Cognitive Biases

Question 1

Anchoring Bias

Answer 1

We are over-reliant and attribute too much importance to too the first piece of evidence or information we learn about. E.g in negotiations, whoever goes first establishes the range of offers.

Question 2

Availability Heuristic

Answer 2

People over-estimate the importance and implications of the information they happen to have for example claiming that smoking isn’t bad for you because you know someone who smoked 40 a day and lived to 100

Question 3

Bandwagon Effects

Answer 3

The probability of one person adopting a belief increases based on the number of people who hold those beliefs, this is a powerful form of group think.

Question 4

Blind-spot bias

Answer 4

Failing to be aware of your own cognitive biases is a blindspot. We are far more likely to recognise cognitive biases in others than in ourselves.

Question 5

Choice-Support Bias

Answer 5

When we chose something we tend to overestimate how good it is and we will try to deny or fail to recognise the flaws in our choices

Question 6

Clustering Illusions

Answer 6

The tendency to spot patterns in random events, e.g a gambler betting on red because there have been a string of reds.

Question 7

Confirmation Bias

Answer 7

The tendency to only listen to, recognise or search for information which will confirm our own preconceptions and views.

Question 8

Conservatism Bias

Answer 8

This is where we tend to favour and are more firm in our beliefs of old evidence as opposed to new evidence e.g why it took so long to believe that the world was round.

Question 9

Information Bias

Answer 9

Where we continue to search out information that isn’t relevant to our decision or what action we will take.

Question 10

The Ostrich Effect

Answer 10

The tendency to try and avoid bad information by ‘burying our heads in the sand’. E.g investors check their portfolios far less often during bad markets

Question 11

Outcome Bias

Answer 11

The tendency to judge the efficacy of our situation based on the outcome, if we win a lot of money on a gamble it doesn’t mean we made a good decision.

Question 12

Placebo Effect

Answer 12

When simply believing or expecting something to happen means we feel it does or has e.g in medicine.

Question 13

Pro Innovation Bias

Answer 13

When the proponent of a new idea or innovation overestimates it’s value or usefulness

Question 14

Recency

Answer 14

The tendency to only focus on the most recent data and ignore old but reliable data. E.g investors failing to look at old movements in the market over time.

Question 15

Salience

Answer 15

Our tendency to focus on the most recognisable aspects of a person or event, e.g imagining death by a mugging as opposed to the more likely car-crash

Question 16

Selective Perception

Answer 16

Allowing our expectations to influence what perceive, for example noticing more faults and errors in other people

Question 17

Stereotyping

Answer 17

Expecting a group or person to have certain qualities without any real information or evidence.

Question 18

Survivorship Bias

Answer 18

An error that comes from only focusing on surviving examples causing us to misjudge a situation e.g thinking being an entrepreneur is easy because we don’t know about all those that have failed.