I recently read Thinking Fast & Slow by Daniel Kahneman, and it was my favorite read of this year. I had been generally familiar with Behavioral Economics previously, but this was the deepest I’d gotten into it. Kahneman is a very strong writer, and it left me with lots of things to think about. A few of the ideas in particular felt relevant to management, and I thought I’d highlight them here.
Everybody thinks about their lives and careers as a story. When we evaluate how good a story it is we tend to think about the high points, low points and most recent feelings only, neglecting how long any of those things lasted. [Summarized from the chapter 36 “Life as a Story”]
This made me think of how a bad week, or a very bad incident in the past can negatively color the story of an employee with an otherwise happy tenure leading to what Michael Lopp calls shields down moments. This can feel unfair for managers who are doing things right and want to maintain their teams, but the main lesson I take is to not let little annoyances fester without addressing them, as little things can shift people’s attitudes by more than is justified by a big picture view.
Humans have a number of cognitive traits that make us bad at predicting and estimating — we ignore evidence that is not currently on our mind, become confident on relatively small pieces of information, and have a tendency to simplify complexity away by answering easier questions than what we’ve been asked. We also over-weight “causal thinking” and underestimate regression to the mean. [Summarized from Chapters 18-24]
This was easy enough to accept personally – I’m perennially overconfident in my estimates. The lesson here in my mind is that more process around predictions may lead to better outcomes; left to our own devices we’ll think less about predictions and not notice that our confidence is based on flimsy evidence. For more important predictions, processes that force us to be more thorough should help.
Humans are very sensitive to how questions are framed — we hate losing things more than we like gaining them, are very associative in our thinking, and often aren’t consistent in how we make choices depending on external factors like a suggested answer, another question we were just asked, or how close it is to a meal. [Summarized from Chapters 25-34]
I see this type of stuff in behavioral economics mostly quoted in terms of “nudge” like behavioral manipulation, but this mostly has me thinking about the importance of communication plans. It’s easy to think that getting info passed to a team or individual is more important than how you do it, but actually how choices and changes are communicated has a real impact on how people feel about them, which can make a big difference to team morale and retention over the course of many communication opportunities. Lara Hogan has some good resources on communication plans including this article.
We all overweight things that are easy for us to see vs things that are not (availability bias). We tend to see our own contributions as bigger and more meaningful than others, our own challenges as more painful, and our own skills as more impressive. Because of course we see all the evidence for those and only a fraction of what others are doing. [Summarized from Chapter 12 and some references elsewhere]
This was a good reminder to me to be humble and not overweight my own accomplishments first. But it also is a good thing to keep in mind the next time a teammate feels underappreciated or that they may have been unfairly passed up for an opportunity. We’re all prisoners of our own perspectives, and while that may sometimes lead us astray in terms of how we stack up a little grace can go a long way here.