We humans are prone to making a variety of decision making mistakes because of 'cognitive biases', tendencies in how we think and process information. These biases can be very useful, allowing us to make faster decisions in some circumstances. But they can also lead to problems, as we will see.
Being aware of these tendencies is the first step to avoiding decision mistakes...
The status quo bias is the observation that people like things to stay the same. They don't much like change.
Humans also tend to be loss aversive creatures, preferring to avoid losses than to achieve gains.
The status quo bias can lead to decision making mistakes were people avoid decisions because they're afraid of consequences or adverse responses. In other words, they don't want to lose!
Named after the visual blind spot, the bias blind spot describes how people usually consider themselves better than average for their good characteristics and worse than average for the negative ones. In the original testing, the subjects even considered themselves less susceptible than average to this bias when it was explained to them!
In a similar vein, the self-serving bias is where people claim more responsibility for their successes than for their failures.
People also consider that they perform better in areas that are related to their self-esteem (where performing the activity boosts their self-esteem). In these areas any decision making mistakes will often be explained away in order to keep the sense of self intact.
The contrast effect occurs when something is increased or decreased in importance when it is compared to some recently observed contrasting object. These effects are ubiquitous with humans and also animals. A weighty object is considered heavier than normal when compared with a lighter one, for example.
Allied with this is the focusing effect when people place too much importance on one aspect of an event and then make mistakes in terms of predicting future outcomes. For example, many people consider they would prefer to live in a warmer climate because it's more comfortable and pleasant. But they don't consider the different insects nor the potentially dangerous animals and droughts they would have to contend with.
The third bias in this group is hyperbolic discounting when people prefer more immediate payoffs than later ones. This bias is amplified as both payoffs approach the present. That is, the closer the two dates are to today, the more desire the person will have to choose the closest one.
The opportunities for con artists, get-rich-quick schemers and even moneylenders to use these biases to cause decision making mistakes in their victims is obvious!
A few of the more common biases causing mistakes and negative effects include:
Omission bias is where we judge harmful actions as worse or less moral than inactions or omissions that are equally harmful. The decision making mistakes that this leads to are again indecisions and delayed decisions. It seems we prefer to ask for permission than forgiveness.
Planning fallacy is the tendency to underestimate the amount of time it would take to complete a task. Enough said!
Post purchase rationalization is a tendency to convince yourself by rational argument that your purchase was actually good value, especially after investing a lot of time, money or effort in something. Recent thinking suggests that many decisions are actually made emotionally and the rationalization is done to justify that. So the rationalization may actually be done prepurchase.
Selective perception is where the expectation determines how we perceive the world. We see what we want to see. If you sort for difficulties, that's what you'll find. If you seek out what works, that's what you'll get.
Learn about more decision making mistakes...