“12 angry men ” Before watching the movie, read HBR “The hidden traps of decision making” and watch the video, “Are we in charge of our decisions?” by Dan Airley. During the movie, please follow the posted movie guide. After the movie, complete the Leadership Observation. While writing the observation, incorporate the main teachings you have learned about dialogue, advocacy and inquiry, and making decisions in a group setting as they apply to the movie. 2 – 3 Pages
What Can You Do About It?
First of all, remember that in any given decision, maintaining the status quo may indeed be the
best choice, but you don’t want to choose it just because it is comfortable. Once you become
aware of the status-quo trap, you can use these techniques to lessen its pull:
Always remind yourself of your objectives and examine how they would be served by the
status quo. You may find that elements of the current situation act as barriers to your goals.
Never think of the status quo as your only alternative. Identify other options and use them
as counterbalances, carefully evaluating all the pluses and minuses.
Ask yourself whether you would choose the status-quo alternative if, in fact, it weren’t the
Avoid exaggerating the effort or cost involved in switching from the status quo.
Remember that the desirability of the status quo will change over time. When comparing
alternatives, always evaluate them in terms of the future as well as the present.
If you have several alternatives that are superior to the status quo, don’t default to the
status quo just because you’re having a hard time picking the best alternative. Force
yourself to choose.
The Sunk-Cost Trap
Another of our deep-seated biases is to make choices in a way that justifies past choices, even
when the past choices no longer seem valid. Most of us have fallen into this trap. We may have
refused, for example, to sell a stock or a mutual fund at a loss, forgoing other, more attractive
investments. Or we may have poured enormous effort into improving the performance of an
employee whom we knew we shouldn’t have hired in the first place. Our past decisions become
what economists term sunk costs—old investments of time or money that are now irrecoverable.
We know, rationally, that sunk costs are irrelevant to the present decision, but nevertheless they
prey on our minds, leading us to make inappropriate decisions.
Why can’t people free themselves from past decisions? Frequently, it’s because they are
unwilling, consciously or not, to admit to a mistake. Acknowledging a poor decision in one’s
personal life may be purely a private matter, involving only one’s self-esteem, but in business, a
bad decision is often a very public matter, inviting critical comments from colleagues or bosses.
If you fire a poor performer whom you hired, you’re making a public admission of poor
judgment. It seems psychologically safer to let him or her stay on, even though that choice only
compounds the error.
The sunk-cost bias shows up with disturbing regularity in banking, where it can have
particularly dire consequences. When a borrower’s business runs into trouble, a lender will often
advance additional funds in hopes of providing the business with some breathing room to
recover. If the business does have a good chance of coming back, that’s a wise investment.
Otherwise, it’s just throwing good money after bad.
One of us helped a major U.S. bank recover after it made many bad loans to foreign
businesses. We found that the bankers responsible for originating the problem loans were far
more likely to advance additional funds—repeatedly, in many cases—than were bankers who
took over the accounts after the original loans were made. Too often, the original bankers’
strategy—and loans—ended in failure. Having been trapped by an escalation of commitment,
they had tried, consciously or unconsciously, to protect their earlier, flawed decisions. They had
fallen victim to the sunk-cost bias. The bank finally solved the problem by instituting a policy
requiring that a loan be immediately reassigned to another banker as soon as any problem arose.
The new banker was able to take a fresh, unbiased look at the merit of offering more funds.
Sometimes a corporate culture reinforces the sunk-cost trap. If the penalties for making a
decision that leads to an unfavorable outcome are overly severe, managers will be motivated to
let failed projects drag on endlessly—in the vain hope that they’ll somehow be able to transform
them into successes. Executives should recognize that, in an uncertain world where
unforeseeable events are common, good decisions can sometimes lead to bad outcomes. By
acknowledging that some good ideas will end in failure, executives will encourage people to cut
their losses rather than let them mount.
What Can You Do About It?
For all decisions with a history, you will need to make a conscious effort to set aside any sunk
costs—whether psychological or economic—that will muddy your thinking about the choice at
hand. Try these techniques:
Seek out and listen carefully to the views of people who were uninvolved with the earlier
decisions and who are hence unlikely to be committed to them.
Examine why admitting to an earlier mistake distresses you. If the problem lies in your
own wounded self-esteem, deal with it head-on. Remind yourself that even smart choices
can have bad consequences, through no fault of the original decision maker, and that even
the best and most experienced managers are not immune to errors in judgment. Remember
the wise words of Warren Buffett: “When you find yourself in a hole, the best thing you
can do is stop digging.”
Be on the lookout for the influence of sunk-cost biases in the decisions and
recommendations made by your subordinates. Reassign responsibilities when necessary.
Don’t cultivate a failure-fearing culture that leads employees to perpetuate their mistakes.
In rewarding people, look at the quality of their decision making (taking into account what
was known at the time their decisions were made), not just the quality of the outcomes.
The Confirming-Evidence Trap
Imagine that you’re the president of a successful midsize U.S. manufacturer considering whether
to call off a planned plant expansion. For a while you’ve been concerned that your company
won’t be able to sustain the rapid pace of growth of its exports. You fear that the value of the
U.S. dollar will strengthen in coming months, making your goods more costly for overseas
consumers and dampening demand. But before you put the brakes on the plant expansion, you
decide to call up an acquaintance, the chief executive of a similar company that recently
mothballed a new factory, to check her reasoning. She presents a strong case that other
currencies are about to weaken significantly against the dollar. What do you do?
You’d better not let that conversation be the clincher, because you’ve probably just fallen
victim to the confirming-evidence bias. This bias leads us to seek out information that supports
our existing instinct or point of view while avoiding information that contradicts it. What, after
all, did you expect your acquaintance to give, other than a strong argument in favor of her own
decision? The confirming-evidence bias not only affects where we go to collect evidence but also
how we interpret the evidence we do receive, leading us to give too much weight to supporting
information and too little to conflicting information.
In one psychological study of this phenomenon, two groups—one opposed to and one
supporting capital punishment—each read two reports of carefully conducted research on the
effectiveness of the death penalty as a deterrent to crime. One report concluded that the death
penalty was effective; the other concluded it was not. Despite being exposed to solid scientific
information supporting counterarguments, the members of both groups became even more
convinced of the validity of their own position after reading both reports. They automatically
accepted the supporting information and dismissed the conflicting information.
There are two fundamental psychological forces at work here. The first is our tendency to
subconsciously decide what we want to do before we figure out why we want to do it. The
second is our inclination to be more engaged by things we like than by things we dislike—a
tendency well documented even in babies. Naturally, then, we are drawn to information that
supports our subconscious leanings.
What Can You Do About It?
It’s not that you shouldn’t make the choice you’re subconsciously drawn to. It’s just that you
want to be sure it’s the smart choice. You need to put it to the test. Here’s how:
Always check to see whether you are examining all the evidence with equal rigor. Avoid
the tendency to accept confirming evidence without question.
Get someone you respect to play devil’s advocate, to argue against the decision you’re
contemplating. Better yet, build the counterarguments yourself. What’s the strongest
reason to do something else? The second strongest reason? The third? Consider the
position with an open mind.
Be honest with yourself about your motives. Are you really gathering information to help
you make a smart choice, or are you just looking for evidence confirming what you think
you’d like to do?
In seeking the advice of others, don’t ask leading questions that invite confirming
evidence. And if you find that an adviser always seems to support your point of view, find
a new adviser. Don’t surround yourself with yes-men.