I am reading an article from the Harvard Business Review titled "The hidden traps of decision making" for my Organizational Processes class. It provided much fodder for thought.
The first hidden trap of decision making is ANCHORING. When I read this, I couldn't help but recall my positive bias for all things made by Apple. My bias initially started from reading positive, glowing reviews about Steve Jobs and the iPod. In one case, in a friendly argument with my sister, I even passionately defended the iPod shuffle as a great MP3 player out of my desire to be consistent! Honestly though, I have to admit, it's a crappy idea. How useful is a MP3 player without a display, which will force you to listen to a random sequence of tracks? You might own it, but you can't control it, literally. But defend it, I did. I now understand I was a victim of the anchor trap. My strategy going forward, is to be aware that there exists such a trap and to stay as open minded as possible.
The second trap is STATUS QUO. I have been guilty of this so many times, that it's hard to pick just one example! I bought Cisco stock during the heydays for $65 a share. Then came the dot com bust and I watched the stock price fall steadily from $65 to the sub-$20 range, taking a big chunk of my portfolio with it. I finally sold it when it was in the teens. The reason this memory sticks with me painfully is not just the financial loss. For someone who thinks of herself as being a logical, analytical person and an engineer to boot, how can I reconcile the fact that it took me as long as it did to sell the stock? The reason I waited was because I knew I would have to do extra paperwork come tax season to report a capital loss, and I just didn't want to go to that trouble. I preferred to not disturb status quo no matter how illogical, than to take the extra 10 minutes to complete and file a schedule D IRS tax form. Now I know that kind of stupidity actually has a name.
The third trap is the SUNK COST trap. I couldn't help but smile when I read this because this time around, I was "smart" and recognized it. Just that it took too long to think of all possible alternatives and time was running out, so I resorted to the status quo trap instead! I still have the car I bought from my very first job 10 years ago. I couldn't bear to let it go for sentimental reasons. Besides, it's been a real work horse and never asked for much beyond basic maintenance in the time I've owned it. That changed 6 months ago. Last December I paid a mechanic $800 to take care of some problems. Eight months later, I was back at the mechanic's again, this time being told it's going to cost $2500 to fix the car. Fully realizing that I might be throwing good money after bad and working out conditional probabilities (I kid you not), I went ahead and had the car fixed anyway, promising myself that the next time the car needed repairs that cost more than $500, I will buy a new car. The human psyche is strange.
To be continued in the next post...