Cognitive Biases — How to Outsmart Yourself and Stop Being Irrational
While people like to believe that they are rational and logical, the fact is that people are continually under the influence of cognitive biases. These biases distort thinking, and sway the decisions and judgments that people make each and every day. How to outsmart yourself and stop being such an irrational person?
Cognitive biases are inherent in the way we think, and many of them are unconscious.
Identifying the biases you experience and purport in your everyday interactions is the first step to understanding how our mental processes work, which can help us make better, more informed decisions.
Simply put, cognitive biases are the distortions of reality through which we view the world.
The world is vastly complex and humans have never before been bombarded by so much information on a daily basis. We cannot process all the information around us, therefore we must resort to mental shortcuts to make decisions quickly and effectively.
Everyone exhibits cognitive bias. It might be easier to spot in others, but it is important to know that it is something that also affects your thinking.
When you are making judgments about the world around you, you like to think that you are objective, logical, and capable of taking in and evaluating all the information that is available to you. Unfortunately, these biases sometimes trip us up, leading to poor decisions and bad judgments.
Welcome to the fascinating and frustrating world of cognitive bias — it’s full of challenge and opportunity. And although cognitive biases exist only in our heads, they affect everything around us, including our work.
You may believe that your conscious self is in control of your life, but the scientific reality is very much the opposite. Conquer these cognitive biases to turn things around and outsmart yourself the elegant and efficient way!
Cognitive Bias #1: Confirmation Bias
Confirmation bias is the idea that people seek out information and data that confirms their pre-existing ideas. They tend to ignore contrary information. This can be a very dangerous cognitive bias in business and investing.
This type of bias refers to the tendency to seek out information that supports something you already believe.
This is a particularly pernicious subset of cognitive bias — you remember the hits and forget the misses, which is a flaw in human reasoning. People will cue into things that matter to them, and dismiss the things that don’t, often leading to the ostrich effect, where a subject buries their head in the sand to avoid information that may disprove their original point.
Confirmation bias is favoring information that conforms to your existing beliefs and discounting evidence that does not conform.
This tendency seems more prevalent than ever, since many people receive their news from social media outlets that track likes and searches, feeding you information based on your apparent preferences.
When we become attached to our beliefs, we’re really good at spotting facts that seem to support them.
After all, it’s easier to convince ourselves we’re right than it is to consider another view. Any bad idea can look good if you want it to work. In teams, this feeds into the false consensus effect, the phenomenon by which we tend to assume that others, including our colleagues and customers, agree with us more than they actually do.
When people would like a certain idea to be true, they end up believing it to be true. They are motivated by wishful thinking.
For example, a person with a low self-esteem is highly sensitive to being ignored by other people, and they constantly monitor for signs that people might not like them.
It’s how strongly you stick to your existing beliefs, despite evidence to the contrary, that will determine how much confirmation bias will skew your decisions.
A variant of the cognitive bias is the backfire effect, where evidence that goes against your existing beliefs only leads you to strengthen those beliefs. The modern world, unfortunately, is rife with examples of the backfire effect: the flat Earth society for example.
The problem with this is that it can lead to poor choices, an inability to listen to opposing views, or even contribute to other people who hold different opinions.
The often unconscious act of referencing only those perspectives that fuel our pre-existing views, while at the same time ignoring or dismissing opinions — no matter how valid — that threaten our world view is counterproductive.
Cognitive Bias #2: Self-serving Bias
This bias does serve an important role in protecting self-esteem. However, it can often also lead to faulty attributions such as blaming others for our own shortcomings.
The self-serving bias is a tendency for people tend to give themselves credit for successes but lay the blame for failures on outside causes.
When you do well on a project, you probably assume that it’s because you worked hard. But when things turn out badly, you are more likely to blame it on circumstances or bad luck.
This results in attributing positive events to oneself and conversely negative events as blame on oneself.
When something goes wrong in your life, you may have a tendency to blame an outside force for causing it. But when something goes wrong in someone else’s life, you might wonder whether that person was somehow to blame, if an internal characteristic or flaw caused their problem.
The self-serving bias can be influenced by a variety of factors.
Age and sex have been shown to play a part. Older people are more likely to take credit for their successes, while men are more likely to pin their failures on outside forces.
Do you blame external forces when something bad happens, but take credit when something good happens?
It’s self-serving bias if you think you’ve won in poker because you’re skilled at it, but lost because you’ve been dealt a bad hand. Another example: your favorite soccer team wins a game because they’re a wonderful team of great players, but they lose a game because the referee has been bought and they should’ve gotten a penalty.
This bias results in a tendency to blame outside circumstances for bad situations rather than taking personal responsibility.
Many of us can recall times that we’ve done something and decided that if everything is going to plan, it’s due to skill, and if things go the other way, then it’s just bad luck.
Cognitive Bias #3: Anchoring Bias
This one is a cognitive bias that describes the human tendency to rely too heavily on the first piece of information offered (the “anchor”) when making decisions.
