Confirmation Bias Can Cloud Director Judgement

Theranos is one example of how “we hear what we want to hear and disregard the rest.”

By Ralph A. Weber and Dale E. Jones

We all know the basic facts of the Theranos debacle: Brilliant Stanford dropout fools almost everyone about a blood-testing device she proclaims will revolutionize healthcare. Conscience-stricken employees reach out to investigative reporter. Theranos collapses.

While Elizabeth Holmes’s name lives in infamy, it’s important to note that the Theranos board included such luminaries as George Schultz, James Mattis, David Boies, Henry Kissinger and Sam Nunn. How did so many accomplished people miss that the company whose board they served on was a sham?

Theranos’ was not the first — nor the last — company board that did not see what could or should have been discovered earlier. The same question has been posted about Enron, and now Boeing. It behooves all corporate board members to ask, “How do my board colleagues and I ensure we’re not next?”

In their seminal 2011 bestseller, Thinking, Fast and Slow, Daniel Kahneman and Amor Tversky examined the multiple ways we commit errors in logic and reasoning. The book breaks down the differences between “fast thinking,” and “slow thinking.” People who rely on fast thinking like to boast that they “trust their gut;” those who predominantly use slow thinking are marked by their patience and intentional effort to see all sides of an issue before coming to a conclusion. The Theranos story is replete with examples of smart people who followed their affection for Holmes and her vision — who “fast thought” — while ignoring red flags. 

Much of that can be traced to confirmation bias, a powerful mental shortcut that quietly undercuts good decision making. Because uncertainty creates discomfort, we want to eliminate it by solving problems as quickly as possible. We identify a possible answer and then look for facts to support or “confirm” that choice. Instead of being open to new evidence, confirmation bias takes over and we ignore or discount contradictory evidence as untrustworthy. As Paul Simon sings in “The Boxer,” when confirmation bias is at work, “We hear what we want to hear and disregard the rest.”

Confirmation bias was a huge factor time and time again in allowing Theranos’s board to look the other way as evidence mounted that the company was being deceptive. Even after his own grandson blew the whistle, George Schultz’s passion for Holmes’s vision made him unable to let go of his belief in Theranos.

What can a board do to promote slow thinking and battle confirmation bias? Here are three ways to avoid becoming the next Theranos board.

Schedule board meetings right after meals.

One barrier to deliberate, “slow” thinking is fatigue. The brain accounts for only 2% of total body mass but uses approximately 20% of your daily calorie intake. Difficult cognitive tasks drain brain glucose, limiting cognitive performance. In other words, the tired mind takes the path of least resistance.

A study of Israeli judges reviewing parole applications revealed that the strongest determinant of whether an applicant received parole was the time of day the case came before the panel. When cases came before them either early in the morning or after breaks for lunch, the judges granted parole at a rate of 65%; approvals dropped to near zero in the ensuing hours before the next break. As mental energy lagged, it was easiest to take the path of least resistance and turn applicants down.

Board agendas should schedule the issues that call for the most intense thinking when directors are freshest. Glucose stores can be replenished by fruits and fruit drinks that naturally taste sweet (as opposed to artificial sweeteners), something boards should also keep in mind when deciding seemingly innocuous details such as break-time snacks. 

Applaud, rather than tolerate, opposing ideas.

The military and intelligence community have long understood the value of “red teams,” whose role is to challenge the accepted wisdom of the group. Board members often play that role, sometimes announcing in advance of their remarks the qualifier, “Just to play devil’s advocate…” But this comment suggests that going against the group consensus needs to be noted and excused, rather than expected and encouraged.

Humility drives a culture that values red teams and devil’s advocates. Leaders who value humility strengthen their decision-making by understanding they may be wrong. We all know people who are not always right but who are never in doubt. The superficial attraction of such self-assured people wears thin when the consequences of their narrow field of vision come home to roost.

One way to ensure that contrary ideas get presented is to mandate that the person who presents a recommendation to the board includes, in their slide deck, the best reason to vote against the proposal. Painful as this may be to the presenter, it achieves two important things: It gives the board a jumping-off point for their own insights into why the idea may not be well-advised; and it helps assure the board that management was not wearing blinders that limited their view of the problem and its potential solutions.

When selecting board members, vet for these overlooked qualities.

Boards need to more robustly vet how prospective board members approach problems and interact with others. As we saw with the Theranos board, simply having a record of success in a challenging field is not enough. In a paper published this past spring, Kahneman and others offered suggestions on how to implement this process. 

First, look for pretentiousness and pride. People who are not always right but never in doubt may succeed in many spheres, but board work is not one of them. Conversely, taking the time to consider that you may be wrong helps engage deliberate thinking and offsets cognitive flaws like confirmation bias. One can easily test for this by asking a candidate for a recent instance when they changed their mind after realizing they were wrong. If they can’t name one, they don’t belong on the board.

Also, people who are lifelong learners and continue to expand their base of knowledge and experience are more likely to bring ideas up that challenge the status quo. Ask about books they’ve read recently that have impacted their thinking and led them to see things differently.

Abraham Lincoln assembled his famed “Team of Rivals,” the strongest men in the country with their own egos and ambitions, to speak their minds. A board of rivals may not sound productive, but a board of rivaling ideas could be the difference between becoming a success — or the next Theranos. 

Ralph A. Weber is a founding member of Gass Weber Mullins, a Milwaukee law firm. Dale E. Jones is the CEO of Diversified Search, one of the top ten executive search firms in the nation. Both sit on the board of Northwestern Mutual.

 


Issue: 
2019 Fourth Quarter

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