Photo Credit: Beril Kocadereli

There are some psychological biases and heuristics that play a role in our daily decision-making.

The human mind is extremely efficient. By categorizing, interpreting and using insights, it preserves energy that may be necessary for survival. However, we are not living in caves anymore so we can and should learn to avoid them.

Simply by becoming aware of how we come across to biases in our daily life, we can avoid falling into prey in them.

Anchoring Bias

We rely too heavily on one trait of information we receive while making decisions.

Especially while negotiation, this bias plays a major role. When one party asks the other for some specific amount of money, the number given plays a major role during the rest of the negotiation.

It could be in a business setting or any other daily decision-making process involving bargaining.

Availability Heuristic

We overestimate the importance of information that is available to us.

One should consider statistics more heavily rather than available information.

It is not enough to know a friend who has a friend who has done something like “My grandmother smoke for 50 years and she is fine so smoking isn’t so bad.”

Confirmation Bias

We tend to process information by looking for information that is consistent with our existing thoughts and beliefs.

When we watch the news, we are more likely to believe the news supporting our beliefs and interpreting those that contradict us as fake news.

It is valid in business and personal relationships as well. We like to be validated and interpret information accordingly.

Recency Effect

We tend to weigh the latest information more heavily than older data.

People in marketing know this and try to end their advertising powerfully, trying to occupy a space in the minds of the consumers.

They also pay extra attention to the packaging and window displays around the product, giving you a good “last” impression before you make your decision.

Self-Serving Bias

We tend to take credit for positive events or outcomes, but blame outside factors for negative events.

It could be shown in interpreting a promotion by thinking we are great and what we do is amazing. Similarly, it can show itself in interpreting skipping a promotion because the other employee who got it played a trick on us.

It is valid in any type of competition, our relative performance is more important than our actual performance in most cases.

The Fundamental Attribution Error

We tend to under-emphasize the importance of situational explanations for a given behavior and over-emphasize the role of personality.

Not every behavior reflects our personality. When an employee sees their boss shouting on the first day of work, s/he may think the boss is rude, impolite and wonder how s/he will work for that person.

However, this does not reflect the nature of the boss, it is a situational factor. We attribute the behavior to the personality instead of the situation.

Sunk Cost Bias

We tend to stick with a decision because we have already put the money or effort down for that decision and want to make sure it isn’t lost.

Companies tend to continue spending on a certain plan that brings them no good or an unhealthy long relationship lasts even longer because there is an investment in it.

Simply, we feel obliged to continue just because we want to make sure our efforts were not for nothing.

Hindsight Bias

We tend to overestimate our own ability to have predicted an event after learning about the outcome.

We all have heard someone saying “I knew it all along”. However, they didn’t know it at the time and there was uncertainty for them just as much as others.

This could be seen after elections are made, competitions are finalized or market fluctuations occurred.

Maybe you have heard some or all before. It is not about learning but about practicing. It requires conscious effort to remember that they exist and they should be avoided.

They may show themselves as minor errors with no cost to you, your relationships or your business but it may not always be the case. So why not try to avoid them?