…Classic examples of cognitive biases are escalating commitments, such as those countries that want to hold the Olympic Games and World Games – the projected losses keep rising but they will keep persisting with it.

“Another example is rigidity in the face of crisis, so when something is going wrong we tend to withdraw, to find fault with the external environment,” he continues.

“Often, if it is the senior manager who has made the decision, they don’t want to admit they made the mistake, or they genuinely believe in it, or hope things will change. It’s a classic example of craziness. You keep doing the same thing and hope like hell for a different outcome.

“The more dangerous cognitive traps are actually things like the success paradox. You’ve been successful, and once you’ve been successful you want to exploit that success and keep doing the same thing again and again.

“That can be quite dangerous because if your external environment is changing, and your success is based on assumptions about the current environment, these will not hold true in the long-term.

Here Sonpar references Danny Miller’s 1990 book, The Icarus Paradox: How Exceptional Companies Bring About Their Own Downfall. He refers to the dangers of flying too close to the sun – what brings you up may eventually bring you down.

When we look at our decisions, a lot of our decision-making can be quite erratic. We often don’t go through a very detailed fact-finding process, we just pick up the phone and ask somebody ‘What should I do? and then do it. Or we do it because someone else is. More often than not that works, but it can lead to disasters too.”

This is where behavioural economics and behavioural strategy come into the picture. This has been around for at least 40 or 50 years, but it was considered a very fringe, ‘out there’ kind of a discipline with little respect,” says Sonpar. “Yet when you look at the world today, I would argue that a lot of accountants and bankers and financiers are actually artists. What they do is more of an art than a science as such.

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If you want to learn about cognitive biases and apply that to decision making you should read Judgment and Managerial Decision Making by Harvard Professor Max Bazerman.  If you’re looking for a quick and easy guide that will almost certainly improve your decision making try Problem Solving 101.