3 Cognitive Biases That Keep People From Anticipating 'Big Shocks'

Andrew ZolliAndrew Zolli says we need to allow systems to fail in order to reset.

Photo: Max Nisen, Business Insider

As the world becomes more interconnected, it’s also increasingly volatile.An unexpected shock in one place sends ripples throughout the world, and we’re going to see more of them going forward.

That was one of the biggest lessons of the financial crisis, and it’s important that we figure out how to better survive such shocks.

That’s the subject of Resilience: Why Things Bounce Back, a new book by Poptech Executive Director Andrew Zolli. Poptech brings innovators together from throughout the world to create change.

BAM recently hosted a discussion of the topic with Zolli, Tipping Point author Malcolm Gladwell, and Radiolab’s Jad Abumrad. In his talk, Zolli outlined three cognitive biases that prevent humans from seeing these big shocks coming and even help create them.

The novelty bias

When thinking about the future, which is always uncertain, people have a tendency to take what’s happening in the present and make it the dominant feature going forward.

One example is the housing crisis. It seems obvious in hindsight that prices couldn’t go up forever. People behaved as though they did. 

We focus on people, not our surroundings

This particular bias, according to Zolli, goes all the way back to the earliest humans. Humans are conditioned at a very basic level to see other humans as the primary threat. 

That’s one of the things that makes it very easy to mobilize a response to terrorism, for example, but very difficult to get people to respond to slower crises like global warming or a decades-long credit bubble.

Risk compensation

Incentives and perceptions matter. Mandating that people wear bike helmets is designed to make them safer. However, drivers see the helmets, think that bikers are at less risk, and drive closer and more aggressively around bicyclists, helping negate the benefit of helmets. 

So if we won’t see the next crisis coming, how do we survive better?

We need to better understand failure, says Zolli. Rather than allowing things to fail and reorganize, we have a tendency to attempt to preserve the status quo. That leads us to preserve structures that have already proven themselves vulnerable. 

Failure can be healthy when it allows a system to reset — when we learn from mistakes and rebuild in a way that preserves the memory of what went wrong. 

We need to realise that past ways of doing things aren’t the only option just because they’re familiar and easy. Zolli mentioned Iceland as a possible alternative model. The country, rather than bailing out its banks, allowed them to fail, and drafted a new constitution. 

Simply propping up the status quo in an increasingly volatile world could make future crises even worse.

NOW READ: 61 Cognitive Biases That Screw Up The Way You Think >

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