Protect yourself from poor COVID-related decisions by being aware of cognitive biases – particularly the normalcy bias, attentional bias, and planning fallacy – and making strategic plans that can prevent your gut reactions from taking over. That’s the key take-away message of this episode of the Wise Decision Maker Show, which describes how not to let cognitive biases control us when dealing with COVID.
Video: “How Not to Let Cognitive Biases Control Us When Dealing with COVID”
Podcast: “How Not to Let Cognitive Biases Control Us When Dealing with COVID”
Links Mentioned in Videocast and Podcast
- Here is the article: How Not to Let Cognitive Biases Control Us When Dealing with COVID
- The book Never Go With Your Gut: How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters is available here
- The book Resilience: Adapt and Plan for the New Abnormal of the COVID-19 Coronavirus Pandemic is available here
- You are welcome to register for the free Wise Decision Maker Course
Hello, everyone, and welcome to another episode of the Wise Decision Maker Show where we help you make the wisest and most profitable decisions. Today, we want to talk about how do we not let cognitive biases these dangerous judgment errors in our heads, not control us when we’re dealing with COVID COVID-19 the pandemic, it’s very easy to make bad mistakes and many people actually made pretty bad mistakes around the pandemic, even from the start of the pandemic have gone onwards as well. But let’s talk about the start of the pandemic. Elan Musk, one of the most famous entrepreneurs in the world, one of the richest people in the world, founder of Tesla, SpaceX and so on. He tweeted that the Coronavirus panic is dumb on March 6 920 20, when COVID was taking root here in the United States. And that got a lot of likes, got a lot of retweets. 1.7 5 Million Likes over 100,000 retweets because he’s very popular and that of course, caused other many other people who listened to him to make bad decisions around the coronavirus pandemic. And then just a short while later, in a couple of weeks after the declaration of the National Emergency here knighted states on March 15. On March 19, so four days after that he tweeted that based on current trends, probably close to zero new cases in the US by the end of April. Well, you know, since that time, there have been around 8 million cases. And we’re now close to being done. And that’s a bad problem. He made a bad mistake, bad prediction. So many people who are dropping yours who trust Elon Musk listened to him. They listened to him and they made bad decisions in turn because of his advice. So that’s new money, you know, maybe new money more entrepreneurial, more likely to make mistakes. What about old money? You know, people like Goldman Sachs investment bank, very famous, very prominent. One of the key things that they do is give advice to their clients on how to invest. So they estimate US GDP growth. And they estimated US GDP growth in the second quarter of 2020. So the second quarter of 2020. They made an estimate on February 24. February 24. So it’s the middle of the first quarter. The second quarter would start on April 1, they are mid late second first quarter on February 24, when the coronavirus pandemic was spreading widely in Italy and shutting down a number of cities. They said that it will be 2.7% growth of US GDP in the second quarter. Now, only a couple of weeks later on March 15. They changed their estimates from 2.7% growth to 5% decline 5% decline, that’s a huge change. That’s a 7.7% change in three weeks. That’s pretty bad. But only a few days later, on March 20, they made another prediction that it would be a 24% decline 24% decline. So it went from a 5% decline to a 24% decline. That’s a really bad 19% change, you know, really, really bad. Obviously, better estimates. Obviously, Goldman Sachs made some bad decisions around the pandemic. Lots of people made bad decisions, and most were caught unprepared and still continue to make some bad decisions around the pandemic, because they underestimated the threat and still continue to underestimate the threat of the pandemic, the consequences of the pandemic. So they were caught unprepared. And they had to turn to their business continuity plans, that emergency business continuity plan, so I chose to turn to them, even though these plans are not a good fit for the situation. I mean, I’m someone who’s a future proofing expert, and risk management expert. I’ve done a lot of business continuity plans and the typical business continuity plan is not a good fit for this sort of situation. Why is that? Because they’re great for emergencies. emergencies like one to two week emergencies when there’s a hurricane when there’s a blizzard. That’s great. That’s what they’re fit for. But COVID-19 is not an emergency. That’s not what it’s about. It’s a major disrupter. And that’s how you should think of it. That’s how it needs to be thought about some major disrupter of our lives or worlds. It changed our path going forward. It’s not a short term emergency. It’s a slow moving, high impact long term train wreck. It’s a marathon, not a sprint. So relying on business continuity plans that are meant for a short term emergency led a number of companies into serious serious problems and led a number of people who live in the emergency to continue with your plans business continued plans into a number of serious problems. What we have to understand is that as a result of this major disrupter of COVID-19 This is a path changer. It is very much about changing the world will not go back to what it was the world will change forever, even