Twenty-Four Decision Making Errors!

Posted: April 30, 2012 in Decision Making

Decisions, decisions, decisions — they make up the foundation of our life. Each of us makes hundreds, perhaps even thousands of them every day. They range from simple to complex, from mundane to exhilarating, even life altering.  Without decisions, there would be no action because they are the bridge between our thoughts and emotions, and taking action.

As central and important as decisions are to our work and life overall, one would think they would be fairly easy to make error free. Actually most of them are: what time should I get up, what should I eat, when should I leave for work, which way should I take to work, what lane should I be in, where should I park, etc., etc.  Many of these are made with little if any conscious thought. If we had to think about every decision, consider every option, the pro’s and con’s, we would be paralyzed.

Without careful thought and consideration, however, we are more prone to fall prey to one or more of the following decision errors. The list of theories is from www.ChangingMinds.org.

  1. Ambiguity Effect: We prefer a known probability to an unknown one.
  2. Anchoring and Adjustment Heuristic: We base estimates on known anchors.
  3. Availability Heuristic: Recent events seem more likely.
  4. Bias Blind Spot: We do not compensate enough for our own bias.
  5. Bias Correction: Well-meaning over-compensation.
  6. Biased sampling: We base decisions on available small samples.
  7. Bounded Rationality: We only use limited logic in decisions.
  8. Conjunction Fallacy: An overlap seems twice as likely.
  9. Disconfirmation bias: Agreeing with what supports beliefs and vice versa.
  10. Endowment Effect: We value more highly the things we own.
  11. Focusing Effect: We pay more attention to some things than others.
  12. Gambler’s Fallacy: Belief we can predict random events.
  13. Hot Hand Phenomenon: Assuming success breeds success.
  14. Illusory Correlation: We see correlation where it is not.
  15. Mere Thought Effect: Thinking creates polarization.
  16. Mood-Congruent Judgment: Our moods bias our judgments.
  17. Neglect of probability bias: Ignoring probability; assuming certainty.
  18. Overconfidence Barrier: We are too confident in our own judgments.
  19. Prospect Theory: We value certain gains and try to avoid certain losses.
  20. Psychological Accounting: We care about direct outcomes. We also compare in ratios rather than absolute amounts.
  21. Representativeness Heuristic: We guess probability from a ‘comparable’ event.
  22. Restraint Bias: Assuming we can control urges.
  23. Social Judgment Theory: We vary our judgments about an anchor position.
  24. Sunk-Cost Effect: We are reluctant to pull out of an investment.

So what’s a person to do?  How about use a second language?

According to the Association for Psychological Science, the journal article, “The Foreign-Language Effect: Thinking in a Foreign Tongue Reduces Decision Biases” suggests just that thing.

“Researchers at the University of Chicago have found that people make more analytic decisions when they think through a problem in their non-native tongue.  These findings have implications in many arenas but especially for people doing business in a global economy.”  The article can be found in the April issue of Psychological Science,

According to lead writer, Boaz Keysar, a University of Chicago psychologist, “cognitive biases such as loss aversion are deeply emotional responses, and understanding a second language requires conscious thought in a way that processing our native tongue doesn’t. Because we have to think more to make sense of the question when it’s in a foreign language, we automatically think carefully about the answer—we don’t just answer based on our cognitive biases.”

There should, however, be a caveat here.  A large body of evidence shows that emotions are extremely important in making good decisions.  If instincts or gut feelings that result from our experience are excluded through strict logic or critical thinking, the quality of the decision may well be in jeopardy.  In my experience, I have never seen an organization promote “integrated decision making,” which appears to be critical to success.

So, in the absence of integrated decision making, perhaps we would do just as well using the Christie-Davies Theorem.

 “If your facts are wrong but your logic is perfect, then your conclusions are inevitably false. Therefore, by making mistakes in your logic, you have at least a random chance of coming to a correct conclusion.”

~ John Christopher Davies (Emeritus Professor University of Reading, UK)

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