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Cognitive Bias: How Your Mind Plays Tricks on You and How to Overcome That

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.

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IDEA EXTRACTED FROM:

Cognitive Bias: How Your Mind Plays Tricks on You and How to Overcome That

Cognitive Bias: How Your Mind Plays Tricks on You and How to Overcome That

https://zapier.com/blog/cognitive-bias/

zapier.com

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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; instead, our minds give that info their own spin, which can sometimes be deceptive.

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.

Negativity Bias

Is the tendency to change our thought processes and behaviors more because of negative things than we do because of neutral or positive things.

How to control it: Track your wins: record objectives attained, new ideas realized, and positive effects your work has had on the lives of others.

Confirmation Bias

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 Cost Fallacy

It describes our tendency to commit to something just because we've already invested resources in it—even if it would be better to give up on it.

How to control it: Always reevaluate your processes in light of new evidence.

Anchoring Effect

Is the tendency to privilege the first information we encounter, even when subsequent information turns out to be more relevant or realistic.

How to control it: Because the anchoring effect can give you blinders for specific metrics, be sure that you're always reviewing data from new angles.

The IKEA Effect

Is why we get attached to things when we had a hand in creating them. 

It echoes the sunk cost fallacy: We're not prioritizing the object/project as much as we are the resources we've put into it.

The IKEA effect is easy to put to good use at work. You can do it for yourself by getting deeper in the weeds of the project you're a part of.

Goal Gradient Effect

It explains why we work harder to achieve our goals when they're most closely in sight: At work, you might notice that you and your coworkers sprint toward a project's finish line once you can see the light at the end of the tunnel.

How to control it: Visualize your work in ways that allow you to see how far you have to go.

Cognitive Miser Theory

We tend to put the least amount of effort possible into problem-solving. 

We are apt to minimize cognitive effort and save our strength for when it's most needed. If we're not consciously engaged with the details, we're likely to take any shortcut that presents itself.

How to control it: Mindful and deliberate choices about how we apply our mental effort can help us establish patterns that eliminate friction and emphasize our strengths.

SIMILAR ARTICLES & IDEAS:

Status quo bias
Status quo bias

Status quo bias is when we prefer that our environment and situation should remain unchanged.

The bias has the most impact in the area of decision-making, as we tend to pre...

Common Explanations for Status Quo Bias

These explanations are all irrational for preferring the status quo:

  • Loss Aversion: When we make decisions, we weigh the potential for loss more heavily than the potential for gain.
  • Sunk Costs: We continue to invest resources like time, money, or effort into a specific endeavor just because we are already invested, not because it is the best choice.
  • Cognitive Dissonance: In decision-making, we an option as more valuable once we have chosen it. Considering an alternative can cause cognitive dissonance.
  • Mere Exposure Effect: It states that people prefer something they've been exposed to before.
  • Rationality vs. Irrationality: We may choose to keep our current situation because of the potential transition cost of switching to an alternative. It becomes irrational when we ignore choices that can improve a situation because we want to maintain the status quo.
Status Quo Bias examples
  • When offered several sandwich options, individuals often choose a sandwich they have eaten before.
  • In 1985, Coca Cola reformulated the original Coke flavor and started selling a "New Coke." Although blind taste tests found many consumers preferred New Coke, consumers continued to buy Coke Classic. New Coke was discontinued in 1992.
  • In political elections, the current candidate is more likely to win than the challenger.
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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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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The Way We Delude Ourselves
The Way We Delude Ourselves

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 ...

Hyperbolic Discounting

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.

Common Biases
  • Actor-Observer Bias: the way the explanation of other people’s behaviour tends to focus on the influence of their personality while being less focused on the situation while being just the opposite while explaining one’s own behaviour.
  • Zeigarnik Effect: when something unfinished and incomplete tends to linger in the mind and memory.
  • The IKEA Effect: when our own assembling of an object is placed at a higher value than the other objects.
  • Optimism Bias: makes us underestimate the cost and duration for every project we try to undertake or plan.
  • Availability Bias: makes us believe whatever is more easily available to our consciousness, and is more vivid (or entrenched) in our memory.

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Biases...
Biases...

... specifically cognitive biases, are your unchecked tendencies to make decisions or take actions in an irrational way. 

Instead of making decisions based on facts and data, you ...

