Projection Bias

Introduction

In early 2022, as the world grappled with post-pandemic uncertainty, Peloton’s leadership faced a critical decision. With pandemic-driven demand for home fitness equipment soaring in 2020 and 2021, the company made bold investments in expanding production and logistics, betting on sustained consumer behavior. Yet, as gyms reopened and fitness habits shifted, Peloton found itself burdened with excess inventory and plummeting demand, a miscalculation that cost the company billions in market value. The misstep wasn’t merely a failure of forecasting—it was a classic case of projection bias at play. Leaders assumed that consumer behaviors during the pandemic would persist indefinitely, projecting their current circumstances and preferences into the future.

Projection bias is not confined to fitness companies. Leaders across industries often overestimate the permanence of trends or underestimate the dynamic nature of human behavior. This cognitive shortcut, while seemingly intuitive, can lead to flawed strategies, misguided investments, and missed opportunities.

If even seasoned executives can fall prey to this bias, what safeguards exist to ensure we don’t repeat their mistakes? Can we, as leaders, truly separate our decisions from the context we find ourselves in today?

What Is Projection Bias?

Projection bias is a cognitive distortion where individuals mistakenly assume that their current emotions, preferences, or circumstances will remain unchanged in the future. This bias occurs because humans tend to project their present state of mind onto future scenarios, leading to overconfidence in the stability of trends or decisions. The bias is particularly insidious in leadership because it often operates unconsciously, shaping strategies, investments, and team dynamics without explicit awareness.

In leadership contexts, projection bias can manifest in decisions as varied as product development, market forecasts, and organizational restructuring. Consider a CEO launching a new product line based on their team’s current enthusiasm without accounting for changing market trends or customer behavior. The result? A product that fails to resonate with a future audience whose needs and desires have evolved.

Renowned psychologist Daniel Gilbert, whose research delves into affective forecasting, describes this bias as “miswanting”—the human tendency to misjudge what will bring happiness or satisfaction in the future. In business terms, this translates to misjudging what markets, customers, or even employees will value over time.

Take, for example, Blockbuster’s fateful misstep in rejecting a partnership with Netflix in 2000. Blockbuster’s leaders projected their current dominance in physical video rentals onto a future where digital streaming was already gaining momentum. Their failure to account for shifting technological trends and consumer preferences, rooted in projection bias, ultimately led to the company’s demise.

This bias thrives because of the human brain’s reliance on heuristics—mental shortcuts designed to conserve energy. When leaders face complex decisions, they often default to their current reality as a frame of reference. Unfortunately, this approach frequently blinds them to the inevitable variability of the future. Projection bias, then, is not just a harmless cognitive quirk—it’s a hidden threat to long-term strategic thinking in business leadership.

The Roots of Projection Bias

Understanding projection bias requires delving into the psychology and cognitive mechanisms that underpin this common distortion. The bias arises from the brain’s natural inclination to anchor decisions in the present, coupled with an overestimation of how much current circumstances influence future outcomes. This section explores its roots through key experiments and insights into human cognition.

The Present-Focused Brain

Projection bias is rooted in the brain's reliance on the present as a reference point. Humans struggle to accurately imagine how they will feel or think under different circumstances, often defaulting to their current state. This tendency is tied to the limitations of episodic memory, which plays a critical role in imagining the future. According to research by Gilbert, Wilson, and colleagues (2002), people often base future predictions on current emotional and situational cues, even when those cues are likely to change.

In one experiment, participants were asked to predict how much they would enjoy eating a certain food after fasting versus after eating. The study revealed that those who were hungry projected their current hunger into the future, overestimating how much they would want the food later. Conversely, those who were full underestimated their future desire for the same food. This highlights the difficulty of separating present experiences from future expectations—a hallmark of projection bias.

