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Mehak, an experienced MBA from a leading business school, walks into a discussion with a large vendor. Her vendor asks for a ridiculous commission to do business with her company. Although she is well-trained to handle such situations, how can she effectively bargain while maximising value for her company?
Most conventional education systems lay primary emphasis on left brain-dominated analytical intelligence. Good business transactions are often seen as a product of sound analytical rigour, numerical intelligence, fact-based negotiation and so on. In reality, however, it is the non-analytical brain that dominates interactions, professional and personal, among individuals. The human mind, no matter how rational, is also equipped to cloud its rational side with a list of thinking errors often referred to as Cognitive Biases. The chapter looks at some of the more common situations involving these biases we encounter on a day-to-day basis. I will keep referring to Mehak as the protagonist in all the anecdotes.
Mehak is trying to research the potential of portable steel toilets in India. She is trying to go through archives of news articles. Implicitly, she tends to open those that favour her initial thought of the segment being highly attractive.
The ‘Confirmation Bias’ is the tendency to look for evidence that supports an inbuilt theory and implicitly reject or discount evidence that disproves it. The best way to overcome this bias is to always run all evidence past another person or someone completely outside that sphere of work.
Mehak walks into a client meeting as an external consultant and gives a presentation on the future of the portable steel toilets in India. She looks professional, well-groomed and impressive, sounds crisp, diligent and thorough. The audience is impressed.
The audience, initially unaware of the segment, gives her a thumbs up. Classical case of the ‘Halo Effect’. This ‘bias is the tendency of an audience to favour a person basis the supposition of a halo, manifested through an impressive personality. It is difficult to get rid of this bias consciously, but the best way is to avoid taking any decision quickly and wait patiently to absorb the real picture.
Mehak is called for a second presentation to detail out some of her hypotheses. She is equally well prepared, but the impact is not as good as the first one. Some of the client members begin to ask her really tough questions.
There are multiple biases that are at play here. The ‘Law of Small Numbers’ refers to the fact that most things tend to average over time. One good day will eventually be followed up with a below average day. The ‘Halo Bias’, also at play here, over the period of time, tends to subside once people start entering details in the fine print.
As Mehak realises that the presentation is getting tricky, she decides to avoid number heavy slides and resorts to narrating a story. A story of a widowed woman in rural India whose only way out of poverty is to look at portable steel toilets. The audience begins to get a ‘real-life pulse’ of the potential of the product.
‘Representativeness’, or the tendency to predict the universal from the specific, is a double-edged sword. If largely true, it is an excellent tool to get people to appreciate the underlying drivers in any study. However, a good story can hide the flaw that the universal may not be inferred from the specific. The easiest way to counter a good story is to come up with another story that proves the absolute opposite.
After the meeting, Mehak steps outside the building for a quick smoke. Her client counterparts, smoking a few feet away, start shuddering in disbelief. They decide to reconsider if she is the right person they want to work with.
‘Stereotyping Bias’ refers to an expectation of behaviour from a certain person depending on factors like gender, race, age, affluence without factoring in the individual identity. It can be tricky as a stereotype often has negative connotations with some of them being linked to poorer performance, immoral behaviour or lack of professionalism.
In conclusion, cognitive biases play a critical role in our interactions with others. While some of them are genetic, some of them have been implicitly absorbed from our environment or developed from personal experiences. While it is difficult to train the mind to overcome years of ‘nature and nurture’ grooming, a few quick fixes will do no harm.
(Excerpted from Sandeep Das’ The Practical MBA with permission from Penguin India. The author is the Global Foresight Lead for Emerging Countries for Mars Wrigley)
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