What Cognitive Biases Are Covering Up And Why Decision ... · cognitive traps are very hard to spot. But the moment you learn about them and manage to realize you are susceptible

© 2015 Yaware

What Cognitive Biases Are Covering Up And Why

Decision-Making Is At Risk

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CONTENTS

Introduction…………………………………………………………………………………3 How a Single Fact May Lead to a Wrong Judgement: a Tricky Anchoring Effect………………..............................4 The Bias Blind Spot Is Our Excuse for Being Over-Confident…………………………………..............................................8 Are We Overly Credulous? No, It’s Just the Illusory Truth Effect……………………………….....................................................11 The Influence of the Peak-end Bias on Our Past Experiences………………………………...……………………………….15 Frequency Illusion or Why Some Words Are Chasing Us……………………………………….......................................18

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INTRODUCTION

Why are people bad at making decisions? It depends on each particular case of course, and one can hardly think of any obvious reason immediately. However, there’s a basic explanation which works for everyone. In fact, it underlies our every judgment as it derives from human fundamental abilities: cognition and perception. This reason is called cognitive biases – a curious psychological phenomenon which stands for the tendency to misinterpret reality because of perceptual errors. Thinking about it is really puzzling as you can think about your brain only with your brain. Not surprisingly we do make those mistakes.

As you’ll see in this eBook, all of these cognitive traps are very hard to spot. But the moment you learn about them and manage to realize you are susceptible to their influence, you might avoid plenty of trouble both at work and home.

The purpose of this eBook is to guide you through 5 cognitive biases which make us think in terms of what we suppose is true rather than what is really true: 1. the anchoring effect;

2. the bias blind spot; 3. the illusory truth effect; 4. the peak-end bias; 5. the frequency illusion or Baader-Meinhof phenomenon.

Having read about them, you’ll also see once more how really important it is to encourage critical thinking and active learning in order to make good choices. Otherwise you risk to stay locked within your biased opinions, not able to understand reality around you.

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CHAPTER 1

How a Single Fact May Lead to a Wrong Judgement: a Tricky Anchoring Effect

We like thinking we can assess the surrounding world rationally and

objectively, making sane judgments whenever we have to. The phenomenon of cognitive biases challenges this belief and proves what we think is true is in fact far from the truth. What is truly surprising about cognitive biases is they are fundamental to the way we think and perceive the world around us, yet for one reason or another they’re always left unnoticed. There’s a whole variety of these biases, each of them dealing with a specific aspect of cognition and perception. In this article we will focus on the one called the anchoring effect.

Overestimating Significance of Random Facts Anchoring means a tendency to refer to or rely too much on a single specific fact, opinion, etc. (it’s sometimes referred to as focalism.) Basically it means that before making a decision we keep returning to the fact or opinion articulated previously and try to adjust our decisions to it. In other words, a bias towards that fact emerges. 4



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This is what we usually think: we are rational and analyze all factors carefully before making a final decision.

This is what really happens: that very first fact just sticks in your mind and inevitably influences your further choices.

Scientists D. Kahneman and A. Tversky were the first to launch research on this bias. Later, various studies confirmed it really works and is very hard to avoid. For instance, in one of the studies a group of students was asked if Mahatma Gandhi died before or after 9 years of age; the 2nd group was given the options of before or after 140 years of age. While both options were clearly senseless we can see visible trace of the anchoring effect in the answers. The 1st group answered 50 years on average and the 2nd one answered 67 years. That is, students to whom a smaller number was told gave the smaller figure and vice versa.

Do Anchors Mean Reliability? We tend to use anchors as proofs to our decisions and judgments which is clearly wrong. The anchors can be wrong, can deceit and mislead us and cause dramatically false outcomes. Yet we are unable to get rid of them completely and this is exactly what’s the most dangerous about them. Likewise, the anchoring effect impacts our emotional side. We usually judge things depending on the mood we are currently in, that is our current emotion is an anchor which influences decision-making.

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One possible explanation of this cognitive bias is it stems from our desire to simplify things we are unfamiliar with or facilitate decision-making with any facts available, regardless of how fragile and unreliable they might be.

Anchors in Negotiations Negotiations and commerce are the areas in which the anchoring effect is most striking. Imagine one negotiating party is bringing the price of $500 to the table. It sticks to everybody’s mind, it’s like a starting point for negotiating. Obviously, it would depend greatly whether $500 is beneficial for both parties – not too low, but not too high either. That’s why negotiating parties are usually extremely reluctant to be the first to reveal the number. The same effect is true for salary negotiations and large purchases where the price can be negotiated (estates, jewellery, cars, etc.). No matter what the final price is both buyer and seller will bear the initial figure in mind all the time.

BATNA BATNA, Best Alternative to a Negotiated Agreement, is a technique used in negotiations to produce a solution that will help not to lose more than the bottom line allows.

How exactly does BATNA work in terms of its connection with the anchoring effect?

It means you should have several options discussed before the negotiations – some critical figures, both higher and lower than your most desirable outcome. So if the other party makes the offer you can quickly decide if it’s acceptable to you.

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A logical question then arises: is it better to speak first or wait for another party to speak? Negotiating parties often hesitate to speak out their figures first (afraid of aiming too low or too high). The best option is to be the first to make an offer. Evidence shows the final figure is usually close to the very first number. What we can learn from this is that being initiative and not afraid of speaking out first works better than taking a wait-and-see attitude which eventually can result in poorer negotiating terms. *It’s better not to try out this approach (i.e., making the first move) in situations when you really lack information and the other party clearly has the advantage.

