What have we learned? Insights from a decade of bias research
Matthew Welsh A and Steve Begg AThe University of Adelaide
The APPEA Journal 56(1) 435-450 https://doi.org/10.1071/AJ15032
Published: 2016
Abstract
Cognitive biases—unconscious errors resulting from how people’s minds work—have been observed in both laboratory and in situ examinations of petroleum personnel’s decisions, and have been demonstrated to result in significant lost value. Since 2003, the CIBP group at the Australian School of Petroleum has been conducting research into such effects, including the use of a battery of questions designed to test oil and gas personnel’s susceptibility to said biases.
This paper tracks industry performance on biases across the last decade, noting changes relative to baseline results from Welsh et al (2005) and on insights since gained into the nature and operation of cognitive biases more generally. Results are discussed in light of standard findings regarding the strength of biases observed in the wider psychological literature and in direct comparison with results observed in a sample of petroleum students collected from 2005–15, providing valuable benchmarks.
The central observation is that bias strength has remained stable across the period in question, according with earlier studies suggesting biases are robust and increased awareness of their existence is insufficient to reduce bias susceptibility. Given this observation, the authors look in finer detail at what can be done, discussing the benefits ongoing training regarding the nature of biases can provide, before describing debiasing techniques and changes to the elicitation methods and tools known to reduce bias, based on state-of-the-art understanding of when and how biases occur. This, the authors argue, offers significant opportunities to reduce bias and improve industry decisions and economic outcomes.
Matthew Welsh is employed as a Senior Research Fellow in the Centre for Improved Business Performance (CIBP) at the Australian School of Petroleum where, for the past 12 years, he has conducted research on psychological aspects of decision-making and the impact that these have on the accuracy of forecasts and, thus, economic outcomes. Matthew is a member of the American Geophysical Union, Cognitive Science Society and Association for Psychological Science, and has written 40 papers for psychology journals and industry outlets. He has been an invited Discussion Leader at an SPE forum on risk mitigation and uncertainty management, and presented work at psychology, engineering, geology and geophysics conferences worldwide. He holds a BA (Hons) in philosophy, a Graduate Certificate in Education (Higher), and a BSc (Hons) and PhD in psychology from the University of Adelaide. matthew.welsh@adelaide.edu.au |
Steve Begg is a Professor at the University of Adelaide’s Australian School of Petroleum, where he specialises in tools and processes for improved business performance. His focus is on asset and portfolio economic evaluation and decision-making under uncertainty, including psychological and judgmental factors. Prior to joining the University in 2002, Steve spend 19 years in the oil and gas industry as Director of Decision Science and Strategic Planning for Landmark Corp., in a variety of senior geoscience and engineering operational assignments for BP Exploration, and as a reservoir characterisation researcher and project manager with BP Research. Steve has twice been an SPE Distinguished Lecturer on decision making and uncertainty assessment topics, and was commissioned by the SPE to co-author a book—Making Good Decisions. He was recently elected to the Board of the Society of Decision Professionals, and won the SPE Asia-Pacific Management & Information Award. Steve holds a PhD degree in geophysics and a BSc degree in geological geophysics from Reading University. steve@sbegg.com |
