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The "I Knew It All Along" Trap: How Hindsight Bias Affects Business Decisions
Episode 3529th March 2024 • Connect & Convert: The Sales Accelerator Podcast • Sales RX and Wizard of Ads Employee Optimization
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In this episode, we delve into the concept of the "I knew it all along" bias, also known as hindsight bias. This cognitive bias leads people to believe that past events were more predictable than they actually were at the time. We explore how this bias can affect decision-making in business, causing companies to resist change and overlook past mistakes. By recognizing and challenging this bias, businesses can take control of their outcomes and make better decisions for the future.

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Dennis:

Welcome back to Connect and Convert, the sales accelerator podcast

Dennis:

where we share insider secrets.

Dennis:

To make your sales grow faster than ever.

Dennis:

We promise, right?

Dennis:

Leah, my, I'm Dennis Collins and there's Leah.

Dennis:

Hi Leah.

Leah:

Absolutely.

Leah:

You have our absolute guarantee.

Leah:

That is what we are.

Dennis:

Or your money back, right?

Dennis:

And

Leah:

that's a Canadian guarantee you can take to the bank.

Dennis:

As if a U.

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S.

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guarantee is no good.

Dennis:

Is that what you're saying?

Leah:

Well, I don't know.

Leah:

I watch the news.

Leah:

That's all I'm going to say.

Dennis:

Oh, boy.

Dennis:

That hurts.

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A deep stab by our Canadian so called friend here.

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Hey, well, you know what?

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Maybe this is an apropos topic today.

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We're going to talk about what I call the I knew it all along bias.

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I told you it's the, I told you so.

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Bias, you know, as you know, Leah, I'm a, I'm a nerd.

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I'm a big fan of studying cognitive biases.

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There are over 200 known cognitive biases.

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Okay?

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I promise you, you, I'm not gonna list all 200 today, but I have a couple favorites.

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Okay?

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So let me give you a story first to start this off.

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An event has taken place, okay?

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You had no way really to accurately predict in advance what the outcome

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would be, but after it actually happens, you are very certain that

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you really knew the outcome all along, way before it ever happened.

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Okay.

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I got, I got a story about that.

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Back in my radio days in Miami, we bought a station.

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That was in a oldies type music format, and there was another station that also

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had an oldies format, but we knew when we bought the station, there was only

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room for one oldies format in the market.

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Right.

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So we bought it with with that in mind, and we told ourselves, okay, um,

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That, you know, we needed to somehow figure out a way to get them out of it.

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Okay, that was no easy task getting a company to change a format is a big deal.

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It's a really big deal.

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Okay.

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So eventually, the day comes, and they do it.

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They switched to a country music format.

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Wow.

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Leaving us the only Oli station in the market.

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So guess what we said?

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We knew it all along.

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Okay?

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We told you so.

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That was going to happen.

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Really?

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We didn't know it.

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Okay.

Dennis:

But isn't that an, yeah, that's called the hindsight bias, but

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there are hundreds of biases.

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Uh, what, what's your favorite bias?

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Leah?

Dennis:

You probably have a couple biases.

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You.

Leah:

No, I'm not really a biased kind of a person.

Leah:

I'm not that, that's not my thing.

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I'm, I'm very open-minded.

Leah:

I like to, you know, as you know, look at, look, look at the heart of the matter

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and then make a decision based on that.

Leah:

But no, I don't think maybe when it comes to wizard academy because they sponsor us.

Leah:

I mean, I love wizard academy, but, uh, so,

Dennis:

so you don't have any cognitive biases, but you are by

Dennis:

wizard academy is a bias buster.

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It is.

Dennis:

It is.

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It's a blind, it's a blind spot bias buster.

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Wizardacademy.

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org, our sponsor, check it out.

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You will find a class that suits you.

Dennis:

You will be glad you did.

Leah:

And of course, Dennis, I'm teasing because even, even when we're

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kibitzing at the beginning of our, of our podcast, and I'm teasing you

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a little bit about American banking.

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I mean, we have biases based on what we read on the people we

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know on our personal preferences.

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When it comes, why are there so many restaurants out there?

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That's a, that's a form of bias.

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I like this flavor.

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You like that flavor, which Mexican restaurant is the best.

Leah:

You cannot avoid it.

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And if you have someone who's telling you, Oh no, I don't have biases.

Leah:

Wow.

Leah:

Be very wary.

Dennis:

Yep.

Dennis:

For sure.

Dennis:

They actually have a name for that one.

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It's called the bias blind spot.

