Shortform summary of "Thinking, Fast and Slow", Cognitive Revolution (Sapiens): How Gossip Changed Our Brains, Overcoming Your Ego: Always Seek the Truth, How We Rely on Transactive Memory in Relationships and Work, Law 17: Keep Others in Suspense: Cultivate an Air of Unpredictability (48 Laws of Power), What Is Your Mindset? Instead, we use shortcuts (heuristics) to arrive at decisions that, while maybe not the absolute best, are usually good enough. Click here to get the process started today. One. The truth is we’ve tried these deals. Read the following description of a person. He likes soft music and wears glasses. We recently dealt with this situation ourselves. What usually happens is that an ambitious partner-hopeful will cook up a deal and try to work through all of the details on his or her end first. It would take quite a bit of brainpower and several read-throughs until I could pick up the gist. Construction workers outnumber librarians by 10:1 in the US – there are likely more shy construction workers than all librarians! Ideally, you should have examined the base rate of both professions in the male population, then adjusted based on his description. Heuristics are mental rules of thumb that allow us to jump past all the hard thinking that might otherwise go into a decision. She’s published dozens of articles and book reviews spanning a wide range of topics, including health, relationships, psychology, science, and much more. Representativeness heuristic bias occurs when the similarity of objects or events confuses people's thinking regarding the probability of an outcome. Shortform note: the representativeness heuristic causes problems when your System 1 forms a coherent story that is inaccurate. These rabbit holes run DEEP and take up most of the creative energy and juices that are the lifeblood to driving your own business forward. In general, the way to overcome the representativeness heuristic is to use Bayesian statistics. We discussed them and ultimately decided it wasn’t worth the hassle of slowing down the deal. She majored in economics at university and, as a student, she was passionate about the issues of equality and discrimination. We’ve written about this extensively in our blog post In Contracts We Trust, but the basic idea is this: Don’t let your single greatest point of leverage in a new business deal be the contract. If someone contacts us claiming they run various successful companies and they’re using a Yahoo/Gmail account, they have virtually no online presence with an uncommon name, or use a name like “John Smith” and have no reference to any work or companies they’ve worked with – this person and the deal is a complete waste of time. Representativeness Heuristic. With these objective criteria, you’ll avoid relying on stereotypes.). "Educated guess" is a heuristic that allows a person to reach a conclusion without exhaustive research. Anything you can do to sort, sift, and disqualify applicants at the top of the funnel moves you closer to your best hire and getting the deal done. If Your Offer To Work Together Is Long, Complicated, And/Or Confusing Right From The Start, We’ll … Let’s imagine the following scenario: Consider Laura Smith. The representativeness heuristic describes when we estimate the likelihood of an event by comparing it to an existing prototype in our minds. But when viewed separately, people who view only option 1 are willing to pay more than people who view only option 2. Finally after a few iterations, he’ll reach out with a 1,500+ word email covering his backstory, how the deal came to him, the opportunity, the risks, a few scenarios, some outlier possibilities, and a FAQ section to head off any potential questions you might have. The representative heuristic is used because System 1 desires coherence, and matching like to like forms a coherent story that is simply irresistible. Let us know in the comments and please share if you found this valuable! Start by predicting the base rates, using whatever factual data you have. It’s another “I Want Your Monies” email, but it’s more insidious – they want your money AND a bunch of your time wasted. Required fields are marked *. 4 Business Heuristics For Making Business Decisions. This just goes to show how entrenched the representativeness heuristic is—you seek to justify your stereotype rather than looking at the raw data.). Disagree with any of the above? (Shortform note: to counter stereotypes, think about what factors matter, and how you’ll measure whether someone matches those factors. I’ve talked to many successful entrepreneurs about this behind closed doors and almost all admit that it’s experience and guts that drive many of their decisions – not iterative testing. For example, if you expect engineers to be plain and soft-spoken, a candidate who’s fashionable and outgoing might strike you as suspicious. You’d be surprised at how often entrepreneurs make decisions based on their gut – it’s just not as sexy to talk about. People frequently make the mistake of believing that two similar things or events are more closely correlated than they actually are. Think of the hiring process as a funnel. That’s not to say that we might not have missed ONE magical unicorn-of-a-deal that was out there, but I sleep just fine at night thinking about all of the time not wasted on scammers and sketchiness. We’ll share a few of the heuristics we use regularly and hope that other experienced entrepreneurs will share theirs as well. Why Your Attitude Is Hurting You, How Brer Rabbit Inspired the Civil Rights Movement, Weak Inductive Arguments: You Make Them All the Time. (Shortform note: even after reading this, you might think – but what about self-selection? When people use categories in order to make a decision about a person, thing or event they are utilizing representativeness heuristics. Common problems involve stereotypes that cause incorrect snap judgments: System 1 desires a coherent story. For example, in the New York Times example above, start by estimating the % of people who have a PhD and the % who have a college degree. We’ve tried to land these deals for years and in many different scenarios. Guide to the Representative Heuristic: Definition, Examples. The representativeness heuristic works much of the time, so it’s hard to tell when it leads us astray. Still – there is a way for us to wrap up our years of experience and painful mistakes into bite-sized chunks you can use to avoid the same. there’s something wrong. One of the pioneers who tried to objectively evaluate the user experience on digital platforms is Jakob Nielsen with his heuristic evaluation. Again, by pure number of people, there are far more people in the latter group than the former. Take away this convenient story, and you engage System 2. For example, when hiring for a job, think about what skills you need in the job and how you’ll measure whether a job candidate shows those skills. Large companies often use overly-protective lawyers who use language nobody else can read, much less understand. Many people when asked this question g… The presence of broken dinner plates “pollutes” the set, and people average the whole set less. In the Tom W. question above, when students are asked to estimate the % of the population working in construction or libraries, the guesses are far more accurate. Here, people use the heuristic—what is the average value of the plate in each set?—rather than considering the total value of all plates. You’ll likely end up with a more accurate estimate than if you didn’t estimate the base rate. The last example in the theme of representative heuristic is how the average value of a set of items can confuse us about its total value. Save my name, email, and website in this browser for the next time I comment. This one’s a bit tough and I’ve been guilty of this myself. Availability Heuristic in Politics. Which profession is Tom W. more likely to be? It’s 2014. While in the Israeli army, Kahneman was tasked with evaluating which recruits would be best suited for officer positions. As a result, you might judge that those events are more frequent or probable than others. Someone sees a latino guy standing on the lawn of a fancy property, and wrongly assumes he’s the gardener rather than the owner. The second option with 5 broken plates should be strictly more valuable because it has 25 intact dishes, whereas the first option only has 24. A lot of it is bullshit. Is it more likely that Laura works at a bank? The affect heuristic is a type of mental shortcut in which people make decisions that are heavily influenced by their current emotions. Would love to catch a beer (or two) the next time he’s in your city. Isn’t it possible that all the shy librarians outnumber all the shy construction workers, even though there are 10 times more construction workers than librarians?