The psychological biases identified by cognitive psychology and behavioural economics are well known. Anchoring, overconfidence bias, and curse of knowledge are three important biases businesses must guard against to prevent irrational action. But acknowledging a problem is merely the first step towards solving it. To truly prevent heuristics from hampering a business, they must be controlled. Kalido can help with this in two ways. Firstly, its advanced technology is able to give objective analyses, untainted by extraneous variables. Secondly, Kalido helps users improve relations and communication, to counter negative assumptions.
In this article, we discuss how this 2-fold approach can help businesses overcome these common biases.
Anchoring describes the tendency of the human mind to judge new information against earlier information. The earlier information serves as an ‘anchor’ and is overly relied on. It becomes an arbitrary benchmark against which later information is judged. For example, a supplier quotes Price A for goods. A second supplier quotes Price B. Regardless of whether the original price was reasonable or not, every other quote will be evaluated against it. This means later information is not judged on its own merit, but rather against an arbitrary standard set by earlier information.
The danger of anchoring lies in its lack of objectivity. Early information is not necessarily better or more accurate. For example, Price A may have been unreasonably high to begin with. And while Price B may be lower, it still does not reflect the true value of the goods. However, the purchaser may be inclined to accept this later price, simply because Price A set such an unreasonable bar.
Businesses that fail to guard against the anchoring bias will often make decisions based on bad information. To prevent this, they need an objective way of evaluating information. Regardless of the order that information is received, data should be evaluated on its own merit. This sort of objective collection and analysis of information is what artificial intelligence excels at. Information processing systems offer an objective result. This gives a business the best solution to a problem, based on good information.
Anchoring is often a problem during the recruitment process. Human recruiters can be swayed by the first candidates they meet. Later candidates are pegged against the earlier ones, and not judged on their suitability for the role. In contrast, Kalido’s smart algorithms are objective. Once the user has specified the skills they’re looking for, Kalido combs its entire network to find the most appropriate person. Kalido takes all of a candidate’s skills, interests, and education and work history into account. It discounts irrelevant information (like how well the candidate stacks up to the one before) – something human recruiters struggle to do. Candidates are chosen based on good, relevant information. They’re then matched to positions because they actually suit the role. This means companies using Kalido to fill positions will be able to do so quickly and accurately, without the anchoring bias causing suboptimal hiring.
2) Overconfidence bias
This bias is another example of when decisions are made using bad information. As its name suggests, the bias leads a business to be too optimistic. And while a positive outlook is good, unrealistic optimism means lack of preparation when things don’t go according to plan. For example, a company may have huge confidence in its ability to win a new client. It may discount competitors and see itself as the only horse in the race. This could lead to lack of effort, as the pitch becomes a ‘sure thing’. The company may also rack up financial liabilities, in anticipation of a big payday. If the confidence is unwarranted, the company may in fact lose the pitch. And be in huge debt to boot.
One way of reigning in overconfidence is getting a second, third, or fourth opinion. A company willing to seek advice from other sources will get a much more realistic view of its own chances of success. Instead of relying exclusively on rose-tinted data, objective data from other experts will provide a more balanced view.
When seeking second opinions, companies should likewise look to Kalido. Kalido can match companies with skilled individuals across many fields. The company need only specify the particular skill or expertise it needs, and Kalido will do the rest. The company can verify the person’s credentials with common contacts and affiliations. Once suitable and trusted people are found, the company can ask them for their honest and objective assessment of its strengths and weaknesses. It can then address any issues which it may have overlooked. If confidence is warranted, it will be closer to fact, and less fantasy.
3) Curse of knowledge
Assuming other people have as much information as you is the root cause of many misunderstandings. Curse of knowledge means the protagonist is unable to put themself in someone else’s shoes. If the other party fails to understand something, or fails to act in accordance with knowledge the protagonist possesses, the protagonist becomes impatient.
Supervisors may assume subordinates know more than they do. So, when a subordinate underperforms, this is seen as insubordination, incompetence, or laziness. Meanwhile, the subordinate may genuinely not know any better. Likewise, subordinates may assume supervisors are always in the loop. They may under-report, instead of ‘wasting the supervisor’s time’. Crucial information may not be passed along. Between colleagues, curse of knowledge can cause untold friction. This is especially true when combined with hostile attribution bias. Under the latter bias, the protagonist fails to give others the benefit of the doubt. Instead of chalking something up to an honest mistake, bad faith or foul play is suspected.
Curse of knowledge can only be combatted through open and honest communication. Instead of assuming one knows the inner working of another, the other should simply be asked what they do or do not know. While old school companies may run on bureaucracy and fear, soft skills such as teamwork and verbal communication will be the cornerstone on which future business is built. In fact, more than 78% of hiring managers want employees who can work well as part of a team, according to the National Association of Colleges and Employers Job Outlook Survey 2017. Undoubtedly, being able to speak openly with colleagues fosters trust and cooperation. Misunderstandings are avoided or quickly cleared up, allowing the business to move forward.
Kalido fosters better relations by allowing users to see each other’s comprehensive profiles, including skills, interests, past and current projects, education and work history. Common contacts and affiliations are also made transparent. This helps users understand all the things that uniquely make up a person. It also helps users see each other as people, and not as a job title. Knowing more about colleagues gives more points of interest or commonality to bond over. Free chats and calls also encourage more interaction. More interaction means better communication. And better communication means the curse of knowledge bias can be more effectively dealt with. Colleagues will feel more comfortable admitting what they do or do not know. Which means no one is left in the dark.
Psychological biases will inevitably crop up, regardless of how vigilant an individual or group of individuals may be. But being aware of these biases, and consciously taking steps to combat them, significantly decreases their potency. As an advanced AI system which also encourages better human relations, Kalido can help businesses tackle these biases, so they no longer hold your business back.