25 Cognitive Biases Flashcards
REWARD & PUNISHMENT SUPER-RESPONSE TENDENCY
Never underestimate the power incentives and disincentives have on motivating people to complete a task
If you find the right incentive you can motivate people to act a certain way, enhance performance or be more productive. If people aren’t doing what you want them to do, your incentive or disincentive is wrong.
When sales of a new superior technology were low, Will discovered that the commission for the old system was higher than the new.
A quick change in the commission structure quickly increased sales for the new system.
LIKING/LOVING TENDENCY
People ignore the faults of other people, products or companies that they love, like or admire
Humans ignore the faults of, comply with the wishes of and favor people or products associated with the object of their affection. They will even distort facts to facilitate their love.
Colin loves his new Smartphone, even though it was discovered the company that makes it uses sweatshops, child labor and has been accused of many human rights violations.
DISLIKE/HATING TENDENCY
Humans ignore the virtues and views put forth by those things or persons they dislike.
People will often distort facts to justify the hatred towards people, products or companies while putting on blinder to other options or opinions. We even dislike products or views associated with what we hate.
Edward refuses to buy product, from a company if he knows it supports or promotes conservative policies and values. He says “I don’t care how good the product is, I don’t want to support their agenda.”
DOUBT AVOIDANCE TENDENCY
If unsure about a decision humans will try to remove any doubt by making an ill-informed, quick decision.
The combination of uncertainty, confusion and stress can lead a person to mak ing a quick irrational decision. This is an effort to remove doubt from the decision making process.
Under pressure to make a car buying decision, Ralph quickly picked one, because it looked the fastest, even though he had no idea if it actually was. To justify his decision he said “this car has everything I need.”
INCONSISTENCY - AVOIDANCE
TENDENCY
The human brain conserves energy by being reluctant to change, which is a way of
avoiding inconsistency. Eliminating a bad habit is a rare trait. Since it takes a lot of energy for the brain to change habits, it is easy to avoid change. The saying “ you can’t teach an old
dog new tricks” is a result of this tendency.
Despite the evidence that smoking is bad for your health, Grace says “I’ve been smoking my whole life” and asks “why should I stop now?” She continues to smoke to this day.
CURIOSITY TENDENCY
Curiosity has been one of the main drivers in
human progress throughout history. Curiosity has driven innovation, exploration and technology. It has driven people to the bottom of the ocean, into space and across the Earth even risking life to satisfy their curiosity.
When asked why he wanted to be a computer engineer, Roger replied “I have always been curious as to what makes a computer work and if I could make them better”. It was curiosity that drove his career decision.
KANTIAN FAIRNESS TENDENCY
People expect a certain level of fairness and will act irrationally to punish those who are not fair
Life is not fair, but many people can’t accept this. People have a tendency to reject an offer if they think it’s unfair. Tolerating a little fairness should be okay if it means greater fairness for all.
“I always let drivers merge on the freeway” said Susan “I know that they’ll return the favor when I need to do the same.” She continued “If you treat drivers fairly they will treat you in kind.”
RECIPROCATION TENDENCY
In reciprocation tendency, we tend to want to return the favor when someone helps us.
The desire to return favors can be a good thing, but it can lead to making poor decisions if you make a purchase or reciprocate in kind out of a feeling of obligation based on these minor favors.
While walking through the grocery store fill said “I try to avoid free samples, because I feel obligated to buy the product even if I don’t like it.” She went on “I only take a sample if I know I’m going to buy it.”
ENVY/ JEALOUSY
TENDENCY
Envy/jealousy comes from the desire to have a
quality, possession or attribute belonging to
someone else. Envy or jealousy occurs often when the object of your desire is seen in
possession of another person. Warren Buffet has been quoted as saying “it is not greed that drives the world, but envy”
After seeing his neighbor drive up in a brand new luxury car, Tim said to his wife “I work just as hard if not harder than he does, I deserve a car like that or better. I’m tired of everyone else having nicer things”.
INFLUENCE-FROM-MERE
ASSOCIATION TENDENCY
People can easily be manipulated by mere
association through advertising, quality perception, celebrity, etc.
Associations, whether positive or negative, can influence what people buy, how they think or how they perceive a situation. Media, advertising, political groups etc. use association to influence people’s perception.
“I always thought that the highest price product was the best quality said Fred. “Until I discovered some companies raise their price to make people believe their product is the best” he continued.
SIMPLE PAIN
AVOIDING
PSYCHOLOGICAL DENIAL
Humans have a habit of distorting facts, until they become bearable for our own views.
Facing the truth can be too hard to bare. In the most extreme cases such as death, love and chemical dependency, it is easy to distort the facts when the pain of reality is too hard to face.
Even after a year of being lost at sea, Alice refused to believe her husband of 20 years was dead. “I won’t believe he’s gone until I see the body” she said “it’s just too painful to think about.”
EXCESSIVE SELF-REGARD
TENDENCY
People have a tendency to believe they are above average. This is where overconfidence comes from. Obsessive high regard for our abilities, possessions and even children is common.
Munger says “the greatest type of pride should
be taking pride in being trustworthy to avoid developing an ego.”
“I don’t care what the test says” Jim cried “I have a above average intelligence compared to the average person” he continued, even after he got a low IQ test score for the second time.
OVER-OPTIMISM TENDENCY
Over-optimism bias usually shows that excess of optimism is the normal human condition.
Humans have habit of being over-optimistic about their situation whether good or bad. The lottery is an example of this tendency, people are over-optimistic even though the odds of winning are ridiculously small.
Even though times were tough, Jim and Sally decided to buy a bigger home. They said “we’re optimistic that we’ll be making more money in the near future, enough to cover our increase in expenses with a new home.”
DEPRIVAL-SUPERREACTION
TENDENCY
Deprival-Superreaction refers to people’s
tendency to strongly prefer avoiding losses
to acquiring gains.
Humans tend to over reacts irrationally even to a small loss, or threatened loss, of property, love, friendship, opportunity, status or anything of value. Losses are twice as powerful, psychologically, as gain.
Even though he didn’t like his 15 year old car and wanted to sell it, Jack was ready to risk his life in order to prevent it from being stolen. “I got so mad when I saw someone trying to steal my car” he said.
SOCIAL-PROOF TENDENCY
Social-Proof Tendency is an automatic tendency to think and act as others around think and act.
If humans are unsure of what to do, or are looking for acceptance, they will simply follow the crowd and do what everyone else is doing. This can influence people to make huge mistakes and poor judgments.
When all of his friends bought a fake ID, Jake wanted one too even though it was illegal to have one. He said “I don’t want to be left outside while my friends have fun at the club.”
