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4 Common Decision-Making Mistakes That Are Holding You Back

Anchoring Bias

When we’re evaluating an option, we often fixate on the first piece of information we have about it.

Decide in advance what outcome you have in mind.

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4 Common Decision-Making Mistakes That Are Holding You Back

4 Common Decision-Making Mistakes That Are Holding You Back

https://www.bustle.com/p/4-decision-making-mistakes-people-make-the-most-according-to-expert-8185640

bustle.com

5

Key Ideas

Decision-making errors

Most decision-making errors boil down to:

  • logical fallacies (over-generalizations, comparing apples and oranges, circular thinking)
  • limiting beliefs (underestimations of what's possible)
  • judgment biases (valuing certain factors above others).

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.

Anchoring Bias

When we’re evaluating an option, we often fixate on the first piece of information we have about it.

Decide in advance what outcome you have in mind.

The Sunk Cost Fallacy

“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?”

SIMILAR ARTICLES & 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
  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 repeat themselves over time, we should take a step back and play a game of averages.

  3. Emotionally driven decisions. Hold off on making important decisions when you are in a bad mood.

  4.  Confirmation bias. Always look for conflicting evidence and then make judgments based on more well-rounded information.

  5. Ego depletion. When we're drained, physically or mentally, we're less likely to think critically.

  6. 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.

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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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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Not Making Good Decisions
We are exposed to biases that influence our ability to make good decisions.
  • We are quick to jump to conclusions because we fail to search for information that might disprove our thoughts.
The Four Villains of Decision Making
  • Narrow framing: The tendency to define our choices in binary terms. We ask, "should I, or shouldn't I?" instead of “What are the ways I could...?”
  • Confirmation bias: People tend to select the information that supports their preexisting attitudes, beliefs, and actions. 
  • Short-term emotion: When we’ve got a difficult decision to make, our feelings occupy our minds. And this doesn't add any new information that could benefit us. 
  • Overconfidence: People often think they know more than they actually do about how the future will unfold.
Defeating Decision-Making Villains
  • Counter narrow framing by widening your options. Expand your set of choices.
  • Confirmation bias leads you to gather self-serving information. Analyze and test your assumptions to overcome the bias.
  • Short-term emotion will tempt you to make the wrong choice. So distance yourself before deciding.
  • Prepare to be wrong. Don't be overconfident about how the future will unfold.
Making decisions
Making decisions

Decision making is critical for entrepreneurs. Every day, you have to set out on a course of action, choose tactics, evaluate results, and otherwise choose from arrays of options.

4 common mistakes that can trip you up
  1. Monumentalizing the Trivial. Place a limit on how long you're willing to spend addressing the issue. When the time ends, make your choice and move on.
  2. Dredging Sunk Costs. Estimate how much the decision would take in total to follow through. If the cost is higher than the benefit, change your decision.
  3. Drowning in Data. Identify less than 10 pieces of relevant data that will have a strong impact on your decision's outcome. Then forget everything else.
  4. Do-or-Die Mentality. Realize that every decision is temporary. Use an overall decision-making strategy that stretches over time, not that imagines each moment to be the most critical one for the business.
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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Cognitive biases
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.

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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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Your brain is the biggest obstacle.
There are lazy people, slackers, and folks who don’t step up, but generally, human beings are hardwired to hang in, not to leave or quit. 

What’s hard for human beings is letting go...

The most common biases
  • You’re focused on the time and energy you’ve already invested, or the sunk cost fallacy.
  • Your eyes are trained on positive cues -being overly optimistic and loss averse. Always trying harder and for longer.
  • When we realize we’re likely to fail at a job or other endeavor, we begin to see that goal as even more valuable than it was initially.
  • FOMO—and the fear of making a mistake.
Do this if you want to quit
  • Get a bead on your emotions. Don’t set yourself up for a “straw-that-broke-the-camel’s back” moment.
  • Motivate yourself. Quitting isn’t an end in and of itself; it’s a pathway to a new destination.

  • Make a plan that not only sets your new goal but anticipates possible setbacks and pitfalls along the way.

  • Prepare for the stress of transition. The best defence is knowing ahead of time how you’re likely to react.

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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