Decision Tips
Be aware that experience can lead to arrogance and overconfidence.
Experience is the name everyone gives to their mistakes.
—O. Wilde
A Cleveland, Ohio, fire commander and his crew encountered a fire at the back of a house. The commander led his hose team into the building. Standing in the living room, they blasted water onto the smoke and flames that appeared to consume the kitchen. But the fire roared back and continued to burn. The men doused the fire again, and the flames briefly subsided. Then they flared up again with an even greater intensity. As the firefighters retreated and regrouped, the commander was gripped by an uneasy feeling. He ordered everyone to leave. Just as the crew reached the street, the living-room floor caved in. Had the men stayed in the house, they would have plunged into a blazing basement.1
Why did the commander give the order to leave? Because the fire’s behavior didn’t match his expectations. Much of the fire was burning underneath the living-room floor, so it was unaffected by the firefighters’ attack. Also, the rising heat made the room extremely hot—too hot for such a seemingly small fire. Another clue that this was not just a small kitchen fire was that the sounds it emitted were strangely quiet. Hot fires are loud. The commander was intuitively sensing that the floor was muffling the roar of the flames raging below.
Veteran firefighters have accumulated a storehouse of experiences, and they subconsciously categorize fires according to how they should react to them. They look for cues or patterns in situations that direct them to take one action over another. In other words, veteran firefighters use their experience to make better decisions.
As shown in the fire-fighting example, experience can be an excellent teacher. But not always! Experience can also lead to arrogance, overconfidence, and choices that lack creativity. For instance, if you scored high on overconfidence in Chapter 11, “Are You Overconfident?” you need to be careful not to let your experience cloud your objectivity and limit your choices. In this chapter, we look at situations where experience is a plus and where it can be a hindrance.
The common argument in favor of experience in decision making follows this logic: Over time, we make mistakes; we learn from those mistakes what works and what doesn’t; we gain experience; and that experience helps us to make better decisions in the future. Consistent with our discussion in the previous chapter, then, experience allows us to learn from our mistakes.
Before I proceed too far, let’s clarify what we mean by the term experience. Is it age? Is it length of time doing an activity? Is it a measure of accumulated expertise? The value of experience in decision making likely depends on how you define the term.2 Since we’re concerned with both quality and quantity, we define experience as repeated feedback that accumulates into developed expertise. Therefore, 20 years of “experience” may not reflect 20 years of accumulated expertise. It may merely be one year of experience repeated 20 times!
Many of the biases and errors described in Part III of this book don’t lessen with experience. This has been explained by pointing out three limitations to experience.3 First, there is delay in feedback. Because there is typically a long lag time between making a decision and its outcome, it’s often hard for people to learn from their mistakes. Second, people never know what the outcome would have been had they made another choice. So, learning is hampered by the lack of a clear cause-effect relationship. And third, there is variability between situations. Learning is clouded because we can’t be sure that what worked (or didn’t work) in one situation would achieve similar results in another situation. These limitations suggest that just because we know what happened (experience) doesn’t mean we know why it happened (learning) and are able to act on our knowledge.4
The strongest case for experience is its value for assessing situations and in making routine decisions.5 Experience allows you to size up a situation: “I’ve seen this situation a number of times before. I know what’s worked and what hasn’t, so here’s what I need to do.” Experience also works well with routine situations because, again, past practices provide insights into how to best solve a problem. In the same way that organizations create rules and procedures so employees can quickly and efficiently solve routine problems, individuals create mental “programs” for handling recurring problems. For instance, you drive to work every day using the interstate highway. Each morning, just before you leave home, you check the traffic report. On those days when there’s an accident and traffic is backed up, you take an alternate route that’s two miles longer but you’ve learned is never congested.
Be aware that experience can be a liability as well as an asset.
What about the downside of experience? Experience can reduce decision quality when it leads to arrogance, overconfidence, or inaccurate perceptions, or when it limits creativity. As noted in Chapter 13, “How Can You Be So Darn Sure About That? Coping with Overconfidence,” overconfidence can be a problem for all of us. But it’s more likely to seriously undermine decision quality when it’s applied in a different context or when conditions change. Paul Allen became one of the richest men in the world by cofounding Microsoft. Yet that experience didn’t prove transferable to his private equity firm, Vulcan Capital—where he lost billions of dollars in an assortment of investments related to trying to create a wired world. Similarly, T. Boone Pickens made billions investing in oil, and then lost billions investing in wind energy. Experience can also lead to inaccurate perceptions.6 We see what we expect to see, and extensive experience can limit our perceptions. If your experiences are biased, your perceptions are likely to be inaccurate. So, you can misperceive problems, possible solutions, and the risks associated with various solutions. Finally, experience can limit creativity.7 With new and novel decisions that require innovative solutions, experience can reduce your ability to see outside the box. Many important scientific breakthroughs and inventions, in fact, have been made by naïve individuals who didn’t know enough to know that it couldn’t be done!
Our conclusion? Be aware that experience can be a liability as well as an asset. It can lead to arrogance and overconfidence. Individuals who have had success in the past need to be alert not to behave overconfidently, especially when dealing with problems outside their areas of expertise. You should also be cautious about relying on your experience when dealing with new and novel situations. Finding a creative solution requires you to think outside your normal range of options. However, you should feel comfortable relying on your experience when dealing with routine problems.
Be aware that experience can lead to arrogance and overconfidence.
Downplay experience in new and novel situations that require innovative solutions.
Rely on experience with routine problems.