Practical steps to tackle wilful blindness

Go through this 9 point checklist to avoid biases leading to wilful blindness at various stages of the decision-making process.

CHECK 1: Question your conviction

The hardest thing to do is questioning our own convictions that form the foundation of our current strategy. However, do we actually know what we think we know? This can be intimidating and scary, but it is important to see the world as it really is, instead of being wilfully blind. "Our current strategy is based on realistic assumptions, not on beliefs."

CHECK 2: Focus on the right thing

Very often in meetings we focus on the most urgent issues; we are drawn to the status quo and we get distracted from the things that really matter. We need to ask ourselves: in a wider context, is this issue the most important? Or have we become wilfully blind to the long term? "Our focus is on the right issues."  

CHECK 3: Scenario thinking

One of the most effective tools to think about the future is scenario thinking. It forces us to consider how the world might develop and how that could affect our strategy. A scenario is simply an imagined future, not a prediction. Thinking about, and accounting for, a number of plausible yet challenging scenarios can help you discover patterns and understand the world better. By overcoming wilful blindness we are creating memories of the future, so to speak. "We use realistic and challenging scenarios to think about how the world might develop."

CHECK 4: Draw up a robust investment strategy

In an uncertain world, there is no such thing as the perfect strategy. The best we can do is come up with a number of strategies that will lead to acceptable outcomes. Next, we choose the strategies that can best withstand the more challenging conditions we imagined when using scenario thinking. The world will develop in a way we cannot properly imagine right now. People and businesses will adapt and change their behaviour. Not acknowledging this and looking too far into the future is a form of wilful blindness. After all, the dynamics will change over time. "Our portfolio is still robust, even in unfavourable market conditions."  

CHECK 5: Pre-commitments

When the markets are doing well, it is easier to think clearly about what should be done during a financial crisis. Thinking about this in advance, making plans and preparing to execute these plans can help you act decisively during a crisis. Furthermore, it allows you to take a mental step back and realise what is actually happening in the market while everyone else is in a state of panic. "We have determined and recorded what to do under rapidly changing conditions."  

CHECK 6: Stress scenarios

Once our strategy is beginning to take shape, we must assess how well it can withstand stressful periods. These can be either historical periods of stress or carefully constructed stress scenarios based on expected changes in market dynamics. "We are able to survive a stress scenario."  

CHECK 7: The devil’s advocate

To avoid groupthink, we should appoint one person in our group of decision-makers to act as the devil’s advocate. This must be done in advance of the meeting, to allow them to look for any weak points in the proposed strategy actively, especially assumptions that we might be wilfully blind to. By giving someone this task, it becomes a role they must play and it allows them to go against the group’s opinion in a safe context. "We have appointed someone to argue against our proposal."  

CHECK 8: Pre-mortem

A pre-mortem is an excellent tool for identifying extreme risks in advance. The decision-makers must imagine a situation in which our strategy fails in five years’ time. From that moment in the future, they travel back in time to identify the events that might have led to this failure. Doing so shifts the focus and helps to identify major risks in advance and address wilful blindness. It is then possible to take measures to limit these risks before they ever occur. "We know what might cause our strategy to fail in the years to come."  

CHECK 9: A final check-up

Before making the final decision, we must take a step back and realise that we might be overly attached to our plans and wilfully blind to its weaknesses. "When our decision is second-guessed, we can explain our decision to our participants."  

Author

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Stefan Lundbergh

Stefan, Director of Cardano Imagine, is the author of this piece. He regularly speaks at conferences and writes pieces about the pensions industry.

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