Cognitive Effort and Mental Shortcuts

Projection bias is also linked to the brain’s reliance on heuristics, or mental shortcuts, to process complex information. The brain prefers efficiency over accuracy, leading to oversimplifications that distort judgment. A notable experiment conducted by Loewenstein et al. (2003) demonstrated how these shortcuts influence decision-making. Participants were asked to evaluate their future preferences for various consumer goods under different scenarios. The findings showed that individuals consistently projected their current preferences into the future, regardless of whether the scenario involved substantial environmental or emotional changes.

This reliance on heuristics becomes particularly problematic in leadership, where decisions often involve high stakes and long time horizons. Leaders may overinvest in trends or initiatives that align with their present beliefs while overlooking evidence of future volatility.

The Emotional Anchor

Another crucial root of projection bias lies in the role of emotions as anchors for future predictions. The affect heuristic, a psychological principle explaining how emotions influence judgments, contributes significantly to this bias. A study by Ariely and Loewenstein (2006) on emotional decision-making demonstrated how people’s choices vary dramatically based on their emotional state at the time of the decision. Participants who were exposed to emotionally charged stimuli, such as arousing images or music, were more likely to project those heightened emotions onto future decisions, regardless of their actual long-term preferences.

For leaders, this mechanism is particularly risky during times of crisis or rapid change. Emotional intensity during these moments can cloud judgment, leading to strategies that reflect transient feelings rather than measured forecasts.

Evolutionary Underpinnings

From an evolutionary perspective, projection bias may have developed as a survival mechanism. Early humans relied on present circumstances to guide immediate decisions, such as securing food or avoiding predators. However, this same adaptive trait has become a liability in modern, complex environments where long-term planning is essential. Evolutionarily, the bias helped conserve cognitive resources, but in today’s business landscape, it often results in oversights and miscalculations.

The Business Impact of Projection Bias

Projection bias in leadership can have far-reaching consequences, particularly in strategic decision-making, market forecasting, and team management. This section examines the ripple effects of this cognitive distortion across key aspects of business, supported by real-world examples and insights into its outcomes.

Misguided Strategic Decisions

Leaders frequently make strategic decisions based on the assumption that current trends or circumstances will remain constant. This often results in overestimating future opportunities or risks. Peloton's overproduction of fitness equipment during the pandemic is a prime example. Leadership misjudged the longevity of consumer behaviors shaped by lockdowns, leading to surplus inventory and financial losses. Their assumption that people’s preference for home workouts would remain static blinded them to the rebound of gym culture.

Another notable example is Kodak’s reluctance to pivot fully to digital photography. In the late 1990s, Kodak projected its dominance in film photography into the future, dismissing the rapid adoption of digital technology. This bias led to underinvestment in digital innovation, ultimately causing the company’s decline. In both cases, projection bias skewed strategic foresight, with devastating results.

Overconfidence in Market Forecasting

Projection bias is particularly problematic in market forecasting, where it leads to overly optimistic or pessimistic predictions based on current market conditions. During economic booms, for instance, companies often over-expand, assuming the growth will continue indefinitely. Conversely, during downturns, they may cut too deeply, projecting temporary challenges as permanent shifts.

A striking example comes from the 2008 financial crisis. Many financial institutions made decisions based on the assumption that housing prices would continue rising, as they had for years. This projection of stability into the future ignored historical data on market volatility and contributed to risky lending practices that eventually collapsed the global economy.

Flawed Team Management and Recruitment

Projection bias also influences how leaders manage their teams and recruit talent. Leaders often assume that employees’ current attitudes and performance will remain consistent over time. This bias can lead to overlooking potential for growth or underestimating the likelihood of burnout or disengagement.

In recruitment, the bias manifests when hiring managers overvalue candidates who excel in current circumstances while failing to consider how they might adapt to future challenges. For example, during rapid expansions, companies may hire aggressively, assuming the current pace of growth will persist. When the market slows, these same organizations often find themselves overstaffed or with a workforce misaligned to new priorities.

