Risk Management Series

Common Mistakes in Decision Making

(adapted from Halpern, 1989)

1. Failure to seek disconfirming evidence

“We have a bias or predilection to look for confirming information” and fail to seek opposing views or evaluate the impact of a bad decision. It is discomforting to have someone challenge your decision, but they may be correct. Seeking disagreement will make you reevaluate and consider new information that can be invaluable in risk assessment. You don’t want people to just confirm your decisions, you want them to be a real critic so that all aspects can be considered.

2. Using “rule of thumb” guidelines to solve problems can lead to fast solutions but they may not give the correct answer, eg. immediately culling all open cows following palpation will reduce your herd forage requirements and direct costs but may reduce income. Market your animals rather than accept the market. Rules of thumb are helpful guidelines that have to be fine tuned to your situation. Evaluate your alternatives and risks before acting.

3. Wishful thinking

“The tendency to believe that pleasant events are more likely than unpleasant ones is a manifestation of wishful thinking, the idea that if we want something to happen it will….Optimism may be a wonderful human trait, but not when it distorts the decision-making process. Good decisions rely on realistic assessment of likelihood, not optimistic ones. Failure to consider seriously unpleasant outcomes can lead to disastrous consequences” eg. below normal rainfall is resulting in a potential forage shortfall but you fail to reduce stocking rate because it could rain. This destroys your pastures and pocket book. Even if it does rain your pastures need rest to recover from the drought before you resume normal stocking rates. Many ranchers and pastures never recover before the next drought occurs.

4. Entrapment

“A situation in which an individual has already invested money, time, or effort and decides to continue in this situation because of the initial investment”. Many ranchers believe that a cow is too valuable to sell when the market is low and when it is high, thus they are trapped. They need to consider the present value and what the cow investment is likely to return in the future rather than the money already spent. You can invest more than the cow is worth and can produce in the future if you are not careful!

5. Perception of Best

We select alternatives that seem “best” to us, and our determination of what’s best is not always based on sound rational criteria. Perception and wisdom may not be sound criteria when considering complex decisions identify the tradeoffs. You would think that killing brush would increase your forage supply and allow you to make more money, but the assumptions may not be true. You could kill the brush and only undesirable plants grow or other non-target brush takes over or forage production does not allow enough livestock to be grazed to pay for the brush control.

6. Liking

You have observed that a neighbor implemented a decision that created a pasture that looks good to you and therefore you implement the same practices. It may not work for you. In fact, how many neighbors would tell you it looks good but did not work or provide enough details for you to adequately evaluate the practice for your specific situation. Be careful, looks can be deceiving. Liking a specific bull and buying it without checking out its production capabilities, genetics, behavior, etc. can lead to a wreck.

7. Mere exposure effect

“…..prior exposure creates a sense of familiarity, which in turn can enhance your liking stimulus…”. You are more likely to continue doing what dad and granddad did on the ranch because you are familiar with these activities and decisions, but everything is changing and the old practices or policies could be wrong today. It takes effort to learn something new or to question familiar practices. Don’t just do the same things year after year and expect to see improvement when the ranch is deteriorating, assets shrinking, you are working harder, and failure is likely. Make changes before you are in a crisis.

Plan, Monitor, Implement, Monitor, Control, Monitor and Adjust

People don’t plan to fail they just fail to adequately plan and evaluate risks, assumptions, and likely outcome. Many people assume things are going well only to be faced by “daily” crisis situations. A good plan that evaluates alternatives prepares you for making adjustments when things are not going as expected. The only way you will determine if the plan is not working is by constantly monitoring current and forecast conditions or criteria that you have identified in your plan. Crises are usually a result of gradual processes, ie. forage shortfalls result from gradual depletion of the forage supply. Procedures for monitoring and improving rangeland management decisions

are described in several Extension bulletins. Use of these techniques can greatly reduce your risk and allow you to reduce the impact of bad decisions. You must constantly adjust management based on new information rather than assume your plan is working.


Drucker, P. F. 1974. Management. Harper & Row, Pub., N. Y.

Halpern, Diane F. 1989. Thought and Knowledge. 2nd ed. Lawrence Erlbaum Assoc. Pub., Hillsdale, N. J

See our website at http://trmep.tamu.edu for additional risk management information.

Support provided by the TAEX Risk Management initiative.

Educational programs of the Texas Agricultural Extension Service are open to all people without regard to race, color, sex, disability, religion, age, or national origin.

Issued in furtherance of Cooperative Extension Work in Agriculture and Home Economics, Acts of Congress of May 8, 1914, as amended, June 30, 1914, in cooperation with the United States Department of Agriculture. Edward A. Hiler, Director, Texas Agricultural Extension Service, the Texas A&M University System.