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This bias causes people to, they can easily recognize cognitive biases in

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other people, but they fail to see the impact biases have on their own judgment.

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They have a bias.

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for the non bias bias.

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So how about that?

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We tend to believe that our own perceptions and judgments are

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rational, are accurate, free from bias.

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I got a newsflash, Leah.

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If we're human, and I think we are, we're all susceptible to cognitive

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biases that can distort our thinking, especially when we're not aware.

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I think the first step in this is just say acknowledge the fact that

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we're biased and it's a blind spot.

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We don't see it, but we can take steps to critically examine thought processes.

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We can seek outside perspectives.

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We can use tools and strategies.

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There's a lot of things we can and should do to eliminate it.

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So what, what, what is the impact of hindsight bias on a small business?

Dennis:

Well.

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Basically, it's, it's the tendency to perceive past events as

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having been more predictable than they actually were at the time.

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Of course, that's after, you know, hindsight, you know,

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is always 20 20, as they say.

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After an event has occurred, we have more information.

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We know, you know, more than we did before it occurred.

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So, oh yeah, I knew that was going to happen.

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That's, that was predictable.

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I saw that coming.

Dennis:

Um, do you ever have that feeling, Leah?

Dennis:

I knew it all along.

Dennis:

Does that resonate with you?

Leah:

Absolutely.

Leah:

And, and we, we want to have that.

Leah:

We want to have that Gnostic knowledge.

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We want to be able to think, okay, when I make a decision, I'm very logical.

Leah:

I'm very, you know, I'm basing it on all of this information.

Leah:

But you said it best, Dennis, a lot of that information wasn't

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available prior to it being hindsight.

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If the information is all laid out in front of us, What are we going to do?

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We're going to create a bias based on that information.

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When there's new information that is suddenly relevant,

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we're going to change the bias.

Leah:

It's the human condition.

Dennis:

Why is that, you know, why is that dangerous in business?

Dennis:

Well, when a company succeeds or fails, people often look back and

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point to the factors that they believe made the outcome obvious.

Dennis:

Well, of course, now it's obvious.

Dennis:

How about Apple's success?

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With the iPhone, you know, everybody's excited about the iPhone to this day.

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It's one of the most coveted things that you can have many.

Dennis:

Um, at first claim, the product success was inevitable.

Dennis:

I don't know if you remember.

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It was not inevitable.

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Okay.

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There was a lot of skepticism.

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There was a lot of question.

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What is this iPhone?

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Who is this guy jobs?

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What is this stuff all about?

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There was uncertainty about its launch, but of course hindsight biases.

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Oh yeah, we knew that was going to happen.

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We knew that we knew it all along.

Dennis:

How about let's talk politics for a minute.

Dennis:

This will get us in trouble, won't it?

Dennis:

Uh, the 2016 U.

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S.

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presidential election.

Dennis:

Now, I know you Canadians don't care what happens here, but

Leah:

that was an interesting election.

Leah:

It was.

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Many people claimed that Donald Trump's victory was inevitable, was

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obvious in hindsight, despite the polls, the pundits, the evidence suggesting

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Otherwise, in fact, it was quite a surprise on election night when the

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announcement was that Trump had won.

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But hindsight biases.

Dennis:

Oh, I knew it all along.

Dennis:

Interesting, isn't it?

Dennis:

Yeah.

Dennis:

Can't we have obviously another election year here in 2024 coming up later in 2024.

Dennis:

Let's see what I hadn't heard.

Dennis:

I know.

Dennis:

I know.

Dennis:

Well, the news doesn't travel up to Canada, you know, there's, but

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I'll keep, you know what, Lee, I'll keep you advised on that.

Dennis:

I'll, I'll let you know.

Dennis:

So what are the dangers?

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Okay.

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We know bias exists.

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We know hindsight bias exists.

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I can tell you from my own experience of running radio stations for all those

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years, When we failed to examine our past mistakes or our bad decisions

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by saying, well, that outcome was inevitable or predictable, that kind

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of gives up control, doesn't it?

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That kind of says, oh, well, nothing I can do about it.

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See, I have a strong belief in the concept of agency, not ad agencies, but agency.

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Agency, our ability to do something.

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about stuff.

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We can control some outcomes.

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Okay, we can fix bad judgments, poor decisions, past mistakes.

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But first of all, we have to accept the fact that they were not inevitable.

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Okay, there are things we can do once we accept that.

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It also is change resistant.

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A lot of businesses believe their current strategy, their current

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decisions, those are optimal.

