Beyond biases and heuristics
August 9, 2007
Today’s session at the Academy of Management prompted an interesting conversation with Laure Cabantous on technology and decision-making. The session, titled “Heuristics and Biases,” included three laboratory studies and my paper with David Stark, “Distributed Calculation: Mechanisms of Risk Arbitrage in a World of Uncertainty.”
The pairing of the papers was surprising but effective. Two of the pieces examined how humans make mistakes, use rules of thumb and experience biases when making assessments. My presentation argued the reverse. Individuals have limited cognitive resources, to be sure. But they are only too aware of this, and develop calculative technology to make up for their limitations. For instance, merger arbitrageurs have limited attention span, but they have developed a dashboard-type interface that they call “Trading Summary” and that allows them to see, at a glance, the status of all the trades they are involved in.
The third presentation, by Sanford deVoe and Jeff Pfeffer discussed an interesting bias. Thinking about one’s own hourly wage, the authors found, makes people less willing to volunteer time. The reason for this is priming, a result that is consistent with research that suggests that economics makes people selfish.
What to make of the session? As Laure Cabantous noted after the session, a more interesting session should have been titled Beyond Biases and Heuristics. Economic actors can experience biases, we know that… but they can address them with calculative devices (see our book on this). One interesting question is: what are the consequences of this move? What mediation, biases and effects do they have?
Perhaps we should think about one such session for next year’s Academy…