Business Critical Thinking
To whom it may concern:
'Logically speaking...' How often do we say this simple phrase? There is a presumption that logic is not only good, but that the human mind can easily calculate the pros and cons of most decisions. However, the human brain did not evolve to naturally gravitate to an emotion-free, Spock-like way of evaluating options. "When people face an uncertain situation, they don't carefully evaluate the information or look up relevant statistics. Instead, their decisions depend on mental short cuts, which often lead them to make foolish decisions. The short cuts aren't a faster way of doing the math; they're a way of skipping the math altogether" (Lehrer 2011). The sooner we admit this, the better we can cope with the challenges with which life presents us; the sooner a business organization admits this, the better it can guard against irrationality, or at least plan for the mishaps irrationality may generate.
The illogic of thinking as applies to commerce was perhaps last, most fatefully manifested in the recent recession. Consumers assumed that housing values would continue to go up, and they ignored or simply did not understand the consequences of taking out adjustable rate mortgages they could ill-afford to pay when interest rates increased. Even at the time, Fed Chairman Alan Greenspan used the world 'irrational exuberance' to describe the faith placed in the housing market by homeowners, investors, and bankers alike. Economic bubbles have risen to the surface of the economy, swelled and burst since time immemorial. Every time, otherwise intelligent investors assume that current prosperity can somehow continue indefinitely, even when they know the assets in question are overvalued. Understanding how emotions can influence economic decision-making in a negative fashion is essential to protect one's self against risk and to learn how to take intelligent risks and is the subject of the following memo...
Memo: Logical fallacies in business
Common fallacy 1: A lack of appreciation for the art of doing nothing
A common cliche is that it 'is better to do something than nothing.' But that is often not the case in business. In fact, according to the Princeton psychologist Daniel Kahneman, when comparing the success rates of traders on Wall Street: "the most active traders had the poorest results, while those who traded the least earned the highest returns [and] men act on their useless ideas significantly more often than women do, and that as a result women achieve better investment results than men" (Kahneman 2011). Simply looking busy and being engaged in frenetic activity does not generate value. Making moves for the sake of moving can result in the loss of valuable stocks that accrue value slowly over time and the acquisition of less valuable stocks that eventually go bankrupt. One central tenant that must be observed in business is the need for all actions to have a purpose. The idea that a shark dies when it is standing still does not mean that darting everywhere will lead one to prosperity. It essential that when individuals businesses embark upon any ventures there must be a clear, underlying long-term strategy rather than a desire to make an empty, purposeless display of motion. All too often that 'motion' is simply following the crowd and following other investors down the path of another bubble.
Quite often it is the slow-building, long-term investment strategy that succeeds. Investment guru Warren Buffet famously avoided both the dot.com bubble and housing bubble of recent years because of his belief in blue-chip stock and companies that make products rather than sell their image. 'Slow and steady wins the race' is not a sexy investment strategy, but it is a good way to avoid one of the common pitfalls investors find themselves falling into -- constantly chasing the next new thing. "Like bargain hunters, value investors seek products that are beneficial and of high quality but underpriced. In other words, the value investor searches for stocks that he or she believes are undervalued...
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Radical retraining of staff was clearly necessary, but there was a need to avoid the mistakes of the past in the way training sessions were structured. Several approaches were considered. One solution was that management could improve 'quality control' of the worker's performance with customers. Management would inform the workers their phone conversations would be recorded and screened so this would not seem like a 'gotcha' method of enforcement. Screening
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Critical thinking is the rationally closely controlled process of aggressively and competently conceptualizing, applying, analyzing, synthesizing, and assessing information gathered from observation, experience, reflection, reasoning, or communication, as a guide to belief and action. It involves the scrutiny of those structures or elements of thought implicit in all reasoning, purpose, problem, or question, assumptions; concepts; empirical grounding; reasoning leading to conclusions; implications and consequences; objections from alternative viewpoints; and frame
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