5 Cognitive Biases that are Impacting your Decision

Uncategorized Mar 04, 2021

We all have cognitive biases; it is very natural to have biases that help us navigate this complicated world. Biases are human tendencies that offer us psychological shortcuts to make decisions. However, biases can limit our ability to make informed decisions. It is essential to be aware of these biases and become better logical thinkers. This article will address five cognitive biases that influence our daily behavior.

Anchoring Bias:

People tend to remember and rely on the first piece of information they hear. This first piece of information becomes their anchor and their benchmark. People do not like to make their decisions in a vacuum: they like to compare prices, colors, shapes, and other differentiators that help them make decisions. If you want to sell your car, be the first to state the price; your stated price will serve as an anchor to the conversation. Marketers use this concept to guide us to make decisions. Always be aware of this bias. Verify the first thing that you hear.

Bandwagon Effect:

Most people tend to make decisions that conform with the decisions made by people around them. People will ignore their own beliefs and experiences to follow the herd. People need a shortcut to make decisions and use the popularity matrix to visit restaurants, read books, and watch movies. This is why people view busy restaurants as good and empty restaurants as bad; they follow the crowd. This concept is used in politics and advertising. Marketers focus on this concept because it provides people with social proof and a sense of belonging. Avoid making decisions based on the crowd’s preference. Use your own logical thinking.

Confirmation Bias:

We tend to search for information that confirms our beliefs and to ignore information that contradicts our preconceptions. People who watch Fox News and MSNBC are not searching for information that challenges their thinking. They’re merely looking for information that confirms their preconceived notions. People who believe that teachers are underpaid will seek information to ensure their beliefs, ignoring all the other evidence that teachers are paid fairly. Conspiracy theorists tend to seek information that supports their theories and validates their points of view. They connect unrelated events to weave their ideas and find evidence to support their logic. Be aware of this bias because it can cloud your judgment and prevent you from thinking clearly.

The Illusion of Control:

People tend to overestimate their ability to control events, so they try to recreate their experiences to pinpoint their shortcomings when they fail. This leads them to second-guess themselves, i.e., If I did X instead of Y, I could have been more successful. The truth is we do not fully control our environment; there are circumstances beyond our control. Gamblers and addicts think that they can control their environments and their circumstances, so they overindulge in activities over which they have zero control. This illusion leads people to lose their ability to differentiate between chance, luck, and skills. If you want to make wiser decisions, take care to distinguish between luck, skills, and factors beyond your control.

Survivorship Bias:

We misjudge most situations because we depend on surviving examples. We study successful people and ignore people who failed. Examples of success and failure add value, but we tend to focus on one side of the equation. It is a psychological concept and statistical problem where sample data is not random. We tend to be biased toward successful examples. We watch a movie about a stockbroker who became a millionaire trading stocks. We conclude it is easy to replicate his success, ignoring the scores of people who attempted to trade stocks and failed miserably. If you want to make better decisions, meet successful people and unsuccessful people, and learn from both.

To be a better decision-maker, be aware of these biases. Seek information, understand circumstances, and do not follow the crowd.