It’s a wonder we ever get anything right.
Cognitive bias is a fancy-pants name for all the “distortions in the human mind that are hard to avoid and lead to perceptions and judgements that deviate from the reality…” – Rudiger and Pohl in “Cognitive Illusions”. I haven’t read it.
And all this happens involuntarily and without our knowledge.
Jeeze. That explains a few things…
Hindsight Bias…the inclination to see past events as predictable.
Yup – got that one.
Fundamental Attribution Error…basically – “he did bad stuff because he’s bad”, not because he was in a bad situation (and maybe had been for a very long time).
I’m OK on this one I think.
Rationalisation…constructing a logical justification for an emotional decision.
Used to do this. Not anymore. I now know I am much, much more emotional than I ever thought. Just kept a lid on it.
Bandwagon Effect…the tendency to do or believe something because others do.
Ha! Don’t have any of this…or do I? Hmmm. The casual observer may disagree.
Confirmation Bias…a classic. Searching for evidence to back up your case, rather than gathering all the evidence and taking a balanced view.
Got this one licked usually, unless I’m clearly right in which case I’m not biased am I?
Status-Quo Bias…the preference towards alternatives that maintain the current situation.
AV anyone? I’ll be voting yes. Anarchy in the UK!
Illusion of control…the tendency for human beings to believe they can control outcomes when they cannot.
Messed up big on this one once when v young. Cost my employer a bob or too. Still, we all learned from it!
Recallability Trap…giving great weight to recent events over past events.
The M1 is shut just now because there was a fire in a scrap yard near to the carriageway. I heard some politician calling for specific new legislation to stop scrap yards going on fire. I laughed out loud while chopping a shallot. Almost cut my bloody hand off. The boys said “what is it Daddy?” I couldn’t begin to explain.
Sunk Cost Bias…another classic. To make decisions in a way that justifies past decisions, even if they are no longer relevant.
I know someone who will not throw stuff out because at that point it becomes “a waste”. No, if you don’t use it and it’s lying around, it’s already a waste. I’m not telling you who this person is. I don’t think she reads my blog. Why would she?
Loss Aversion…tendency to strongly prefer avoiding losses to making gains.
Here’s a question for you. You buy a share in company A for £10 and one in company B for £10. Two weeks later the A share is at £5 and the B share is at £15. What do you do? –
a) sell both
b) keep both
c) sell A and keep B
d) keep A and sell B
Answer at the bottom.
Anchoring…when making a decision, the mind gives too much weight to the first information received.
Yes….I never liked him from the moment I met him. Oops.
Survivorship Bias….failure to include “deaths” in your research, e.g. when doing market research failing to include in the sample those who no longer buy, or got close but swerved at the last minute.
Goodness me we are frail beings are we not? All these biases to overcome. The brain really is amazing, but, as I’ve said before, it’s not user-friendly and has no manual. Still, forewarned is forearmed, as they say.
c) sell A and keep B.
Cut your losses and ride your winners. Most people would keep A and wait for it to “come good”. They would also sell B to realise a small gain. The likelihood is that A will continue to decline and B will continue to rise, so selling A to prevent further losses and holding B to realise greater gains is the correct answer, usually. But loss aversion prevents us from doing the right thing.