How to recognise 5 cognitive bias in decision-making - choose better with these tips

Introduction

Every day, we humans make thousands of small and big decisions – what to buy, who to work with, where to invest. Psychological research has revealed a long list of cognitive biases and heuristics that influence our choices without us noticing. However, these "shortcuts in thinking" can be learned to recognise – and even utilise in one's own decision-making. In this article, I will present five key phenomena and provide concrete tips on how to utilise them.

1. Confirmation bias

What is it?

People seek, interpret, and remember information in a way that confirms their own preconceptions and beliefs. Contradictory data may be ignored or downplayed. Confirmation bias is quite similar to status quo bias, as both seek to resist change or new perspectives that differ from one's current views.

Humans, like other organisms, tend to avoid change.

Here's how to tackle confirmation bias:

• Build a more stable foundation for your decisions by systematically gathering evidence to support and challenge your key assumptions.

• When you want to confirm your investment decisions or business strategy, focus on finding statistics and expert opinions that bring multiple perspectives to your plan.

• It's nice to stay in your comfort zone, but if you want new ideas in your life, it's good to learn to tolerate different views, as they may contain a nugget of gold.

2. Anchoring bias

What is it?

The first set of numbers or information you encounter acts as an anchor around which subsequent assessments are formed. For example, a high price affects consumers' subsequent perceptions of what is a "fair" price.

The purpose of anchoring is to serve as a reference point or benchmark. If we do not have a benchmark, we cannot know, for example, whether a price is relative, i.e., whether it is expensive or cheap. As with confirmation bias, moving the anchor requires new information that challenges the location and quality of the current fixed point. Moving the anchor often requires a strong reason, which often means personal experience of the anchor's location.

Here's how to tackle the anchoring bias:

• Remember, everything is always relative, so for example, price is only absolute as a number, but its meaning depends on your own wealth and willingness to pay.

• Choose your point of comparison carefully if you are comparing prices, as this will determine your perception of the relative cost of the price. Is it your wealth? Your spending habits? Or is it based on your perceptions?

3. Framing effect

What is it?

The same content can evoke different feelings and decisions depending on how it is phrased: "30% discount" vs. "normal price €100, now €70." The purpose of framing is to create an impression of, for example, the quality of the pricing mentioned above, i.e., how it compares to competing products or stores.

One thing can be expressed in more than one way, for example, inversely, such as 95% of people have blue eyes or 5% of people do not have blue eyes. This has been found to have an impact on how the issue is understood. It also affects purchasing behaviour, where positive wording is generally easier to understand, and people prefer to hear about the potential benefits rather than the disadvantages.

Here's how to tackle framing bias:

• Framing is often used in a way that emphasises the desired reaction. If you want to get a customer to hurry up, talk about how few spots are left, like "only 5 spots left."

• In internal communications, you can influence your team by reporting on the progress of the project in a positive light ("we are 80% done") instead of focusing on unfinished tasks.

4. Bandwagon effect

What is it?

People are more likely to do something when they believe others are doing the same. Social proof is a powerful motivator. The power of example is great in herd behaviour, because when we see others succeeding at something, it lowers our self-protection threshold and increases our belief in our own ability to do the same thing.

By following the example of others, we put our own thinking aside, allowing others to think and consider what to do, acting as if someone else had put the words in our mouths. The same thing can also be expressed by saying that we are given a script and follow it like knitting instructions, without deviating from the pattern that someone else has made for us.

By outsourcing our thinking to others, we save energy and effort, meaning we are just along for the ride and don't have to pedal ourselves.

Here's how to tackle availability heuristics:

• When making purchasing decisions, do you seek out the experiences and opinions of others about a product or service? Do you buy something because everyone else has bought it, even though you don't really need it?

• Stop and think: is this really my idea, or is it someone else's? Pay attention to your feelings, as they strongly influence your opinions when you form a genuine view while controlling your emotions.

5. Availability heuristic

What is it?

We assess the probability of an event based on how easily examples come to mind. Recent news reports or powerful images make something seem more likely. Availability heuristic relies on ease, meaning that even though we have a lot of things and information stored in our memory, utilising the entire library is laborious.

People usually act reactively, and availability heuristics specifically utilise this, meaning that they do not involve deep reflection or go through every nook and cranny of the brain. Availability heuristics is basically working memory, which is forgotten fairly quickly once we are no longer dealing with the issue. Heuristics in general uses a lot of shortcuts and takes the path of least resistance and the quickest route.

Here's how to tackle availability heuristics:

• If you want to reduce the role of availability heuristics, you need to stop and dig deeper into your memory. Keep in mind that in life, freshness is what matters most, because we can only live in the present moment.

• Taking shortcuts is relatively easy and effortless, but if you want to analyse things, you need to make time and space for it. When you operate automatically, you act quickly and reactively, which means you overlook things and take the most direct route forward.

Summary

Cognitive biases are a natural part of our thinking, but they are not just pitfalls. By recognising confirmation bias, anchoring, framing effect, herd effect, and availability heuristic, you can increase control over your decision-making, but remember: You can only increase control to a limited extent; the most important thing is to know how to stop and slow down our thinking, especially the speed of our subconscious and its role in decisions.

Remember: If these biases dominate your decision-making and you feel like you are just going with the flow, there is nothing wrong with you. On the contrary, you are acting like all living beings. Humans have simply formed a perception of their own rationality and deliberateness, when in reality we have a very limited ability to control our own thoughts and behaviour. The best way to gain even a little more control over your own actions is to slow down and stop to analyse the situation.