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Those are the best decisions we can make based on past success.

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Dangerous, dangerous thinking.

Dennis:

Have you had clients, have you done businesses that fall into that

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bias, uh, not really evaluating what happened in the past?

Leah:

Absolutely.

Leah:

And what it does is it mitigates personal responsibility.

Leah:

When it comes to business, it's not always as a negative.

Leah:

When positive stuff is happening, and I think of clients that I've helped with

Leah:

advertising, the, the, it always breaks my heart when after a year of advertising,

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they'll go, yeah, you know what?

Leah:

We grew here and this happened and this happened.

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That was going to happen anyway.

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That really had nothing to do with what it is that we were doing.

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That, that is just as much my fault as it is theirs for not recognizing

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what happened because I didn't set them up to realize that that point

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in the sand of what's going on.

Leah:

I, I often like to take things away from the advertising or

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the, the, um, business arena.

Leah:

And let's look at, Personal responsibility in the areas like health.

Leah:

How many people do you know that are not at their healthiest weight

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will defend to the death the fact that they hardly eat anything?

Leah:

They, they don't eat unhealthy.

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They don't, they cannot figure out where this weight came from because they, it's

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certainly not anything that they're doing, but if you take away, yeah, but if you

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take away their opportunity for that bias, if you, if you pull it out of the equation

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by forcing them to what take a, make a journal of what it is that they're eating.

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They're in a state of shock.

Leah:

I had no idea I was eating that much.

Leah:

I didn't realize.

Leah:

I didn't know.

Dennis:

I eat 5, 000 calories a day?

Dennis:

Oh!

Leah:

And they thought they were on a starvation plan.

Leah:

So by forcing the issue, it gets rid of that ability for them to, um,

Leah:

just not know what's going on or to claim, not to have, be responsible.

Dennis:

I like your take on that.

Dennis:

The The kind of overlooking our accountability, just, well, there's

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nothing I could do about that.

Dennis:

I knew it all along, uh, not a good place for a successful business owner to be.

Dennis:

So we always like to issue a challenge, right?

Dennis:

Yes.

Dennis:

One of our, one of our closing remarks is also a challenge, a breakout challenge.

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We challenge you this coming week.

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Review your decision making process.

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Okay?

Dennis:

Take a look at the good, the bad, and the ugly.

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All decisions.

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Okay?

Dennis:

Review it.

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Don't say that they were all inevitable, because they're not.

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Some might be.

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Most aren't.

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What could you have done differently with decision A, B, or C that

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could have had a different outcome?

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Get a coach or consultant to evaluate your situation.

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It's awfully hard to see from inside the bottle.

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Okay?

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You can't read the label on the bottle from inside the bottle.

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Get someone you trust to give you an objective view of what's

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going on in your business.

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But by all means, challenge.

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Question your decision making process.

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Use a tool such as Edward De Bono's Six Thinking Hats.

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Six thinking hats.

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We'll do a podcast on that one day.

Dennis:

Interesting.

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Easy process.

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Easy process to learn.

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Easy to use.

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Game changer.

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When it comes to decision making.

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Game changer.

Dennis:

Okay.

Dennis:

Let's do that.

Dennis:

So do we have, do we have any questions that have come in by any chance?

Dennis:

We try to answer any questions, uh, that our viewers, listeners send us.

Dennis:

Uh, I, I don't know if we have any, Leah, do you see any?

Dennis:

No.

Dennis:

Okay.

Dennis:

Okay.

Leah:

Well, I know we have a few that we're going to be actually building

Leah:

into podcasts because they're not to be answered just in 30 seconds.

Leah:

So we're not going to just, we're not just going to dabble in the answering.

Leah:

We're going to, we're going to give some definite ones.

Leah:

So that's why you got to stay tuned.

Leah:

We're getting there.

Dennis:

We're going to give you the, we're going to give you the meat.

Dennis:

Right.

Dennis:

Where's the meat?

Dennis:

The meat's right here, right?

Dennis:

Absolutely.

Dennis:

As always, I've enjoyed this time together.

Dennis:

I hope our audience has enjoyed it.

Dennis:

Please write in.

Dennis:

Please, uh, talk to us.

Dennis:

Send us emails.

Dennis:

We'd love to get them ask a question.

Dennis:

We'll put you on the podcast.

Dennis:

Okay, but for now Leah Bumfrey and Dennis Collins signing off for

Dennis:

this episode of connect and convert the sales Accelerator podcast.

Dennis:

See you next time

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