The Opinion Of Change

Prospect Theory posits that people for people to take advantage of a gain, there has to be at least twice as much benefit as any potential loss. Some practical examples: 

  • When playing a game where you would win if you rolled an even number, and lost if you threw an odd number, you are more likely to play if you would win $2 and only lose $1. 
  • When moving (job, house, city), the hope that you have for the future in the new place must be significantly more than the area you are leaving. 
  • When changing software vendors, you must feel that the benefit provided is at least 2x more than your current vendor.

Prospect Theory, Opinions, and Small Numbers

The problem that we run into is that when we are the catalyst for change in our world, we often don’t seek enough feedback to make an informed decision. Statisticians tell us that we need to have a good sample size before we can draw meaningful conclusions. 

For example, when you are changing a feature of a piece of software, you may take a survey of 5 managers who may be using it. Two of the managers respond that it doesn’t meet their needs. Three of the managers say that it does. In light of prospect theory, we are more likely to abandon the feature because of the two negative reviews. (Note that the prospect theory findings are echoed in the Ideal Praise-to-Criticism Ratio.) Our problem with our small sample size is that even though we had 60% of managers positively reacting to the feature, we put too much weight on the two individual managers who had criticism. If you were to take a survey of 100 managers across the organization and found that 60 managers would have a significant work-productivity gain, it would be much more difficult to shelve the work. 

Be sure that you have solicited feedback from a large number of people before you decide on what result is most important to move forward. Also, ensure that this group is randomly selected and can provide you with an accurate picture of the whole group’s opinion. Don’t be swayed by a small number of strong opinions that are right in front of you.