Comments on: Cognitive Bias in Strategic Decision Making

By: prosolution pill

prosolution pill — Tue, 31 Jan 2006 16:49:36 +0000

By: canada venapro

canada venapro — Wed, 25 Jan 2006 17:55:12 +0000

By: J

Fri, 20 Jan 2006 18:09:42 +0000

I’m not saying “champions” are just lucky, but that they may have an extemely narrow range of competence, and a senior mgr/CEO needs to assess the value of (or, more honestly, ignore) their advice outside that range (the CEO needs to assess himself in the same light). I don’t know where in your career path you got your MBA, but a friend of mine who spent the last few years getting his while running a business expressed surprise several times at the things his classmates didn’t know. Would/did you have the same reaction if you got your MBA after being a COO?

By: Rob

Rob — Fri, 20 Jan 2006 13:28:14 +0000

J,
Agreed that most managers are looking for champions, and not figuring out if they are good workers, lucky, or whatever else.

Laurence,
That’s a good point, about the coffee guy.

I guess I am contrasting it with being underconfident. It’s sort of like sports – there is always a luck aspect and even an unranked team might, on rare occasion, knock off the top dog. That is why they play the game. Some people may not even play the game unless they are overconfident.

By: laurence haughton

laurence haughton — Fri, 20 Jan 2006 03:35:59 +0000

What’s the value of knowing “what to do” versus being overconfident in your abilities? I can think of some recent examples like the dud(e) who opened the coffee bar (you blogged about it a few weeks ago).

Honestly if we’ve learned anything from our experiences it’s the value of practical wisdom in entrepreneurship.

By: Rob

Rob — Fri, 20 Jan 2006 03:13:50 +0000

I guess it depends on your perspective. On the one hand, if you are overconfident and think your chances are better than they really are, you might work harder because you have more hope and higher expectations. But on the flip side, if you have a more realistic expectation you will realize how everything is stacked against you and you will work harder to compensate.

So you could say you work hard either way, and working hard is really the most important thing when you are starting up.

By: J

Fri, 20 Jan 2006 03:00:31 +0000

“Fostering a culture of open discussion” would be wonderful, but how on earth do you do that? For some things, putting the idea out there and allowing all employees to take anonymous pot shots at it would work, but for major strategic decisions, not enough people are going to know enough about what’s being to proposed to make any comment at all.

I do wish B-schools would have some program that fought the “champion effect”, but is it rocket science to understand that some managers, no matter how gifted they are, are going to be self interested and/or simply not know what they’re talking about at times? An ethics class that taught grads that it’s pRobably not right to expect an eight figure severance package after destroying billions of dollars in shareholder value and the careers of thousands of people would be nice too.

By: Jason

Jason — Fri, 20 Jan 2006 02:15:39 +0000

I think overconfidence CAN be a good thing for entrepeneurs. The statistics are intimidating (the vast majority of business fail within the first 5 years). Usually you have to deal with a withering barrage of criticism from co-workers, experts, and the man on the street. You need to deal with an overwhelming number of pRoblems, not just getting a good product out.

This requires overconfidence and a willful ignorance of survivorship bias. I suppose it also involves an underestimation of the difficulties you’ll face. I’ve done it once before, and it looks like I’ll be trying again. As they say, its better to be lucky then smart, but its even better to know the difference. Guess we’ll see how long my luck holds out.

By: laurence haughton

laurence haughton — Fri, 20 Jan 2006 01:30:59 +0000

Do you have data to back up your claim that “For entrepreneurs, over-confidence is a good thing?”

How can it be that “there is no such a thing as over-estimation of future demand or growth opportunities?” If a store buys too many original Ipods (to use your anecdote) they had no money to take advantage of the Ipod nano surge this last Christmas season.