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Cognitive Biases and Project Planning

January 19, 2012
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Cognitive biases are more common than we imagine, even among folks who are technically well-trained and competent. These can lead to misreading data and faults in project planning.

Daniel Kahneman is a trailblazer in uncovering and demonstrating such biases. He won the Nobel Prize in economics. He is the only Nobel Laureate in economics who is a psychologist.

Kahneman’s recent book, “Thinking, Fast and Slow” was written to provide a guide to biases of various kinds, some of which are relevant to engineers. He and his colleague Tversky discovered these “systematic errors in the thinking of normal people”.

One example, called The Linda Problem, entails using skilled, well-educated folks. It is a seemingly simple probability problem with two possible solutions provided. Even among the group of students in Stanford’s Graduate School of Business who were given this problem, 85% chose the incorrect answer. These students had extensive training in probability, so it would seem all should be alert to the underlying bias.

Another bias called The Planning Fallacy, Kahneman writes, “may well be the most significant of the cognitive biases.” This provides a tendency to over-estimate benefits and under-estimate costs. This can result in choosing riskier projects.

About 20 such biases were identified and demonstrated by simple tests.

Two different systems or processes for decision making were identified. They are called System One and System Two. System One produces quick and dirty solutions. System Two is a slower, deliberate, analytical and consciously effortful mode of reasoning.

In a simplified explanation, System One evolved so that we could respond quickly to threats to our safety. System Two is not only slower, but it can also be overtaxed easily so that it cannot handle multiple tasks. System Two also tires easily, or undergoes ego depletion. It is considered lazy, so that it does not necessarily respond to all appropriate tasks. Kahneman states that these systems are not physical in our brain: he uses the word “system” to describe a process.

It is to be emphasized that these cognitive, decision-influencing biases are universal and not limited to folks in technology and related areas. According to David Brooks in the New York Times, “Kahneman and Tversky’s work will be remembered hundreds of years from now. . . and that it is a crucial pivot point in the way we see ourselves”.

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