Risk, Bias and Decision Making: Pre-mortems

Recently at Lux in New York City, Josh Wolfe invited three celebrated decision and risk specialists for a lunch to discuss the latest academic research and empirical insights from the world of psychology and decision sciences. Our lunch included Daniel Kahneman, who won the 2002 Nobel Prize in Economics for his work on decision sciences. His book Thinking Fast and Slow has been a major bestseller and summarizes much of his work in the field. We also had Annie Duke, a World Series of Poker champion who researches cognitive psychology at the University of Pennsylvania. Her books How to Decide and Thinking in Bets have also been tremendously influential best sellers, and she is also the co-founder of the Alliance for Decision Education. Also joining us was Michael Mauboussin, the Head of Consilient Research at Counterpoint Global and who has also taught finance for decades at Columbia. His book More Than You Know is similarly a major bestseller. This is an edited four-part series from our lunch seminar, with each part covering one topic of the conversation for easier listening. In this first part, we discuss the concept of pre-mortems, an approach of looking at the outcome of our decision and if it were to fail, why we think it would fail. It’s an approach that’s designed to overcome groupthink and avoid the fact that pessimists are really unpopular in group decision-making sessions. However, recent research has shown that they don’t always help people and groups change their mind. We look at pre-mortems, prospective hindsight, legitimizing dissent, self-serving bias and pre-parade or backcasts to see how this tool can affect and improve decision-making given the most recent academic literature.