Psychologists have studied the behavior of people in corporate business for several decades. These professionals believe the biases and misconceptions leading business people exhibit influence workplace decisions. Some biases and misconceptions are excessive optimism, overconfidence, confirmation bias, and projection. As business managers frequently make corporate decisions in the face of risky alternatives, the psychological need to avoid financial losses is stronger than long-term financial gains, reliable products, and public safety.
Biases
A variety of behaviors in the business world compel people to make poor financial judgments, irrational decisions, and uninformed economic forecasts. One reason for these circumstances is people often display biases, which are cognitive predispositions that lead to mistakes. Most people, in general, try to think positively, perhaps because all languages have many more optimistic adjectives than pessimistic ones. However, according to James Montier, the inclination to look at the brighter side of things often leads to excessive optimism, which is a recurring bias in the corporate world. Business managers demonstrate this type of bias when they become unrealistically hopeful about their business activities.
On July 26, 2004, BusinessWeek published a cover story about the business behaviors of Chief Executive Officer Scott McNealy of the technologically advanced firm Sun Microsystems. According to the article, in 1995 McNealy made an unpopular decision when he opted not to follow the market trend of making servers for Microsoft Windows software. Instead, McNealy instructed Sun’s technicians to create the company’s personal computer software called Solaris. Although Sun’s competitors IBM, Digital Equipment Corp., and Hewlett-Packard thought it would be profitable to develop “new servers to run the next version of Microsoft Corp.'s Windows software,” Sun’s servers outperformed the competition in reliability, security, and speed. As Sun’s software rose in demand and profits increased tremendously during the technology boom of the latter 1990s, people looked at McNealy as the prototype CEO.