Whether the project is big or small, basic fallacies in human cognition can quickly become its biggest threat. I will now present 3 cognitive biases that can seriously jeopardize your project, unless you keep them in line.
- Sunk-costs Fallacy/Escalation of Commitment
The phenomenon works like this: as someone invests more time and money into a given project, they gradually begin to justify continuing investments by magnifying the potential return. As an example, let us say that a person invests and loses 10,000 USD with the hope of doubling his money, but then chooses to invest another 10,000 USD with the hope of quadrupling his money. It is incredibly important to keep all investments within the realm of reason, and discontinue all projects without a clear return on investment.
We tend to give preferential treatment to members we perceive to be in our own group. This is why close relatives and loved ones often make poor business partners. Preferential treatment usually results in members ignoring serious weaknesses and errors in their project. This partly explains why the consulting industry is booming, people often make erroneous decisions if circumscribed to their given group.
We all like to search for, interpret and remember information such that it confirms our own ideas. This strategy only works if you are the most knowledgeable and experienced person in the world in your field. Needless to say, most people are not immune to errors. It is actually extremely valuable to seek out DISCONFIRMING information. If you work in a team, then someone should play the Devil’s Advocate and viciously look for errors in the project before they become serious.
So, there are 3 things to think about in your projects. With this knowledge in mind, you can take steps to prevent these from killing your project.4
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