Nine cognitive biases you should know because
if you don’t you may make foolish decisions. In Dr. Kahneman’s Thinking Fast
and Slow he explains that we have a Two System way of thinking.
The first is the intuitive, “gut reaction” way
of thinking and making decisions. The second way of thinking is the analytical,
“critical thinking” way of making decisions.
In the first way of thinking, we form “first
impressions” and when we use this type of thinking we often jump to
conclusions. Our second method of thinking does reflection, problem-solving,
and analysis. However, we spend most of our time in thinking fast while we identify
with our second type of thinking. Most of us consider ourselves rational,
analytical human beings. Thus, we think we spend most of our time engaged in logical analytical thinking.
Actually, we spend almost all of our daily
lives engaged in emotional thinking. Only if we encounter something unexpected,
or if we make a conscious effort, do we engage Logical thinking?
These biases have evolved over thousands of
years, we are pattern-seeking primates, which is useful for hunting prey, but
terrible for complex tasks. So, we are now regularly prone to hundreds of
biases, too deeply ingrained to overcome without removing the human from the
process. Reading the book is not enough.
One of the biggest problems with emotional
thinking is that it seeks to quickly create a coherent, plausible story — an explanation for what is happening — by relying on associations and memories,
pattern-matching, and assumptions. When we use this type of thinking we will
default to that plausible, convenient story — even if that story is based on
incorrect information.
This type of thinking is highly adept it
automatically and effortlessly identifies causal connections between events,
sometimes even when the connection is spurious.
This is the reason why people jump to
conclusions, assume bad intentions, give in to prejudices or biases, and buy
into conspiracy theories. They focus on limited available evidence and do not
consider absent evidence. They invent a coherent story, causal relationships,
or underlying intentions. And then we quickly form a judgment or impression,
which in turn gets quickly endorsed by our logical thinking.
As a result, people may make wrong judgments
and decisions due to biases. There are several potential errors in judgment
that people may make when they over-rely on emotional thinking:
01 Law of large numbers
People don’t understand statistics very well.
As a result, they may look at the results of a small sample — e.g. 100 people
responding to a survey — and conclude that it’s representative of the
population. This also explains why people jump to conclusions with just a few
data points or limited evidence. If three people said something, then maybe it’s
true? If you personally observe one incident, you are more likely to generalize
this occurrence to the whole population. For example, imagine two maternity
hospitals, one large, one small. In a week, 60 percent of births are female.
Which hospital is more likely to be the venue? It takes time to figure out… the
smaller one. Small sample sizes suffer more from deviation from the mean.
02 Gambler’s fallacy and the Illusion of
understanding:
The original sin is
the tendency to assume that bad luck will be compensated by good luck. Karma.
Alas, we are frequently crippled by the belief that life will magically
auto-correct to compensate us for previous losses. People often create flawed
explanations for past events, a phenomenon known as a narrative fallacy. These
“explanatory stories that people find compelling are simple; they are concrete
rather than abstract; assign a larger role to talent, stupidity, and intentions
than to luck; and focus on a few striking events that happened rather than on
the countless events that failed to happen. Good stories provide a simple and
coherent account of people’s actions and intentions. You are always ready to
interpret behaviour as a manifestation of general propensities and personality
traits — causes that you can readily match to effects.”
