Archivio per 11 ottobre 2016

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Feeling Smart

See on Scoop.itBounded Rationality and Beyond

Which is smarter—your head or your gut? It’s a familiar refrain: you’re getting too emotional. Try and think rationally. But is it always good advice? In this surprising book, Eyal Winter asks a simple question: why do we have emotions? If they lead to such bad decisions, why hasn’t evolution long since made emotions irrelevant? The answer is that, even though they may not behave in a purely logical manner, our emotions frequently lead us to better, safer, more optimal outcomes. In fact, as Winter discovers, there is often logic in emotion, and emotion in logic. For instance, many mutually beneficial commitments—such as marriage, or being a member of a team—are only possible when underscored by emotion rather than deliberate thought. The difference between pleasurable music and bad noise is mathematically precise; yet it is also something we feel at an instinctive level. And even though people are usually overconfident—how can we all be above average?—we often benefit from our arrogance. Feeling Smart brings together game theory, evolution, and behavioral science to produce a surprising and very persuasive defense of how we think, even when we don’t.

See on publicaffairsbooks.com

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Are you ready to decide? | McKinsey & Company

See on Scoop.itBounded Rationality and Beyond

Before doing so, executives should ask themselves two sets of questions. Good managers—even great ones—can make spectacularly bad choices. Some of them result from bad luck or poor timing, but a large body of research suggests that many are caused by cognitive and behavioral biases. While techniques to “debias” decision making do exist, it’s often difficult for executives, whose own biases may be part of the problem, to know when they are worth applying. In this article, we propose a simple, checklist-based approach that can help flag times when the decision-making process may have gone awry and interventions are necessary. Our early research, which we explain later, suggests that is the case roughly 75 percent of the time. Biases in action In our experience, two particular types of bias weigh heavily on the decisions of large corporations—confirmation bias and overconfidence bias. The former describes our unconscious tendency to attach more weight than we should to information that is consistent with our beliefs, hypotheses, and recent experiences and to discount information that contradicts them. Overconfidence bias frequently makes executives misjudge their own abilities, as well as the competencies of the business. It leads them to take risks they should not take, in the mistaken belief that they will be able to control outcomes. The combination of misreading the environment and overestimating skill and control can lead to dire consequences. Consider, for instance, a decision made by Blockbuster, the video-rental giant, in the spring of 2000. A promising start-up approached Blockbuster’s management with an offer to sell itself for $50 million and join forces to create a “click-and-mortar” video-rental model. Its name? Netflix. As a former Netflix executive recalled, Blockbuster “just about laughed [us] out of their office.”1 Netflix is now worth over $25 billion. Blockbuster filed for bankruptcy in 2010 and has since been liquidated.

See on mckinsey.com

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Leadership and behavior: Mastering the mechanics of reason and emotion | McKinsey & Company

See on Scoop.itBounded Rationality and Beyond

A Nobel Prize winner and a leading behavioral economist offer common sense and counterintuitive insights on performance, collaboration, and innovation. The confluence of economics, psychology, game theory, and neuroscience has opened new vistas—not just on how people think and behave, but also on how organizations function. Over the past two decades, academic insight and real-world experience have demonstrated, beyond much doubt, that when companies channel their competitive and collaborative instincts, embrace diversity, and recognize the needs and emotions of their employees, they can reap dividends in performance.1 The pioneering work of Nobel laureate and Harvard professor Eric Maskin in mechanism design theory represents one powerful application. Combining game theory, behavioral economics, and engineering, his ideas help an organization’s leaders choose a desired result and then design game-like rules that can realize it by taking into account how different independently acting, intelligent people will behave. The work of Hebrew University professor Eyal Winter challenges and advances our understanding of what “intelligence” really means. In his latest book, Feeling Smart: Why Our Emotions Are More Rational Than We Think (PublicAffairs, 2014), Winter shows that although emotions are thought to be at odds with rationality, they’re actually a key factor in rational decision making.2 In this discussion, led by McKinsey partner Julia Sperling, a medical doctor and neuroscientist by training, and McKinsey Publishing’s David Schwartz, Maskin and Winter explore some of the implications of their work for leaders of all stripes.

See on mckinsey.com




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