Cognitive Biases are a collection of faulty and illogical ways of thinking which are hardwired in the brain, most of which we aren’t aware of.
The idea of cognitive biases was invented in the 1970s by two social scientists Amos Tversky and Daniel Kahneman, with Kahneman winning the 2002 Nobel Prize in Economics for the same.
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It's a tendency to heavily weigh the moment which is closer to the present, as compared to something in the near or distant future.
Example: If you are offered a choice of $150 right now or $180 after 30 days, you would be more inclined to choose the money you are offered right now. However, if we take the present moment out of the equation, and put this offer in the distant future, where you are offered $150 in 12 months or $180 in 13 months, your choice is likely to be the latter one.
It makes us certain without a doubt that if the flipped coin lands a heads up five times consecutively, it will land as tails up the sixth time. The real odds still stand at 50-50 for each flip.
It's our tendency to place importance on the first figure that we hear or see and tends to greatly affect our decisions, estimates or predictions.
Negotiators use this tactic and start with an extremely high or low number, anchoring the subsequent deal in their favour.
Sunk-cost thinking makes us stick with a bad decision due the investments already made.
This is one of the most common and dangerous ones, and is related to our beliefs. It leads us to ‘confirm’ what we already know, believe or suspect when any new piece of data comes in the light. If there is an alternate or conflicting piece of evidence, we tend to sideline, ignore or discount it. If it is too powerful to be ignored, it makes us experience cognitive dissonance.
People unconsciously seek to confirm their existing beliefs. To expand one's mind or prove any hypothesis, one should be looking for pieces of evidence that disprove it.
Is the tendency to focus on new information that confirms pre-existing beliefs and trivialize anything that might challenge those beliefs.
How to control it: Seek out information that goes against your pre-existing beliefs.
“Sunk costs” are money, time, or effort we’ve already spent and can’t get back.
Cultivate a habit of admitting your mistakes. Ask yourself: If the past didn’t exist and you’re just starting out now, what would you do?”
This is why it pays off to be the first one to offer a bolstering range instead of a firm number when negotiating your salary. The first offer will establish the possibilities in each person’s mind.