10 Cognitive Biases and Errors in Decision Making
I am a student of BS Psychology and can explain simply understandable to any person.
Cognitive biases are systematic patterns of deviation from norm or rationality in judgment. They often result from the brain’s attempt to simplify information processing. Here, I explain ten common cognitive biases that impact our thinking and decision-making processes.
1. Confirmation Bias
Confirmation bias is the tendency to search for, interpret, and remember information that confirms one’s preexisting beliefs or theories. This bias leads to selective gathering of evidence and can prevent individuals from considering alternative perspectives or data that contradicts their initial views.
2. Anchoring Bias
Anchoring bias occurs when individuals rely too heavily on the first piece of information they receive (the “anchor”) when making decisions. This initial information unduly influences subsequent judgments and estimates. For example, the initial price of a product can set a benchmark, affecting how people perceive subsequent prices.
3. Hindsight Bias
Hindsight bias is the inclination to see events as having been predictable after they have already occurred. This bias makes individuals believe they knew the outcome all along, leading to an oversimplified understanding of cause and effect and hindering learning from past experiences.
4. Availability Heuristic
The availability heuristic is a mental shortcut that relies on immediate examples that come to mind when evaluating a specific topic, concept, or decision. This can lead to overestimating the likelihood of events that are more readily recalled, often because they are recent or emotionally charged.
5. Overconfidence Bias
The overconfidence bias is the tendency for individuals to overestimate their own abilities, knowledge, and predictions. This can lead to excessive risk-taking and a lack of preparation for unforeseen events. It is common in fields like finance and entrepreneurship, where accurate forecasting is crucial.
6. Social Proof
Social proof is the tendency to conform to the actions of others, assuming that their behavior reflects the correct decision. This bias can lead to herd behavior, where individuals follow the majority without independent analysis, often seen in consumer behavior and social media trends.
7. Loss Aversion
Loss aversion refers to the tendency to prefer avoiding losses over acquiring equivalent gains. The emotional impact of losing something is often more intense than the pleasure of gaining something of the same value, leading individuals to make overly conservative decisions to avoid potential losses.
8. Self-Serving Bias
Self-serving bias is the tendency to attribute positive events to one’s own character while attributing negative events to external factors. This bias helps maintain and enhance self-esteem but can lead to distorted perceptions of reality and hinder personal growth and accountability.
9. Sunk Cost Fallacy
The sunk cost fallacy occurs when individuals continue a behavior or endeavor as a result of previously invested resources (time, money, or effort), rather than cutting their losses. This bias can lead to irrational decision-making, as people are unwilling to abandon something they have already invested in.
10. Framing Effect
The framing effect is the tendency for people’s decisions to be influenced by how information is presented, rather than just on the information itself. For example, people may react differently to a choice depending on whether it is framed as a gain or a loss, even if the underlying information is the same.
Understanding these cognitive biases can help individuals recognize and mitigate their effects, leading to more rational and effective decision-making. By being aware of these biases, we can take steps to counteract them and make more informed choices.