Ethics: address actions and decisions in terms of moral right and

wrong

An Agentic Theory of Morality

The exercise of moral agency:
• Inhibitive: refrain from doing the wrong
things
• Proactive: doing the right things

We exercise moral agency through self-

regulations and self-sanctions: failure to do
the right things would incur self-devaluation
costs (people want to preserve a moral self-
image: “I’m a good person!”)

Moral disengagement
Moral knowledge is not always translated into moral
actions: there are inconsistencies between people’s desire
to be ethical and their actual unethical conduct and
decisions

• Different strategies may overlap

• One decision/action may be
rationalized with multiple
strategies
Unethical decision making, is often about regular people
convincing themselves that they aren’t doing anything
wrong (moral disengagement)

Unethical behavior happens incrementally, on a

“slippery slope,” where people are desensitized to small
adjustment to moral standards
Assumptions of rational decision
making
• Decision-making condition is clear, unambigious, and
certain
• Outcomes of each alternative are known or predictable
• Decision maker is fully objective and logical and has
the ability
to access and process all necessary information (100%
rational
agents)
→ These are unrealistic and uncommon conditions
Bounded rationality
• Rational within the limits of decision
makers’ ability to gather and process
information.
• Search for and accept decisions that
are “good enough” – decision
makers satisfice instead of maximize.

Intuition
• Make decisions on the basis of
experience, feelings, and
accumulated judgment.

Prospect Theory
Outcomes as gains and losses
• Decision-makers see outcomes as gains
and losses relative to a reference point
Diminishing sensitivity
• The impact of an additional gain or loss
diminishes as the value of the original sum
increases (S shape)

Loss aversion
• The displeasure (disutility) of losing is much
greater than the pleasure (utility) of gaining
the same amount

Key Insights of Prospect

Theory
• People have asymmetric attitudes towards risk
regarding gain and
loss
• For choices involving only probable gains and mixed
situations
(gains and losses are possible), people are usually risk-
averse
• For choices involving only bad outcomes (a sure loss
vs. a
probable larger loss), people are often risk-seeking

Which of the following two options would you prefer?

• High probability condition
A. Receiving $4,000 with 90% probability
B. Receiving $8,000 with 45% probability
• Low probability condition
A. Receiving $4,000 with 0.2% probability
B. Receiving $8,000 with 0.1% probability
The certain option (A) is preferred in the high probability condition as people tend to
overweight the high probability of this choice (i.e., certainty effect). In the low
probability condition, A attracts fewer people the certainty effect is much weaker at
small probabilities.

Certainty effect
• The tendency to overvalue options with
certain outcomes compared to those with
merely probable outcomes (even when the
expected values are similar or worse)

• A “certain” reward feels disproportionately

more attractive than a reward with even a
slight risk attached.

Framing/loss aversion
• Gain vs. loss framing
• People make different choices depending on whether a
situation is characterized as a gain or a loss
risk averse when outcomes are framed as gains.
risk seeking when outcomes are framed as losses.

Framing effect (cont.)

Altering relative
salience of different
aspects of an issue
lead to different
judgments and
choices
Decision makers:
tend to passively
accept the given
frame

Sunk cost trap

• People tend to escalate commitment to a course of action in
which they have
made substantial prior investments of time, money, and/or other
resources,
even if this course of action is no longer valid.

Status quo bias

• Preference for the current
state of affairs
• Why?
▪ Laziness, inertia
▪ Risk-aversion (uncertainty
avoidance)
▪ Loss aversion: the current
baseline (or status quo) is
taken as a reference point;
change from that baseline is
perceived as a loss.

Endowment effect
26
• The tendency to assign a higher value to items or
possessions they
already own compared to the value they would place on
obtaining an
item they do not own.
• Ascribe more value to things just because they “own”
them.
• Why?
o Loss aversion
o Mere ownership effect (emotional attachment with what they
own)

Availability/recallability bias
• The tendency to weigh judgments toward immediately
available
examples and/or information
• Highly imaginable and vivid information/examples
(more recent,
more salient) have a disproportionate effect on
judgments and
decisions.
• Assess risks by how readily examples come to mind
▪ Perceived risk of terrorism was high after 9/11
▪ Perceived frequency of homicides tends to be higher than that of
suicide (examples
of homicides are more available than suicide)
Anchoring bias
• People tend to rely heavily on the first piece of
information offered
(the “anchor”), even when the information is irrelevant or
arbitrary.
• The anchor is salient and easily accessible in memory
(availability
heuristic)

Base rate neglect

• The tendency to underweight base rate or
prior information compared with specific,
anecdotal information when estimating the
probability of an uncertain event
• Because this information is more mentally
accessible than base rate statistics. (availability
heuristic)

Confirmation bias
• The tendency to search for, recall, and favor information that
confirms their
preexisting beliefs, whereas to downplay or avoid information that
disconfirms
prior views or positions.
• Also, the tendency to interpret information as supportive of
existing views.

