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COGNITIVE BIASES IN PROJECT DECISION-MAKING

Cognitive Biases in Project Management

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Page 1: Cognitive Biases in Project Management

COGNITIVE BIASES IN PROJECT DECISION-MAKING

Page 2: Cognitive Biases in Project Management

AimCognitive biases of project managers

can lead to perceptual distortion and inaccurate judgment affecting business and economic decisions and human behavior in general.

Subjecting these biases to scientific investigations and independently verifiable facts is the aim of the presentation

Page 3: Cognitive Biases in Project Management

Ignoring Regression to Mean

The tendency to expect extreme events to be followed by similar extreme events.

In reality, extreme events are most likely to be followed by an average event.

Page 4: Cognitive Biases in Project Management

Anecdote

Daniel Kahneman was awarded  Nobel Prize in Economic Sciences in 2002.

The notable thing about this Nobel prize was that Daniel Kahneman was not an Economist but a Psychologist

Page 5: Cognitive Biases in Project Management

Confirmation bias

 The tendency to search for or interpret information in a way that confirms to one's preconceptions.

Page 6: Cognitive Biases in Project Management

Gambler's fallacy

The tendency to think that future probabilities are altered by past events.

This bias results from an erroneous conceptualization of the Law of large numbers (Trial size for expectancy given by Bernoulli’s theorem) .

Page 7: Cognitive Biases in Project Management

Experimenter's or Expectation bias

 The tendency for experimenters to believe in data that agree with their expectations for the outcome, and to disbelieve or downgrade the data that appear to conflict with those expectations.

Page 8: Cognitive Biases in Project Management

Framing Effect

 Drawing different conclusions from the same information, depending on how or by whom that information is presented.

Page 9: Cognitive Biases in Project Management

Knowledge Bias

 The tendency of people to choose the option they know best rather than the best option.

Page 10: Cognitive Biases in Project Management

Normalcy Bias

 The failure to plan for a disaster which has never happened before.

Page 11: Cognitive Biases in Project Management

Outcome Bias

The tendency to judge a decision by its eventual outcome instead of quality of the decision at the time it was made.

This bias manifests in the review of project decisions.

Page 12: Cognitive Biases in Project Management

Well Travelled Road Effect

 Underestimation of the duration taken to traverse oft-traveled routes and overestimation of the duration taken to traverse less familiar routes.

Page 13: Cognitive Biases in Project Management

Half-Truths

In ancient Roman law, two half proofs constituted a complete proof .

Page 14: Cognitive Biases in Project Management

False Positives

The probability that ‘A’ will occur if ‘B’ occurs will generally differ from the probability that ‘B’ will occur if ‘A’ occurs.

The probability that an event will occur if or given that other event occur is called Conditional Probability.

Page 15: Cognitive Biases in Project Management

Hindsight Bias

The tendency to see past events as being predictable at the time those events happened.

In day-to-day life the past often seems obvious even when we could not have predicted.

This bias manifests in the review of project decisions.

Page 16: Cognitive Biases in Project Management

Anecdote

Army Chief of Staff General George Marshal was faulted by U.S Congress Committee for having missed all the “signs” of a coming attack of Pearl harbor.

Page 17: Cognitive Biases in Project Management

Conclusion

Page 18: Cognitive Biases in Project Management

Thank You

Page 19: Cognitive Biases in Project Management

“False Positive” - Tested positive but HIV Negative.

“True Positive” - Tested positive and HIV positive

"True Negative” -Tested negative and HIV negative

“False Negative” - Tested negative but HIV positive

Page 20: Cognitive Biases in Project Management

As per the rule of compounding probabilities, no finite number of partial proofs will ever add up to a certainty.

Page 21: Cognitive Biases in Project Management

Doctor’s Confusion

“He would test positive if he was not HIV infected”

with the chances that

“He would not be HIV infected if tested positive”

Page 22: Cognitive Biases in Project Management

The study of randomness tells us that the crystal ball view of events is possible, unfortunately, only after they happen.

Page 23: Cognitive Biases in Project Management

If you get 45 heads in the first 100 tosses, the coin would not develop a bias towards tail for the rest of the tosses to catch up!