Biases = shortcuts for processing information

The brain creates shortcuts in order to make fast decisions when it hits information or inspiration overload

These shortcuts form unconscious biases so it’s easier for your brain to categorize information and make quick judgments over and over again.

Self-serving Bias
It causes you to claim your successes and ignore your failures. 

This means that when something good happens, you take the credit, but when something bad happens, you blame it on external factors.

Self-serving bias may manifest at work when you receive critical feedback. Instead of keeping an open mind, you may put up a defense when your manager or team member is sharing feedback or constructive criticism.

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Cognitive Bias
Cognitive Bias

Cognitive Bias is a predictable pattern of mental errors where we misperceive reality and move away from the most likely way of reaching our goals.

These mental blind spots...

Unconscious Bias

Unconscious bias refers to unconscious forms of discrimination and stereotyping. Unconscious bias often leads to discrimination, be it deliberate or unintentional.

Unconscious bias is different from cognitive biases. Cognitive biases relate to our brains' particular wiring, while unconscious bias refers to perceptions between different groups and are specific to different societies.

How to Reduce Unconscious Bias
  • Recognise that the unconscious bias is a systemic issue. Internal cultures need to be checked and addressed first.
  • There is no shame or guilt in unconscious bias. Unconscious bias stems from our tendency to categorise people into social groups and often doesn't match our conscious values.
  • It takes a series of conversations and interventions to prevent and protect against unconscious bias.
Distinction bias

Is the tendency to over-value the effect of small quantitative differences when comparing options.

For example: we think a 1,200 square foot home will make us happier than a 1,000 squa...

Overcome distinction bias

  • Don’t compare options side by side: In comparison mode, we end up spending too much time playing “spot the difference.” Instead, evaluate each choice individually and on their own merit.
  • Know your “Must-Haves” before you look for something to buy: that way, you won't get suckered into features you don’t really need.
  • Optimize for things you can’t get used to: your happiness will adjust back to anything that is stable and certain like your income, the size of your house, or the quality of your TV.

Information that matches our beliefs

We surround ourselves with it: We tend to like people who think like us; if we agree with someone's beliefs, we're more likely to be friends with them.

This makes sense, but it means ...

The "swimmer's body illusion"

It's a thinking mistake and it occurs when we confuse selection factors with results. 

Professional swimmers don't have perfect bodies because they train extensively. Rather, they are good swimmers because of their physiques.

The sunk cost fallacy

It plays on this tendency of ours to emphasize loss over gain.

The term sunk cost refers to any cost that has been paid already and cannot be recovered. The reason we can't ignore the cost, even though it's already been paid, is that we're wired to feel loss far more strongly than gain.

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The ABCDs of categorizing decisions
The ABCDs of categorizing decisions
  • Big-bet decisions: infrequent and high-risk - from major acquisitions to game-changing capital investments;
  • Cross-cutting decisions: frequent and high-risk - think pricin...
Approaching big bet decisions
  • Appoint an executive sponsor to work with a project lead to frame important decisions for senior leaders to weigh in on;
  • Break things down (with decision meetings at each stage), and connect them up.
  • Focuses on debating the solution (instead of endlessly elaborating the problem) and gather the right people.
  • Move faster without losing commitment: get comfortable living with imperfect data and being clear about what “good enough” looks like.
Approaching cross-cutting decisions
  • Identify decisions that involve a cross-cutting group of leaders, and work with the stakeholders of each to agree on what the main steps in the process entail.
  • Work through a set of real-life scenarios to pressure-test the system in collaboration with the people who will be running the process.
  • Limit the number of decision-making bodies, and clarify for each its mandate, standing membership, roles etc.
  • Create shared objectives, metrics, and collaboration targets.

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The negativity bias
The negativity bias

We have the tendency to give more weight in our minds to things that go wrong than to things that go right—so much so that just one negative event can hijack our minds in ways that can be detriment...

Findings about the negativity bias
  • We get upset when someone doesn't fulfill a promise. However, if they do more than promised, we're not grateful enough for it.
  • People learn more and faster from punishment and reward. If you have to pick one, negative feedback stimulates learning faster than positive feedback.
The Negative Golden Rule

Do not do unto others what you do not want to be done unto you.

It is about focusing on eliminating the negative more than encouraging the positive. Because there’s abundant evidence from multiple sources that relationships are far more strongly affected by negative things than positive things.

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