Why We Make Poor Decisions

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Researchers long believed that humans make well-considered, logical decisions. More recently though, studies have shown that there are several errors in the process that derail our thinking. While we sometimes make good decisions, we are prone to make emotionally driven, seemingly irrational choices.

In this article, we’ll go through the various mental mistakes and biases that lead to us making poor decisions.

Later, we’ll discuss confirmation bias. First, though, we’ll find out about the survivorship bias.

Without further ado, let’s get into it.

The Survivorship Bias

We are exposed to this bias every day. Whenever we see articles with titles like ‘8 Things Elon Musk Does Every Day to be Successful’, this bias is in action.

This bias exists because of our tendency to focus on the successful people in a particular field and try to learn from and emulate them, disregarding those who have followed the same strategy and failed to achieve a comparable level of success.

The thing is, no one ever hears about the people who fail and don’t make it to the top of their field or manage to master their hobby, we only hear and read about those who make it big. As a result, we place too much value on the strategies and tactics they employ and forget that that advice or regime doesn’t work for most people.

Thus, we have no idea if a particular strategy will work for us, but the survivalist bias may mean that we decide to follow it anyway. Soon, we’ll discuss loss aversion. For now, it’s time to talk about the availability heuristic.

The Availability Heuristic

Our brains assume that any examples that come to mind easily are the most crucial. This is called the availability heuristic.

In his book, The Better Angels of Our Nature: Why Violence Has Declined, Stephen Pinker argues that we are living in the most peaceful era in history. Some doubt that claim. We ask ourselves if that can possibly be true when we hear about horrific crimes on the news every day.

Even though Pinker’s claims have been challenged by more recent research, the availability heuristic may partly explain why we find such arguments hard to credit.

We place a disproportional degree of importance on immediately available information, i.e., news articles and stories.

It could well be that crime rates and sexual assault are falling, but the amount of information that’s available on any disaster or heinous crime is increasing and is easier to find than ever before. Therefore, the likelihood that we will hear about it is higher than at any other time in history, and we come to assume that crimes and disasters happen more often than they do.

We overestimate the impact of what we remember and don’t place enough value on events we hear nothing of.

Next up, is loss aversion.

Loss Aversion

We tend to prefer avoiding loss to acquiring gains. If someone gives us £20, we experience satisfaction, but if we lose £20, we feel a disproportionally large sense of dissatisfaction. The responses may be opposite, but they are not equal.

This desire to avoid loss can lead us to make bad decisions and alter the way we behave so that we keep hold of things we own. We feel protective of things that belong to us and we can come to overvalue them in comparison to alternatives.

Let’s look at an example of loss aversion. Imagine you buy a new pair of shoes. You may get a small amount of pleasure from it. If, later, you have to sell those shoes could be painful — even if you never wore them. This is loss aversion in action.

You know how good it feels when you sail through a green light on your way to work, right? Well, loss aversion is the reason we get annoyed when we are held up by red lights and traffic on the way home. We feel the loss of time more keenly and can get angry if a car in front of us stops us from getting through the lights before they change.

Loss aversion means that any loss we may incur in the future almost always outweighs any pleasure we derived from acquiring or achieving something.

Anchoring

Let’s say you’re shopping, and you see that you can only buy 10 of a given item. That number sticks in your mind and you end up buying twice as many as you would have done had there been no limit on the number of items you could buy. The effect is called anchoring and getting a specific number stuck in your head can lead to silly, emotionally driven decisions that are not based on logic at all.

We encounter this effect most often in pricing. If you see a watch selling for £400, it might seem expensive. But if you enter a shop and the first watch you see costs £4,000, the one on sale for £400 looks like a good deal. By fixing or anchoring a higher number in your head, marketers can make mid-priced items seem like a much better buy than they would appear on their own.

Having a higher price fixed in the mind can make a comparatively reasonable price seem like a bargain, even if it isn’t. Thus, this effect can lead us to make poor decisions.

Confirmation Bias

We talked about confirmation bias in an earlier post. This refers to the tendency we all have to look for information that supports beliefs we already hold. In consequence, we undervalue and discount evidence or findings that support the opposite viewpoint.

Thus, changing your mind is far more difficult than it seems. The surer you are of your view on something, the more likely you are to disregard evidence suggesting something else is true.

For example, if you believe climate change is a serious problem, you will dismiss all information to the contrary.

It is not natural for us to come up with a theory and test it to find out if it holds water. Instead, we form one hypothesis, convince ourselves that it’s true, and actively seek out information that supports it.

This can lead us to only seek out information that validates our pre-existing beliefs and can therefore influence our choices and decisions.

What to Do About It

Now that you’re aware of some of the mental biases affecting our decision-making process, the question of how you can minimise the effects arises.

The best way to think of these biases is as shortcuts our brains take to help us make decisions. While they may not be useful in some situations, they are especially useful in others, so you don’t want to get rid of these mental ‘errors.’

The usefulness of these thinking mechanisms means that our brains are so good at carrying them out that we slip into patterns of thinking effortlessly and end up making choices that don’t benefit us.

Self-awareness is the best weapon we have against making poor decisions. By being aware of these biases, we have a better chance of spotting when we are likely to fall prey to them and can re-examine our choices.

Wrapping Up

Now that you’re aware of some of the most prevalent mental biases and errors we are prone to and how they can lead us to make poor decisions, you might be able to start making better, more logical decisions in the future.

Hopefully, this article will give you the confidence to confront biases and make better decisions that serve you well.

Are there any biases you have experienced that we haven’t mentioned? Let us know in the comments.

If you enjoyed this piece, check out our post on 4 cognitive biases that affect productivity.

Thanks for reading!