Cognitive Biases and How to Avoid them – Guest Blog by Dinesh Damodaran

Are you aware of the way your mind works? Many people aren’t. Most of us are unaware of how our cognitive biases affect what we perceive, think, and do. To be human is to experience bias. We all have biases, and yet many of us don’t even realize that they influence our thoughts, feelings and behaviors on a daily basis. The word ‘bias’ has an inherent negative connotation; after all, who wants to feel like their actions are being motivated by anything other than logic? But recognizing your biases enables you to acknowledge them in yourself – and potentially others – which can help you make better decisions.

What is Cognitive Bias?

Cognitive biases are mental shortcuts that our brains make without us even realizing it. They are also known as a mental heuristic. It is an error in judgement that occurs when people use simplified rules of thumb. These rules are typically learned through social or environmental conditioning (i.e., society or one’s culture). Sometimes they have a positive impact on the way we think, but many times they can hinder us from making good decisions.

Why is it important?

The human mind is a fascinating product of millions of years of evolution. It’s the seat of our identity, and it can be incredibly powerful when used properly. However, there are several natural psychological tendencies that often work against us in ways we don’t even realize. If you want to get more out of life though (and who doesn’t?) then it pays to understand how these cognitive biases impact your decision-making process.

Cognitive Biases and the modern society

Cognitive biases are a major issue in today’s society. Everything from the way you choose what to wear, to the food you eat, and even how much money you invest is influenced by your subconscious mind. Essentially, what we believe to be true comes mostly from our perception of reality; not objective facts or proven research methods. Your beliefs can influence your happiness and success at work or in personal relationships. 

7 Cognitive Biases

Wikipedia lists 197 cognitive biases. This post would become a book if all of them were to be discussed. In this post, I look at a few popular ones that one must be mindful of.

  1. Anchoring

What is it?

Anchoring is a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the “anchor”) when making decisions. Oftentimes we use this to benchmark other information and make our decisions.

Anchoring in real life

Anchoring is a psychological technique that is used extensively by marketers to influence purchasing behaviours in consumers. You can see anchoring at play in a supermarket. We all use anchoring in our daily lives. For instance, when we are browsing the supermarket and see apples priced at 4 for $1, we tend to compare it with other similar products instead of thinking about its price per unit. Oftentimes the supermarket will also put three similar items next to each other. The first item is cheap and the third item is the most expensive. We tend to pick the middle item which is cheaper than the most expensive item but more expensive than the cheapest item.

  1. Confirmation Bias

What is it?

Confirmation bias is the tendency to seek out information that confirms our own existing beliefs and prejudices. It’s a cognitive shortcoming we all share, one that can have significant consequences in how we make decisions and live our lives. It’s easy to understand why this happens; when you are operating in your comfort zone, it can be tempting to only seek out the things which confirm this reality.

Confirmation Bias in real life

When people believe a certain religion and it’s people are bad and go seeking news or videos that validate these beliefs they are practicing this bias. 

  1. Dunning-Kruger Effect

What is it?

The Dunning-Kruger effect is a cognitive bias in which people of low ability believe they are highly competent and make poor decisions and reach erroneous conclusions. It occurs because these individuals suffer from illusory superiority, mistakenly assessing their ability as much higher than it really is. This cognitive bias can also affect experts; however, the more expertise one has on a given topic, the less likely he or she will be susceptible to the illusion of competence that often characterizes those who suffer from this specific cognitive bias. 

Dunning-Kruger Effect in real life

In May 2016, Roberto Burioni was asked to appear on a popular TV talk show and face off against two opponents of vaccines. The host gave most of the air time to the Italian celebrities then turned his attention to the virologist with just a few minutes left. Burioni realized he didn’t have time to make the usual arguments about statistics and scientific uncertainty, so he focused on his main points. “The Earth is round, gasoline is flammable, and vaccines are safe and effective,” he said. “All of these other myths are dangerous lies.” If you have ever seen people on Twitter with no credibility argue with scientists and people with knowledge and authority you have seen the Dunning Kruger effect in action.

