"The first principle is that you must not fool yourself – and you are the easiest person to fool." – Richard Feynman.
"We know accurately only when we know little. With knowledge, doubt increases." – Goethe
I have a personal vendetta against cognitive biases. I think one of the best ways to be successful in life is not to make any major mistakes – the kind that send you into bankruptcy, surgery, divorce, or any other traumatic life altering situation. Of course, the flip side of that coin is that not taking any risks is a sure way to a life of mediocrity.
I balance these two things by trying to take risks smartly. And that means avoiding lousy decisions because of cognitive biases. The problem is that cognitive biases are so dangerous because we don't know we have them and don't recognize when we fall prey to them. I am always on guard for this very reason. I spend a lot of time, when I make decisions, examining my thought processes for evidence of cognitive biases.
In social situations though, an obsession with cognitive biases can be, in some ways, self-defeating. In my case, it often leads to what I call recursive self-doubt in business decision making. It explains why fools are often more triumphant than the intelligent.
Imagine a situation in which you are discussing strategy with your strategic thinking team. Let's say it is two years ago and "wisdom of crowds" is all the rage. Everyone on your team wants to figure out how to use the wisdom of crowds to transform your company by engaging ideas and skills from the "edge." But you don't buy it. You've read books about the madness of crowds. You realize that the average person knows next to nothing about your business, and you in general have a healthy skepticism towards anything new. But what if you are wrong? What if there is some cognitive bias that is preventing you from thinking clearly about the matter? After all, new books are coming out explaining how this is a revolutionary transformation that you need to embrace. "Wikinomics" is often quoted by your the people on your team. Bloggers and even some in the mainstream media are talking about the crowd revolution. Your concern that you may have missed something causes you to begin to doubt yourself – not because you really do doubt yourself, but because you understand the propensity of humans toward cognitive biases and bad decision making.
This is the problem of recursive self-doubt. Once you go down that path, it can snowball as you first question yourself, then question your questioning of yourself, then question why you questioned your questioning of yourself, and so on until you basically assume the group must be correct. And it all started because you were the only one at the table who understood cognitive biases. You were the only one trying to guard yourself against them, and as a result, you made a bad decision.
By mid 2007, when the whole wisdom of crowds thing has died down and most people have realized the severe limitations under which crowds can outperform other forms of decision making, no one remembers that you were the lone one on the team questioning the decision. No one thinks to listen to you a little more intently the next time around. The people who implemented your wisdom of crowds strategy have been promoted, and the blame when it didn't work has fallen on those who came along later.
Teamwork is tough when you are the only rational player on an emotional team. Particularly when you know that no one is always right. By choosing a cautious approach to decision making, you can actually end up worse off. But you know that changing your approach to jump from fad to fad doesn't work either.
The problem with taking a long-term view, the contrarian view, is that you have to have pillars of support. You must have the financial and emotional reserves on your business (and life) balance sheet to make it through the next year when no one wants to deal with you because you aren't part of the fad. And of course, when you really do believe a structural change is taking place, you have to explain why, as a non-fad follower, you are following this latest fad.
In much the same way that daily horoscopes are written generically so that whatever happens is interpreted as fulfillment of the horoscope, I think a significant majority of people go through life making poor decisions but taking advantage of some good luck, and believing that it wasn't luck that put them there. A person making one accurate prediction and 40 inaccurate ones will hold on to that one time they were correct as a reason for why you should listen to them, read their book, hire them to consult, or whatever it may be. Smashing the latest business idolatry is a niche market, and is not nearly as profitable as reinforcing what others already want to believe.
How do you fight the slide into recursive self doubt without sacrificing your attention to quality decision making and your guard against cognitive bias? For me personally, I just always try to minimize the downside of being wrong. I use my decision tickler to help monitor the progress of my decisions, so that I can change course early if necessary. It doesn't totally eliminate RSDD (recursive self doubt disorder!) but it helps manage it.
Now if you ever wonder how fools get ahead and how the world gets to be as screwed up as it is, you only need to look to RSDD. Many smart people fall prey to Goethe's quote at the beginning of this post. By knowing more, they are less confident than their less informed peers. Of course, applying this at the level of national politics implies that most politicians… well, we don't talk about politics on this blog.