Last week, I spent four days at the beach off the coast of South Carolina. The island I visited is home to many deer, raccoons, seabirds, and other creatures that slither and leap. The deer are especially curious. They approach almost any person within their view. This leads me to think that despite a law against feeding wildlife, people can’t resist doing so. I infer that the behavior of the deer is a generalized response to specific events. Not smart, but then again, deer don’t have large brains.
Fortunately, people have much larger brains that can enable more complicated thoughts as well as foresight, imagination, and introspection. Humans have something else that is often thought of as an advantage, the capacity for meta-cognition. This is thinking about thinking. Despite the ability to observe our own cognitive processes, people are often too preoccupied and busy to think about how they take in information and make decisions. Quick judgments save time and successful people have usually been rewarded for speed, at least in our memory, if not in reality.
For example, a critical decision faced by a Board of Directors is choosing the CEO. This is a high-stakes decision and one with which most board members have limited experience. Nonetheless, most express confidence in their ability to manage it well. This confidence isn’t necessarily arrogance. Rather, it exists for two reasons:
- First, overconfidence is a human condition. A history of success can add fuel to this fire.
- Second, people tend to generalize from specific experiences. Discerning how the situation before us is different than what we have seen in the past takes time and intellectual effort.
When Amazon moved from selling books online to selling almost everything, Wal-Mart (and many others) didn’t recognize the profound shift in consumer behavior that was just beginning. Wal-Mart’s history of success provided justification for their confidence. It was also a likely contributor to their slow response. Later, the company took dramatic steps to establish an online presence. In five years, Wal-Mart acquired fifteen companies, including the online platform, Jet, for $3 Billion.
Overconfidence Leads To Bad DecisionsConfidence can be so powerful that it can blind leaders to external and internal issues. Click To Tweet
The current Equifax debacle demonstrates, yet again that “I didn’t know” is an inadequate reply to a crisis. A Wall Street Journal article published on November 3, 2017, reports that key executives at the company didn’t violate policy when selling shares after the breach because they didn’t know about it. I suppose they are breathing a sigh of relief but the question remains, why didn’t they know? Why didn’t senior executives know immediately? Innocence of wrongdoing isn’t in the criteria for senior leadership.
Running a company without critiquing your own thinking is a form of blindness. Yet, thinking about thinking and decision-making isn’t so easy. Here are three things you can do that will help:
- Understand that as smart and experienced as you are, invisible decision traps exist and respect no one.
- Be an observer of your own thinking and decision-making. Good instincts are not enough.
- Seek advice. Courageous leaders ask for expert advice to help them make decisions they can’t afford to get wrong.