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Five Mental Hiccups

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Richard Maltzman
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Evolution has changed our minds.  I don’t mean like, whether you prefer nachos or potato chips.  I mean… it has literally changed the way we think. As humans have evolved, we’ve developed heuristics – mental shortcuts, and biases based on those heuristics.  These all have to do with preserving our energy and survival, which is ironic, because we need to understand and work around some of these biases which could actually threaten our economic, social, and environmental survival.

This post is related to, but not part of, the series I’m currently running on this blog, Partnering for Sustainable Progress.  That series is featuring examples of partnerships between industry, academia, and government.  This short post supports the fact that those partnerships pay off – in particular, that focusing on ESG (Environment, Social, Governance) aspects actually helps for-profit organizations do better.

Mainly, I want to draw your attention to a new Harvard Business Review article posted this month by Andrew Winston and Paul Polman, called, “Yes, Investing in ESG Pays Off”, and highlight the five “mental hiccups” (rooted in heuristics and biases) that cause us as project managers and other key decision makers to ignore important facts that are staring us right in the face.

 The article summary is:

Why are leaders so reluctant to make ESG investments? Even those who know they’ll pay off are reluctant to do so, for five key reasons. The authors outline each — the numbers hide the truth about the real cost, our biases trick us, we focus on short-term benefits, we think about costs in silos, and we miss the bigger existential costs — and propose a solution for getting past these flawed mental models.

Just Capital, for example has created a list of companies prioritizing stakeholders (not just shareholders) that they call the Just 100. This group has outperformed the market.

See chart below.

As Project Managers we know that shareholders are not the only stakeholders.  In fact, as project managers, we have a chance to be true change agents by pointing this out to senior management, who often have what I will call “shareholder myopia”.  Good project leaders scan the landscape for anyone who cares about or is affected by the project (or has the project affect them) in any way.

Much of the reason comes down to heuristics and biases – mental hiccups.  Below (I will challenge you to read the article to get the full context) is the list of 5 hiccups.

1. The Numbers Hide the Truth About Real Costs

Solution: Price the unpriced.

2. Our Own Biases Trick Us

Solution: Diversify the group making decisions.

3. We Focus on Short-Term Costs and Benefits

Solution: Redefine your tools for investment decisions.

4. We Think About Costs in Silos (Instead of Systems)

Solution: Broaden thinking on value and think in systems.  Comment from  your blogger: this is where we as project managers shine!  We are silo-busters!!

5. We Miss the Bigger, Existential Costs

Solution: Understand the world’s thresholds and learn to think in net positive terms.

Again, from the article:

These five mental hiccups are not the only missteps that affect outcomes, but they are the primary ones that drag down sustainability investment. The mental models expose a win-lose, narrow, and negative mindset. In our book Net Positive, we explore ways to build businesses that solve societal problems and improve the well-being of everyone they impact. It takes courage and humility, but also a mindset that we can, in collaboration, solve many problems and improve the economics on sustainability for all. It’s not as simplistic as “win-win” but working together, we can get more done (what we call 1+1=11).

It’s easier (and frankly lazier) to think in old ways. We can fight these issues and make sustainability fit into a normal model of seeking a good return on investment. But let’s step back a moment. Why exactly do we have to stick with traditional terms? It’s increasingly absurd and surreal to have to justify investing in our very survival — or have to prove that we should stop funding what’s killing us. At the macro level we’ve long passed the point where the cost of action is far lower than the cost of inaction — i.e., huge swaths of the planet becoming uninhabitable, which, again, is kind of bad for business. It definitely pays to invest in our shared future.

 

The government, industry, and academic partnerships I’m referring to – they seem to get the idea of the long-term (and even short-term) payoff of ESG investment.  They even seem to understand the workarounds listed above for the five hiccups.

How about you?  Are you using old thinking and (hic) finding yourself getting that (hic) short-term windfall only to find that (hic) you should have considered the longer-term impacts and (hic) advantages and short-term benefits of thinking long-term?

Boo! (That was supposed to stop the hiccups, but instead: read the article…get the book).

 

Posted by Richard Maltzman on: April 17, 2022 04:18 PM | Permalink

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