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The False Consensus Effect

In Management 4 Mins Read By

In psychology, the false consensus effect, also known as consensus bias, is a pervasive cognitive bias in social inferences, such that people tend to see their own behavioral choices and judgments as relatively common and appropriate to existing circumstances.

The False Consensus Bias refers to peoples tendency;

  • Others share your beliefs
  • Others will behave similarly
  • Overestimate the extent to which their beliefs or opinions are typical of those of others

This false consensus is significant because it increases or decreases self-esteem, the overconfidence effect or a belief that everyone knows one’s own knowledge. It can be derived from a desire to conform and be liked by others in a social environment. This bias is especially prevalent in group settings where one thinks the collective opinion of their own group matches that of the larger population. Since the members of a group reach a consensus and rarely encounter those who dispute it, they tend to believe that everybody thinks the same way.

The false-consensus effect is not restricted to cases where people believe that their values are shared by the majority, but it still manifests as an overestimate of the extent of their belief

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The Dunning Kruger Effect: Why Incompetent People Think They Are Competent.

In Management 8 Mins Read By

The only true wisdom is in knowing you know nothing. – Socrates

The Dunning–Kruger effect is a cognitive bias in which people with low ability at a task overestimate their ability. It is related to the cognitive bias of illusory superiority and comes from the inability of people to recognize their lack of ability. 

According to Social Psychologists, David Dunning and Justin Kruger, People tend to hold overly favorable views of their abilities in many social and intellectual domains. The bias results from an internal illusion in people of low ability and from an external misperception in people of high ability; that is,

The miscalibration of the incompetent stems from an error about the self, whereas the miscalibration of the highly competent stems from an error about others.

The authors suggest that this overestimation occurs, in part, because people who are unskilled in these domains suffer a dual burden: Not only do these people reach erroneous conclusions and make unfortunate choices, but their incompetence robs them of the metacognitive ability to realize it.

Across four studies, the authors found that participants scoring in the bottom quartile on tests of humor, grammar, and logic grossly overestimated their test performance and ability. Although their test scores put them in the 12th percentile, they estimated themselves to be in the 62nd. Several analyses linked this miscalibration to deficits in metacognitive skill, or the capacity to distinguish accuracy from error. Paradoxically, improving the skills of the participants, and thus increasing their metacognitive competence, helped them recognize the limitations of their abilities. 

The average person suffers from three delusions: That he is a good driver, That he has a good sense of humor and That he is a good listener

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The Sunk Cost Fallacy

In Management 5 Mins Read By

Recently I enrolled in a Bootcamp, which I had thought would help me achieve one of my career goals. Few weeks into the program and after I had paid a large sum of money, which was non-refundable, I realized It was not going to help achieve the career goal that I had intended and coupled with my hectic work schedule. It was not easy pulling the plug on the program, even though I had invested a large chunk of money, but I had to for the sake of my sanity & save money, time, and energy.

In retrospect, it was not a wrong move to leave the program as I was able to use that time for some other activities such as writing some IT certifications. I had to think of the trade-off I would be making vis a vis my career goals.

The Sunk Cost Fallacy is the tendency to continue to sink money, time, or effort into an activity/project we know is not going to give us our expected result. We continue these resources imply because we have already incurred a cost (sunk), which cannot be recouped. We place more value on the project based on how much we have already invested rather than the real present value.

The sunk cost is very pervasive in every area of our lives as we continue to spend money, time and effort in abusive relationships, loss generating business, viewing boring movies or sports games, nonproductive dating/marriage, or even schooling and career choice. There are lots of examples of the sunk cost in the business world such as Concorde, Google Glass, Microsoft Zune among others.

Here are some examples of the sunk cost fallacy:

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The Peter Principle

In Management 5 Mins Read By

Challenge the belief that the selection of a candidate for promotion should be based on their performance in their current role, rather than on their ability relevant to the intended role.

The Peter principle is a concept in management developed by Laurence J. Peter, which observes that people in a hierarchy tend to rise to their “level of incompetence”: an employee is promoted based on their success in previous jobs until they reach a level at which they are no longer competent, as skills in one job do not necessarily translate to another. 

The Peter principle states that a person who is competent at their job will earn promotion to a more senior position which requires different skills. If the promoted person lacks the skills required for their new role, then they will be incompetent at their new level, and so they will not be promoted again.

But if they are competent at their new role, then they will be promoted again, and they will continue to be promoted until they eventually reach a level at which they are incompetent. Being incompetent, they do not qualify to be promoted again, and so remain stuck at that final level for the rest of their career (termed “Final Placement” or “Peter’s Plateau”).

In a Hierarchy: Every Employee Tends to Rise to His Level of Incompetence

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