  1. Spotlight Effect

The Spotlight Effect is a cognitive bias that makes people think that they are more noticeable and observable than they really are. People believe the things about themselves that others tell them. The spotlight effect is a common cognitive bias in which individuals overestimate the degree to which other people are paying attention to their behavior, actions and mistakes. It influences how you perceive yourself, your self-image, as well as how others see you. In this way, we tend to see ourselves through the lens of other people’s perceptions.

Spotlight Effect in real life

Several studies have demonstrated that we tend to overestimate how much our appearance, performance or actions in a social setting are recalled by others. So if you have ever been conscious about the way you look and how others perceive you, you have experienced the Spotlight Effect. It is particularly debilitating if you happen to suffer from social anxiety. As the popular adage goes “What other people think of you is none of your business.”

  1. Status quo bias

The status quo bias is a cognitive bias that occurs when someone identifies with the current state of things and becomes unwilling to change those things. It  refers to the fact that we get used to things staying the same way. This means people will often opt for the status quo in decision-making situations, even if they are less than ideal. This can lead us to make choices that are less than optimal, even though they might be exactly what we want right now. The status quo bias is the tendency of people to be resistant to changes in the way things are. It’s a psychological phenomenon that manifests itself as an irrational fear of change, even if the proposed change would be beneficial.

Status quo in real life

If you are putting off that change in diet which is healthier than your current one, resisting switching jobs because you are comfortable in your present job then you are indulging in the status quo bias.

  1. Sunk cost fallacy

The sunk cost fallacy is a cognitive bias where people irrationally continue to invest in something that is not working. The main reason for this is the desire to avoid wasting their previous investment by throwing more time and money after bad ideas. However, research shows that most of us are prone to holding on too long because we don’t want our effort or hard work wasted. There can be psychological factors at play when it comes to sunk costs as well such as self-identity and ego–which may cause you to keep making the same mistakes over again.

Sunk cost fallacy in real life

While most common examples involve objects that we purchase with money such as a car, a time share or a profession we spent several hundreds of thousands of dollars in education, we tend to overlook the sunk cost fallacy in operation in other areas of our lives. If you are in a bad or loveless marriage because you’ve been together for a long time you are influenced by the sunk cost fallacy.

  1. Zeigarnik effect

The Zeigarnik effect is the tendency to have an intrusive and persistent recollection of an uncompleted or interrupted activity. It is a cognitive bias that people have to complete tasks they’ve left unfinished, even after the task has no consequence on their lives or careers. It can have adverse consequences if you’re not aware of it. The term refers to Russian psychologist Bluma Wulfovna Zeigarnik who discovered the phenomenon in her research about how waiters remember unfulfilled orders more than fulfilled ones. 

Zeigarnik effect in real life

We tend to focus on our failures rather than accomplishments. While during the course of our lives we do regret the things we didn’t do than the things we did. It is important to celebrate our achievements rather than dwell on our failures or incomplete tasks. 

Why should you work on fixing your cognitive biases?

Your brain makes all kinds of decisions that you don’t realize it’s making. And what’s worse, these unconscious biases can have a major impact on your professional and personal life. You should fix your cognitive biases because they cause you to make bad decisions and can even hurt the people around you. It’s hard to avoid your cognitive bias, but you can lessen their impact.

Fixing your cognitive biases can help you:

• Gain a better understanding of how your own biases can affect you, and others.

• Improve the quality of decisions made and the decision-making process.

• Find new opportunities and solutions.

• Improve decision-making skills by overcoming misleading information.

• Get a clear understanding of what is really going on in different situations.

• Use the power of cognitive biases to benefit you.

• Learn how to identify and avoid those unconscious biases that are stopping you from making the best decisions possible.

How to work on reducing the impact and influence of your cognitive biases

  1. Understand what cognitive biases are.
  2. Recognize that you are susceptible to biases.
  3. Find out which cognitive biases are affecting your decision-making process.
  4. Learn how to identify them in your own thinking and in the thoughts of others.
  5. Be aware of your surroundings and how they might affect your thinking. 
  6. Think about whether you’re being influenced by a bias when making decisions or forming opinions.
  7. Seek out more information from other sources.
  8. Consider other points of view, especially those that disagree with yours.
  9. Find ways to renew and reinforce the new information into future situations.

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