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6 Common Decision-Making Blunders That Could Kill Your Business

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https://www.entrepreneur.com/article/313591

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6 Common Decision-Making Blunders That Could Kill Your Business
Opinions expressed by Entrepreneur contributors are their own. Humans are often very irrational. If you've ever explored behavioral economics or psychology, you've likely found a host of examples demonstrating situations when we make objectively -- and clearly -- bad decisions. With the way our brains function, it makes sense.

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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...

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6 of the largest decision-making blunders

  1. Sunk-cost fallacy. Present yourself with the new options at hand -- without considering the sunk cost.

  2. Narrow framing. When we're in situations that will repea...

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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 ...

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.

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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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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Survivorship bias refers to our tendency to focus on the winners while completely forgetting about the losers who are employing the same strategy.


Loss aversion refers to our tendency to strongly prefer avoiding losses over acquiring gains.

Loss aversion refers to our tendency to strongly prefer avoiding losses over acquiring gains.

Availability Heuristic appears when we assume that the examples coming to mind easily are the most prevalent.

Availability Heuristic appears when we assume that the examples coming to mind easily are the most prevalent.

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