Don’t you love when you go to book a holiday and the booking site has suddenly displayed a price drop?
The cost is still high, but it’s half the price it was before. That’s surely reason enough to justify handing over your credit card, right? This is the anchor effect and we have all fallen victim to it at one point or another.
The anchoring effect is the tendency to privilege the first information we encounter, even when subsequent information turns out to be more relevant or realistic.
For businesses driven by metrics, it often manifests as an inappropriate emphasis on certain metrics over others, even if the other metrics may be more useful in meeting broader goals. If you started a project with a desire to increase lead generation, you might become laser-focused on your lead numbers without considering if they’re qualified leads who are more likely to convert.
During decision making, anchoring occurs when individuals use an initial piece of information to make subsequent judgments.
Once an anchor is set, other judgments are made by adjusting away from that anchor, and there is a bias toward interpreting other information around the anchor. This causes pre-loaded and determined tunnel vision and influences final decision making.
In other words, what you learn early in an investigation often has a greater impact on your judgment than information you learn later.
For example, if you learn the average price for a car is a certain value, you will think any amount below that is a good deal, perhaps not searching for better deals. You can use this bias to set the expectations of others by putting the first information on the table for consideration.
Many businesses actively exploit the psychology behind anchoring, particularly restaurants.
By including a wide range of dishes at varying prices, they manipulate most customers’ tendency to choose the mid-priced option. People do this because they tend to fixate on the relative savings or difference in price between two options, not the actual prices themselves.
Cognitive Bias #4: Authority Bias
Under most circumstances, trusting a known authority figure who is an expert in their field is a good bet. It’s a valuable shortcut that saves us time. But like many of these cognitive biases, once influence from authority becomes an automatic response, it causes trouble.
The ‘Milgram Obedience Experiment’ was the first and most infamous study on the authority bias, and was conducted in 1961 by Stanley Milgram.
In this experiment, participants were ordered to administer painful and potentially harmful electric shocks to another person. Many of them did so, even when they felt that it was wrong because they felt pressured by the perceived authority of the person leading the experiment.
Authority bias is the tendency to attribute greater accuracy to the opinion of an authority figure and be more influenced by that opinion.
You’ve been trained since birth to believe that obedience to proper authority is right and disobedience is wrong, and hence this bias comes naturally to you. It’s hidden underneath your good nature.
Unfortunately, you might look to those in power as having something special you lack — intellect, knowledge, or some spark of something you would like to see inside yourself.
This plays well with your vanity, no matter how intelligent a person you are. This is why people sometimes subscribe to the beliefs of celebrities who endorse exotic religions, or denounce sound medicines. In general, you rarely go over the pros and cons of what an authority suggests.
Authority comes in degrees and once it’s in your grasp it grows.
We have a collective respect for authority and are quick to believe who we see as authority figures over everyone else — often to exaggerated degrees and often with little merit other than the fact we perceive these people as authority figures.
There’s nothing wrong with trusting the experts, but there’s also nothing wrong with checking that the expert actually deserves your trust.
Whenever you are about to follow a particular path, think about what authority figures may have had an influence on that decision. Think to what degree authority bias has come into play and if appropriate, challenge the authority figure in question or at least check that the authority you have afforded them is justified.
Cognitive Bias #5: Status-quo Bias
Status-quo bias is favoring the current situation or status quo and maintaining it due to loss aversion — or fear of losing it — and do nothing as a result. This is a subtle bias on an emotional level that makes us reduce risk and prefer what is familiar or “the way we do things around here” as it is known.
Status quo bias is a preference for things to stay relatively unchanged. It describes our preference for the current state of affairs; resulting in resistance to change.
Individuals experiencing status quo bias often perceive any deviation from the usual as negative or a loss, resulting in a strong aversion to change. For marketers, customers with status quo bias can be a real challenge.
Engaging in status quo bias is a sign that you’re not taking an effortful approach to decision-making.
While this works to free up mental resources for other tasks, it means that we don’t necessarily make decisions based on sound reasoning. This can lead us to make choices that aren’t in our best interest. In this case, always sticking with the default option can cause us to miss out on opportunities that would be beneficial to us.
Change can be a scary thing for many people, which is perhaps why many tend to prefer that things simply stay the way they are.
While status quo bias is frequently considered to be irrational, sticking to choices that worked in the past is often a safe and less difficult decision due to informational and cognitive limitations. For example, status quo bias is more likely when there is choice overload or high uncertainty.
When individuals are faced with the choice to change their environment or remain in their current state of affairs, most will choose the familiar.
It is likely that this is a form of risk aversion that is characteristic of status quo bias — that individuals averse to the risk of losing their current reality will choose to remain, even at the expense of living in real, rather than a virtual, reality.
The status quo effect is pervasive in both inconsequential and major decisions.
Oftentimes we are held back by what we believe to be the safe option, simply because it is the default. Bearing in mind our natural propensity for the status quo will enable us to recognize the allure of inertia and more effectively overcome it.
