Every day, we make many decisions in our personal and professional lives. Some of our choices are conscious, while others are unconscious. Some decisions may seem trivial but can have a lasting impact later on. Occasionally, we make life-changing decisions.
How do you make sure that your decisions are based on objective information? Are you making sure you aren’t influenced by any of the cognitive biases that commonly drive our decision making process? According to psychology, good decision making skills require us to see past these cognitive biases.
We all have preconceptions and biases that influence our decision making skills without our knowledge. Because our brains cannot handle everything we see, there are shortcuts and experience-based judgments to help us make sense of the world around us. Shortcuts can help us function, but they are not always correct. In fact, they may lead to some exceedingly illogical conclusions.
- Why do good people make bad decisions?
- What are cognitive biases?
- 1. Don't just look for information that validates your own views (Confirmation bias)
- 2. Don’t overestimate your chances of success (Overconfidence Bias)
- 3. Understand why you procrastinate (Inertia bias)
- 4. When change is warranted, don't resist it (Status quo bias)
- 5. Do not repeat the same decision without checking if circumstances have changed (Choice-Supportive Bias)
- 6. Pay attention to the accuracy of the stats (Base rate bias)
- 7. Pull the plug when something isn't working (The sunk cost fallacy)
- Final thoughts
Indeed, no one has yet devised a time-tested decision making process. It has always been subjective. Even brilliant, diligent people may make errors when making decisions based on the best available information and knowledge. On the plus side, continuous improvement of critical thinking skills and problem-solving skills leads to improved decision making.
Let’s discuss avoiding common cognitive biases when making decisions about work, business, or anything else. It may surprise you how common these issues are! After reading this article, you will know a few things to look out for and how to make smart decisions.
Why do good people make bad decisions?
There are many reasons why good people make poor decisions. For instance, bias may influence a person’s decision making. The human brain has built-in preconceptions that might affect the decision making process. As a result, we often choose options based on what we want rather than what we truly need.
We are all affected by cognitive biases, such as Confirmation Bias, Sunk Cost Fallacy, and Procrastination. The good news is that there are potential solutions to these issues that can help us develop better decision making skills. So, we do not need to beat ourselves up for making poor choices, as it’s just part of being human.
Be aware that these biases affect both logical and emotional thinking. We still feel intuitive decision making even when we are biased. However, these biases take away all the advantages of critical thinking.
Whenever you make a decision, you have to choose between two or more alternatives. The more we are aware of these typical traps, the better equipped we are to devise solutions to prevent them. Or we can reduce their adverse effects on our decisions.
When you tame your biases, you acquire adept problem solving skills. This allows you to see life and its challenges more clearly, giving you a better chance at success. So let’s get started!
What are cognitive biases?
Ever wondered why we make decisions the way we do? If you’ve asked yourself this question, you have likely noticed that sometimes we make decisions without paying attention to why.
If you think about it a bit more, there always seem to be specific patterns. The reality is that there are certain things that we take for granted every time without thinking about whether or not they were always true.
Every time we make a decision, our brain activates two hard-wired mechanisms that look for patterns we’ve seen before. The first mechanism looks for known similar patterns in the past to better understand the situation.
There are different techniques for pattern recognition. Template matching theory is the most basic method of human pattern recognition. According to the theory, any object observed is stored in our long-term memory as a template. It is more like a class in object-oriented programming if you come from a programming background.
The brain checks incoming data against templates in memory and tries to find a match. There are many other pattern recognition techniques that the brain uses to process what we experience around us every day.
The second mechanism generates an emotional reaction to the outcome of pattern recognition. It is based on preexisting memories in our brains. When it matches what you already know, you will be able to make sense of things and make the right decision.
Even though these processes may seem obvious, sometimes they fail. The brain can lead us to believe things that aren’t accurate. It affects people from all walks of life.
Cognitive bias is when people’s thinking is influenced by preconceptions or preferences they have accumulated over time. It influences how people see things, including politics and relationships.
This post rounds up 7 crucial biases to avoid when making decisions so you can make the right ones.
1. Don’t just look for information that validates your own views (Confirmation bias)
It’s only natural for us to cling to what we know, and that’s why some facts trouble us. We tend to prioritize information that validates what we already believe. When new data comes in, we don’t treat it neutrally.
This is called confirmation bias. It is defined as people’s tendency to seek out information that confirms their preconceptions. Usually, they emphasize the positive and bury the negative.
How do you identify confirmation bias? The easy way to spot when someone is hesitant to hear new information or uses it in a way that supports their existing belief.
Studies point out that confirmation bias can play a part in medical misdiagnosis. Once a doctor comes to a conclusion about what a patient has, they might ask questions and look for signs that tend to confirm the diagnosis. The doctor might then overlook evidence that contradicts the diagnosis.
Confirmation bias also helps form and re-confirm the stereotypes we have about people. For example, upon meeting a few south Asians who dislike spicy foods, your existing stereotype is unlikely to be changed.
It’s easy to see why confirmation bias is a problem. You can’t have a holistic and balanced view of the problem if you don’t get enough unbiased information.
