﻿ McKinsey Classics: How distortions and cognitive biases undermine decision making
Why strategies go wrong
McKinsey Classics | April 2017
How distortions and cognitive biases undermine decision making
Chief executives must often base big decisions on trust in other executives, but when the interests of certain people aren’t aligned with those of the organization, they tend to look out for themselves. Companies know about this problem, though few realize that it often combines with cognitive biases to form intertwined, far-reaching patterns of distortion and deception. Behavioral economics teaches us that decision making can succumb to universal human weaknesses, such as overconfidence, loss aversion, the champion bias, and “sunflower management.” To learn how to recognize and control them, read “Distortions and deceptions in strategic decisions,” a true McKinsey classic.
The halo effect, and other managerial delusions →
Beating the odds in market entry →
Hidden flaws in strategy →
The problem with TRS
The US stock market has been testing record highs. But do short-term share prices and total returns to shareholders (TRS) truly reflect a company’s long-term prospects? To find out, read the classic article “Measuring stock market performance.”
What’s the problem with TRS? →