4 Mental Missteps That Can Hurt Our Business Decision Making
We all like to believe that we are rational people who make decisions based on logic and critical thinking.
Except we aren’t. None of us make decisions on a purely rational basis. None.
You know what I’m talking about – we’ve all made some choices in our lives that we look back at and go “What was I thinking?”
This happens because there are a predictable set of traps or “fallacies” that our brains trick us into. A whole host of studies in recent years have discovered several of these “mental traps” that hamper our ability to make good decisions. Let’s look at the most common ones that may even find their way into our businesses.
1. The dirty business of survivorship bias
Survivorship bias is the tendency that we have to isolate certain aspects/qualities of successful people and then use them as a guideline to succeed ourselves while completely ignoring all the people who do the same things but aren’t successful.
The internet is flooded with examples of survivorship bias. All the “12 Habits of Successful People” or “6 Things You Can Learn From Tony Robbins” articles you’ve read are an example of this bias.
Consider this – Bill Gates dropped out of school and became a billionaire. Does that mean dropping out of school will make you a billionaire?
For every successful person who has the “12 habits”, there are countless others who have similar habits but aren’t successful. In general, our brain tends to massively overestimate how much a particular attribute, skill or circumstance contributes to a person’s overall success.
To make good decisions, you must consider every aspect of the situation, and not just the ones that are convenient or immediately apparent. Don’t just drop out of school and expect things to happen automatically.
2. Fear of loss influences decisions.
We tend to avoid losing things more than gaining things. For example, studies have shown that you will experience some degree of pleasure or satisfaction if someone hands you a $20 bill. But, you will experience a much larger loss of satisfaction if you lose $20.
Even though both these outcomes are theoretically equal on opposite sides of the spectrum, the reaction you have to the loss far outweighs the pleasure of the gain. This tendency to avoid losses keeps us caught in the “comfort zone” and stops us from making decisions and choices that can empower our lives.
Just think about one of your t-shirts or a pair of jeans that you haven’t worn for several months. Now think about how you would feel if you had to give them away to a stranger. You’ll notice in a split-second how much you’re avoiding losing something that you aren’t currently using at all!
3. You assume that information which is available or most visible is the most important.
This phenomenon is called the “Availability Heuristic” and is a common pitfall that affects our decision-making capabilities.
Let me illustrate this concept with a scenario.
By any measure, this is the best time to be alive on this planet. Crime rates and disease fatalities are lower than ever before. We have an incredible amount of access to information and entertainment. The advent of technology has made our lives incredibly convenient.
And yet (you might have caught yourself doing this just now) people are constantly shocked when they hear that this is the most peaceful time for humanity. They’ll say things like…
“If it’s so peaceful out there, how come there are so many wars? What about Syria or Africa? What about the economic crisis in Greece?”
This is the availability heuristic in action. Technology has made reporting and access to information so easy that you now know more about what’s happening in the world than ever before. In your sphere of information, there’s a lot more bad stuff coming in (because you can get news so easily) but globally, it’s more peaceful than it has ever been.
We constantly overestimate how bad or good things are depending upon the things we remember or have access to, and we constantly underestimate the importance of things that aren’t in the cultural zeitgeist currently.
4. Your decisions are plagued by confirmation bias.
Confirmation bias is perhaps the most prevalent (and most dangerous) mental trap of them all.
It refers to our tendency to pick and choose information that reinforces our preexisting beliefs while completely ignoring anything that doesn’t support your current theory.
Here’s an example – if you’re looking to buy a new supplement, you will read more articles that reinforce how good the supplement is. You will likely be extremely skeptical of anything that doesn’t support your idea to buy the supplement, even if the information is credible and backed by science.
You can apply this deduction to any aspect of your life and you will begin to see that you have a dangerous amount of confirmation bias in your current decision-making. By default, your brain will form a theory about something and from that moment on, you will constantly look for information that supports this theory. By understanding this is how your mind works, you will be able to stop ignoring important information while making decisions.
Your mind is a powerful tool that can completely transform your life if you learn how to harness its power. Logical fallacies and mental traps like the ones we’ve talked about are everywhere. Train yourself to stop in the moment before you decide and think…really think.
“Am I making the right choice here?”
To your success,
Dubsado – The Ultimate Business Automation Tool for Entrepreneurs