It’s challenging to get rid of confirmation bias. But it may be overcome by using a methodical approach to decision making. Try employing one or more of these techniques to help you control your confirmation bias when making day-to-day decisions.
The first step in avoiding confirmation bias is to recognize that it exists. We can try to counteract it only when we are aware of when it happens. In order to avoid confirmation bias, we must evaluate different viewpoints and hear the other side of the argument.
We must, however, try our best to consider things with an open mind. The most effective way to avoid confirmation bias is to accept that we will never know everything. We have a limited amount of knowledge. So it’s only natural that our opinions change with time, even if they contradict what we previously held true.
- Take time to make your final decision – This allows time for more information gathering and evaluation.
- Be skeptical – so you can gain a holistic understanding of the situation.
- Try to prove yourself wrong – it is a healthy way to put your beliefs under the microscope.
- Be open to learning new things -especially new things about your beliefs.
Avoiding the confirmation bias simply comes down to this. Recognize your limitations and try your best not to be limited by them.
2. Don’t overestimate your chances of success (Overconfidence Bias)
It is common for individuals to place an excessive amount of confidence in their ability to predict the future. This is usually a result of incorrectly evaluating our talents, intellect, or skills.
We have all displayed overconfidence at some point in our lives. This is not necessarily a bad thing. Overconfidence gives us control over our thoughts, ideas, and opinions. However, an excessive amount of overconfidence can be detrimental.
Oscar Wilde wrote, “everything in moderation, including moderation.” So, let’s explore the overconfidence bias and how moderation can curb it at work.
Sometimes, there’s nothing wrong with a bit of overconfidence, so you might take a chance and do stuff you wouldn’t normally do. It can, however, be very harmful to your professional or personal life in other circumstances.
For example, overconfidence bias can cause investors to make mistakes. It makes you less cautious than you should be with your investments. It overrides your analytical skills and critical thinking.
The key to successful investing is risk management. Having too much confidence in our investment choices, however, hinders our ability to manage risks effectively.
There are a variety of reasons for overconfidence bias.
We all have a hard time accurately predicting the odds of something happening. We have a tendency to believe in momentum. According to a research study, if something seems to be improving, we expect the trend to continue.
Our confirmation bias also plays a role here. We tend to ignore contradictory information while searching for corroborating evidence for what already seems likely.
It’s natural for people to overestimate their own performance. That’s why we think we’re better than the average. For example, 74% of participants in a survey of fund managers believed they were above average.
Overconfidence can lead to inaccurate time and effort estimates. Some people underestimate how much time and effort it takes to do something. Even skilled people sometimes fall victim to wishful thinking. As the task progresses, any missing element that adds complexity becomes a problem.
It is common for project managers to underestimate the length of a project. Likewise, many investors overestimate the return on their investments.
Pointers to avoid overconfidence
Past success doesn’t guarantee future success, so keep your confidence in check when necessary.
You don’t have to be scared of confidence; generally, it’s a good thing. Your confidence should come from a thorough understanding of the situation, sound logic, and a high likelihood of success.
Irrespective of your experience or expertise, you should always take a cautious approach when circumstances warrant it.
3. Understand why you procrastinate (Inertia bias)
Are you a procrastinator? Do you put things off or avoid doing them? When we don’t have clarity on what to do, we procrastinate. We keep telling ourselves we’ll do it when we’ve saved some money, taken some time off from work, or simply have more energy.
From time to time, we’re all prone to inertia bias. Inertia has to do with resistance to change. It’s the desire to keep the current situation by repeating the same action or avoiding taking any. Voluntary decisions are more likely to be influenced by decision inertia than obligatory ones.
Research by Psychological Bulletin shows that 15%–20% of adults indulge in chronic procrastination, and 25% view it as a character trait.
Reasons for procrastination
People who are perfectionists often put a lot of pressure on themselves to do things perfectly, which leads to procrastination. They feel that many things should be in place before starting anything. They may also worry that they won’t be able to do it well, so they don’t start.
Fear of failure –
Those who are afraid of failure avoid doing things because they don’t want to be disappointed. Perhaps they don’t believe they have the discipline or ability to complete the task.
Lack of motivation –
A person may feel unmotivated to do something because they lack interest, patience, or desire. As a result, they may keep putting off the work, telling themselves that they will get motivated later. But, procrastination persists.
poor time management skills –
Time management isn’t everyone’s strong suit. We commonly underestimate how long a task will take and then run out of time. We can feel overwhelmed and stressed, leading to procrastination.
Someone who is disorganized has a hard time finding what they need to accomplish a task. Sometimes they don’t make enough effort to figure out what materials or resources they exactly need to hit the ground running, so they put it off until later.
To get over procrastination, you need to understand why you don’t want to get on with things in the first place.
When a task becomes overwhelming or stressful, we procrastinate. In such a situation, we can overcome procrastination by breaking the task down into smaller tasks and then using smaller goals and milestones to motivate ourselves.
