The Premortem

Richard Thaler, the father of behavioral economics, just received the 2017 Nobel Prize in economics. I thought I would pass on this brief piece he did for edge.org, answering it's annual question "What Scientific Term or Concept Ought to be more widely known?":

The Premortem

Before a major decision is taken, say to launch a new line of business, write a book, or form a new alliance, those familiar with the details of the proposal are given an assignment. Assume we are at some time in the future when the plan has been implemented, and the outcome was a disaster. Write a brief history of that disaster.

Applied psychologist Gary Klein came up with “The Premortem,” which was later written about by Daniel Kahneman. Of course we are all too familiar with the more common postmortem that typically follows any disaster, along with the accompanying finger pointing. Such postmortems inevitably suffer from hindsight bias, also known as Monday-morning quarterbacking, in which everyone remembers thinking that the disaster was almost inevitable. As I often heard Amos Tversky say, “the handwriting may have been written on the wall all along. The question is: was the ink invisible?”

There are two reasons why premortems might help avert disasters. (I say might because I know of no systematic study of their use. Organizations rarely allow such internal decision making to be observed and recorded.) First, explicitly going through this exercise can overcome the natural organizational tendencies toward groupthink and overconfidence. A devil’s advocate is unpopular anywhere. The premortem procedure gives cover to a cowardly skeptic who otherwise might not speak up. After all, the entire point of the exercise is to think of reasons why the project failed. Who can be blamed for thinking of some unforeseen problem that would otherwise be overlooked in the excitement that usually accompanies any new venture?

The second reason a premortem can work is subtle. Starting the exercise by assuming the project has failed, and now thinking of why that might have happened creates the illusion of certainty, at least hypothetically. Laboratory research shows that by asking why did it fail rather than why might it fail, gets the creative juices flowing. (The same principle can work in finding solutions to tough problems. Assume the problem has been solved, and then ask, how did it happen? Try it!)

An example illustrates how this can work. Suppose a couple years ago an airline CEO invited top management to conduct a premortem on this hypothetical disaster: All of our airline’s flights around the world have been cancelled for two straight days. Why? Of course, many will immediately think of some act of terrorism. But real progress will be made by thinking of much more mundane explanations. Suppose someone timidly suggests that the cause was the reservation system crashed and the backup system did not work properly.

Had this exercise been conducted, it might have prevented a disaster for a major airline that cancelled nearly 2000 flights over a three-day period. During much of that time, passengers could not get any information because the reservation system was down. What caused this fiasco? A power surge blew a transformer and critical systems and network equipment didn’t switch over to backups properly. This havoc was all initiated by the equivalent of blowing a fuse.

T

his episode was bad, but many companies that were once household names and now no longer exist might still be thriving if they had conducted a premortum with the question being: It is three years from now and we are on the verge of bankruptcy. How did this happen?

A

nd, how many wars might not have been started if someone had first asked: We lost. How?