How our perceptions deceive us

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RYAN KRAFT

In my column last week, I presented psychological effects that can cause our decision-making in innovation projects to be erroneous. When we make decisions on whether to continue or cancel a project, they will cause us to overestimate its benefits and underestimate its risks (affect heuristic). Along with the irrational tendency to overrate and thus, avoid losses (loss aversion), we will lean toward keeping projects going.

In this column, I will focus on the errors that I categorize as errors of personal perspective—biased judgments due to our perception of options and information or the individuals who provide us with them.

Our gut feeling

We will constantly face new ideas and information, especially when innovating. Despite their novelty, we may be quick to have an opinion. Our personal history is full of twists and turns, ups and downs that we use as learning points. We rely on these experiences to develop an intuition, which we use to judge new information—our “gut feeling.”


Our gut will let us feel positively or negatively toward options and can color our judgments of risk and value through the ‘affect heuristic’—the same mental shortcut I presented in my last column. We may have a “bad feeling” about a proposition, idea or project in general. This feeling will make our judgments biased and make us overestimate its risks and underrate its merits.

A large problem with this gut feeling, however, is that it does take the differences between our past experiences and a new project into account. While our feeling may be applicable to the situation it emerged from, the slightest changes can render it useless. We must understand our “gut” and consider what may be different before we blindly trust it.

Our perception of others

In a project, we often come together to develop a strategy on how to move forward sharing our thoughts and opinions across different fields of expertise. A team’s finance expert, for example, may give her thoughts on a marketing issue or vice versa. While such a meeting may be held in an open manner, we will not approach and perceive the information neutrally. Our perceptions may be affected by social biases, such as the “fundamental attribution error” or the “halo effect.”

How we judge an individual may come down to a minuscule amount of information.

Presenting us with information or offering an opinion, someone may stutter, speak in a disorganized fashion or lack confidence in his words. This may cause us to believe that he does not know what he is talking about or have faith in his own words. However, doing this we will disregard that we only see a small part of the big picture. Maybe he was feeling unwell, due to sickness or a loss. Making up our mind on an individual based on small bits of situational information is known as the “fundamental attribution error.”

This perception of others may then color our judgments of them and the quality of their work. From our impression, even maybe of individual character traits, a halo shines onto and colors our judgment of the quality of their work. Somebody’s charm or good looks (yes, it can be as superficial as that) can cause us to rate their work to be better and more valuable than that of others. We will then be quick to dismiss or focus on certain information, not because of the information itself, but of our judgment of its source, which may also be biased.

It is important that we understand and reflect on our feelings. Otherwise, we may be too quick to follow what appears to be right, not realizing how much things have changed. Furthermore, we must be aware that there is more to somebody than what we perceive, and be cautious not to let one trait shine onto our further judgments.

Ryan Kraft is an expert in the field of innovation management and behavioral decision sciences. He is currently a Consultant for MoneyMax.ph, the Philippines’ leading financial comparison website. Tweet us @MoneyMaxPH, like us on Facebook: MoneyMax.ph, and email your comments to ryan.kraft@moneymax.ph. For more information, visit our website: www.MoneyMax.ph

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