Understand Cognitive Biases. Make Better Decisions.

Have you ever made a decision only to quickly regret it later?

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What happened? It's likely you were influenced by a psychological bias. All of us have them, and this article will explain five cognitive biases that you definitely need to be aware of to avoid making bad decisions:

  1. Confirmation Bias

  2. Negativity Bias

  3. Projection Bias

  4. Sunk Cost Bias

  5. Short-Term Bias

Without further ado, let's get into it!


1: Confirmation Bias

Confirmation Bias is when we only acknowledge information and people who confirm our existing beliefs. For example, people who support a particular political party will pay attention to information that agrees with them and ignore information that disagrees. Another example is if we think someone is [nice, mean, fill-in-the-blank], we will actively seek to prove that. Clearly, confirmation bias is very harmful because we will make misinformed decisions based on incomplete facts.

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The solution to confirmation bias is to base your confidence on being open-minded rather than on being right. In his book, Principles, Ray Dalio talks at length about how to be more open-minded.

If we are open-minded and we hear an opposing opinion, we would try to learn more about their reasoning. We don't have to agree, but our goal is to learn the truth so that we can make the best judgment. That is proper confidence based on learning, not blind confidence based on ego.


2: Negativity Bias

Negativity Bias is when naturally pay more attention to negative news and pay little attention to positive news. For example, if the news said the stock market went down, people would probably all be talking about it. But if the news said the stock market is doing well, not many people would be talking about it, and many people would take it for granted. Another example is people spending a lot of time reading negative posts on social media but little time reading positive posts. Obviously, intaking negativity will make our minds more negative.

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The solution to negativity bias is simply to be aware of it, and then choose content feed to be focused on positivity instead of negativity. Just like how we want to choose our foods carefully for our health, we should choose content carefully for our mind.


3: Projection Bias

Projection bias is when we think that other people think like us, and we reflect our beliefs and standards onto others. For example, we think someone should be as [loyal, caring, conscientious, etc.] as we are, and then they “let us down”.

The reality is, everyone comes from a different background and upbringing, everyone has different ways of thinking, and no one can read your mind. Therefore, the solution is clearly communicate your perspective and expectations early in a relationship to prevent misunderstandings.

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For example, if you want the other person to arrive 5 minutes early to dates, or to praise you more, or help with a chore, or whatever it is, you have to ask! The reason they don't it is either because they don't know you want it, or they know you want it but they don't think it is a big deal because they don't value it. If they don't value it like you do, then you need to have open communication about why that thing is important to you. We can't expect others to understand us if we don't communicate clearly.


4: Sunk Cost Bias

Sunk cost bias is when you don’t want to abandon a bad investment (of money or time) simply because you invested in it. For example, some people start a university degree only to realize it doesn't suit them, but they keep on going because they don't want to waste their past investment in time and money. Another example is finishing a book or TV series that you are not interested in just because you already started it. The sunk cost cannot be recovered no matter what, so we shouldn't base our decision on it.

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The solution is to ask yourself, "If I started fresh and new today, what would my choice be?" To continue the above examples, if you were to choose a university degree today based on all the information you know, which major would you choose? If you were to choose a book to read today, any book you want, which book would it be? This is how we let go of the sunk cost.

5: Short-Term Gratification Bias

Short-term gratification bias is when people struggle to put off small, short-term pleasure for big long-term rewards. Being able to put off short-term pleasure for long-term gains is extremely important, as demonstrated by The Marshmallow Experiment.

In The Marshmallow Experiment, researchers sat a 4-5 year old kid in a room with a table that had a marshmallow on it. The researcher told the kid that he would be back later, and if the kid did not eat the marshmallow, she would get another marshmallow later. But if the kid ate the marshmallow, then she would not get a second marshmallow. The researcher then left the room for 15 minutes. Of course, some kids ate it right away, some jumped up and down and gave in after a few minutes, while some were able to wait the full 15 minutes.

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The researchers then followed these children for over 40 years to compare the success of those who ate the marshmallows right away versus those who could wait. They found that those who could delay gratification did better on everything measure, such as higher SAT scores, lower levels of drug abuse, less obesity, and better social skills.

So what's the solution to short-term gratification bias? We should always ask ourselves, "How do I want to feel tomorrow? A week later? A month later? A year later?" and "What is the best choice in the long-term rather than the short-term?"

To be clear, relaxation and enjoyment are not necessarily bad, but excessively indulging in them and avoiding responsible is bad. Therefore, everything we do needs to be an appropriate degree.


My Experience

I've always been interested in psychology, so researching these five biases was very fun for me. Of course, researching is not enough, I need to actually use them in my life!

1: Confirmation Bias

I've spent the past couple of years trying to practice humility and open-mindedness in my daily interactions by accepting people's criticisms and complaints rather than defending myself. It was not easy at first, but I got better over time because I reflected on it every day in a journal.

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2: Negativity Bias

When people react strongly to negative news, I try not to get too emotional about it because being too emotional doesn't help. I also filtered my social media influences by unfollowing negative content and following positive content instead.

3: Projection Bias

When people don't behave as I want, I first ask myself, "Did I communicate clearly?" If not, then I try to communicate again in a more clear way. If I did indeed communicate clearly, then I go and ask them why they behaved that way.

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If their reasoning makes sense to me, I obviously won't be upset. If their reasoning is illogical, then I remind myself that getting upset or frustrated helps nobody, and that everyone is just seeking to be accepted and valued for who they are, faults and all, so this is a chance for me to practice The Golden Rule.


4: Sunk Cost Bias

In the past, I had to make a decision between continuing a business job that I was not interested in or switching into teaching, which I might be interested in. I knew about sunk cost bias back then, and I didn't want to fall prey to it. However, all the people around me were pressuring me very hard by saying how I already started this job, and my education is in this field. Although I wanted to base my decision on future happiness rather than past sunk cost, it was emotionally difficult.

A good solution I found was to take an adjacent step rather than jumping the ship altogether. So I found an opportunity to teach business English to university students in Shanghai. I learned from that job that I really do enjoy teaching, so then I took another adjacent step to teach high school business back in Toronto. This way, I could move forward in a better direction while helping the people around me feel more at ease.

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5: Short-Term Gratification Bias

To help myself think longer term, I created a list of values that I care about, such as family, kindness, learning, and teaching. When I die, I hope that people would notice these values reflected in my everyday behavior. Every night, I reflect on whether or not I've acted according to my values. This helps me link my long-term goals to my daily life.

I've also found that stress and unhappiness are usually triggers for seeking short-term pleasure. For example, I would eat some chocolate after I had an argument with someone, or I would play some games to distract myself from unhappiness. But after I learned to become more stress resistant, my desires for short-term pleasures decreased significantly.


Summary

Ray Dalio said,

"The quality of your life ultimately depends on the quality of your decisions."

Understanding some basic psychology is a great way to make better decisions. This article talked about five major cognitive biases:

Which biases do you stumble on? How can you overcome them?


 

Weekly Wisdom Newsletter #178

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