7 Errors (and a Merry Christmas to you, too)

On Christmas eve, as many of us wrap things up for a few days, here are a few thoughts to keep in mind for the new year:

First, know how your customers think. Obvious, but study after study has demonstrated that understanding HOW your customer think, not just WHAT they think, is the number one weapon you have in getting your message, the correct message, to your customers at the right time during their decision process.

Second, next yer will be rough--especially in the south-east. Prepare for it. By the year's end, there MAY be a turn-around in the general services and manufacturing sectors, but as we in Florida are tightly tied to construction and the housing industry, the next 8-12 months will be tough ones. Plan and prepare accordingly.

Third, here are the 7 common errors that we make in reasoning: (from lifehack.org)

a) Confirmation Bias
The confirmation bias is a tendency to seek information to prove, rather than disprove our theories. The problem arises because often, one piece of false evidence can completely invalidate the otherwise supporting factors.

b) Hindsight Bias

Known more commonly under “hindsight is 20/20“ this bias causes people to see past results as appearing more probable than they did initially. This was demonstrated in a study by Paul Lazarsfeld in which he gave participants statements that seemed like common sense. In reality, the opposite of the statements was true.

c) Clustering Illusion

This is the tendency to see patterns where none actually exist. A study conducted by Thomas Gilovich, showed people were easily misled to think patterns existed in random sequences. Although this may be a necessary by product of our ability to detect patterns, it can create problems.

d) Recency Effect

The recency effect is the tendency to give more weight to recent data. Studies have shown participants can more easily remember information at the end of a list than from the middle. The existence of this bias makes it important to gather enough long-term data, so daily up’s and down’s don’t lead to bad decisions.

e) Anchoring Bias

Anchoring is a well-known problem with negotiations. The first person to state a number will usually force the other person to give a new number based on the first. Anchoring happens even when the number is completely random. In one study, participants spun a wheel that either pointed to 15 or 65. They were then asked the number of countries in Africa that belonged to the UN. Even though the number was arbitrary, answers tended to cluster around either 15 or 65.

f) Overconfidence Effect

And you were worried about having too little confidence? Studies have shown that people tend to grossly overestimate their abilities and characteristics from where they should. More than 80% of drivers place themselves in the top 30%.

One study asked participants to answer a difficult question with a range of values to which they were 95% certain the actual answer lay. Despite the fact there was no penalty for extreme uncertainty, less than half of the answers lay within the original margin.

g) Fundamental Attribution Error

Mistaking personality and character traits for differences caused by situations. A classic study demonstrating this had participants rate speakers who were speaking for or against Fidel Castro. Even if the participants were told the position of the speaker was determined by a coin toss, they rated the attitudes of the speaker as being closer to the side they were forced to speak on.

Hope this gives you a leg up during the next year.

-Shawn