Resource Allocation Errors

Projection bias also impacts resource allocation, as leaders may overcommit resources to initiatives that reflect their current priorities rather than future needs. Consider Microsoft’s early 2000s push into the Zune music player. Leadership projected the then-dominant MP3 player trend into the future without anticipating the disruptive potential of smartphone technology. The result was a failed product that consumed significant resources but offered little long-term value.

Undermining Innovation

Finally, projection bias can stifle innovation by anchoring leaders to current realities. This bias discourages exploring radically new ideas or solutions, as leaders often assume that existing market conditions will persist. Blockbuster’s dismissal of Netflix is a clear example of how projection bias can limit a company’s ability to innovate and adapt to change.

The business impact of projection bias is both pervasive and profound. It affects not only the financial health of organizations but also their capacity for innovation and adaptability. By understanding these consequences, leaders can begin to recognize how this bias operates within their decision-making processes and take proactive steps to mitigate its effects. The next challenge is learning how to identify the presence of projection bias in oneself and within organizational dynamics.

Recognizing Projection Bias

Projection bias often operates beneath the surface, making it difficult to detect in real-time decision-making. However, understanding how it manifests in leadership behavior and organizational dynamics is a critical step toward mitigating its effects. This section explores the signs of projection bias in both individual leaders and team environments.

Anchoring Decisions in the Present

A common indicator of projection bias is an overreliance on present conditions as a basis for decisions. Leaders may express confidence in strategies or investments that align with current trends, dismissing evidence of potential shifts. For example, a CEO who continues to pour resources into a declining market segment because of its past success may be projecting the current state onto a rapidly changing future.

Ask yourself: Are you justifying decisions by saying, “This is working now” or “This is how it’s always been”? Such statements often signal projection bias, particularly if they ignore data suggesting future variability.

Resistance to Change

Projection bias frequently manifests as resistance to change. Leaders who assume that current employee preferences, customer behaviors, or market conditions will remain constant may reject new ideas or strategies that challenge the status quo. This resistance often stems from an inability to envision how evolving circumstances might affect outcomes.

In teams, this resistance might appear as groupthink, where members reinforce current perspectives rather than exploring alternative scenarios. A stagnant culture that dismisses disruptive ideas often signals collective projection bias.

Overconfidence in Predictions

Another sign of projection bias is overconfidence in predictions or forecasts. Leaders who believe they have a clear understanding of the future based on current data may be projecting their present certainty onto inherently uncertain situations. This overconfidence can manifest in statements like, “We know where the market is heading” or “The numbers don’t lie,” often without acknowledging potential blind spots or external shifts.

For example, leaders may commit to aggressive growth targets during a booming economy, only to face challenges when market conditions inevitably change. Recognizing overconfidence in forecasts is a key step in identifying projection bias.

Narrow Focus on Current Preferences

Projection bias also appears in a narrow focus on current customer or employee preferences. Leaders who base long-term strategies on present feedback without accounting for potential shifts may overlook emerging needs or opportunities. For instance, relying solely on current customer satisfaction surveys to shape product development, without considering evolving trends, can lead to missed market opportunities.

In team dynamics, this bias may manifest as an inability to anticipate changing team priorities or morale. Leaders who assume that team members will remain satisfied under current conditions may fail to address underlying issues that could lead to disengagement or turnover.

Repeated Mistakes

Finally, repeated misjudgments about future outcomes often point to projection bias. If leaders or teams frequently find themselves unprepared for market shifts, technological disruptions, or changes in employee behavior, it may be because they are consistently projecting present conditions into the future. Reflecting on past decisions and their outcomes can help uncover patterns of projection bias.

Recognizing projection bias requires a willingness to question assumptions and consider alternative perspectives. By identifying these signs in your leadership style and team dynamics, you can begin to address the underlying distortions that lead to flawed decision-making. The next step is to explore actionable strategies for mitigating projection bias in business leadership.