Overconfidence
• Tendency to be overconfident about our accuracy of
estimate or
forecast, although we are not very good.

Bias blind spot: a cognitive bias whereby

individuals believe that they are less
susceptible to cognitive bias in decision-
making than most other people are.
How to make better decisions?
Implement choice architecture
• Improve people’s decisions by carefully structuring
how information and options are presented to them
• Gently “nudge” them in certain direction
▪ Provide checklist and algorithms (standardized interview
& scoring systems)
▪ Set the default (automatically bump up one’s retirement
contribution with every pay raise)

How to make better decisions?

Develop “reliable intuition”
• Under uncertainty, rules of thumb, or heuristics, can yield
reasonable
judgments
• Work towards developing “reliable intuition” in predictable
situations
through learning, reflection, and accumulation of experiences

People look to others for what to do and

how to think (informational signals)

Not wanting to be out of step with the

group, fear of being rejected/ridiculed
(reputational pressures)
The Abilene Paradox
• Groups make ineffective decisions that individual members do
not truly support.
• Both types of social influence may be at play:
• Reputational pressure: go with the flow to avoid “rocking the
boat” or
upset others. (“I am pretty sure it’s a bad idea, but I don’t want to be
the killjoy.”)
• Informational signal: each person holds relevant but
inconclusive information, but does not share the unique info, just
to follow the lead of others. (“Abilene is a long drive, but they seem to
know better as they all want to go.”)

Group polarization
• Members of a deliberating group end up
adopting a more extreme version of the
position they tended before the group
deliberation.
• Group deliberation produces systematic
“risky shift” or “cautious shift,” depending
on whether members are initially disposed
towards risk or caution.

Groupthink
• Groupthink occurs when the desire for consensus takes
precedence over
the quality of the decision process and quality of decision
• The zeal for unanimity in groups with high cohesiveness may
override realistic appraisal of alternative actions
• Groupthink causes deterioration of judgment and rationality in
groups
Negotiation as decision making
• Negotiation is “a form of decision making in which two
or more parties talk with one another in an effort to
resolve their opposing interests.” (Pruitt, 1981)
• Negotiated decision making occurs when:
▪ Multiple (2 or more) parties are involved in decision
making
▪ Interests of multiple parties are not completely aligned

Negotiation basics
Assess target and reservation points

Assess/develop alternatives
Alternatives are important because they give negotiators the
power to walk away when the emerging deal is not attractive
anymore.

Distributive negotiation
• The goals of one party are in fundamental and direct conflict
with the goals of the other party
• One party’s gain is at the other party’s expense: win-lose
situation
• Negotiation parties compete to claim more values
• But, negotiation ≠ competition
• Negotiation can involve both cooperation and competition

Integrative negotiation
Look for win-win solutions through open discussion & mutual
exploration
• Work on surfacing each other’s interests and needs (move from
position to interests)
• Collaborate to “create value” (expanding the pie)
• Turn single-issue to multi-issue negotiations & invent options to
satisfy all parties’ interests (e.g., logrolling)
• Positions: The specific options each person wants
• Interests: Why they want it; the underlying goals, needs, and
concerns
• Bring more issues into the negotiation
• Negotiate by package, not by a single issue
• Create opportunities for tradeoffs based on interests
❑ Logroll: agree to trade off among multiple issues so that each party
achieves a highly preferred outcome for each issue

Integrative negotiation
Collaborative mindset &
communication

• Create a free flow of information needed to develop good

integrative solutions
• Understand outcomes should be measured by joint gains (the
extent to which solutions meet both parties’ goals)
• Demonstrate care and concern for the other parties’ interests
and goals (e.g., practice active listening, show empathy, establish trust)

Negotiated decision as a group

• Need to keep a collective goal in mind; not only have
your own interest, but also team members’ interests in
mind
• Important that no one feels like a “loser” or being
treated unfairly
• Relationships and trust must be maintained over time
❑ It’s not a one-shot negotiation
❑ Trustworthiness will payoff in the long run
Characteristics of complex
systems
Complex interaction
Different elements of a
system interact in ways that
are unexpected and difficult
to perceive or comprehend.

Tight coupling
Subcomponents of a process
are interlinked with little room
for error or time for
adjustment. There is very little
slack or buffer among different
components of the system.