after the pandemic You know, we’ll have years of a pandemic, by the time it’s over, of course, you know, it’s already been over a year and it will be definitely much further before the pandemic is over. It will Chim in the main many months. And that’s the pandemic here, the US globally, where we don’t, where there’s not nearly as quick a vaccine or logical will still be longer, will have changed people’s habits, this pandemic will change people’s values, their desires, their norms, their behaviors, will never go back to the world of January 2020, no matter how much we might want to. And that’s something that we need to fundamentally understand about the pandemic, and the kind of bad decisions, these cognitive biases that we make around it. And this is not easy to hear. You know, when I first found out about the pandemic, when I was researching it, trying to figure it out, it was very painful to me. I struggled with this information and it was really hard. And my clients, those with whom I work with the retainer they made, found it really difficult to accept this nugget of information that’s really unpleasant and information about the pandemic. But what helped me and what helped them get over the hump is that it will be so much more painful for all of us in the long term, if we don’t accept and adapt to the pandemic, and then the major disruption for our path forward into the post COVID reality, as well as still the main months of COVID remaining. So that’s what we need to really be thinking about. The pandemic again, is a slow moving threat. And we as human beings, we just make bad decisions about these slow moving frets. Unusual Fred slow moving ones. Because of how our brain is wired, our brain is not wired to deal with such slow moving frets. Our brain is wired to deal to have the fight or flight reflex, our gut reaction is to greatly underestimate such threats. We face friends in the moment and we make decisions about them in the moment, we did not respond well to raise these slow moving train wrecks sort of threats. Because our gut reactions are based on the savanna environment. That’s what they’re about the savanna environment, we had to face threats that were immediate. Though they were quick, we had to make that quick response. You might have heard of it as the fight or flight rate as the saber toothed Tiger response. You want to jump from you. It’s better to jump at 100 chapters than to miss that one saber toothed tiger. So that fight or flight reflex causes us to react quickly to immediate threats, which is great for saving our lives, but not react well to threats that are slow moving train wrecks like the pandemic. And this leads to decisions that endanger our businesses, our careers, our households, all sorts of things. And here, we need to understand why this bad advice is common. This bad advice comes as a result of these dangerous judgment errors in the savanna environment, the evolutionary background called cognitive biases. cognitive biases are the specific ways that our brains go wrong. Our brain goes wrong in specific ways. And these dangerous judgment errors describe the specific mental processes that cause us to make bad decisions. And they come again, as a result of our evolutionary background and the structure of the wiring of the brain. Now the fight or flight response to threats was life saving for those hunter gatherers that was great in that environment. Because the risks they faced were those immediate intense in the moment risks like saber toothed tigers, but in the modern world, that’s not the kind of risks we face. The risks we face are complex, ambiguous long term, they might come from a smart note, phone notification about a disease that came up somewhere in the middle of nowhere China right in the middle of the chain. So that is something that we have to realize the kind of intuitive responses gut reactions that we have to threats are not well adapted for the pandemic, or most other modern world threats that are slow, high impact threats, high low percent low probability, slow moving high impact for us, so that these major disruptors, and they’re specifically three dangerous judgment errors, three dangerous judgment errors, that we need to watch out for these cognitive biases. By being aware of these cognitive biases and knowing about them and understanding them. We will prevent them from controlling us when we respond to COVID and other major disruptors, so three dangerous judgment errors, cognitive biases, the normalcy bias, the planning fallacy and hyperbolic discount. Let’s talk about each of them in turn, the normalcy bias, what does that refer to? Well, our intuition is to assume that everything will keep going normally, everything will be fine, everything will keep going. As it has been gone in the savanna environment. That was a pretty safe assumption that only really major changes would be just the change of the season. Spring, summer, fall, winter, right? That’s the major change, life would be pretty much the same throughout all this period. That is not a safe assumption in the modern world. Think about the 2008 2009 fiscal crisis. not a sad thing that would have been applicable in the civilian environment. And it fundamentally changed our lives, our economy going forward, the rise of the smartphone that really changed things that really changed dynamics for a number of businesses and for our everyday lives. And of course, the covid 19 pandemic, we cannot assume that the future will go as it has gone in the past, we are facing more and more disruptions in the modern world. And we can’t fall into this normalcy bias. We can’t