How to Mitigate Projection Bias

While projection bias is deeply ingrained in human cognition, leaders can take deliberate steps to counteract its influence. Mitigation involves adopting practices that challenge present-focused thinking and encourage a more dynamic, forward-looking perspective. This section explores strategies leaders can employ to reduce the impact of projection bias on decision-making and organizational success.

Embrace Scenario Planning

Scenario planning is a powerful tool for mitigating projection bias. By envisioning multiple future scenarios, leaders can avoid anchoring decisions solely in current circumstances. This approach encourages flexibility and prepares organizations for a range of potential outcomes. For example, Royal Dutch Shell famously used scenario planning to anticipate and adapt to the oil crises of the 1970s, ensuring its resilience in an uncertain market.

To implement scenario planning, leaders should ask: What if current trends reverse? What if unforeseen factors disrupt the status quo? Exploring these questions can help identify blind spots and build strategies that account for variability.

Seek Diverse Perspectives

Engaging diverse viewpoints is critical for overcoming the tunnel vision caused by projection bias. Leaders should actively solicit input from team members, stakeholders, and external advisors who bring different experiences and perspectives. These voices can challenge assumptions and highlight alternative interpretations of current trends.

For instance, organizations like Procter & Gamble rely on cross-functional teams to evaluate new product launches. By incorporating insights from marketing, finance, and R&D, they reduce the risk of overcommitting to a single, present-focused perspective.

Use Data-Driven Insights

While data itself is not immune to bias, leveraging robust, longitudinal data sets can help leaders recognize patterns and trends beyond the immediate moment. Tools such as predictive analytics and machine learning can identify emerging shifts that may contradict current assumptions.

For example, Netflix uses advanced algorithms to analyze customer viewing habits and predict future preferences. This data-driven approach enables the company to anticipate changes in consumer behavior rather than relying solely on current viewing trends.

Conduct Pre-Mortem Analyses

A pre-mortem analysis flips traditional decision-making on its head by asking leaders to assume their strategy has failed and then explore the reasons why. This exercise helps uncover risks and vulnerabilities that may be overlooked due to projection bias. By proactively identifying potential pitfalls, leaders can refine their plans to address future uncertainties.

Amazon is known for incorporating pre-mortem analyses into its decision-making process, ensuring that potential failures are identified and mitigated before launching major initiatives.

Foster a Culture of Flexibility

Organizational culture plays a significant role in combating projection bias. Leaders should cultivate an environment that values adaptability and encourages questioning of assumptions. This requires fostering psychological safety, where team members feel empowered to challenge present-focused thinking without fear of retribution.

Companies like Google exemplify this approach through their emphasis on innovation and openness to change. By encouraging teams to experiment and pivot when necessary, Google reduces the risk of overcommitting to static strategies.

Develop Emotional Awareness

Since projection bias often stems from anchoring decisions in present emotions, leaders should cultivate emotional intelligence to recognize and separate transient feelings from long-term judgments. Practices such as mindfulness and reflective journaling can help leaders become more aware of how their emotions influence decision-making.

For instance, during the COVID-19 pandemic, many leaders faced heightened anxiety about supply chain disruptions. Those who practiced emotional awareness were better equipped to avoid reactionary decisions, focusing instead on sustainable, long-term solutions.

Test Decisions Against Future Trends

Finally, leaders should routinely test their decisions against future trends and uncertainties. This involves revisiting strategies periodically to assess whether they remain relevant in light of new developments. Tools like trend analysis and industry reports can provide valuable insights into evolving landscapes.

For example, Tesla continually assesses its strategies against advancements in battery technology and government regulations on emissions. This forward-looking approach ensures that its decisions are aligned with future realities rather than current conditions.

Prominent Research on Projection Bias

Research on projection bias has uncovered fascinating insights into its prevalence and impact, especially in decision-making and leadership contexts. This section highlights studies that delve into how the bias influences behavior, offering lessons that leaders can apply to their strategies.

