the halo effect refers to the tendency to rate individuals depending on their attractiveness and personality traits. The halo effect describes how a likable personality or some other desirable trait causes biased judgments. Feelings generally overcome cognitions when we appraise others.

In a work environment, the halo effect is most likely to show up in a supervisor's appraisal of a subordinate's job performance. Indeed, it is probably the most common bias in performance appraisals. The supervisor may rate one single characteristic of the employee, such as enthusiasm, and allow the entire evaluation to be colored by how he or she judges the employee on that characteristic--even though the employee may lack the requisite knowledge or ability to perform the job successfully.

Beautiful People, Ugly Assumptions

Oscar Wilde might have written the punchline for the halo effect when he joked, "It is better to be beautiful than to be good. But it is better to be good than to be ugly." The next time you have to evaluate another person--whether it's to inform a decision on which employee to promote or which prospective borrower to approve--consider how your overall impressions of that individual might influence or override your evaluation of other characteristics.

Does your fondness for an employee's enthusiasm lead you to ignore competence and ability? Does your impression of a borrower's charisma lead you to feel that they are also smart, honest, and hard-working? Remember Groucho Marx's warning: "The secret of life is honesty and fair dealing. If you can fake that, you got it made. …

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