forecast the short term future based on the short term past, I mean, the next few years, our intuition has to feel like the next couple of years will be like the last. And that’s not a safe assumption. It underestimates the likelihood and the impact of major disruptors. So by being aware of the normalcy bias, that will help you watch out for areas where you might be falling for it, and help you address it. So that’s one out of the three dangerous judgment errors. The second one is the planning fallacy, the planning fallacy, we tend to assume that the future will go according to plan, you might have heard the phrase, failing to plan is planning to fail failing to plan is planning to fail. It’s a very famous phrase, it’s well known. It’s very misleading. A much more effective phrase is failing to plan for problems is planning to fail. Failing to plan for problems is what I teach my clients failing to plan for problems is planning to fail. So you don’t want to simply make a plan think that everything will go according to plan, you want to specifically plan for problems to come up because when we just make a plan, we intuitively don’t put in nearly enough steps to address problems and the risks that would come up. And then we underestimate the resources that we will actually need to accomplish our plans to accomplish our projects, whether it’s time, money, social capital information of various sorts, we don’t anticipate that well enough. And many people in the COVID pandemic have not changed their plans nearly quickly enough, and have not adapted to the future of the post world of the post COVID pandemic, they think that everything will go back to the world that it wasn’t January 2020. Like that, when the pandemic is over. First of all the pandemic will have a slow rolling change as it goes from COVID to the post COVID world and we will never go back to January 2020. So you can’t be thinking that way. That’s the second one of the three dangerous judgment dinners. The third one is hyperbolic discounting. hyperbolic discounting. It’s a fancy name for a hyper extra bollock for hyperbolic extra discounting of the future. Because we perceive the short term future as more important than the long term future. That’s our perception. That’s our feeling. And the savanna environment, that was a pretty safe assumption. But just because you couldn’t rely on the future now, if you killed the man with it was going to be pretty hard for you to save all the meats, the better eat as much of it as possible, get it prepared, smoked, because you couldn’t freeze it, so that you couldn’t carry stuff you couldn’t invest into land, right? That’s not something you could invest, and you can’t invest into your professional career, what are you going to become better x chipper or something that’s not gonna work out for you. Now, in the civilian environment, you really needed to be short term oriented. In the mother environment, of course, you can invest in your professional development, taking courses, you know, getting coaching, getting various degrees, getting an MBA, or something like that. Also, of course, you can invest in property in your land and your house, and so on other fixed investments, and you could invest in your organization, your company to build that up better. And you can, of course, put money in the savings account. But that’s not what it feels like we don’t intuitively recognize that that’s something we should be doing. We undervalue the future, the long term future compared to our immediate short term desires. So we prioritize the short term to the detriment of the long term. And we underestimate the long term outcomes and impacts of various events, like the COVID pandemic. So a lot of people greatly underestimated the long term impact of the COVID pandemic, the duration of it, and they are really underestimating what the consequences of the pandemic will be even after it’s over. And that’s something that you can’t fall into that trap. So again, by being aware of hyperbolic discounting, that will help you address it. So these are the three dangerous judgment errors that you should not let control you when you’re dealing with COVID normalcy bias, thinking of the future will be much like the past the planning fallacy, making a plan and thinking that everything will go according to plan and hyperbolic discounting, discounting the long term outcomes and impacts of events right now. discounting the long term future at the expense of the short at the desire to prioritize the short term future by being aware of these problems, you will not let them control you when you’re dealing with COVID. So that’s what I want to share about how to not let cognitive biases control you when you’re dealing with COVID-19 Please make sure to like and follow this wise decision maker show. We have a video cast in the podcast, so whatever you got it. If it’s a video cast on YouTube, if it’s a podcast and iTunes or something like that, leave a review, leave a comment. We’d love to hear what you think, but really helps us make the show better and it helps other folks decide whether they want to check out the show or not. And please share it with your friends on social media everywhere. And make sure to look in the show notes. There’s a lot more information about these topics and other resources that you can check out. Alright everyone, I hope you’ve enjoyed this episode of the Wise Decision Maker Show, and I look forward to seeing you next time. Until then the wisest and most profitable decisions to you, my friends.
Transcribed by https://otter.ai
Originally Published at Disaster Avoidance Experts on April 27, 2021