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 davidz@ecommstock.com 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

 ??  ?? A while back, The Economist conducted a study that asked subscriber­s how they felt about the following three plans:
A while back, The Economist conducted a study that asked subscriber­s how they felt about the following three plans:
 ??  ?? Selwyn Gerber CPA and David Zwebner
Selwyn Gerber CPA and David Zwebner

Newspapers in English

Newspapers from Israel