There are a variety of biases and many of us have more than one type. Biases can be Action, Interest, Pattern-recognition, Stability, or Socially oriented. Following are examples of Action, Interest, and Social biases.
Action Oriented - Push to take action less thoughtfully than we should.
- Excessive Optimism: The tendency for people to be overoptimistic about the outcome of planned actions, to overestimate the likelihood of positive events, and to underestimate the likelihood of negative ones.
- Overconfidence: Overestimating our skill level relative to others', leading us to overestimate our ability to affect future outcomes, and neglect the role of chance.
- Competitor Neglect: The tendency to plan without factoring in competitive responses, as if one is playing against a non-competitive opponent.
Interest Oriented - Arise in the presence of conflicting incentives, including non-monetary and even purely emotional ones.
- Misaligned Individual Incentives: Company incentives for adopting views or seek outcomes favorable to themselves at the expense of the overall company interest.
- Inappropriate Attachments: Emotional attachment of individuals to people or elements of the company (such as legacy products or services or brands) creating a misalignment of interests.
- Misaligned Perception of Business Goals: Disagreements (often unspoken) about the hierarchy or relative weight of objectives pursued by the business and about the trade-offs between them.
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Social Biases - Arise from the preference for harmony over conflict.
- Group-think: Striving for consensus at the cost of a realistic appraisal of alternative courses of action.
- Group-management: Tendency for people to align with the views of their management.
Biases come in many forms and it is incumbent upon all managers to recognize their biases and disregard them when making decisions about business operations.
Jim Lavorato, Principal
Fund-House Ventures, LLC
jlavorato@fundhouse.us
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