How We Decide – Biases

In this post, I will continue my discussion on how we make decisions.  I will specifically focus on a mechanism the human brain devised to help us deal with decision-making.  According to the Wikipedia definition, cognitive bias is a human tendency to draw incorrect conclusions in certain circumstances based on cognitive factors rather than evidence.

Biases can emerge from several mental processes.  However, I believe that these biases are easy ways out for us to cope with the sometime difficult process of making decisions.  Similar to the way we delete, distort and generalize the information received by our senses, biases may be a way for our mind to short-cut the decision process.  We have to make so many decisions so often that it can be overwhelming.  The lazy brain facilitates this by enabling us to bypass the difficult process substituting thoughts for facts or reality.

The following list includes some of the most commonly used biases.  The idea is to keep a few of them in mind when making critical decisions that may be better done with facts or based on reality as opposed to one or more of these so called biases.  This particular list includes biases that are commonly applied in business judgment scenarios.

• Avoiding options for which missing information makes the probability seem unknown.
• Relying too heavily on a single piece of information or past experience when making decisions.
• Neglecting relevant data when discerning correlations or associations.
• Valuing something based on the opinion of someone who is seen as an authority on the topic.
• Estimating what is more likely by what is more available in recent memory.
• Seeing patterns where no patterns exist.
• Believing that the closer the average performance is to a target, the tighter the distribution of the data set.
• Assuming that specific conditions are more probable than general ones.
• Selling assets that have increased in value but hold assets that have decreased in value.
• Thinking that future probabilities are altered by past events, when in reality they are unchanged.
• Performing differently when we know we are being observed.
• Seeing past events as being predictable.
• Supposing a relationship between a certain type of action and an effect.
• Believing that someone must know what is going on.
• Neglecting known odds when reevaluating odds in light of weak evidence.
• Expecting a given result and unconsciously manipulating an experiment or misinterpreting data in order to get it.
• Being over-optimistic about the outcome of planned actions.
• Ignoring an obvious negative situation.
• Overestimating the probability of good things happening to them.
• Perceiving vague images or sounds as real, significant, or important.
• Weighing initial events more than subsequent ones.
• Weighing recent events more than earlier events.
• Expecting extreme performance to continue.
• Distorting evidence or data by the way data is collected.
• Expecting a member of a group to have certain characteristics without having actual information about that individual.
• Judging probability of the whole to be less than the probabilities of the parts.
• Perceiving something to be true if beliefs demand it to be true.
• Concentrating on the people or things that survived some process and ignoring those that didn’t.
• Arguing that a strategy is effective given the winners, while ignoring the large number of losers.
• Believing that recent events appear to have occurred more remotely and remote events appear to have occurred more recently.
• Selecting or adjusting a hypothesis after the data is collected, thus making it impossible to test the hypothesis fairly.

This list is by no means a comprehensive one.  I suggest you do more research to learn additional biases.  Ultimately, we all fall prey to these and many more biases.  Accepting that we may do so and paying close attention to other’s and our own decisions can help us avoid making poor decisions due to one or two of these biases.  Create a list of those you may be most prone to and keep it handy to use a checklist for critical personal or business decisions.  Doing so can go a long way in improving your and other’s judgment.

The BEST is Yet to Come!

Epi Torres, CEO