The Cognitive Shortcut That Can Cloud Decision Making

While many executives believe themselves immune, research says otherwise.

Published: Wednesday, September 7, 2022 - 10:59

(PR Newswire: Cambridge, MA) -- According to research released in MIT Sloan Management Review, inaccurate or false information, if repeated often enough, can result in an illusion of truth, thereby placing executive decision-making at risk.

Researchers from Esade Business School, Purdue University, and University of Cologne have pooled their findings and outlined strategies for organizations to combat this illusory truth effect—the phenomenon that repeating false information can create at least an illusion of truth.

In the world of corporate decision-making, the proliferation of misinformation hurts organizations in many ways. Leaders can find themselves on the receiving end of falsified data, facts, and figures. Misinformation, regardless of whether it was mistakenly passed along or shared with ill intent, is a common occurrence in this digital age.

“One of the most important challenges leaders face in the digital age is preventing inaccurate data, false information, and pseudo-fact,” notes Katharina Schmid, an associate professor at Esade Business School at Ramon Llull University. “Leaders bear a double responsibility in fighting the illusory truth effect; they must combat it for their teams, employees, and companies but also for their own personal reputations.”

“The illusory truth effect occurs effortlessly, but effort is necessary to combat it,” says Jonas De Keersmaecker, postdoctoral researcher at Esade Business School. “While its negative effects can never be fully avoided, its influence can be limited through diligence and a focus on accuracy.”

These strategies aim to create lasting and sustainable value for companies and their clients:

Avoid the bias blind spot. Understand the illusory truth effect and accept that leaders are as vulnerable to it as anyone else.

Avoid epistemic bubbles. Foster an environment in which opposing and differing perspectives can be generated, and where they are openly discussed.

Question facts and assumptions. Develop an accuracy mindset with an emphasis on evaluating whether information fits one’s knowledge. Promote a culture where the default is to consider the truthfulness of new information when it arises. Foster external fact-checking to ensure that information used in decision-making has been verified.

Nudge the truth. Repeat true and relevant information. Prepare to respond with facts and repetition, repetition, repetition.

Managers today contend with incorrect and unreliable information at unparalleled scale. Beware of bias blind spots, maintain an accuracy mindset, perform external fact-checking, and don’t get stuck in an epistemic bubble.

The article “The Cognitive Shortcut That Clouds Decision-Making” was first published Aug. 17, 2022, by The MIT Sloan Management Review (MIT SMR).

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