Four Common Cognitive Biases in the Decision-making Processes

In life, we are faced with decisions big and small. We tend to weigh the pros and cons of what should be done based on how it will affect our future. But less apparent is how we make those calculations and on what our calculus is based. When it's time to make decisions, it's valuable to be aware of Cognitive Biases and how they influence our judgment. Cognitive Biases arise because our brains simplify information based on memories and attention spans. Our personal experience, and our limited mental resources, dictate many of our choices. Below are four common Cognitive Biases that may affect your decision-making process.

Confirmation Bias and “the Backfire Effect”

If you've ever felt like someone bragged about consuming balanced viewpoints, yet after doing so, settled more strictly into their original view, they may be succumbing to the confirmation bias. Confirmation bias means that even if you consume multiple insights on a topic, you cannot gain knowledge on it. Instead, you're cherry-picking the viewpoints that "speak to you," and thereby becoming even more confident that your original belief was correct. How can we combat Confirmation Bias? Remember in school, when we were given the assignment to write a persuasive paper, and the requirements asked us to include the counterargument - the opposing viewpoint? There's a reason that our educators wanted us to argue against ourselves. Including counterarguments shows that you're not only considering the opposing view but acknowledging how that view affects the whole picture. This exact requirement could be applied to any conversation where opposing views are met.

 According to the Columbia Journalism Review, when facts contradict an opinion, that opinion only grows stronger! This is called the backfire effect. The more we try to argue with someone by presenting good counterarguments, the more likely they are to dig into defensiveness. This bias shows why we aren't exactly welcome to opposing ideas. It can be challenging to influence and be influenced by others.

Ostrich Effect

We've all been told, "make a pros and cons list." Some people take that seriously and do all the research they can to get a decent understanding of what all the pros and cons might entail. However, the Ostrich Effect is when people avoid receiving or hearing information that would seem negative and unpleasant. 

The Arrested Development model of Financial Literacy provides an example of financial avoidance and how financial teams and members avoid negative information to avoid a sense of failure. Common ways to avoid this cognitive bias are inattention, forgetfulness, and mainly physical avoidance. More in-depth studies on investors show that this effect is more common in men, older investors, and wealthier investors. Other examples that can be applied to this effect are when someone knows of a bill payment coming up soon or a job promotion they applied for. Some purposely avoid finding out about the cost of the bill or if the position would be given to them. They would instead distract themselves than face a potentially harmful reality.

 How can we combat the Ostrich Effect? It's the adage to face your fears. Imagine you're on a jury, and you can't bear to look at grotesque evidence or hear painful survivor stories. However, to make a fulsome decision and get a holistic understanding of the situation, you have to expose yourself to this information and absorb it. Yes, it's painful; yes, it may not be what we want to hear, but it's imperative to inform your decision.

Bandwagon Effect

Influencers play a huge role in the age of technology and social media. But this isn't new. Humans evolved with "strength in numbers," so it's only natural that we feel like it may be in our best interest to do the same when we see everyone else doing something. However, basing our beliefs and choices on what the majority is doing may not be the best course of action. The Bandwagon Effect has been observed in everything from political campaigns (choosing a person based on where the majority support is) to small teams debating corporate strategy. It can cause groupthink, dangerously leading to poor outcomes because people are afraid to challenge the majority vote. In the iconic 1957 film 12 Angry Men, a jury is responsible for determining the fate of an 18-year-old defendant. It shows the power play that the various men go through to put pressure on a consensus. One calls for a "guilty" vote to make that evening's ball game, never mind that an 18-year-old's life is at stake! They villainize the holdouts who are simply asking for more deliberation. It shows how difficult it may be for one person to go against the grain, but a huge difference that one person can make if bold enough to hold firm against the bandwagon effect.

Zero-risk Bias

Humans crave certainty, and so, taking risks is inherently scary. We fear the unknown: what will happen after this or that choice? Zero-risk Bias is taking the option that avoids risk or not choosing something in order to avoid the risk that comes with it. When it comes to risky decision-making, people tend to overweigh the value of certainty and opt for zero-risk solutions, even if this results in a less favorable outcome. Results indicate that the zero-risk bias is persistent over different methods but highly sensitive to contextual factors: the abstractness of the task, decision domain, and appropriateness of the zero-risk option. For example, in an online survey conducted by 35 U.S. pharmacies and 19 medical directors, the study was made to understand how four cognitive biases could affect medical practices. Although the study states there are no specific studies on zero-bias within the medical field, it provides an example of 408 government workers cleaning hazardous waste. This study stated that less than half of the subjects showed bias towards the zero-risk option, while the other resulted in a more significant lowering of risk.

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Decisions are never easy, and sometimes there is no win-win. In the end, it's genuinely about educating yourself on not just the options but how you may be consciously or unconsciously perceiving them.