Bias number three is called the ambiguity bias, a cognitive bias that affects the way people make decisions.
The ambiguity effect bias explains the human tendency to avoid risk by making decisions based on a known probability for a positive outcome over an unknown probability for a positive outcome, even if statistically both options carry similar risk profiles.
Here’s how it works. Imagine you are taking out an investment policy. The financial advisor lets you know that the riskiest policy is getting returns that are 5 per cent greater than the most popular, middle-of-the-road policy where your investment is guaranteed a certain percentage of return.
Which policy would you choose?
Most people will opt to put their investment in the middle-of-the-road policy. They will sacrifice the potential financial gains of the slightly riskier policy for the emotional security of a guarantee.
Why? Because living with ambiguity means living on the edge, of having to step into the unknown. That could mean life — or death — to the mammalian mind. The discomfort of living on the edge motivates people to play safe.
Naturally it’s not wise to take silly risks with your life savings. You may reach financial heights and you may crash. If the promise is too good to be true, it often is. But, are there areas in your life where you play safe when you might benefit from taking a risk?
In business, consider that it’s risk, and the ambiguity that naturally accompanies risk, that gets in the way of people making significant change.
It’s risky to try new things. It’s risky to make a mistake. It’s risky to admit you don’t know. It’s risky to let your guard down. It’s risky to invest time, effort and money into something that may or may not work.
It’s more comfortable to live behind the veil of “knowing” what you know and doing what you’ve always done. If it ain’t broke, don’t fix it. Get your head down and live a hassle-free life.
While a life filled with the predictability of Groundhog Day seems safe, is it really safe? Is it making the most of being alive?
Ironically, this kind of existence is actually deadening. While your heart may be beating, you stunt your personal growth and the possibility of fulfilment by adopting this approach to life.
The ambiguity effect bias shows up in surprising ways. You can readily imagine it in the voice of a leader in a large organisation. It takes courage to stick one's head above the parapet and challenge the entrenched status quo. It can take months and years to gain the necessary buy-in from stakeholders to merely initiate business transformation, let alone roll it out.
Equally, it arises in start-up organisations. Having worked for several, I have witnessed start-ups make the same mistake over and over again. One of the biggest is using agility as an excuse to cut corners, operating on the premise of beating the real or imagined competition by being bigger, better, faster.
It’s a significant reason why 90 per cent of start-up businesses fail.
There is a kind of kudos that comes with surviving business failure, and there’s a bravado amongst certain entrepreneurs that comes with notching up bankruptcies. However, the fail and fail fast mentality normalises failure to the extent that failure becomes what’s expected. In doing so, it serves to smooth out the anxiety-provoking bumps that accompany ambiguity.
Think about it. If you, your partners and your investors already know you’re likely to fail, there's little risk. It means you can continue down the comfortable path of creating a string of unsuccessful attempts at building a business.
What’s more ambiguous is the path to success. Failure can almost always be guaranteed. Success cannot. As odd as it may sound, failure for many people is less threatening than success. In fact, the thought of success is terrifying.
What makes success so terrifying? Notice what you see as you look at success in terms of the ambiguity effect bias.
Success feels elusive, and because it’s seemingly unknown, it’s safer to remain in the comfort of certainty in life — failure.
But is success really as elusive as you might think?
It isn’t, and I assert that you are already successful. You’re just not present to success. You’re more attuned to failure and criticism of yourself than you are to your successes.
I invite you to do a little exercise. Spend five minutes writing down all the successes you’ve accomplished today already, starting with getting out of bed. Continue writing until the five minutes is up.
What you will begin to recognise is that success is not so ambiguous after all. If you look for it, you’ll find evidence of it all around you. You could strike up a relationship with success. In doing so, it loses its ambiguity. You become comfortable with it. And maybe, just maybe, you become as comfortable with success as you are with failure.
I actively encourage you to extend yourself, to venture out to the edges of life and try something new. All you've got to lose is the effect the ambiguity bias has on your experience of life. And who knows? You might create some brilliant successes at the same time.
I think that’s worth the risk. Don’t you?