How Cognitive Bias Can Lead to Irrational Decisions

Cognitive bias refers to systematic errors in our thinking that affect how we perceive and interpret information and make decisions based on that information. While not intentional or malicious, these biases can significantly impact our decision-making process. They result from the limitations and shortcuts of our cognitive system, which tries to process a vast amount of information efficiently and quickly. However, cognitive biases can also have negative consequences, especially when they lead to irrational decisions against our best interests, goals, or values.

Some Common Cognitive Biases That Affect Our Decisions

Confirmation bias is the tendency to seek, interpret, and remember information that confirms our existing beliefs or hypotheses while ignoring or dismissing information that contradicts them. It can make us overconfident and resistant to changing our opinions even when faced with new evidence. For example, confirmation bias can lead us only to visit news sources that align with our political views and dismiss any opposing arguments as biased or false.

An availability heuristic is the tendency to judge the likelihood or frequency of an event based on how easily we can recall examples from our memory. This heuristic can cause us to overestimate the probability of rare or sensational events and underestimate the likelihood of ordinary or mundane events. For example, it can lead us to fear flying more than driving, even though flying is statistically much safer than driving.

The framing effect is a bias that relates to the influence resulting from the presentation of information rather than from the information itself. The framing effect can make us react differently to the same information depending on the wording or staging of the information, the emphasis placed on specific aspects of the information, or the presentation’s context. For example, preferring our surgeon to announce the planned procedure as “90% effective” rather than 10% ineffective, or the framing effect can lead us to choose a product labeled as "90% fat-free" over one labeled as "10% fat," even though they are essentially the same.

Sunk cost fallacy: This is the tendency to continue investing in a project, course of action, or relationship that has already cost us a significant amount of time, money, or effort, even when it is not worth it. The sunk cost fallacy can make us reluctant to cut our losses and move on because we feel that we have already invested too much to give up. For example, the sunk cost fallacy can lead us to keep watching a boring movie until the end because we have already paid for the ticket.

Related to the sunk cost fallacy is "loss aversion." This bias relates to our tendency to emphasize the chance of sustaining a loss more than the potential to realize a gain. For example, you invest $100 in a stock you believe will result in significant growth, but it steadily declines in value over several months. Because it now sells for less than you paid, you are averse to selling even though the stock will likely decline further. Put another way, investing the funds realized by selling the underperforming stock in a CD with a guaranteed rate of return is an unattractive alternative to continuing to hold the declining stock. Two mundane examples include sitting through a boring or offensive film simply because you paid for the ticket or eating an unappetizing meal because you paid for it.

Hindsight bias is the tendency to see events, even random ones, as more predictable than they are. Some examples of hindsight bias include insisting that you knew who was going to win a football game once the event was over (Monday morning quarterbacking), believing that you knew all along that one political candidate was going to win an election, or saying that you knew you weren't going to win after losing a coin flip with a friend.

Self-serving bias is the tendency to attribute positive outcomes to our abilities and efforts while attributing adverse consequences to external factors or bad luck. Self-serving bias can cause us to overestimate our skills and achievements (the Dunning-Kruger effect) and underestimate our flaws and mistakes. For example, it can lead us to take credit for a successful project at work but blame our co-workers for one that fails.

The bandwagon effect is the tendency to conform to the opinions and behaviors of others, especially when perceiving them as popular or the majority views. The bandwagon effect can make us adopt beliefs or actions that we might not otherwise agree with or do because we want to fit in or avoid social rejection. For example, the bandwagon effect can lead us to vote for candidates because most of our friends or family support them.

 

How to Overcome Cognitive Biases and Make Better Decisions

Although cognitive biases are hard to eliminate because of their being ingrained in our mental system, there are steps we can take to reduce their influence and improve our decision-making:

Be aware of your biases: The first step is to recognize that you are not immune to cognitive biases, which can affect your thinking and behavior in various situations. You can use online resources such as https://effectiviology.com/cognitive-biases/ to learn more about cognitive biases and how they work.

Seek diverse and reliable sources of information: The second step is to broaden your perspective and expose yourself to different viewpoints and credible and trustworthy sources of information. You can use online tools such as https://mediabiasfactcheck.com/ to check the bias and accuracy of various news outlets and websites.

Challenge your assumptions and beliefs: The third step is to question your assumptions and beliefs and test them against evidence and logic. You can use online platforms such as https://www.kialo.com/ to engage in constructive debates with others on various topics and issues.

Consider alternative options and scenarios: The fourth step is to avoid jumping to conclusions based on limited or biased information. Instead, consider other options and scenarios that could explain or influence the situation. You can use online techniques such as https://en.wikipedia.org/wiki/Six_Thinking_Hats to adopt different perspectives and modes of thinking.

Seek feedback and advice from others: The fifth step is to seek input and advice from others who are knowledgeable, experienced, or impartial about the decision you are facing.

Conclusion

Cognitive bias is a natural phenomenon that affects how we think and make decisions. However, cognitive bias can also lead us to make irrational decisions that are not in our best interest. By being aware of our biases, seeking diverse and reliable sources of information, challenging our assumptions and beliefs, considering alternative options and scenarios, and seeking feedback and advice from others, we can overcome cognitive biases and make better decisions.