Week 9 Flashcards
Define Debiasing
Debiasing: to eliminate or reduce the biases present in the decision-making process
Along with “” “” comes with greater uncertainty and “” “” on our brain (cognitive resources)
more choices, greater demand
List the Two key biasing approaches?
- Modify the Decision-Maker
- Modify the Environment
What is the “Modify the Decision-Maker”
Modify the Decision-Maker
- Focuses on helping individuals overcome their own biases
- Goal: Give people the tools and knowledge to make better choices
Example:
- People delay saving for retirement because they mistakenly think money grows at a steady, slow rate.
- In reality, savings grow exponentially, not linearly.
- Starting early makes a huge difference over time.
✅ Tip to correct the bias: Use the Rule of 72:
Money doubles in about 72 ÷ interest rate years
Example: At 6% interest, money doubles every 12 years
What is the “Modify the Environment”
Modify the Environment
Involves changing the setting or context in which decisions are made
Goal: Reduce bias by guiding people toward better choices without changing the person
Define Nudge
Nudge: A nudge changes the environment to influence behavior — without taking away choices or changing the options
- Uses psychology to gently steer people toward better decisions
Goal: Help individuals or society make healthier, smarter, or more future-focused choices
Example:
- ✅ Save More Tomorrow is a nudge — it encourages higher retirement savings by using future raises, without forcing anyone to do anything
- Default retirement plan enrollment: You’re automatically signed up unless you opt out. Most people stay in—so savings go up.
- Healthy foods placed at eye level in cafeterias or stores. You’re more likely to choose them without thinking
- Smaller plates in buffets to reduce overeating
what can Debiasing can lead to? what outcomes?
Debiasing can lead to:
-
One specific outcome (same for everyone)
- Example: A universal nudge that encourages everyone to save more for retirement
- A range of outcomes, depending on the individual
- Example: everyone saves the right amount for themselves
What are 2 Key Factors That Lead to Bias Errors
1. System 1 vs. System 2 Thinking
System 1 = Fast, automatic, intuitive
- Helps us make quick decisions, but often relies on shortcuts (heuristics) that can lead to mistakes
System 2 = Slower, more effortful, logical
- Helps correct errors, but isn’t always engaged
2. Narrow Thinking
- Making decisions based on limited, familiar, or easily available information
- Even with deep thought, people may miss key factors if they don’t know what they’re overlooking
What is decision readiness? what are the 3 factors that negatively affect this?
Decision Readiness: A person is “decision ready” when their System 2 (slow, logical thinking) is fully active and able to process complex information.
3 Factors That Negatively Affect Decision Readiness:
Fatigue & Distraction: When tired or distracted, people default to System 1 (fast, automatic thinking)
Makes careful, rational decision-making harder
Visceral Influences: Incidental emotions (like stress, fear, or excitement) can distort thinking
These emotions aren’t related to the decision itself but still influence it
Individual Differences: People vary in intelligence, training, and thinking style
Some biases (like overconfidence) are linked to cognitive ability
Others (like anchoring or sunk cost fallacy) affect everyone, regardless of ability
What are the 3 tools for Modify the Decision-Maker
🛠️ Tools to Modify the Decision-Maker
1. Education
- Teaches rules, principles, and facts
- Pro: Builds knowledge
- Con: May be forgotten over time or applied too late
- Best use: Just-in-time, context-specific learning (right when decisions are made)
- Multiple Perspectives
- Encourages thinking beyond one’s default view
- Helps counter narrow thinking
How: - Generate alternatives
- Consider the opposite viewpoint
- Temper overconfidence
- Assess uncertainty
- Decision Models
- Structured tools or systems to guide decision-making
- Example: Baseball teams used data models to predict player performance and gain a competitive edge
- Advantage: Promotes objective, data-driven choices
Modify the Decision Maker, Within Multiple Perspectives, what are the other cognitive strategies?
- Generating Alternatives: Considering multiple perspectives improves decision quality.
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Tempering Optimism/Plan for Failure: “Prospective hindsight” (imagining failure) improves planning.
- Imagine your plan has failed — then ask, “Why?” This helps you prepare better.
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Improving Judgmental Accuracy: The “crowd within” method (averaging multiple self-predictions) enhances forecasts.
- If you guess something twice and average your answers, you’ll usually be more accurate.
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Assessing Uncertainty/Break big questions into small parts: Breaking estimates into smaller steps improves confidence interval accuracy.
- When you estimate something complex, split it into smaller steps. You’ll be more realistic and confident.
What are the Tools to Modify the Environment
Incentives:
Motivate people to make better, smarter choices
Often used to improve self-control (e.g., exercising, dieting, quitting smoking)
- People sometimes make bad decisions simply because they lack motivation
- Solution: Offer rewards (money, benefits, or consequences) to encourage better choices
Choice Architecture - refers to the manner in which alternatives or information is presented, and a choice architect is someone who is engaged in designing that environment
- focus on things like defaults (something that automatically happens, no choice has to be made) and nudges to help design a decision-making environment that encourages good choice selection
A checklist – reducing errors and in some cases savings lives.
* Checklists, by design, reduce errors arising from forgetfulness and other memory errors.
* Aid in high stressful conditions like a surgery room
Simplify extreme complexity
Nudge: Modify the environment without restricting choice or altering alternatives
When choosing a debiasing strategy, what are 6 Factors to consider?
also what are outcome nudges and process nudges
Choosing a Debiasing Strategy
Factors to consider:
- Effectiveness – Does it work in this context?
- Decision Readiness– Are people alert enough to engage (aka able to use System 2?
- Competence/Benevolence – Who benefits?
-
Heterogeneity – Does it work for diverse individuals?
- Outcome Nudges: Same result for all (e.g., auto-enroll in retirement plan)
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Process Nudges: Help people think better (e.g., prompts to reflect on goals)
More variety in people → favor process-based approaches
- Decision Frequency – One-time vs. repeated decisions.
- Decision Complexity – Simple nudges vs. education needed.
