Unconscious ChoiceProduct Management

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Product Tank, Kansas City, December 7

Behavioral economistCognitive scientist of illogical thinking

“Most people do not take the trouble to think through [a] problem. Intelligence is not only the ability to reason; it is also the ability to find relevant material in memory and to deploy attention when needed.”

Heuristic #1: PRIMINGHeuristic #2: COGNITIVE EASEHeuristic #3: COHERENT STORIES (ASSOCIATIVE COHERENCE)Heuristic #4: CONFIRMATION BIASHeuristic #5: THE HALO EFFECTHeuristic #6: JUDGEMENTHeuristic #7: SUBSTITUTIONHeuristic #8: AFFECTHeuristic #9: THE LAW OF SMALL NUMBERSHeuristic #10: CONFIDENCE OVER DOUBTHeuristic #11: THE ANCHORING EFFECTHeuristic #12: THE AVAILABILITY HEURISTICHeuristic #13: AVAILABILITY CASCADESHeuristic #14: REPRESENTATIVENESSHeuristic #15: THE CONJUNCTION FALLACYHeuristic #16: OVERLOOKING STATISTICSHeuristic #17: OVERLOOKING LUCKHeuristic #18: INTUITIVE PREDICTIONSHeuristic #19: THE NARRATIVE FALLACYHeuristic #20: THE HINDSIGHT ILLUSIONHeuristic #21: THE ILLUSION OF VALIDITYHeuristic #22: IGNORING ALGORITHMSHeuristic #23: TRUSTING EXPERT INTUITIONHeuristic #24: THE PLANNING FALACYHeuristic #25: THE OPTIMISTIC BIASHeuristic #26: OMITTING SUBJECTIVITYHeuristic #27: THEORY-INDUCED BLINDNESSHeuristic #28: LOSS AVERSIONHeuristic #29: THE ENDOWMENT EFFECTHeuristic #30: LOSS AVERSIONHeuristic #31: THE POSSIBILITY EFFECTHeuristic #32: THE CERTAINTY EFFECTHeuristic #33: THE EXPECTATION PRINCIPLEHeuristic #34: OVERESTIMATING THE LIKELIHOOD OF RARE EVENTSHeuristic #35: THINKING NARROWLYHeuristic #36: THE DISPOSITION EFFFECTHeuristic #37: THE SUNK COST FALLACYHeuristic #38: FEAR OF REGRETHeuristic #39: IGNORING JOINT EVALUATIONSHeuristic #40: IGNORING FRAMESHeuristic #41: IGNORING OUR TWO SELVESHeuristic #42: THE PEAK END RULEHeuristic #43: DURATION NEGLECTHeuristic #44: NARRATIVE WHOLENESSHeuristic #45: VALUING A REMEMBERING SELF OVERHeuristic #46: AFFECTIVE FORECASTINGHeuristic #48: MISWANTING

Two Systems Fast Thinking Slow Thinking

Two Systems Fast Thinking

Two Systems Fast Thinking

Two Systems: Slow Thinking

deliberating, solving, reasoning, focus, considering other data, weighing the options

Two Systems: Fast ThinkingSlow Thinking

Inaccurate judgement or bias

No energy or choosing not Meanwhile, behind the scenes…

“Because thinking slow takes work we are prone to think fast, the path of least

resistance.”

“Laziness is built deep into our

nature.”

So What? 48 Laws – Biased, Over Confidence, Choice

Shift the Focus48 Laws – Biased, Over Confidence, Choice

Kahneman’ s Court

Heuristic #1: PRIMINGHeuristic #2: COGNITIVE EASEHeuristic #3: COHERENT STORIESHeuristic #4: CONFIRMATION BIASHeuristic #5: THE HALO EFFECTHeuristic #6: JUDGEMENTHeuristic #7: SUBSTITUTIONHeuristic #8: AFFECTHeuristic #9: THE LAW OF SMALL NUMBERSHeuristic #10: CONFIDENCE OVER DOUBTHeuristic #11: THE ANCHORING EFFECTHeuristic #12: THE AVAILABILITY HEURISTICHeuristic #13: AVAILABILITY CASCADESHeuristic #14: REPRESENTATIVENESSHeuristic #15: THE CONJUNCTION FALLACYHeuristic #16: OVERLOOKING STATISTICSHeuristic #17: OVERLOOKING LUCKHeuristic #18: INTUITIVE PREDICTIONSHeuristic #19: THE NARRATIVE FALLACYHeuristic #20: THE HINDSIGHT ILLUSIONHeuristic #21: THE ILLUSION OF VALIDITYHeuristic #22: IGNORING ALGORITHMS

Heuristic #23: TRUSTING EXPERT INTUITIONHeuristic #24: THE PLANNING FALACYHeuristic #25: THE OPTIMISTIC BIASHeuristic #26: OMITTING SUBJECTIVITYHeuristic #27: THEORY-INDUCED BLINDNESSHeuristic #28: LOSS AVERSIONHeuristic #29: THE ENDOWMENT EFFECTHeuristic #30: LOSS AVERSIONHeuristic #31: THE POSSIBILITY EFFECTHeuristic #32: THE CERTAINTY EFFECTHeuristic #33: THE EXPECTATION PRINCIPLEHeuristic #34: OVERESTIMATING THE LIKELIHOOD OF RARE EVENTSHeuristic #35: THINKING NARROWLYHeuristic #36: THE DISPOSITION EFFFECTHeuristic #37: THE SUNK COST FALLACYHeuristic #38: FEAR OF REGRETHeuristic #39: IGNORING JOINT EVALUATIONSHeuristic #40: IGNORING FRAMESHeuristic #41: IGNORING OUR TWO SELVESHeuristic #42: THE PEAK END RULEHeuristic #43: DURATION NEGLECTHeuristic #44: NARRATIVE WHOLENESS

Laws

Going to court….Unconscious and conscious product management

Victim of the thinking laws?

