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Charlie Munger is one of the richest men in the world. He made his fortune as Warren Buffet’s business partner at Berkshire Hathaway, which he helped grow into a company worth almost half a trillion dollars. Munger attributes his success to making exceptionally good decisions. You could say he’s obsessed with why humans make good and bad decisions. Through personal research and observation, Munger created a set of mental models to use as guides for any decision he makes. “I sought good judgement mostly by collecting instances of bad judgement, then pondering ways to avoid such outcomes,” he explained in his famous speech The Psychology of Human Misjudgment. (1) In the piece, Munger outlined 25 different tendencies that influence poor decision making.
These tendencies, otherwise known as cognitive biases, are behavioral patterns that lead to illogical thought. (2) Luckily for us, we don’t have to go through the painstaking research that Munger did or build our own mental models. Do a quick google search and you’ll find over a hundred cognitive biases and research-based explanations of how these small behavior patterns inhibit good decision making. So far, the go-to way to eliminate cognitive biases has been to design around them. We’ve built smarter systems, checklists, and forms to catch the kinds of biases that lead us astray. Exciting research into meditation reveals another option: training our brain to resist the effects of cognitive biases so that they don’t influence our decisions.
Our Broken Judgement System
You make hundreds of decisions each day. You choose what to eat, what to wear, and even what to say to the person next to you on the train. Each decision zaps some of your mental energy. To save time and processing power, humans rely on heuristics–or mental shortcuts based on past experience and human instinct–to help us make some of our decisions. (3) Heuristics can help us make simple choices, such as if a berry is safe to eat, based on its color and the color of edible berries we’ve eaten in the past. Heuristics are powerful because you don’t even realize you’re using them.
Heuristics can fail, however, when they’re used when making complex decisions. For example, humans are bad at grasping the probability of unknown events. If you see someone flip a quarter to head’s three times in a row, the representative heuristic leads you to think that the next time that person flips a quarter, it’s more likely to fall on heads than tails. In reality, the chances of a coin flipping heads or tails is always 50–50. When a heuristic leads you astray, the error in judgement that you make is referred to as a cognitive bias.
Business leaders are as susceptible as anyone to cognitive biases. You’re more likely to agree to a business decision if you see your colleagues agree with it, too (social proof). You’ll probably fix a minor bug you hear about multiple times than a more important bug you hear about just once, since your brain misinterprets frequency to indicate of importance (availability heuristic). In Silicon Valley, we often associate someone’s success to a personality trait instead of an actual contributor, such as luck, network, or professional experience (fundamental attribution error). Some cognitive biases are driven by emotion and gut instinct . Others result when your brain tries to connect the dots with too little information or inaccurate memories. (5,6)
Meditation and Negativity Bias
“[Our results show that] even for people who don’t have much experience with meditation or time to put into it, it may be useful to do a little mindfulness meditation just before facing a situation or task in which it would help to not emphasize the negative so much and appreciate the positive more.” — Dr. Laura Kiken, University of North Carolina, Chapel Hill
New research shows that meditation can help you overcome common cognitive biases. Dr. Laura Kiken and Dr. Natalie Shook investigated meditation as a tool for preventing negativity bias, our tendency to remember bad memories more strongly than good ones. We benefit from negativity bias in survival situations; for instance, the most vivid feeling you have about an open flame on your stove is probably that it can burn you. But negativity has detrimental effects in more complicated situations. A negative mindset can reduce your confidence and put you at more risk for anxiety and depression. In leadership situations, negative thinking can make leaders overly cautious, controlling, and resistant to taking risks. (7) Focusing on the negative and criticizing employees can distract and demoralize the whole team.
Kiken and Shook’s experiments revealed that just one meditation session can make people less susceptible to negativity bias. In their study, participants with little or no meditation experience classified different targets as either harmful or helpful after undergoing a 15 minute meditation session or an equivalent control session. People who meditated did not show negativity bias or remember the negative experiences more than the positive ones, whereas the control group did. (8) The researchers explained, “[Participants] correctly classified positive and negative stimuli more equally than those in the control condition. Interestingly, the difference in negativity bias stemmed from better categorization of positives. Furthermore, those in the mindfulness condition reported higher levels of optimism compared to the control condition.” (9) People who meditated were less affected by the negative events they experienced and came out of the study in a more positive mood.
