The hidden traps of decision making

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...

To share or not to share?

What's it with people claiming to be entrepreneurs who are tight lipped and believe everyone is out to steal their ideas? It makes no sense to me and I find it downright funny. If you won't share your idea because it is so easy to duplicate, you have a serious problem with your competitive advantage. It better not be something every Tom and Jane can replicate overnight! If it is something so cool that no one else can do it, what are you worried about? Think iPod. Think of the (lack of)success of its copycats.

Slideshare contest winner

This slideshow was announced the winner of this year's contest. A classmate from MIT Sloan and I were brainstorming ideas to participate in this contest, but eventually ended up not entering due to time constraints. Just as well.

I was disappointed at the outcome. Comparing this year's winner to the winners from the past, there seems to be a clear and obvious pattern. Not to take away from the content of these presentations which is definitely thought provoking, the recipe seems to be as follows: throw in a bunch of statistics, eye catching visuals and short phrases, stir well, spice up with the hot topic of the day, heat and serve with a side of captivating images. Never one to cook by the book, my reaction was, well, whatever. How predictable.

How would the judges judge a presentation on a topic that does not lend itself to statistics or catchy phrases? Not every topic one needs to present on lends itself to this stock formula. When we were planning to enter the competition, we thought this would be an edifying experience. Turns out we made a wise choice with how to spend our time.

Mobile technologies

I was thrilled to learn that fellow MIT-ians took the top prize at the Google competition to develop software for the Android platform. It's a very cool application that got me thinking. It would be fantastic to have an application that will look at my to-do lists, and use the GPS feature to figure out where I am, and prompt me to complete certain tasks from my to-do lists, based on my location, time of day and due dates. A mobile version of Remember the Milk, so to speak, but smarter in doing automatic location based planning. If you know of an already existing application that will do this, please let me know, I could really use one!

Thanks Guy!

So I got an email today that took me completely by surprise. It was from Guy Kawasaki saying he enjoyed my blog post titled "Salesmanship" and had tweeted it. And lo and behold, my inbox is deluged with comments/questions/interest about my blog at a scale unprecedented so far! Some of the notes were so thought provoking and engaging that I've decided to reconsider my decision of using this blog as a personal wiki. I learned today that there's much to be learned from my "lessons learned" by engaging the wider entrepreneurial community. So, Thanks Guy!, for the shout out on Twitter, and Thank you, Tweeters!, for taking the time to write so many thoughtful messages. I promise to respond to each of you individually though it may take a little longer than my usual email turnaround time.

NY Times and Sexism

I normally make it a point to discuss only topics pertaining to my journey as an entrepreneur on this blog, but had to make an exception this time to focus attention on the audacity and blatant sexism displayed by NY Times. They classified and printed this article about Women bloggers in the Style and Fashion section! I can't imagine a similar article about male bloggers being printed anywhere other than the technology section. Perhaps they were trying to prove the point many of the attendees at the conference made about being ignored and patronized by the media.

Salesmanship

When I started my first company, I was convinced I hated sales. I disliked the idea of selling something a person does not really need, but ends up buying because I was glib. I questioned the ethics of it, and told myself that I would never be a good salesperson because of this. Boy was I wrong! Well before I acquired my first customer, I realized that practically EVERY aspect of running a business involved sales. I was constantly selling something or the other - an idea, a product, a vision - to someone or another, be it the software engineer, a partner or an investor.

Why I remembered this today - I stumbled upon this really interesting blog post titled "What I learned buying a rug in Turkey". I found myself relating to a lot of the author's experiences and educated myself about the psychology and science behind it. I am looking forward to reading Robert Cialdini's book. I will post a review when I am finished.

Mr. Weisburgh's post reminded me of my own experience recently when we were visiting the Taj Mahal in Agra, India. In order to minimize pollution and for security reasons, vehicles are not allowed close to the Taj and the nearest parking was a fair distance away. When we reached this parking lot, we were besieged with people offering to take us to the entrance using various means of transport - a golf cart, an EV, a horse carriage, and a cycle rickshaw were our options. The horse carriage and the rickshaw drivers got our attention appealing to our emotions - they pointed out this was their livelihood and will likely forgo a meal if we end up picking the golf cart. Having effectively whittled away our choices, the rickshaw puller played the emotional card further asking us to choose between feeding a horse versus a human being. We were effectively trapped though I had misgivings about a man doing the work of a horse - the road had a slight slope and it was no easy task for one man to haul 300+ pounds of our combined weight.

We had negotiated for one way transportation only since we were trying to get to the Taj as quickly as possible before it closed for the evening, and had planned to take a leisurely stroll back enjoying the cool evening breeze. When we reached the entrance, several things happened. Looking back at it after reading Mr. Weisburgh's post, it was classic salesmanship that I experienced, without recognizing it.

1. Reciprocation: During the ride, the rickshaw driver informed us that electronics such as cell phones and iPods are not allowed inside the Taj for security reasons and to make sure we leave them at the lockers provided if we didn't want to be harassed by security people. He also made it a point to mention that potable water wasn't readily available inside the Taj, and to make sure we take our own when we go in since it was a particularly warm day. We were very grateful for this advice, particularly since it was spot on.

2. Commitment and Consistency: The driver told us that all of the entrances would look alike once we were inside, and to make sure we retrace our path and come out of the same entrance if we didn't want to be stranded a long hike away from the parking lot where our car was parked. We couldn't deny the logic of this advice and committed to coming out the same entrance, and out of consistency, agreed to meet him when we returned since he said he would wait for us.

3. Social Proof: The driver was so grateful for the business that when he clasped his hands together to profusely thank us, who were we to say we won't give him our business on the return trip?

4. Liking: The driver provided helpful tips on how to get the most out of our Taj visit and built a rapport with us before he successfully talked us into riding his rickshaw for the return trip.

5. Authority: He told us he was born and raised in the area and had been in this business for a number of years and therefore had inside knowledge of the Taj, thus establishing his authority.

6. Scarcity: Knowing that time was scarce and if we had walked we would have made it barely 10 minutes before closing time (as the rickshaw driver pointed out) made the rickshaw ride more compelling.

I bet the rickshaw driver hasn't read Cialdini's book. Successful salespeople just seem to know the tricks.