(Thinking Fast Errors)

Thinking above the law? (Thinking Slow Master)

Kahneman’ s Court

Heuristic #24: THE PLANNING FALACYHeuristic #5: THE HALO EFFECT

The Planning Fallacy LawResearch shows we are overly optimistic in forecasts

and have an “illusion of control”

Studies: - Railroad Projects: For a span of 40 years, 90% railroads projects

overestimated usage by 106% and underestimated cost by 45% - Kitchen Remodels: estimate $20K more expensive than estimated - CFO Estimates on S&P Performance: 80% confidence, slightly above

0% correlations with actual performance and estimates

“The story that breeds overconfidence”

Many fails: “I know the stats and we just take more shots, faster, to get to success”

Ignore the stats of failure: “We will be different than the 90% of ideas that fail”

The Planning Fallacy LawProduct Management Implications

Victim of the Law Above the Law

Overly optimistic in forecasts and have an “illusion of control”

% Intent: Plan to spend X% designing the new or in customer development & discovery... then Friday…repeatBelieve forecast of success on hope: “The market is $500m, if we can get just 1%, and hockey stick users”Pad your agile roadmap: “Let’s add an extra month in there, just in case…”

Intentional %: execute product thinking goals like shipping code

Equal transparency: Publish possibilities of success and failure equally on future plans (roadmaps, profit, estimates, & adoption) personally and with team

Many fails/experiments: “I know the stats and we just take more shots, faster to get to success”

The Planning Fallacy LawTactics for Mastery

Above the LawEqual transparency: Publish possibilities of success and failure equally on future plans (roadmaps, profit, adoption)

Dual Idea Perspective: Add a competing hypothesis at the beginning

Find an Outside View: Baseline with external forecasts/studies and customize to avoid recycling internal trash data

Pre-mortems: Team writes a story of that product team being a disaster (especially leadership or clients)

The Halo Effect LawSequence matters and impression is lazy

Studies: - Solomon Asch sequencing - Teacher essay grading

“exaggerated emotional coherence”

Solomon Asch Research

What do you think of Alan and Ben?– Alan is intelligent, industrious, impulsive,

critical, stubborn, and envious.– Ben is envious, stubborn, critical,

impulsive, industrious, and intelligent.

Solomon Asch Research

What do you think of Alan and Ben?– Alan is intelligent, industrious, impulsive,

critical, stubborn, and envious.– Ben is envious, stubborn, critical,

impulsive, industrious, and intelligent.

The Halo Effect LawSequence matters and impression is

lazy

Studies: - Solomon Asch sequencing - Teacher essay grading

“exaggerated emotional coherence”

Strategic facilitator: pre-plan meetings with influencers to build over/under confidence

Scrub input: intake of ideas separate from each other (decorrelate)

Victim of meeting pirates: allows meetings to get hijacked by first to speak (feedback, strategy pitches, scrum)

The Halo Effect LawProduct Management Implications

Victim of the Law Above the Law

Sequence matters and impression is lazy

Writing off sources due to history: loud customers, lame coworkers, old methodsTrojan horse interviewees: like agreement and like you, so buzz from the beginning

“Blink” pro: intentionally owning and omitting first impression bias

Solo-solutions: intake of ideas separate from each other (decorrelate)

The Halo Effect LawTactics for Mastery

Above the LawStrategic facilitator: pre-plan meetings with influencers to build over/under confidence

Wisdom of Crowds Method1: for prioritization, value forecasting, etc. intake all of the data/feedback decorrelated, and average them (omit outliers) for estimate

Independent Thought First: before an issue is discussed, all members of the committee are asked to write a brief summary of their position (approvals, prioritization, brainwriting ideation)

1Wisdom of Crowds, James Surowiecki, 2004

Unconscious Product ManagementWhich one do you find yourself being?

Ignore the possibility of failureHope > dataOnly using internal data Padding roadmapVictim of halo effect meetingsLabeling your areas of inputWorking with others like you

Thinking Fast Errors

Intentionally Thinking Slow

Meanwhile, the struggle continues…

End of Year Review Activity– Think of a challenge for yourself on using

thinking slow tactics to beat bias, overconfidence, or error in choice in 2017

–Write it down a short note to your future self–Mailed to you at end of Q1

Product Thinking Velocity: % intent v. intentional %, personal sprint cycle

Combine overconfidence with critical thinking. Increase clear thinking by increasing doubt radar. Be aware and be intentional.

Thank You

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