What is Cognitive Bias, and why does it matter?
Cognitive bias is the tendency to think in a certain way because of our background, experiences, and beliefs. It can be a good thing when we are aware of it, but it can also lead to mistakes and wrong decisions. The idea of cognitive biases was introduced by Amos Tversky and Daniel Kahneman in 1972 and is based on their experience of people's intuition failing when it comes to reasoning about their decisions. They showed several ways that the decisions we make differ from rational choices.
In both our professional and personal lives, when we make decisions, we should try to avoid cognitive bias as much as possible or at least be aware of it. We can do this by being mindful of our own biases and how they might affect our decision-making. Cognitive bias is a way of describing the human tendency to fill in a missing thought with an answer that seems plausible. For instance, when one is asked, "Do you like to eat bananas?" and one's brain fills in the blank with "yes".The same could happen for something like "What kind of car do you drive?" It would be easy for someone to say they have driven a Toyota Camry from their childhood. Another example of cognitive bias would be the tendency to categorize certain people by their physical appearance. For instance, a person's brain might fill in the blanks with "police officer" or "school teacher".
Types of Cognitive Biases That Influence the Way We Think
There are many types of cognitive biases described in the literature. The following is a list of cognitive biases and the conditions in which they manifest. Below are some of the most common cognitive biases I have encountered. There are many more cognitive biases described in various books and articles.
1. Confirmation Bias
Confirmation bias occurs when you reject information that goes against what you believe and searches for data that supports your existing beliefs. This tendency may lead to biased decisions that don't consider all the relevant information. Occasionally, you are more likely to notice information that agrees with your views and miss information that contradicts them. When a person believes that their side is always right, or when they believe that one side is always wrong, confirmation bias can lead to accepting information only from sources that support their own views. When this occurs, they might be unable to properly weigh the evidence and make an unbiased decision.
2. Anchoring
The tendency to rely too heavily on the first piece of information given. For example, if you asked 10 people what their favourite book is, the most popular response would be “Harry Potter”. Then, you ask them how much they paid for it, and someone might say, “I bought it for $10 because I couldn’t resist!” But that person has only read Harry Potter a few times, and it may not be the most interesting book to read. This is because people tend to overvalue the more recent data, in this case, the person’s purchase. When individuals are asked how much they want to spend on something, the amount they choose is often considered an anchor for what they believe other people will choose too. This means that the person’s chosen amount is based off of how much someone else has stated their desired price point to be, not necessarily what the individual believes is fair. This is an interesting topic because it brings up many questions. For instance, considering the topic of car prices, we can come up with many other questions, what do you think the average cost of a car should be? What are some of the factors that can affect the price people believe a car should be?
3. Overconfidence Bias
This is when we 'overthink' a decision and place too much worth on our knowledge or expertise. Our contribution to the final decision may not be as valuable as we believe it is. Mismatching incentives can often lead to irrational choices, such as individuals buying shares in a company. In a business context, overconfidence bias may lead people in power to ignore other team members' opinions or even people who directly deal with clients to ignore clients' perspectives of a problem.
4. Halo Effect
It is difficult to think that someone you like and trust in one context could be wrong in another. If you trust someone in one context, you will continue to trust them in other contexts. , and you will have a hard time believing them when they're wrong. If someone is not trustworthy in one context, it's difficult to trust them in another. With increasingly popular social media figures and political and business leaders coming out daily, getting rid of the Halo effect in decision-making may be difficult. But if you are aware of this, you could get some outside perspective before taking a critical decision.
5. Gambler's Fallacy
With the gambler's fallacy, you expect past events to change the outcome. However, in reality, anything can happen, and they can happen at any moment. With this in mind, it's best not to get your hopes up too high because you can't predict what will happen next. The gambler's fallacy is a mistake in thinking that makes you believe that the likelihood of a certain event happening will change depending on how recently it has occurred. This fallacy suggests that if an event happened more recently, it would be more likely to happen again.
6. Fundamental Attribution Error
This is the tendency to blame others when things go wrong- instead of looking objectively at the situation. In particular, you may blame or judge someone based on their personality trait or a stereotype. Arguing over whether or not an ongoing situation is "a good idea" because someone has a different opinion. Any business leader should realize that other people are interested in what you say, not because you have the power within a hierarchy. Discussions should be based on facts, figures and logic and not on personalities and how people have treated you or are being treated by others.