Burnout is another reason for procrastination. Mix up some lightweight or creative work with the heavy stuff to avoid burnout.
Scheduling your tasks also helps sometimes. Having a fixed deadline might motivate you to take action compared to not having a deadline at all.
Brian Tracy’s best-selling book on Time Management, ‘Eat That Frog’ suggests eating the ugliest frog first. You must make the decision you are most likely to procrastinate as soon as possible. Doing so makes all the other less challenging decisions much more manageable. That’s definitely great career advice.
4. When change is warranted, don’t resist it (Status quo bias)
It’s the tendency to stick with the status quo or take the easier option. This bias can be decisive when you are at a crossroads with a highly impactful decision on hand.
For example, someone might pass up a promotion because they’re afraid of the mental turmoil it might cause. Maybe they invested a lot of time in a project, so they wouldn’t want to give it up before it’s done. They may fail to seize the new opportunity, believing that the current situation must be better than anything else because it’s the status quo.
Status quo bias results from psychological attachments to the current situation. Psychological commitment refers to our tendency to stick with our initial decisions, even when evidence suggests otherwise. This creates false perceptions about the status quo that aren’t based on reality.
In certain situations, the status quo bias can be beneficial. People can avoid making rash decisions based on short-term fluctuations in the stock market. Status quo bias can protect you from panic selling if you’ve already bought into the right investments.
Depending on your starting point, the status quo bias may or may not be helpful. You wouldn’t benefit from the status quo bias if you didn’t make wise investments from the start. You could end up losing a lot of money in the long run. So even though status quo bias isn’t always bad, you have to be smart about it.
1. Beware of the status quo bias – The first step to overcoming bias is to be aware of it. When making a decision, ask yourself if you’re considering all the options or just going with the status quo.
2. Consider the long-term consequences. Sticking with the status quo may have short-term benefits, but it’s essential to also consider the long-term consequences. For example, if you stay at a job you hate, you’ll be unhappy now and later. A change, however, may be difficult at first, but it may lead to a more satisfying long-term result.
3. Weigh the costs and benefits of change. You should weigh the costs and benefits of the current and expected future states before making a final decision. Look at the potential outcomes of each option and pick the best outcome.
5. Do not repeat the same decision without checking if circumstances have changed (Choice-Supportive Bias)
Choice supportive bias occurs when you overestimate the positive aspects of an option after choosing it. At the same time, you underestimate the negative aspects of your choice. How the human brain works can influence this bias because our memory gets changed without realizing it.
Perhaps you remember the positive aspects of a restaurant you chose before, for example, if you were to choose one for dinner with friends. Once you’ve made the decision to go to that same place, you tend to justify to yourself why it was a good choice.
However, if you had gone to this place since one of your friends liked it more than the one you chose, you might have remembered the negative aspects more than the positive.
People generally don’t have access to all the reasons why they make a particular decision. After an event, the brain automatically creates reasons that justify our actions. This means we tend to remember the positive aspects of our choices more clearly than the negative aspects of any alternatives we didn’t choose.
6. Pay attention to the accuracy of the stats (Base rate bias)
Base rate bias is when you think something has a higher chance of happening than it actually does. It usually happens when you make a decision based on the information you have, but don’t take into account that not all of that information is accurate.
Because of this, they tend to make incorrect conclusions about probabilities. The base rate is always subject to bias in sampling. That makes rational decision making difficult. You must apply your critical thinking and reasoning skills to handle such situations.
Imagine you are a doctor trying to decide whether surgery is a viable option for a cancer patient. Only considering the information you know about the patient might lead to the wrong decision. You might make the right choice by considering relevant statistics about how this particular surgery usually works for patients with a similar condition.
Look at the statistics or use specific examples that don’t match your initial assumption. Then, you can avoid base rate bias. You can also try to be more aware of your own biases and how they may affect your decision making. Getting a second opinion is always a good idea if you are biased in your assessment.
7. Pull the plug when something isn’t working (The sunk cost fallacy)
The sunk cost fallacy is when you keep doing something that isn’t likely to succeed because you’ve already put so much effort or money into it. It can keep people from making rational decisions based on their current circumstances because they’re too focused on what they’ve already done.
A person might take a vacation as planned, even knowing the destination city was hit by a recent storm. The trip may not go well, but they feel like they paid for it, and it would be a waste not to go. This kind of thinking can lead to risks and sub-optimal decision making in all areas of life.
There are times when we want to see some projects or tasks through because these affect our key performance indicators. That is also a form of sunk cost fallacy. If this is the case, someone in a leadership role should take the initiative to terminate those projects. Then look into ways to reduce possible key performance indicators’ impact.
Good decision making skills don’t happen by accident. When it comes to decision making, cognitive biases can trip us up. However, once you become aware of them, you can work to mitigate their effects.
Take a step back and look at the situation objectively next time you have to make an important decision. Know what’s motivating you and what information you’re using. This will always help you make rational decisions.
Consider getting input from others who may have a different perspective. Keep calm, and don’t let your emotions cloud your judgement.