10 Cognitive Biases That Cause Bad Decision Making

  Top 10 Cognitive Biases you need to know

1. Anchoring bias
Anchoring Bias is when  we humans usually completely rely on the first information that we receive no matter how reliable that piece of information is when we take decisions the very first information has tremendous effect on our brain for instance I want to sell you a car and you are interested to buy it let's say you ask me what the prices and I tell you thirty thousand dollars now. If you come back a week later and I say I will sell it to you for twenty thousand dollars this seems like a new very cheap price to you right because your judgement is based on the initial information you got which was $30,000 you feel like you're getting deal but let's say the first time that you you ask me and I I say $10,000 and then you come back the next week and I tell you I'm gonna sell to you for $20,000 now it doesn't look like a very good deal because of the anchoring bias this is just a very generic use of the anchoring bias

Another example is trees what if I asked you if the tallest tree in the world was higher or lower than 1,200 feet and if so how tall the same effect occurrs if I asked you to guess out of thin air instead of giving you an anchor of 1,200 feet the results are crazy.

  2. Availability Heuristic bias

People overstimulate the importance of information that they have let me give you an example here some people think that terrorism is the biggest threat to the United States because that's what they see on TV the news always talks about it and because of that it inflates the danger but if you look at the real perspectives televisions cause 55 times more deaths than terrorism yes TV's literally fall on people and kill them fifty five more times than terrorism you're more likely to killed by a cow than a terrorist according to the consumer product safety commission it's more likely to die from a coconut falling on your head and killing you than a terrorist attack even the police that are hired to protect you from terrorist it's estimated that you were a hundred thirty times to be killed by the police and by a terrorist that's because people don't make the decision based on facts and statistics but usually they make it on news and stories and stuff they hear from other people people because it's way scarier to die from a terrorist attack than a falling coconut and because of this usually the news won't cover it because there's not much money in it

 3. The Bandwagon effect

People do or believe in something not because they actually do believe it but because that's what the rest of the world believes in in other words following the rest without thinking if you've ever heard of someone say well if your friends jump off a bridge would you then that someone is accusing you of the band wagon effect it happens alot with us I mean a lot of people vote for a certain candidate in the election because he's the most popular or because they want to be part of the majority it happens alot in the stock market too if someone starts buying a stock because they think it's going to rise then a lot of other people are going to start picking the stock as well it can also happen during meetings if everyone agrees on something you are more likely to agree with him on that object in management the opposite of this is called the group think and it's something companies try very hard to avoid because if nine out of ten people agree something for the last person doesn't and won't speak up it could squelch a great idea number

 4. Choice supportive bias

People have the tendency to defend themselves because it was their choice just because I made the choice it must be right for example let's say a person buys an apple product let's say it's a Mac book instead of a Windows PC well he's more likely to ignore the downside or the faults of the the apple computer while point out the downsides of the PC he's more likely to notice the advantages of the apple computer not Windows computer why would someone point out that they made a bad decision well let's say you have a dog you think it's awesome because it's your dog although it might poop on the floor every now and then same goes for political candidates not the pooping part but they both may suck but one of the lesser of two evils maybe right in your mind because you voted for them .

5. Confirmation bias
Confirmation Bias is when We tend to listen to information that confirms what already know or even interpret the information that we receive in a way that confirms the current information that already have let's say that your friends believes that suites are unhealthy this is generally a pretty broad belief he will only focus the information that confirms what we know he is also more likely to read articles that supports his believes he doesn't go through and type positive health effects of increasing blood glucose levels or positive effects of eating a bowl of ice cream no he will instinctively go to Google and type in how bad is sugar for you the confirmation bias is a very dangerous in scientific situations and is actually one of the most widely committed cognitive Biases

 6.The Ostrich Bias

This is the decision rather subconscious decision to ignore the negative information it may also be an indication we only want to consider the positive aspects of something this goes beyond are only looking for the positive information but this is when there negative information and we choose to ignore it as an outlier sometimes even when we have a problem we try to ignore it thinking it will go away let's say you have an assignment to do it's not something that you really want to do so you may just keep on procrastinating with it because you're minding said it will go away or is solved by ignoring it smokers usually they know it's bad for their health but a lot of them keep ignoring the negative implications of cigarettes thinking it will not damage them or might stop them before anything serious will happen because they consider themselves in outleir to avoid finding out negative information we just stop looking for it this could be a serious crime in many scientific research laboratories and basically promotes ingorance

 7. Outcome Bias

We tend to judge the efficacy of a decision based primarily on how things turn out after decision is made we rarely examine the conditions that existed at the time of the decision choosing instead to evaluate performance solely or mostly on whether the end result was positive or not in other words you decide whether an action is right or wrong based on the outcome this goes a little bit into consequentialism but it goes hand in hand with the hindsight bias let's say there's a manager who wants to take the decision his team and the data are telling him to make one decision but his gut is telling him to make another decision well he goes ahead and makes decision that has got told him to do and then in the end it was the right decision does that mean it's actually better to trust your gut rather than listen to your team who is advising you based on facts and statistics well that's what the outcome biases is . You take the decision and bass the effectiveness of your decision on the outcome even if it was luck now this is bad logical thinking and will actually lead you to ruin thinking and bad outcome in the long run 

8. Overconfidence Bias
Sometimes you get to overconfident and start taking decisions not based on facts but on your opinion or gut feeling because you have been correct so many times in the past for example you are a stock trader and you pick five stocks in a couple years all of them turn out to be successful and profitable it increases your confidence to a point where you can start believing that whatever stock you pick will be successful it's quite dangerous because you might stop looking at facts and solely rely on your opinion check out the gamblers fallacy if you want more information on this just want more information on this just because you flip the coin five times and it landed heads doesn't mean that the next time there's more than fifty percent chance of it landing on ahead again ego is the enemy is a great book about this bias.

 9. Placebo Bias

When you believe something will have a certain effect on you then it will actually cause that effect for instance you are sick and the doctor give you a certain medicine even if that medicine doesn't actually help you even if it's just made of sugar you believe that it will help you and it will actually causes you to recover quicker this might not sound very logical but dozens of experiments have proven this that's why if you realize positive people usually have positive life and vice versa the way think is super important for the same reason lot of personal development books say that if you really believe something you will eventually achieve it or else find a way to achieve it because the placebo effect will give you the motivation that need the mind truly is a powerful thing and this actually isn't always bad thinking in fact you can use a placebo effect in our advantage if we use it wisely there's actually a reverse of this and it's cause the nocebo and this is when it is native

 10. Survivorship Bias

Bias this bias is when you are judging something based on the surviving information let me give you an example here there are a lot of articles titled like things millionaires do every morning does that mean doing those things every morning will make you a millionaire no there are tons of people who did them and didn't become a millionaire but there are also tons of people people who did them and did become a millionaire so these articles are primarily based on the ones who survived other people to do the same thing but didn't become millionaires another example is to say that buildings in an ancient were built using extreme engineering because they lasted so long this is a bad conclusion because you aren't considering what ratio of buildings were built to how many that lasted thousand of years of weathering when the other ninty percent have already watched away it's hard hard to know what you don't know

Post a Comment

0 Comments