Cognitive Biases Flashcards
Anchoring bias
People are <b>over-reliant</b> on the first piece of information they hear. In a salary negotiation, whoever makes the first offer establishes a range of reasonable possibilities in each person’s mind.
Availability heuristic
People <b>overestimate the importance</b> of information that is available to them. A person might argue that smoking is not unhealthy because they know someone who lived to 100 and smoked three packs a day.
Bandwagon effect
The probability of one person adopting a belief increases based on the number of people who hold that belief. This is a powerful form of <b>groupthink</b> and is the reason meetings are often unproductive.
Blind-spot bias
<b>Failing to recognize</b> your own cognitive biases is a bias in itself. People notice cognitive and motivational biases much more in others than in themselves.
Choice-supportive bias
When you choose something, you tend to feel positive about it, even if that <b>choice has flaws</b>. Like how you think your dog is awesome—even if it bites people every once in a while.
Clustering illusion
This is the tendency to <b>see patterns in random events</b>. It is key to various gambling fallacies, like the idea that red is more or less likely to turn up on a roulette table after a string of reds.
Confirmation bias
We tend to listen only to information that confirms our <b>preconceptions</b>—one of the many reasons it’s so hard to have an intelligent conversation about climate change.
Conservatism bias
Where people favor prior evidence over new evidence or information that has emerged. People were <b>slow to accept</b> that the Earth was round because they maintained their earlier understanding that the planet was flat.
Information bias
The tendency to <b>seek information when it does not affect action</b>. More information is not always better. With less information, people can often make more accurate predictions.
Ostrich effect
The decision to <b>ignore dangerous or negative information</b> by “burying” one’s head in the sand like an ostrich. Research suggests that investors check the value of their holdings significantly less often during bad markets.
Outcome bias
Judging a decision based on the <b>outcome</b>—rather than house exactly the decision was made in the moment. Just because you won a lot in Vegas doesn’t mean gambling your money was a smart decision.
Overconfidence
Some of us are <b>too confident about our abilities</b>, and this causes us to take greater risks in our daily lives. Experts are more prone to this bias than laypeople, since they are more convinced that they are right.
Placebo effect
When <b>simply believing</b> that something will have a certain effect on you causes it to have that effect. In medicine, people given fake pills often experience the same physiological effects as people given the real thing.
Pro-innovation bias
When a proponent of an innovation tends to <b>overvalue its usefulness</b> and undervalue its limitations. Seen often in Silicon Valley.
Recency
The tendency to weight the <b>latest information</b> more heavily than older data. Investors often think the market will always look the way it looks today and make unwise decisions.
