I pass a giant, sealed jar of jellybeans around in my Executive MBA class, asking students to guess how many beans are in the jar. Half the class writes their answers on a piece of paper, the other half emails me their guesses. Then I ask: Who in the class do you think will have the most accurate guess?
They often choose an engineer or the person with the most attention to detail. What I always find, though, is that the most accurate answer is actually the average of everybody’s answers. This teaches a fundamental principle: the wisdom of crowds. There is knowledge that resides in the group that does not reside between any one person’s ears.
I then start quizzing the students. For those who guessed pretty close to the correct amount, I ask why they were accurate. They typically describe their systematic methodology or something about their technical background that makes them well attuned to educated guesswork. Those that were farthest away, though, describe external factors contributing to their poor guesswork. They note they were not given much time to consider the problem or were distracted by the class lecture that was going on simultaneously.
Psychologists call this the fundamental attribution error. We ascribe successes to our wonderful, talented selves, but invent external attributions for our failures. Think, for instance, how company successes are always the result of brilliant strategies, but failures seem to be a result of market perturbations or the competitive environment.
The jelly bean exercise, though, belies a third important principle about managerial cognitions. The half of the class that emailed their guess is inevitably more accurate than the half that wrote their guess on a piece of paper. Are emailers smarter than writers? No!
The exercise demonstrates the anchoring bias, which is a human tendency to make decisions based on initial information. Students emailing their guess were making their decision in a vacuum, so they were deciding “how many jelly beans are in the jar?” Those writing on the paper were deciding “how different will my guess about the number of jelly beans be from the already existing guesses?” Their answers were biased by those that came before.
Next time you grab a handful of jelly beans, remind yourself that your decision making may not be as rational as you think. We are all subject to cognitive biases that impair the quality of our decisions.
Professor and Luck Eminent Scholar
Department of Management