Meditation and Sunk Cost Bias
“Meditation helped me achieve this goal: make better decisions in both my personal and business life. I started meditation from zero just a couple of years ago using Lift since the start, now its a solid habit I do every day like breathing.” ~ Francesco Pham
Meditation has also been shown to reduce your susceptibility to sunk cost bias, the tendency to hold on to bad investments. Sunk cost bias is what leads you to watch a bad movie because you paid for the ticket or keep an employee that isn’t a fit for the role because you invested time training them. The rational decision in these cases is to leave the movie early and do something you enjoy more, or in the case of the employee, hire someone better to replace them.
Researchers at INSEAD business school ran a study in which participants listened to a 15-minute breath focused meditation, just as in the negativity bias study. Immediately after listening to the tape, participants had to make a business decision as the owner of a make believe firm: should they buy a $10,000 printer that worked at double speed and would cut production costs in half or keep using a newly purchased $200,000 printer. The rational decision, ignoring sunk costs, would be to buy the $10,000 printer. Researchers found that 78% of people who meditated before making the decision ignored sunk cost to make the right decision. In the group that did not meditate, only 44% of people overcame sunk cost bias to make the right choice. (10)
So how does meditation counter the inner workings of our brain and give us the superpower to overcome biases that are hardwired into them? Andy Hafenbrack, head researcher of the INSEAD study, thinks that meditation reduced sunk cost bias in two steps: first, by focusing people on the present moment and second, by reducing their negative emotions around the decision. He explained, “By focusing attention on the physical sensations of breathing, which draws attention to a concrete experience taking place in the present moment, people focus less on the past and future. By focusing less on the past and future, people feel less negative emotion, and the reduction in negative emotion helps them resist the sunk cost bias or say that they would cut their losses sooner.” (11)
Other research suggests a third aspect could explain why mindfulness helps reduces sunk cost bias. When we make a bad decision, we tend to rationalize the decision as a good one. This phenomena, cognitive dissonance, is at play when we choose to continue a bad investment: we think that if we made a good decision before, then the decision should still be good now. Researchers Natalia Karelaia and Jochen Reb believe that mindfulness could help people make better decisions by detaching their ego and emotions from previous decisions. (12) They explained, “Less mindful individuals may be more likely to filter and interpret information in an overly optimistic manner to maintain the mistaken believe that the chosen course of action was indeed the right one.” (13)
Negativity bias and sunk cost bias are just two of many cognitive biases that lead to bad decision making, but evidence is mounting that mindfulness can help leaders overcome faulty logic that leads to bad decisions. Perhaps the most important thing that mindfulness does is remind you that there is a decision to make. It’s so easy to be reactive when making a decision, especially when ego, emotions, or money is at risk. When you can hold off on responding to your gut instinct, or to the negative emotions that a decision or comment stirs up inside of you, you give yourself the chance to fully evaluate a decision so that you make the best one.
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(1) Munger, Charles T. “The Psychology of Human Misjudgement.”
(2) Tversky, Amos, and Daniel Kahneman. “Judgment under uncertainty: Heuristics and biases.” science 185.4157 (1974): 1124–1131.
(3,4,5) Wikipedia: “Hueristic”
(6) Loewenstein, George, and Jennifer S. Lerner. “The role of affect in decision making.” Handbook of affective science 619.642 (2003): 3.
(7,8.9) Kiken, Laura G., and Natalie J. Shook. “Looking up: Mindfulness increases positive judgments and reduces negativity bias.” Social Psychological and Personality Science (2011): 1948550610396585.
(10) Hafenbrack, Andrew C., Zoe Kinias, and Sigal G. Barsade. “Debiasing the Mind Through Meditation Mindfulness and the Sunk-Cost Bias.” Psychological science 25.2 (2014): 369–376.
(12,13) Karelaia, Natalia, and Jochen Reb. “Improving Decision Making Through Mindfulness.” (2014).
Thanks to everyone who gave feedback on this chapter: Patrick Whitaker, Erik Santoro, David Ploskonka, Ellie Taesali, Duncan Davidson, Seth Edwards, Zane Heard, and Brad Dennis.