Why Your Future Self Disagrees With You

In a groundbreaking study by Read and van Leeuwen (1998), participants were asked to select snacks for two different timeframes: one for immediate consumption and another for future consumption. When choosing for the future, participants often selected healthier options, envisioning their future selves as more disciplined. However, when the future arrived, they reverted to less healthy choices. This mismatch between projected and actual behavior demonstrates how projection bias skews not only personal decisions but also leadership planning. Leaders often envision their organizations as more disciplined or innovative in the future than is realistic, leading to overambitious strategies that falter during execution.

The Seasonal Trap of Consumer Behavior

Kahneman and Tversky’s work on judgment under uncertainty has a direct application to seasonal business cycles. A study by Loewenstein and Ubel (2008) examined consumer preferences for heating and cooling products. Participants overestimated their need for such items when surveyed during extreme weather conditions—hot summers or cold winters. This highlights projection bias in business forecasting, where leaders may overinvest in seasonal trends, failing to account for the cyclical nature of demand.

Retail businesses that heavily stock winter clothing after a particularly harsh season or tech companies that overproduce during a temporary boom in gadget demand fall into this trap, often leading to inventory surpluses or financial losses.

The “Hot Hand” Fallacy in Corporate Decision-Making

Projection bias frequently interacts with other cognitive distortions, such as the “hot hand” fallacy. A study by Bar-Eli et al. (2006) explored this effect in basketball, where players and coaches believed a player with a scoring streak was more likely to make subsequent shots. Similarly, in corporate settings, leaders often assume that current success will persist indefinitely, leading to unchecked expansion or risk-taking.

This bias was evident in the rapid scaling of WeWork under its founder, Adam Neumann. The company’s leadership projected its initial popularity and high valuation as indicators of sustained growth, ignoring market saturation and shifting investor sentiment. The eventual fallout demonstrated the dangers of overextending based on a biased view of the future.

Anchored in the Now: Emotional States and Long-Term Decisions

Research by Wilson and Gilbert (2003) delves into the emotional aspects of projection bias, revealing that individuals in heightened emotional states—whether positive or negative—are more likely to project those emotions into the future. In leadership, this means decisions made during crises or euphoria are especially prone to distortion.

For example, during the early days of the COVID-19 pandemic, many companies made drastic, reactive decisions about remote work policies, expecting long-term trends to mirror immediate needs. While some of these decisions aligned with future realities, others led to costly missteps as conditions normalized and employee preferences evolved.

The Evolutionary Shortcuts Behind Bad Decisions

A fascinating evolutionary perspective comes from Hill and Buss (2008), who investigated how projection bias might have developed as an adaptive trait. Their findings suggest that early humans benefited from projecting current needs, such as food or shelter, into the future to secure immediate resources. However, in modern contexts like business leadership, this hardwired tendency often leads to overcommitting to fleeting trends or underestimating long-term variability.

This evolutionary lens underscores the importance of questioning instinctive reactions in leadership. While our ancestors survived by prioritizing present-focused thinking, thriving in today’s complex, fast-changing business environment requires a conscious effort to override these cognitive shortcuts.

These studies collectively reveal the pervasive and multifaceted nature of projection bias. By understanding its impact through diverse research findings, leaders can better equip themselves to identify and counteract this bias in their decision-making processes.

Conclusion

Projection bias is a subtle yet powerful influence on leadership decisions, distorting how we plan for the future by anchoring us to the present. From strategic missteps to flawed forecasts, its impact can be profound—but it is not insurmountable. By embracing tools like scenario planning, seeking diverse perspectives, and challenging assumptions, leaders can build strategies that adapt to change and uncertainty. Recognizing and mitigating this bias is not just about avoiding mistakes; it’s about fostering a mindset that embraces the dynamic, ever-evolving nature of business. Are you ready to lead with clarity and foresight?