Entrepreneurs’ Organization helps entrepreneurs achieve their full potential by enabling life-enhancing connections, designing shared experiences, and providing collaborative learning. Dr. Gleb Tsipursky, CEO of Disaster Avoidance Experts, author, and EO 360° podcast guest, empowers leaders to avoid business disasters. As a cognitive neuroscientist and expert on how cognitive biases impact human behavior, we asked Dr. Tsipursky what happens to leaders who anchor to the wrong pandemic data. Here’s what he shared:
Have your views stayed the same since the Covid-19 pandemic started in March? Do you know people who continue to view the virus as just a minor inconvenience despite evidence to the contrary?
For instance, many people are still anchored to the erroneous belief spread earlier in the year that Covid-19 isn’t much different from the common flu.
Many top entrepreneurs still express Covid skepticism: For example, Elon Musk said he won’t take a vaccine, casts doubt on Covid tests, and disparages mitigation efforts. That’s despite scientific proof of the benefits of mitigation efforts including masking and new developments, such as recent requests by governors to remain at home and telecommute to slow the third wave of the virus. Similarly, they ignore research showing that crowded indoor spaces such as restaurants, gyms and hotels significantly increase the risk of contracting the virus.
People have a tendency to stick to their beliefs based on the first information they receive. This holds true even with strong new evidence that these beliefs are erroneous. Behavioral economists and cognitive neuroscientists call this mental blind spot anchoring.
Anchoring is one of many dangerous judgment errors, or cognitive biases, that harm the decision-making process in business and every area of life.
Taking steps to address cognitive biases will help us make better decisions to manage risks wisely. Similarly, we can use research-based steps to address anchoring in business decision making.
Anchoring in Fintech: A Case Study
Let’s look at the case of a fintech startup weighed down by anchoring, which led to a disastrous first few months of remote work and, unfortunately, Covid-19 infections.
When “Lauren,” an EO member and CEO of a130-employee Texas-based startup, first heard of Covid-19, she and her leadership team shrugged it off as a mere nuisance. They didn’t prepare for an extended disruption, opting to follow early CDC guidelines to prepare for a brief interruption caused by a short-term outbreak.
Due to this, the senior management team asked all employees to report to the office as states reopened, totally disregarding news reports of an uptick of cases in Texas.
However, because of the leadership team’s dismissive attitude toward Covid-19, neither executives nor employees took necessary precautions. Many did not follow social distancing guidelines or wear masks in the office environment.
Not surprisingly, problems soon arose, starting with a virus outbreak traced to a company-wide meeting. Almost three dozen staff and three C-suite leaders contracted the virus.
The COO and several employees were hospitalized, and two older employees died. This resulted in a massive decrease in productivity, resignations and low morale.