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Why business is often Irrational!

By Peter Neville Lewis, Jan 18 2018 04:39PM

Here’s why Rationality and, by association, business planning often doesn’t work.


Consider these two well known experiments.


1. 10 people were assigned a random lottery ticket, 10 others were allowed to write the number of their choice on a blank ticket.

Before drawing the winner participants were asked how much they would sell their ticket for.

The Irrational answer for those with a chosen number was at least 5 times more than those holding random numbers.

But Rationally since it was a lottery every ticket had the same odds! Hmmm?


2. Soup cans are put on discount at a supermarket. Shoppers normally buy 3.3 cans on average.

But when there is a sign stating “offer limited to 12 cans” purchases go up to 7 average!

Psycologists call this an anchoring heuristic. In the first instance shoppers “anchor” on what they came to buy, but in the second they “anchor” on the 12 limit and adjust downwards.


Behavioural economics such as the above prove how predictably Irrational we can be in making what should be Rational decisions!


Does this happen in your organisation? Does the Rational get swamped by the Irrational and non-relevant “anchors”? Probably!

(For example Fairness and Integrity are part of every banker’s code yet....they sold us a fraudulent product called PPI!

So if this is a people “thing” what measures do you have to improve decision making and limit risk damage?


Pedro the Jester




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Corporate-jester-1

Why The Corporate Jester?

 

Because there is always a need to “call it out”, point out the emperor’s clothes may not be quite so fancy as he thinks (or others are telling him) and boldly say what others dare not!

 

The role of court jester was well known centuries ago and they had the licence to attack pomposity or stupidity in their betters without fear of retribution. (Well nearly!) Many of Shakespeare’s plays have a fool who is the commentator on human foibles – the most famous probably being in King Lear, the architect of his own downfall through his wilfulness.  Familiar?

 

May not an ass know when the cart draws the horse?  (Fool – King Lear, Act 1 scene 4)