24 Concepts to Succeed in Business (2/3)
Principles to help you navigate the business world
This is Part 2 of the most useful concepts that help me thrive in the business world.
These concepts are psychological effects, observations and principles that can be seen everywhere in business and influence our decision making all the time.
Being aware these exist is the first step to (a) mitigate their impact on us and (b) leverage them to our advantage.
Success means being able to do (a) and (b) everyday.
So, I’ll be publishing 24 concepts for the year 2024.
I’m dividing this 24 concepts into three separate posts, because I am sure breaking it down will make it easier to absorb them.
If you haven’t read Part 1 (concepts from #1 to #8):
Let’s start with Part 2 (concepts from #9 to #16).
(Deep dive by clicking on the title of each concept)
9. Availability Bias 📰
We have an innate tendency to disproportionately rely on easily available information.
Example: Investors might put money into a tech startup because they recently heard success stories about similar companies, while ignoring other sectors that might offer better opportunities.
10. Confirmation Bias 🔎
We tend to seek out information that confirms our preexisting beliefs or hypotheses.
Example: A product manager believes a new feature will be popular and only seeks feedback from customers and stakeholders who have previously expressed interest in similar features, ignoring broader market feedback that suggests otherwise.
11. Framing Effect 🖼️
Decisions are influenced by how information is presented or framed.
Example: The likelihood of purchasing a product varies depending on whether it is presented with a percentage discount (e.g. "20% off") or a dollar amount discount (e.g. "$10 off").
Marketing Professor Dr. Jonah Berger offers an easy way to help remember this difference. He calls it the “Rule of 100” in his book “Contagious: Why Things Catch On”.
If your product costs more than $100, go with a $ discount.
Is it less than $100? Go with a % discount.
The rationale?
With two-digit prices (<$100), the absolute value of the % discount is higher than the $ discount (i.e. A product costing $80, saying “20% discount” is more effective than saying “$16 off”, cause 20 > 16.
However, with three-digit prices ($100 and above) it’s the opposite.
For a $200 product, it’s either 20% off or $40 off. And 40 > 20.
12. Halo Effect 😇
One positive trait can influence the perception of other unrelated traits.
Example: A charismatic leader might be perceived as competent in all areas of the business, even if their expertise is limited to a specific domain, leading to over-reliance on their judgment in unrelated areas.
13. Bystander Effect 👥
We are less likely to offer help to a victim in presence of other people.
Example: In a large meeting, an important issue might go unaddressed because everyone assumes someone else will take care of it.
For this reason is key to end each meeting assigning tasks, responsibilities, and deadlines to ensure accountability.
14. Parkinson's Law ⏳
Work expands to fill the time available for its completion.
Example: Procrastinating on that client presentation until the night before it's due, then completing it within a few hours.
15. Pygmalion Effect 📈
Higher expectations lead to an increase in performance.
Example: A manager who believes in their team’s potential and communicates high expectations can boost the team’s productivity.
16. Survivorship Bias 🏆
We focus on successful examples while ignoring those that failed, leading to distorted or incomplete views.
Example: Studying only successful startups to understand what makes them succeed, while ignoring the learnings from the many that failed.
During WWII, statistician Abraham Wald, part of the Statistical Research Group (SRG) at Columbia University, studied the damage on aircraft that returned from missions. He noticed that these planes had bullet holes in certain areas, while other parts were intact.
Instead of reinforcing the damaged areas, Wald recommended adding armor to the intact parts. His reasoning was that planes hit in these areas were not making it back.
And this is exactly what happened: reinforcing the undamaged areas helped more planes survive and return safely.
See you next Sunday 🗓️
Thanks,
Giacomo
Halo Effect is one of the most interesting to me! After learning about it in “Influence”, I started to see it everywhere
Separately, I just came across the recency bias and I've got to say its definitely my favourite