7. Bandwagon Bias
It's normal to follow the crowd because of bandwagon bias. If enough people are doing something, then you might as well join in. To protect yourself from this, make sure to think for yourself and do what's best for you- even if it means being a little different. This tendency to follow the crowd has been studied and explained by Robert Cialdini, who wrote in his book, "Influence: The Psychology of Persuasion," that this instinct is often triggered in social situations."It is human nature to want to be part of the group," says Cialdini. "If you are surrounded by people who are behaving one way or another and enough members of a group behave in one way or another, then it becomes difficult.
8. Mere Exposure Effect
Robert Zajonc did a study in 1968 that showed that the more exposure to an object, the greater your interest or liking for it. For example, if you spend time with your brother every day, you are more likely to like him than if he spent less time with you.This is also true for other people: The more time and exposure to a person, the more likely we will like them.We get familiar and comfortable with someone over time which can result in liking them more.
9. Hindsight Bias
Hindsight bias is when people believe they predicted an event that already happened when in reality, they had no knowledge of the outcome before it happened. Another way of thinking about this is that people believe they have the ability to look into the future, but it's impossible to know what will happen. The Hindsight Bias is a cognitive bias that occurs when individuals evaluate an event after it has already occurred. This bias can occur in various forms, such as overconfidence in one's knowledge, past self-attribution, and status quo bias. The hindsight bias can be applied to many events, including sports betting, stock market predictions etc.
10. Dunning-Kruger Effect
The Dunning-Kruger effect is the phenomenon whereby people are likely to overestimate their skill level and underestimate other people's competence. One example of this is someone who cannot tell how much they still have to learn in a field but believes they are just as skilled as someone who has been at it for years. Another example of the Dunning-Kruger effect is when someone thinks that they can build a creative solution by themselves because they can follow directions from others.
How to Identify & Overcome Our Own Bias
There are some tell-tale signs you can use to judge if cognitive biases are interfering with your decisions. Although they might be easier to recognise in others, you should be well-practised at spotting the signs within yourself too. If any of the following is true for you, it could be a sign of a bias:
Living in a world of only what you want to see or only hearing confirms your opinion.
Taking credit for accomplishments and blaming others for failures.
Thinking that if something goes wrong, someone must have been at fault, and it's not related to any outlying circumstance.
With as many cognitive biases as there are, it can be hard to keep track of them and prevent them from affecting you, but fortunately, there are plenty of things you can do to keep them at bay.
1. Be aware
The first step against this bias is to be aware of them. When you know, there are factors that can influence your judgment, the likelihood of your making a correct decision increases.
2. Consider current factors influencing decisions
It's important to consider the situation and identify things that could make you feel over-confident or ignore the information. The bandwagon effect is one thing to watch out for – any attitudes adopted solely because other people do it.
3. Reflect on the past
Keep a lookout for patterns in how you perceive things. If, for example, you find out that your intuition overrules cold logic, then take on opportunities to allow data to guide you more comprehensively.
4. Strive for a growth mindset
People with growth mindsets believe that what the mind can conceive can be achieved. They tend to learn from criticism and see mistakes as a chance to grow. They don’t think factors are unchanging or unchangeable.
5. Identify what makes you uncomfortable
Sometimes what people might do or say can make us feel irritated. It's worth considering why this might be, as it could stem from our own bias.
6. Embrace the opposite
By considering both sides of an issue, you become better at thinking critically and with more empathy. Next time you have an initial reaction to something, try to push your idea to the opposite extreme and notice what happens.
7. Be curious
Curiosity can be really helpful as it stops people from assuming they're right- it's essential for getting any closer to the truth. It also helps us think more openly about new problems and look at things differently.
8. Seek multiple perspectives
When we ask other people for their opinion or feedback, we open up our blind spots and create opportunities to grow. We also ensure quality by involving others in the process.
9. Look for disconfirming facts
When we encounter new things, be open-minded and try to see where it could lead. Seek out arguments that run counter to your beliefs and see them as opportunities rather than threats
10. be humble - intellectually
Being humble all of the time is very important for intellectual growth. One could spend their whole life believing anything as long as they don’t have any doubts and never consider any other perspectives. This can quickly lead down a path of misguided actions, ideas and beliefs if this continues unchecked
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