Cognitive Bias #6: Optimism Bias
This bias refers to how we as humans are more likely to estimate a positive outcome if we are in a good mood. It leads you to believe that you are less likely to suffer from misfortune and more likely to attain success than your peers.
Optimism bias is our tendency to overestimate the odds of our own success compared to other people’s.
By the way, researchers have found that whether people are making predictions about their future wealth, relationships, or health, they usually overestimate success and underestimate the likelihood of negative outcomes.
It makes sense that we think this way. Evolution generally favors optimists.
Those who take risks and believe they can succeed are more likely to pass their sunny genes on to the next generation. And entrepreneurs and leaders are required to bet against the odds, avoid analysis paralysis, and drive innovation. So when the stakes are high optimism bias is bound to be part of the game.
But optimism is strong medicine, and a little goes a long way.
Overly optimistic predictions can be dangerous, leading us to waste time and resources pursuing unrealistic goals. In the real world of business, things don’t always work out for the best, and it serves us well to know when conditions are not on our side.
Your brain has a built-in optimism bias. The phenomenon is also often referred to as the illusion of invulnerability, and unrealistic optimism.
The optimism bias instills feelings of control. We generally want to feel as if we have control over our lives and our fates. But it doesn’t mean that we have an overly sunny outlook on our own lives. It can also lead to poor decision-making, which can sometimes have disastrous results.
That being said, it is necessary to have some optimism. Optimism encourages us to persevere, even in the face of hardship or rejection.
It pushes us to believe in our own abilities. It nudges us towards focusing on the positive without becoming preoccupied with the negative. Yet, overall it is important to be aware of how our optimism can blind us to negative outcomes and result in poor decision making.
Cognitive Bias #7: Hindsight Bias
The hindsight bias occurs for a combination of reasons, including our ability to misremember previous predictions, our tendency to view events as inevitable, and our tendency to believe we could have foreseen certain events.
Hindsight bias, also known as the knew-it-all-along effect, is when people perceive events to be more predictable after they happen.
With this bias, people overestimate their ability to predict an outcome beforehand, even though the information they had at the time would not have led them to the correct outcome. This type of bias happens often in sports and world affairs. Hindsight bias can lead to overconfidence in one’s ability to predict future outcomes.
This bias is a psychological phenomenon can result in an oversimplification in cause and effect.
For example, after the great recession of 2007, many analysts explained that all the signs of the financial bubble were there. If the signs had been that obvious, how come almost no one saw it coming in real time?
For instance, it happened in November 2008, when Barack Obama won the election.
After accepting the Democratic nomination three months earlier, his chance of victory hovered around 60%. When he won, you may well have been one of those who knew that was going to be the outcome, and imagined that his odds of winning had been much, much higher. But just because he won didn’t change his odds of winning prior to his victory.
People like to think of the world as a predictable place. Believing an outcome was inevitable can be comforting for some people.
One potential problem with this way of thinking is that it can lead to overconfidence. If we mistakenly believe that we have exceptional foresight or intuition, we might become too confident and more likely to take unnecessary risks.
We experience hindsight bias because our brains are constantly trying to make sense of the world.
To do that, we’re constantly connecting causes and effects, connecting chains of events. Understanding cause and effect is an essential skill for survival, but when we succumb to hindsight bias, we oversimplify those explanations. We see unpredictable events as obvious.
When we misinterpret our thinking that preceded an outcome, it can color our judgments for future predictions.
When we concoct such false explanations of the past—and of our own predictions — we can’t learn and adapt for future decisions. When we don’t take what really happened to heart, we fail to learn from our mistakes and tend to repeat them.
Life would be impossible without heuristics, as we’d have to think about every choice we make as if it’s the first time. However, heuristics don’t always help us make good, objective decisions.
No one is ever a fully rational human being. However, we can make an effort to be less biased.
Here’s the one trick you need to know to become less biased: awareness. Being aware of a cognitive bias and having it in the front of your mind when you make a decision will help you recognize it and ultimately avoid it.
To be human is to be biased. We are no less human at work, especially if we expect ourselves to be cool and rational all the time.
Before we can offset our cognitive biases or use them to our advantage, we must admit that we have them, we always have, and we probably always will — at least until we’ve uploaded ourselves into the cloud.
Many of these biases are inevitable.
We simply don’t have the time to evaluate every thought in every decision for the presence of any bias. Understanding these biases is very helpful in learning how they can lead us to poor decisions in life.
It’s unrealistic to think that you can eliminate cognitive biases, but you can improve your ability to spot the situations where you’ll be vulnerable to them.
By learning more about how they work, slowing your decision-making process, collaborating with others, and using objective checklists and processes, you can reduce the chances that cognitive biases will lead you astray.
And by implementing the right tools, you can even use cognitive bias to our advantage.
I hope you found this list of cognitive biases valuable. The cognitive biases above are common, but this is only a sampling of the many biases that can affect your thinking. If you have any comments please share your thoughts in the comments below, I would love to hear from you.