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6 Cognitive Biases That Are Messing Up Your Decision Making
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Confirmation bias
People don't like to rethink their beliefs once they are formed.
We would rather ignore information that would challenge our ideas than engage with threatening new information. This is called "confirmation bias".
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Availability heuristic
Our brain likes to take shortcuts to solve a problem when normal methods are too slow to find a solution.
The problem with this approach is that frightening events are easier to recall than every-day events. We should be aware that alarmist news broadcasts don't help in an accurate sense of events.
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Anchoring
We have a tendency to stubbornly hold on to a number once we hear it and gauge all other numbers based on the initial number, even if the information is not that relevant.
For example, if customers are limited to 'four per customer' they are more likely to buy four, even if they did not initially intend to do so.
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Halo effect
Our brains like shortcuts and ideas that are consistent.
When someone makes a good first impression during an interview, their professional accomplishments are more likely to be viewed as similarly positive later.
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Sunk cost fallacy
The idea is once we are invested in something, we become less likely to abandon it, even if it is clear that it will ultimately fail.
We frequently lose more if we don't make the hard decision to cut our losses.
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Survivorship bias
We are more likely to listen to success stories than failures. The result is that we often over-estimate the likelihood of success in risky ventures.
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SIMILAR ARTICLES & IDEAS:
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Key Ideas
Decision-making errors
Most decision-making errors boil down to:
- logical fallacies (over-generalizations, comparing apples and oranges, circular thinking)
- limiting beliefs (underes...
Confirmation Bias
If you already have an opinion about something before you've even tried to figure it out, chances are you'll over-value information that confirms that opinion.
Think about what kinds of information you would expect to find to support alternative outcomes.
Attribution Bias
The “fundamental attribution error,” is when we excuse our own mistakes but blame other people for theirs.
Give other people the chance to explain themselves before judging their behavior.
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Key Ideas
Why decision-making blunders are made
Each day, we automatically make thousands of choices, from what time to wake up to what to eat.
The problem with this automatic processing is that there are instances when we jump to concl...
6 of the largest decision-making blunders
Sunk-cost fallacy. Present yourself with the new options at hand -- without considering the sunk cost.
Narrow framing. When we're in situations that will repeat themselves over time, we should take a step back and play a game of averages.
Emotionally driven decisions. Hold off on making important decisions when you are in a bad mood.
Confirmation bias. Always look for conflicting evidence and then make judgments based on more well-rounded information.
Ego depletion. When we're drained, physically or mentally, we're less likely to think critically.
The halo effect says that once we like somebody, we're more likely to look for his or her positive characteristics and avoid the negative ones. Realize your biases toward certain people and do what you can to eliminate them.
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Key Ideas
Cognitive biases
...are common thinking errors that harm our rational decision-making.
We don't always see things as they are. We don't simply glean information through the senses and act on it; inste...
Optimism Bias
Is our tendency to overestimate the odds of our own success compared to other people's.
Overly optimistic predictions can be dangerous, leading us to waste time and resources pursuing unrealistic goals. In the real world of business, things don't always work out for the best, and it serves us well to know when conditions are not on our side.
How to control the optimism bias
- Be skeptical of your own rosy expectations for your work.
- Assume projects will be more difficult and more expensive than you initially think they will.
- Don't trust your good ideas to manifest through positive thinking - be ready to fight for them.
- Trust the numbers. Numbers are firm but fair, and getting intimate with your business's cash flow can help you make more rational decisions.