Manage the Mind to Make Better Decisions
You know the feeling: Every day you get flooded with new ideas and information. You barely have enough time to process it all. Sure, you’re a smart and rational person that puts a lot of thought into the decisions you make. But the brain still takes decision-making shortcuts all the time. It especially happens when you need to act quickly, there is too much information, or limited memory.
Here’s the deal: Research suggests that there are a number of intellectual stumbling blocks which can get you entangled in wrong judgment without you even noticing. They are called Cognitive Biases. The result is errors and irrational decisions that can hold you back. To help all of us escape this mental quicksand we’ve put together this real-world Cognitive Bias Survival Guide. It’s designed to reduce wrong conclusions and bad choices, plus protect you from charlatans trying to exploit ignorance. Think of it as anti-virus software for the brain!
This type of cognitive bias can affect how we judge situations, form beliefs, and behave. In short, it has a huge impact on our lives. So it’s worth watching out for them so that you make it unscathed through the daily intellectual wilderness. Plus, they make for fun dinner party conversations. Let’s go!
...MUCH MOREAmbiguity EffectWhen you make decisions, a lack of information (ambiguity) can affect you. People tend to avoid options where the outcome seems unknown. Instead, they favor choices that seem more predictable. For example, investors tend to put their money into predictable but lower return assets like government bonds instead of the potentially higher-return but uncertain stock market. It’s very human to dislike uncertainty.How To Avoid ItSince the effect is based on a lack of information, figure out what pieces you’re missing and try to fill that gap. When the time comes to make a call, take a step back and judge all options more balanced.Availability HeuristicWe overestimate the importance of events that are more readily available in our memory. We make decisions based on immediate examples that come to mind, which is often efficient. However, the issue is that we remember recent and emotionally charged events better, which can bias us. For example, you might overestimate the probability of losing your job after seeing a report about high national unemployment.How To Avoid ItIt’s not easy to avoid Availability Heuristic. Here’s what you can do. Actively try to preoccupy yourself less with the topic, whether it’s desirable (win the lottery) or scary (an airplane crash).Bandwagon EffectWe’re social animals, so we have a tendency to prefer what’s popular. It’s easy to conform to popular ideas without checking the evidence, especially when we get our information from others. For example, because of time zone differences, election results on the East Coast are published while voting is open on the West Coast. Research shows that this can influence western voters who unconsciously back the perceived winner.How To Avoid ItThe best way to avoid this bias is to take a step back and ask yourself “Is this simply popular or actually good for me, based on facts?” Practice being aware of trends and social pressure.Bias Blind SpotThis is one of the most devious biases. We can easily see how biases affect others, but often overlook how much they influence us. After all, we like to see ourselves in a positive light, right? For example, doctors can underestimate how friendly pharma reps influence their medication prescriptions. Teachers can fool themselves into thinking that grades are only based on objective performance and not student behavior.How To Avoid ItWhile confidence is great, try to be honest about how you may be influenced to make irrational decisions. Ask yourself: “In what situations have I made a biased call and how did I deceive myself?”Confirmation BiasWe often search for and listen to information that confirms what we already believe. Not only do we disregard contrary ideas but we also interpret ambiguous ones to fit our beliefs. Confirming our preconceptions feels good. We like to be right. In reality, we can become blind to the truth (biased). For example, people with low self-esteem might constantly feel ignored, even if it has nothing to do with them.How To Avoid ItA great way to reduce this bias is to actively argue both sides of an idea. What are the logical and rational facts for each position? Practice with an emotional topic like gun control or global warming!Declinism BiasRemember the good old days? Well, we may be wrong! Declinism is our tendency to think that society is in decline and the future looks bleak. Why do we do this? It’s better for survival to be prepared than ignorant of impending disaster. For example, in surveys, a majority agrees that “things are worse than they used to be” when in reality quality of life has improved. On average, we’re actually healthier, richer, and live longer.How To Avoid ItYou want to improve society, that’s great! But when looking back, remember that nostalgia is emotionally magnetic. It’s better to compare measurable data. Try it with a topic you care about.Ostrich EffectYou may know the expression “Bury your head in the sand like an ostrich.” While that’s actually not true for ostriches, it illustrates this bias perfectly. Research shows that we tend to ignore negative information and bad news. Why is that? While the brain is wired to survive it also tries to avoid pain. A perfect example is that people check their investment accounts less frequently when markets are in a downturn.How To Avoid ItBad news won’t change by ignoring it, in fact, it may get even worse. So take that long, hard look at the elephant in the room. It may be difficult, but you will have a much better chance of success.Outcome BiasThis is an interesting one. Outcome Bias is our preference to judge decisions based on the outcome, rather than how we made the decision. In short, we weigh a one-time result more heavily than the decision-making process itself. The best example to illustrate this bias is gambling. Say you went to Vegas, bet all your money, and won. Congrats! But that doesn’t prove that gambling is a smart financial decision.How To Avoid ItWhen making a decision, think of potential positive and negative outcomes. Then double check if a positive result in the past is likely to repeat itself. If it doesn’t is the decision really still worth it?StereotypingYou’ve heard of this one. We irrationally expect a member of a group to have certain characteristics based on a quick look, even though we don’t know any actual information. We all do it because it’s a quick and survival-based way to judge situations. Say you walk down a foggy street at night, and a group of men in hoodies approaches. Friend of foe? Better safe than sorry? The problem comes from overuse and abuse.How To Avoid ItStereotyping begins in our childhood, so it’s a deeply-rooted bias. Try to recognize generalizations in your thinking and question them. Is it really “everybody,” only a majority, or just a single person?Survivorship BiasAll of us have a tendency to focus on the winners, the outliers, the visible successes. In turn, we often overlook the majority that didn’t succeed at something and therefore lacks visibility. The result is that we misjudge probabilities and situations. For example, we might think that becoming a wildly successful Hollywood actor or music star is easy because we simply haven’t heard of all the people that tried and failed.How To Avoid ItOptimism and pursuing your dreams is great. It’s still smart to stay grounded, though. Consider the probabilities of both outcomes, if luck was involved, and which other success factors you may overlook....