The Jerusalem Post
Expose Cognitive Biases For What They Are
Understanding How You Make Decisions Helps To Make Better Ones.
By Selwyn Gerber CPA and David Zwebner Commstock Financial advisors, agents of RVWwealth.com Licensed by the Israel Securities Authority firstname.lastname@example.org 0544-332621
Researchers estimate that humans make an average of 35,000 decisions every day, and a good chunk of them are affected by cognitive biases. According to one study, 20 percent of healthcare providers’ diagnostic mistakes are caused by cognitive biases. And that’s after years of training. With a universe of competing interests vying for first place in our lives, we often feel pressured to act quickly. The problem is there is often a chasm between the information we have and the information we need to make good decisions. Thus, we take mental shortcuts.
Cognitive biases are systematic judgment errors. They are born of flawed reasoning, and that flawed reasoning can cause you to misinterpret information and draw false or inaccurate conclusions. Not surprisingly, we all have them. Our penchant for self-delusion is pretty consistent.
The good news is that becoming aware of your cognitive biases can help you make better decisions. According to a recent study, “debiasing training” can improve your ability to make rational decisions and avoid the errors commonly associated with faulty thinking.
Below are some of the most common examples.
Consider the pitfalls of each as you strike out to make better decisions:
The Dunning-Kruger Effect: You believe that you’re smarter or more skilled than you are, which prevents you from acknowledging your limitations and weaknesses.
Confirmation Bias: When you favor information that aligns with your existing beliefs. In turn, you’ll disregard evidence that doesn’t conform — even if it’s accurate.
Anchoring Bias: Here is when you rely on the first piece of information you’ve learned. Salespeople often use this technique when presenting a high-priced option, which makes everything that follows seem more affordable.
Attentional Bias: This is when you only focus on some things while ignoring others. For instance, if you’re purchasing a new vehicle, you only consider how it looks, but neglect how safe it is.
False Consensus Effect: This bias is when you overestimate how much others will agree with you.
Misinformation Effect: Your memory has been interfered with, changing how you recall past events.
Actor-Observer Bias: Another type of bias that prevents you from becoming more aware of your own shortcomings. For instance, you might have excellent cholesterol because of your family’s genetics, but you might think a co-worker has terrible cholesterol simply because of their diet. Sort the valuable from the worthless.
$59 a year for an online-only subscription.
$125 a year for print only.
$125 a year for print and online.
About 16 percent chose the first option, which was the online-only subscription. The third choice received the remaining 84 percent. That seems like a no-brainer since you would be getting both the print and online versions for the same price.
But, as Ben Walker explains in the Dialogue Review, “when the publisher removed option B, 68 percent chose the cheapest option and demand for the full package — the sale the publisher most favored — slumped.” What did this information show? According to Walker, “the stats demonstrated that irrelevant information — in this case, the obviously lousy option B -- can have a huge influence on our decision making.”
WHAT TO DO:
One of the simplest and most effective ways to remove any bias from your decision-making is to solicit the advice or feedback from others. Ideally, you should turn to those you trust, like a family member, friend, business partner or mentor. These are the people who will offer honest and constructive criticism, pointing out any blind spots while helping you gain fresh points of view.
Learn to make the opposing argument clearly and persuasively.
Reflect on the past. Take a timeout and reflect on similar past scenarios. How did you make that decision? What obstacles did you have, and how did you overcome them? What was the outcome, and what did you learn? Answering these questions can help guide you in making the right decision.
More details? Call Aviel Zwebner 0544-815573