‘Success is a menace, it fools smart people into thinking they can’t lose‘.

– Bill Gates

A fascinating quote from one of my favourite movies of all time, ‘Pirates of the Silicon Valley‘ The context is set at a time when IBM had just decided to enter the personal computing market to compete with Apple. IBM executives and had approached Microsoft to acquire an OS to run their first line of personal computers. While Microsoft didn’t make an OS Bill, a brilliant programmer and shrewd poker player didn’t let this opportunity slip from his fingers. He purchased a rip off OS from a small time company for 50K and licensed it to IBM. IBM’s executives negotiating the deal were completely confident that the future business model would be in the sale of hardware, a business they were very familiar with. Instead of acquiring the OS, they agreed to Microsoft’s terms of a non exclusive license to MS DOS.

This fatal business mistake allowed Microsoft to retain ownership of their OS while also giving them the ability to sell to IBM’s competitors in the future. IBM realised the folly of this decision when they soon found themselves battling against PC clones in a crowded market that also ran MS-DOS.

Bill Gates had sensed IBM executives’ lack of knowledge of the emerging software industry and the IBM executives’ own sense of overconfidence and used this against them to pull off an audacious sleight of hand licensing deal that made him one of the world’s richest men. IBM’s executives’ never caught up to, what in hindsight, was the worst deal in computing history until it was too late. IBM was so successful at the time and they never even considered that they had gifted Microsoft the golden goose.

What influenced them to short-cut what should have been a well thought out decision making process was because of confirmation bias. Bias is a cognitive shortcut that our brain takes allows us to make quick decisions. Bias in itself isn’t inherently bad it saves our brain from melting down from doing so much cognitive processing. Its nature’s ways of conserving energy.

The downsides to bias it makes people suspend cognitive processing and let people rely on shortcuts for making critical decisions. People in product are routinely exposed to strategic decisions which profoundly impact an outcome. On the other hand, a well designed product can use people’s own biases against them and used as a tool to influence product acquisition and engagement. That is however material for a completely different blog post.

Some of the most common biases that potentially affect both business strategy and product development are listed below:

Business strategy biases:

Confirmation bias
The tendency to give more weight to information consistent with our own beliefs and experiences while discounting any information that contradicts it. Cults tend to strongly exhibit this bias.

Overconfidence bias
This bias shows up as an over-estimation of our own abilities. In IBM’s case, its executives were so confident of their success that they never gave much thought to the licensing deal that they signed with Microsoft.

The Dunning Kruger effect is a study that discovered that competence and confidence in some individuals were actually inversely proportional. The more incompetent they were the higher was their level of self confidence. A face palm example of this is the Donald.

Product biases:

Bandwagon effect
The tendency to settle in and copy what everyone else can make you feel safe can give you a me too product with no clear competitive differentiator. Having a good strategic product roadmap is key to having competitive differentiator that give a product a ‘USP’.

Loss aversion
Sometimes carrying on with a failed idea can seem to be more tempting that abandoning it. This is caused by a loss aversion bias caused by the emotional attachment and toll of having sunk time and effort into it. When you see that a feature no longer is yielding value across key metrics it’s time to seriously value whether it’s worth continuing to invest in it.

Law of instrument
“To a carpenter with a hammer everything looks like a nail”. This can sometimes be seen from people that have competencies in a different discipline and tend to rely on the knowledge they have acquired in that background. For example a product manager with a strong technical background may skip creative out of the box thinking and resort to cliches simply because they haven’t developed the muscle for it.

Base rate fallacy
We tend to ignore general information and tend to focus on specific cases in isolation. Sometimes quantitative data alone may not be good enough and may require qualitative data to get the full picture for evidence. This can be seen profoundly in Marissa Mayer’s 40 shades of blue experiment where she insisted on using quantitative data over trusting a designers intuition, honed through years of experience.

Authority bias
We attribute greater weight to the opinion of a person in authority than someone lower down the chain. This is a tough one to go around especially in company with well established hierarchies. This is why more startups are beginning to adopt flatter structures to reduce the effect of this bias on decision making.

Belief bias and Disconfirmation bias
This is where we are more likely to accept an argument in favour of us while rejecting counter argument. This is strongly tied to a person’s own ego and insecurity. So this can be a hard one to check and leave at the door unless you’re very self aware. The most effective way to get past this as a bias fostering a culture of experimentation where failures are celebrated.

Curse of knowledge
When we are experts in a field we automatically assume that others may understand what we already know. Sometimes explaining to developers or designers the intended vision and strategy allows them to align themselves and deliver better rather than just asking them to execute a piece of work.

Planning fallacy
People in product underestimate the time it takes to complete a task. It’s one of the biggest reasons why projects get delayed and deadlines are missed.

Parkinsons’ law of triviality
We tend to waste time on trivial stuff and ignore the big looming issues. As Product Mangers, a lot of this is unintended as we get deeper into the product details or stamping out fires. Daily prioritisation of your tasks based on short term and long term goals can add significant value to delivery.

The Ostrich effect
We deliberately avoid negative information hoping bad feedback will disappear. This is dangerous for product as ignoring warning signs is fatal. There is a lot to learn from failure if used effectively.

Blind spot bias
Learning to be aware of your own biases is as important as checking these in others.

One tip on countering biases is by priming your mind for a deeper level of cognitive processing. A great tip from Jeff Bezos’ letter to shareholders. ‘Take time over decisions that have a big impact, spend very little time on decisions that have a minimal impact’. That will free up your cognitive processing to concentrate on the big decisions.