Normal accidents
• A normal accident happen when unexpected
interaction of two or more errors (because of
interactive complexity) causes a cascade of
failures (because of tight coupling).
• Normal ≠ frequent/common
• Normal means rare but inevitable, the system’s
characteristics make it inherently vulnerable to
such accidents
• Individual decision errors × complex system =
failure/accident
What is an “error?”
• Unintentional deviation from truth or accuracy
o Intentional deviation = violation
• Bound to occur in complex systems
• Errors are ubiquitous and inevitable, but they do
NOT necessarily cause an accident or
disaster/system meltdown

High reliability organizations

(HROs)
FSORE framework for HROs (Weick & Sutcliffe, 2015)
o Preoccupation with failure
o Reluctance to simplify
o Sensitivity to operations
o Commitment to resilience
o Deference to expertise
Preoccupation with failure: pay attention to and learn
from errors, including seemingly trivial ones

Reluctance to simplify: analyse errors from a systems

perspective, be aware of complex interactions

Sensitivity to operations: pay close attention to everyday

front-line events; people are empowered to report errors
on the ground; interpret near-misses as danger rather
than safety

Commitment to resilience: develop the ability to bounce

back from inevitable errors (“the hallmark of an HRO is
not that it is error-free, but that errors don’t disable it.”)

Deference to expertise: respect and utilize insights of

those who are best equipped to advise, even if the
experts are employees on the ground with lower ranking

Psychological safety
“Shared belief that the team is safe for interpersonal
risk-taking”
(Edmondson, 1999)
Interpersonal risk-taking behaviors: admitting an error,
expressing a different point of view, asking for help

Psychological safety is a function of interpersonal trust

and mutual respect. In teams with high psychological
safety, members believe that the group will not rebuke,
marginalize, or penalize them for speaking up or
challenging the prevailing opinion.

eg of everest
Individual level
Cognitive biases
• Decision biases impaired the judgment and choices
that individuals
made
• Evidence of at least three biases in this case:
• Overconfidence bias: tendency to be overconfident with regard
to their judgments and choices
• Sunk cost effect: tendency to escalate commitment to a course
of action in which they have made substantial prior investment of
resources
• Recency effect: tendency to over-emphasize information from
recent events when making decisions and judgments
Lessons for decision making
• Use a multi-level framework for examining an
organizational decision-making failure
o There’s hardly one key factor that caused a catastrophe
o The effects of multiple errors in complex systems can be
compounded and interact in unexpected ways to cause tragic
events
• A climate of psychological safety is essential for open
and collaborative decision making. A lack thereof inhibits
constructive dissent
• Leaders should set the tone for collaborative decision
making; leaders should learn from errors and be aware
of own tendency to err (don’t be overconfident!)

Start by gaining empathy

• Empathy is the foundation of human-centered design
• Empathize is about understanding the human needs
and insights
on what are meaningful for them
• How to empathize?
o Observe how users interact with their environment
o Immerse yourself in users’ experiences
o Engage users directly – interview and interact with them to
capture needs and insights
✓ Encourage stories; ask about specific occurrence: “Tell me about
the last
time you ___”
✓ Dig for feelings and emotions
✓ Ask “WHY”

Define the problem

• Unpack your empathy findings into needs and insights

Needs
Things your partner is trying
to achieve

Insights
Your partner’s feelings and motivation underlying
his/her needs, which can be leveraged in your
design

Explicitly state the problem you

strive to address, based on the
most important insights gained
through your empathy work

The problem statement can be

used as a solution-generating
springboard

Ideate: generate alternatives

• With the problem statement in mind, generate radical
design alternatives
• Go beyond obvious solutions and drive innovation
• Go for volume and variety!
• Defer judgment (don’t judge your ideas yet) – go wide
and go wild!
• Draw > Write (stick figures and squiggly lines are ok!)

Ideate: capture feedback

• Share your ideas and listen to your partner’s feedback
• Fight the urge to defend your ideas
o It’s not about validation, but more opportunities to
deepen your understanding of the users’ needs
(more empathy work!)
• Listen > Talk
• Take notes

Prototype: get your ideas out

into the world
• A prototype can be an object, a
sketch, and role-play activity, a wall of
post-its, a video, a handmade
construction
• Create an experience or make
something tangible that your partner
can interact with or react to

Why prototype?
The cost of failure is the lowest during earlier
phases of the project
Project risk reduces as the number of build & test
cycles increase
Test your solution
• Testing is your chance to gather more feedback, refine
solutions, and continue to learn about your users.
• Testing is iterative, and it should inform the next
iteration of prototyping

Link DT to Decision-Making
• How can the “design thinking” approach facilitate more
effective decision making?
o DT encourages a mindset of experimentation and iteration,
which may help innovative, “outside-of-box” alternatives to
emerge
o By empathizing with people who will be impacted by a
decision, decision makers gain a deeper understanding of the
problem and potential outcomes of their decision
o DT often leverages cross-function teamwork; emphasizes
expansive, divergent thinking in a collaborative setting