Using metacognition to make better business decisions

Business Matter

Manish Shah is the former president of Midwest Law Printing in Chicago. He also worked at Intel, PwC and Motorola. He has an MBA from Kellogg Graduate School of Management, and a MS in Computer Science from Illinois Institute of Technology. He can be reached at

By Manish Shah

Follow effective action with quiet reflection.

From the quiet reflection will come even more effective action.

-Peter Drucker

A new decision-making paradigm is emerging. It dictates that metacognition or self-reflection is a better predictor of good judgment than either intelligence or experience. Metacognition is the ability to think about one’s thinking.

By using metacognition in making decisions, we can overcome limitations of our mind. Human mind suffers from    various psychological biases such as social proof and anchoring. Social proof is the tendency to follow the herd while anchoring is the tendency to rely  heavily on one piece information. If we observe our thinking process when we make a decision, we can eliminate the influence of these and other psychological biases.

Suppose you decide to buy a stock. If you have developed your metacognitive skills, you will reflect on how you came up with this decision. This will ensure that you picked the stock for the right reasons such as current valuation, excellent future prospects and good management but not because your friends bought it (social proof) or because the stock was down 70 percent from its high (anchoring).

Peter Drucker, the management guru extraordinaire, recommended that we keep a   journal to record our key decisions and the rationale behind them. Periodically, we should review this journal and reflect on our past decisions. According to Drucker, this exercise is tremendously effective in helping us refine our decision-making.

The crucial ingredients for making good decisions in a group setting are a high tolerance for dissent and vigorous debate. Too often we have seen our leaders surround themselves with “yes” people, thereby limiting the development of their metacognitive skills. To encourage dissent and spur debate, President Obama has nominated strong willed people to his Cabinet. In doing so, he is trying to emulate President Lincoln, who built a team of rivals. This is a step in the right direction, but it remains to be seen if President Obama’s tolerance for dissent is as high as Lincoln’s.

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