How to Avoid 12 Common Cognitive Biases that Can Ruin Your Decisions
Cognitive biases are systematic errors in thinking that affect our perception, memory, reasoning, and decision-making.
We all make decisions every day, from choosing what to eat for breakfast to deciding how to invest our money. But how often do we stop and think about how we make those decisions? Are we rational and objective, or are we influenced by subconscious factors that distort our judgment?
Cognitive biases are systematic errors in thinking that affect our perception, memory, reasoning, and decision-making. They are often caused by heuristics, mental shortcuts that help us process information quickly but sometimes lead us astray. Cognitive biases can have serious consequences for our personal and professional lives, such as making poor choices, missing opportunities, or harming others.
In this blog post, we will explore 12 common cognitive biases that can affect your decision-making and how to avoid them.
1. Confirmation Bias - This is the tendency to seek, interpret, and remember information that confirms our preexisting beliefs and opinions. For example, if you believe that vaccines are harmful, you might ignore scientific evidence that shows their benefits and focus on anecdotal stories that support your view. Confirmation bias can make us overconfident, resistant to change, and blind to alternative perspectives.
How to avoid it: Seek out information that challenges your assumptions and opinions. Try to be objective and open-minded when evaluating new evidence. Consider the opposite of what you believe and look for reasons why it might be true.
2. Availability Bias - This is the tendency to judge the likelihood or frequency of an event based on how easily we can recall examples from memory. For example, if you have recently heard about a plane crash, you might overestimate the risk of flying and avoid traveling by air. Availability bias can make us ignore statistical data, exaggerate rare events, and neglect other relevant factors.
How to avoid it: Rely on facts and figures rather than personal experiences and anecdotes. Seek out reliable sources of information that provide a balanced and comprehensive view of the situation. Be aware of how the media and social media can influence your perception of reality.
3. Action Bias - This is the tendency to prefer doing something over doing nothing, even when the action is not beneficial or optimal. For example, if you are losing money in the stock market, you might feel compelled to sell your shares or buy more, rather than wait for the market to recover. Action bias can make us impatient, impulsive, and wasteful.
How to avoid it: Think before you act. Weigh the pros and cons of different options and consider the potential outcomes and consequences. Sometimes, the best decision is to do nothing and wait for more information or a better opportunity.
4. Zero-Risk Bias - This is the tendency to prefer options that eliminate a small risk completely over options that reduce a large risk significantly but not completely. For example, if you are offered two insurance plans, one that covers 90% of your medical expenses with a low premium and one that covers 100% with a high premium, you might choose the latter even though it is more expensive and less efficient. Zero-risk bias can make us irrational, risk-averse, and overspend.
How to avoid it: Accept that there is no such thing as zero risk in life. Evaluate the costs and benefits of different options realistically and rationally. Focus on reducing the overall risk rather than eliminating a specific risk.
5. Overconfidence - This is the tendency to overestimate our own knowledge, skills, abilities, or judgments. For example, if you are good at trivia games, you might think that you know more than you actually do about various topics. Overconfidence can make us arrogant, careless, and prone to errors.
How to avoid it: Acknowledge your limitations and gaps in your knowledge. Seek feedback from others and learn from your mistakes. Challenge yourself with difficult tasks and questions that expose your weaknesses.
6. Survivorship Bias - This is the tendency to focus on the successful outcomes of a situation or group and ignore or overlook the failures or losses. For example, if you read stories of successful entrepreneurs who dropped out of college, you might think that formal education is not important for business success. Survivorship bias can make us optimistic, unrealistic, and ignorant of other factors that influence success.
How to avoid it: Look at the whole picture and not just the highlights. Seek out information about both successes and failures and analyze what made them different. Recognize that success is not only a matter of luck or talent but also hard work and perseverance.
7. Gambler’s Fallacy - This is the tendency to think that past events affect future probabilities in random or independent situations. For example, if you flip a coin 10 times and get heads every time, you might think that the next flip is more likely to be tails. Gambler’s fallacy can make us superstitious, irrational, and wasteful.
How to avoid it: Understand the concept of independence in probability theory. Each event has its own probability that is not affected by previous events. Do not let your emotions or intuition override your logic and reason.
8. Dunning-Kruger Effect - This is the tendency for people with low levels of competence or knowledge to overestimate their abilities and for people with high levels of competence or knowledge to underestimate their abilities. For example, if you are a novice at chess, you might think that you are better than you actually are and challenge a more experienced player. Conversely, if you are an expert at chess, you might think that you are worse than you actually are and avoid challenging a less experienced player. Dunning-Kruger effect can make us ignorant, overconfident, or insecure.
How to avoid it: Assess your skills and knowledge objectively and accurately. Seek feedback from others and compare yourself with peers or benchmarks. Keep learning and improving your abilities.
9. Cause-Effect Fallacy - This is the tendency to assume that there is a causal relationship between two events or variables when there is none or when the relationship is more complex than it appears. For example, if you notice that your mood improves after drinking coffee, you might think that coffee causes happiness. Cause-effect fallacy can make us jump to conclusions, oversimplify complex phenomena, and ignore other possible explanations.
How to avoid it: Do not confuse correlation with causation. Correlation means that two events or variables are related or associated in some way, but not necessarily that one causes the other. Causation means that one event or variable directly influences or produces the other. To establish causation, you need to rule out other factors that could affect the outcome and show that the effect occurs consistently and reliably when the cause is present.
10. Hyperbolic Discounting - This is the tendency to prefer smaller rewards that are available sooner over larger rewards that are available later. For example, if you are offered $100 today or $200 in a year, you might choose the former even though the latter is more valuable. Hyperbolic discounting can make us impulsive, short-sighted, and irresponsible.
How to avoid it: Think long-term and plan ahead. Consider the future consequences of your choices and actions. Use tools such as budgets, calendars, reminders, or incentives to help you stick to your goals and delay gratification.
11. False Consensus Effect - This is the tendency to overestimate the extent to which other people share our beliefs, opinions, preferences, or behaviors. For example, if you like pineapple on pizza, you might think that most people also like it. False consensus effect can make us biased, narrow-minded, and intolerant.
How to avoid it: Recognize that people are diverse and have different perspectives and experiences. Seek out opinions and feedback from a variety of sources and backgrounds. Respect and appreciate the differences among people.
12. Psychological Denial - This is the tendency to refuse to accept or acknowledge a reality that is unpleasant, threatening, or painful. For example, if you are diagnosed with a serious illness, you might deny that you have it or that you need treatment. Psychological denial can make us irrational, defensive, and self-destructive.
How to avoid it: Face your problems and challenges head-on. Seek help and support from others who can provide you with information, advice, or comfort. Be honest with yourself and others about your situation and feelings.