A famous experiment by Nobel Prize winner Daniel Kahneman and Amos Tversky went as follows:
Imagine that the US is preparing for an outbreak of an unusual Asian disease, which is expected to kill 600 people. Two alternative programmes to combat the disease have been proposed.
Assume that the exact scientific estimates of the consequences of the programmes are as follows:
If programme A is adopted, 200 will be saved.
If programme B is adopted, there is a one-third probability that 600 people will be saved and a two-thirds probability that no people will be saved.
Which one of the two programmes would you prefer?
Kahneman and Tversky found that a substantial majority of people would choose programme A.
Then they gave another group of people the assignment but with the following description of the (same) options:
If programme A is adopted, 400 people will die.
If programme B is adopted, there is a one-third probability that nobody will die and a two-thirds probability that 600 people will die.
They found that, in this case, a clear majority of respondents favoured programme B! But the programmes really are exactly the same in both cases…!? How come people’s preferences flip although they are confronted with the exact same set of choices (be it described slightly differently)?
It is due to what we call “framing effects”, and they greatly affect people’s preferences and decisions. For instance, In the first case, programme A is described in terms of the certainty of surviving (which people like), but in the second case it is described in terms of the certainty of dying (which people don’t like at all!). Therefore, people choose A when confronted with the first programme description, while in the second case they favour B, although the programmes are the same in both situations.
We also see this influence in strategic decision-making, for instance in terms of whether particular environmental developments are “framed” as opportunities (which we like) or threats (which we don’t like). A few years back, Clark Gilbert – at the time a professor at the Harvard Business School – analysed American newspapers’ responses to the rise of on-line media in the mid-1990s.
He found that those newspapers that, in their internal communications and deliberations, described on-line media as an opportunity (e.g. “a new avenue for attracting advertising revenue”) coped quite well. In contrast, those newspapers that framed the exact same technological developments as a threat (e.g. “it will eat into our advertising market share”) didn’t cope very well at all. In light of the threat, they reduced investments in experimentation, adopted a more authoritarian organisation and management style, and focused more narrowly on their existing resources and activities. As a result, they basically ended up copying their physical newspaper onto the web; and that didn’t work at all. Many of them didn’t survive.
And this effect is quite omni-present. How you frame decision-situations to someone (e.g. your boss) is going to influence substantially what option he is going to favour. How the people who work for you frame a situation while presenting to you, is also going to determine what you will choose. And I guess that may be an opportunity (or a threat…) in and of itself.
