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Cognitive Biases and Influence

Cognitive Biases and Influence
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You may recall that in courses one and two, we talked about how cognitive biases can impact the accuracy with which we evaluate the performance of others. Well, it turns out that some of these cognitive biases can transform into very powerful influence weapons. And I would like for us to talk about those. I’ll start with the availability bias, or availability heuristic, which states we tend to be particularly influenced by vivid, salient, readily available information. Something that’s easily retrievable from memory. In the context of performance appraisals you may recall we talked that where a particularly influenced by the most recent meetings, the most recent interactions with a particular employee when assigning their performance evaluation scores.
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Take a look at the really familiar video of Alex Slusky introducing O power, just the first two minutes of it and identify the uses of availability heuristic in that short segment.
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I’m sure you’ve noticed the active use of visual imagery. He shows you the amount of coal that in theory is necessary to power a light bulb for a year. And he talks about energy losses, and he shows you the actual amount of coal that’s necessary to power a light bulb for a year by bringing an entire wheelbarrow of coal onto the stage. Couldn’t we just shown you a slide with the numbers? So many ounces and grams versus so many pounds and kilos, but he chose to show you the actual amounts of coal. This is a very effective use of availability bias and availability heuristic for influence purposes. It makes the story of O power very vivid, very memorable, very salient.
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Stories help in activating availability heuristic. In addition to giving a slide with declining customer satisfaction scores, bring a dissatisfied customer into the meeting and ask her to tell her story.
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Instead of giving your customer a flyer describing the features of a product, let them experience the prototype. That again is a way to activate availability heuristic. At this point I’m gonna ask you to fill out a quick online poll, which asks you to make a series of choices. Take a couple minutes to do it.
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As you can see, I’ve presented you with a series of options. In the first question, I ask you to choose between a sure chance of winning 500 and a 50 percent chance of winning 1,000. In the second set of options, I ask you to choose between a sure chance of losing 500 and a 50 percent chance of losing 1,000. You can see that in the first set of options, we overwhelming prefer a sure win of 500. In the second set of options, will go for probabilities. Which is a 50% chance of losing 1,000. So when we’re talking about gains, we’ll choose a more certain option, sure 500. We talk about losses, we tend to opt for a gamble for probabilities.
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This very simple poll reveals a great insight about human behavior, which is often discussed as the framing bias under the rubric of a prospect theory. It was first discovered by Daniel Kahneman, Amos Tversky. Daniel Kahneman is a social psychologist, the only social psychologist to win the Nobel Prize in Economics in 2002. And Amos Tversky would have won it too but he had passed away few years before the Nobel was announced. As you know Nobels are not awarded posthumously. The idea of a framing bias, is that when an option is framed to us as a gain we become more risk averse. We talk about gains we go for that sure 500 outcome.
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But when an option is framed to us as a loss, we become more risk seeking. We turn to gambles. We go for the 50 percent chance of losing 1,000.
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Let me give you a more practical managerial example. In several studies, managers were asked the following question. A large car manufacturer has recently been hit with a number of economic difficulties, and it appears as if three plants need to be closed, and six thousand employees laid off. The VP of production has been exploring alternative ways to avoid the crisis. She has developed two plans. Which plan would you select?
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Half of the managers received the following options, plan A this plan will save one of the three plans and 2,000 jobs. Plan B this plan has a one third probability of saving all three plans and all 6,000 jobs, but has a two third probability of saving no plans, and no jobs. And the second group of managers received the following options. This plan, plan A, will result in the loss of two of the three plans and 4,000 jobs. Plan B has a two third probability of resulting in the loss of all three plans and all 6,000 jobs. And he has one third probability of losing no plants and no jobs.
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I’d like you to pause the video and compare the two sets of options, take a couple minutes to do so.
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What I’m sure you realized is that the options across the two sets are identical substantively. The only thing that’s different is the verbal presentation of the options. In the first set of options, they’re framed as gains. In the second set of options, they’re framed as losses. And look at what happens. When these same options are framed as gains, over 80 percent of managers. Choose plan A, which is a safer option and with certain option. Recall that when something is framed to us as a game, we become risk averse. But when we refrain the same option as loses, our preference has changed and managers begin to prefer plan B over plan A.
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Recall that when something is framed to us as a loss, we become more risk seeking, so more likely to go with a risky option, which is plan B.
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The idea here is that you can influence people toward more risk seeking or more risk averse behaviors, by framing a particular idea, a particular proposal, as either a gain or a loss. And in most cases, you can refrain the same idea as either a gain or a loss. For example, I can frame a proposal as a gain. We should enter into this market because we can gain 11% in market share. Or I can frame the same idea as a loss, by not entering into this market, we are missing out on the opportunity to gain 11% in market share. It’s a second framing that will influence my audience towards more risk seeking behaviours. Hiring Jack is critical.
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His experience will enable us to capture the unique opportunity to transform the organization to support cross selling. That option frames a particular proposal as a gain would make our audience more risk averse. But I can refrain the same option as a loss and therefore influence the audience toward more risk seeking behaviors. Hiring Jack is critical, lacking his experience we can miss the unique opportunity to transform the organization to support cross selling. Get this new product and its unique benefits. Don’t miss out on this new product and its unique benefits.
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Keep in mind the verbal framing of your proposals and the implications that framing carries for influence.
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And the final bias in influence tactic that I would like for us to discuss is anchoring, which is based on the idea that when we have an initial estimate on the table. It could be a budget estimate, a cost estimate, a growth estimate, an initial offer to the customer, we only incrementally adjust off of that estimate, off of that starting value. Let me give you an illustration. In several studies, including those we did at Michigan, managers were asked the following question. A newly hired engineer for a computer company in the Boston area has six years of experience and good all around qualifications.
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When asked to estimate the starting salary for this employee, my administrative assistant, knowing little about the profession or the industry, guessed an annual salary of X, what is your estimate? Half of the managers receive a guess of 70,000 dollars. Another half, a guess 120,000 dollars. And you can see that we got a nice 14,000 dollar difference out of this, which was statistically significant. And the guess, the initial estimate by the administrative assistant is purely arbitrary. In negotiations, there’s a lot of research showing that if you start the negotiation with a first offer, you’re going to substantially better off at the end of the negotiation. Because the subsequent discussions will revolve around that initial estimate.
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When you speak up in meetings first, you have an opportunity to anchor the discussion, and in most cases you can anchor the discussion with either low or a high value. For example In a discussion of a budget, budget planning meeting, I can throw a low anchor, our last year’s IT budget was one point five million, or I could use a high anchor, which is our top competitors’ average IT budget is around two point three million.
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In setting goals and objectives, I can lead the discussion with a low anchor. I can say that the average rate of sales growth in the industry is five percent, where I can choose to open the discussion with a high anchor. The average rate of sales growth of four of our largest competitors is 7.5%. In discussing performance, I can again start with the low anchor. It was a two point five percent increase in the number of key accounts company wide. Or I can choose to start with high anchor. Our leading office has increased the number of key accounts by 9%. Going forward, keep in mind those three key biases, availability, framing, and anchoring.
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All of which transform into very powerful influence tactics. These influence tactics constitute a significant addition to your portfolio of influence tools.
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