To help sweep out the mental cobwebs, management writer and business consultant Antonio E. Weiss — author of new bite-size business guide 101 Business Ideas That Will Change The Way You Work provides five fresh and practical ideas guaranteed to boost your business IQ.
1. If you fear losing, you’re more likely to lose out
Loss aversion is the idea that people prefer to avoid losses than gain profits. In human decision-making, ‘losses loom larger than gains.’ For example, in the business world many investors sell stocks too soon, because they fear losing what they have gained. To mitigate the effects of loss aversion, you need to look out for your internal biases and those of your colleagues or customers. When evaluating any options, check whether you are overvaluing a potential loss and undervaluing the possible gains at stake. Also be sensitive to the loss aversion that others exhibit. When presenting options to an audience, for example, always bear in mind how loss aversion will affect how they perceive what you present – use fear of loss aversion to your benefit. Once you are aware of loss aversion there are ways of managing it and using it to your advantage. For example, consider trialling your goods with potential customers as once your service becomes part of their daily routine it is more difficult for them part with them – they fear losing what they’ve gained.
2. Why experts get it wrong
Although expert opinion carries much weight, often experts are no better at predicting events than the rest of the population. There is no accountability of many experts, such as television pundits. If they make predictions that do not come true, no-one is likely to call them up on it. They also tend to add increased variables to their predictions and overvalue certain variables, therefore distorting the normal paths of probability. Often the media drives these predictions to focus on one idea and the certainty of that happening. Therefore remember that although expert opinion comes from those in the field, that does not guarantee that prediction will come true.
3. Fortune favours the beautiful
Although this is a well-known belief, there is factual evidence to support this statement. Physically attractive people earn more, find it easy to get loans and even receive lighter prison sentences! Figures show that a less attractive American male can earn up to $230,000 less than his more attractive peers. That is even after adjusting for education and other factors. Therefore it is something to be aware of when selecting colleagues and employees. To discriminate positively or negatively about somebody because of their looks is a dangerous path to take. You would not discriminate against them because of their gender or race.
4. When you can skip that meeting
There is a widely held belief that face-to-face meetings are always better than those conducted over e-mail, instant messaging or even the telephone. However this is not always the case. Studies carried out by INSEAD and the Kellogg School of Management at Northwestern University show that when business people have not met or are still in the early stages of a business relationship, there are benefits to meeting in person. However once a relationship has been established those benefits are not as strong and if the relations are strained a face-to-face meeting can actually increase tensions. Therefore in a business age where the diary is dominated by meetings and the travel to and from can be longer than the meeting itself, it is important to consider not only the benefits of attending but also the method or platform used to attend.
5. When to trust your gut instinct
If you have confidence that your gut instincts are going to be right, they are more likely to be so. A study from Columbia University and the University of Pittsburgh showed that candidates with a high level of trust in their gut instincts were consistently better at predicting future events than those with a low level. This has been dubbed the ’emotional oracle effect’. It can be explained by how people dive into their conscious and subconscious memory. If people have confidence in their gut feelings then they are stimulated into accessing the memory’s ‘privileged window’, which contains vast amounts of knowledge learnt over time. By recalling this information, they are able to accurately use it to make informed predictions about the future. Those with lower confidence in their predicting skills, however, lack the internal confidence to reach into their recollections and look into the ‘crystal ball’. The lesson: in business, if you know something about a subject, try to stimulate yourself into a high level of trust in your gut feelings (by remembering when you were recently right about something, for instance) and then make your forecast based on your recalled previous knowledge. It’s likely to be a pretty good prediction.
