10 Cognitive Biases That Affect Your Everyday Decisions

We make up to 35,000 decisions a day. Try to avoid these ways of thinking.

Intellectual Takeout | May 10, 2016 | 44,129

We make up to 35,000 decisions a day. Try to avoid these ways of thinking.
10 Cognitive Biases That Affect Your Everyday Decisions

A cognitive bias is defined as a pattern of thinking that deviates from norm or rationality in judgment. Inferences about other people and situations are often woven in an illogical fashion, and individuals can create their own "subjective reality" from their respective perceptions.

Got that? Okay.

Let's take a look at 10 of the most common examples of cognitive bias found in modern humans. 

 

Bandwagon Effect

Believing or doing something because people around you believe or do it

 

 

Indications of popularity such as reviews can make an item appear significantly more desirable. Try to avoid relying too heavily on the opinions of others, and instead weigh up all of the information available.

 

 

Availability Heuristic

Overestimating the importance of information that is easiest to recall

 

It is natural to rely on easily remembered knowledge, but it is also worth thinking twice. The chances of dying from smoking, drinking or obesity are far greater than encountering a killer shark, yet the perceived threat of the latter is greater. If in doubt, supplement intuition with statistics.

 

Dunning-Kruger Effect

Unskilled individuals overestimating their
 abilities and experts underestimating theirs

 

Avoid basing decisions on self-assessment of skill - those with limited ability may be unable to accurately assess their own competence. Equally, if you know you have a high level of competence in a specific area, then try to avoid over-thinking things.

 

Framing Effect

Drawing different conclusions from the
 same information presented differently

 

In politics and the wider media, jargon constantly changes to influence public opinion. The next time you’re considering your stance on a certain issue, listen closely to the information presented and try to uncover its real meaning.

 

Confirmation Bias

Seeking and prioritising information
 that confirms your existing beliefs

 

Seeking out evidence to support our preconceptions may help us feel more secure, but doesn’t always lead to better decisions. Always consider a broad range of opinions - they may all have their own pros and cons.

 

Curse of Knowledge

Struggling to see a problem from the perspective of someone with less knowledge than you

 

Everyone has something in life that they excel at – and sometimes it can be hard to think back to a time when this wasn’t the case. If in doubt, avoid making assumptions and start with the basics to gauge the audience’s existing knowledge. Provide context by including appropriate examples.

 

Reactance

The desire to do the opposite of what is requested or
 advised, due to a perceived threat to freedom of choice

 

When offered information that conflicts with your original understanding, it can be hard to admit you were wrong or ill-informed. Ask if you are objecting to advice simply because it is interfering with your ego.

 

The Sunk Cost Fallacy

Refusing to abandon something unrewarding because you’ve already invested in it

 

In decisions that involve uncertainty, we have an evolutionary tendency to focus on the potential losses. This often results in us ‘throwing good money after bad’, even when there is little chance of success. Remember to separate your emotional investment from the decision you’re making, and know when to cut your losses.

 

Hindsight Bias

Believing that you could have predicted an event after it has occurred

 

When something happens, it often seems so obvious that we should have seen it coming, and we may even misremember an earlier prediction to conform with this belief. Counteract it by asking how likely the event really was to occur.

 

Anchoring Effect

Excessively focusing on the first piece of
 information you receive when making a decision

 

When negotiating the price of an item we are often swayed when we feel we’re getting a bargain. Make sure to consider if the price is actually reasonable for
 that item or if you have perceived the value based against the original price.

It's easy to fall into the pitfalls of cognitive biases - we all do it. Being conscious of your motivations makes these traps easier to spot and avoid. Next time you’re unsure, think carefully about the evidence and be ready to challenge your own reasoning.

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Source: Towergate Insurance

H/T Ritholtz.com