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CHAPTER 2

The Bias Blind Spot Is Our Excuse for Being Over-Confident

The bias blind spot is another cognitive bias which makes people believe in

something completely different from reality, as if reality itself is not complicated enough to get through it. The bias was researched and articulated by Emily Pronin and her colleagues from Princeton University.

What Is the Bias Blind Spot? At its core is a statement that people tend to believe their own judgments are more objective and less susceptible to biases than the judgments of other people. In other words, we are inclined to think we can tell when exactly the other person’s opinion is biased, at the same time thinking we are not biased ourselves which, of course, is wrong a priori. The thing is we are deeply sure our own opinions somehow are rational, precise and objective and we are able to tell exactly if they are biased or not (in most cases it’s “Of course I’m not biased” approach). At the same time we think others fail to see this (while in reality they think the same as we do). So it looks like there’s a circle of people who believe they can tell when others misinterpret something straight away but do not see their own misinterpretation.

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CHAPTER 2

The problem with all biases is they act at an unconscious level. When people assess others they look outwards. But when they assess themselves they look inwards trying to figure out the reasons for unobjective, biased opinions. The fundamental question here is: how can their introspections be objective if the biases exist at the unconscious level? They go unnoticed and unrealized and, if so, people think they are free of them.

Research showed people usually think the facts are true if they’re consistent with their own opinions. That is, if they believe in heliocentrism rather than in geocentrism they’ll support Copernicus’s model wholeheartedly and reject everything different.

Should We Believe in What We Think Confirms Our Opinions?

The same is true for any facts: we gladly believe in something which supports / confirms our worldview rather than contradicts it. A sure way for making sober, objective decisions, isn’t it? Such approach leads us to thinking we believe in facts only. So, if someone tells us something different to our opinions we just ignore (even deny) it rather than take it as a source for interesting discussion and knowledge sharing. It reminds of a curtain drawn in front of our eyes and mind and for what? Just to remain sure it’s us, not them, who are actually right.

The Test Is Wrong, Not Me

Another example of the bias blind spot is any test we pass. Imagine a man who’d passed two tests: the 1st one with a higher score and the 2nd – with lower. He’ll take the results of the 1st test as more credible as it confirms his belief he’s capable of high performance (if only he doesn’t suffer from extremely low self-esteem).

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CHAPTER 2

Honesty Is the Best Policy Being honest with ourselves and admitting our susceptibility to biases is a good way to come to common terms with other people. It doesn’t mean we’ll get rid of them though. Yet it’s a good start for eliminating conflicts and misunderstanding, especially at the office. Otherwise, we’ll be locked within our own biased opinions and it’ll result not in constructive communication but will remind more of beating heads against the same brick wall – we on the one side and others on the other.

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CHAPTER 3

Are We Overly Credulous? No, It’s Just the Illusory Truth Effect

If you want people to believe something repeat it as often as you can and

they’ll eventually rise to the bait. This is the core suggestion of a cognitive bias called the truth effect, or the illusory truth effect. Even at first thought it seems very naive to suggest this can be true. Yet it is true, moreover it’s confirmed by psychological research. The repetition is often a key to making people believe what we want them to believe. The reason for this is people tend to consider things they hear permanently, or at least for several times, to be more plausible. On the contrary, they’d take everything brand new with a significant degree of skepticism and distrust.

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CHAPTER 3

Why Does It Happen and Is It Possible to Persuade Others in Anything You Want?

If people hear the same message again and again they are getting used to it. Our brain spends less time and efforts on processing that information and takes it as truth just because it’s familiar. Psychologists name it cognitive fluency. When seeing familiar, easy recognizable objects we usually smile quietly, satisfied with the idea we know them, understand them.

The reverse is also true. People find it harder to believe in complicated things communicated to them just because the information is new and hard to understand. So it’d take their brains much more time to process it (with no guarantee they’ll get it eventually). It just proves once more that simplicity works best when it comes to explaining something (scientists should remember that). It therefore follows it doesn’t really matter what is told to us: truth or lie. We’ll believe it as long as it is repeated long enough. Hence the name of the bias – the illusory truth effect. Since the illusion of truth is often created and perceived easier than truth itself some think: it’s actually the frequency, not the plausibility that matters in the end.

An optical illusion

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• TV commercials; • political campaigns; • public figures’ opinions; • in other words, something which people are likely to hear or see at least

several times a day.

The classic examples of the illusory truth effect in action:

At this point you might object that most people are sick of advertising and political agitation precisely because they hear them too often. You’re completely right of course.

When Enough Is Enough

A logical question arises: how many times can the message be repeated in order for people to believe it?

Several studies showed people are most likely to believe the message after hearing it

three to five times. After that they might get skeptical and contemptuous.

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Repeating the data works well when people do not pay much attention to the subject. This means it’s better not to reiterate weak arguments to a competent, critical audience – they’ll spot it in an instance. On the contrary, strong arguments can be repeated frequently regardless of how smart the audience is – it will augment plausibility and lead people to thinking the information is true.

Self-Convincing The illusory truth effect also has much to do with self-convincing. If we repeat the same thought, even irrational, for some time we actually end up believing it. It’s especially potent when the idea is already familiar to us, but was just hidden somewhere in the long-term memory. In that case we think it’s 100 percent true, as the fact we already know it (just forgot it) amplifies the impression of truth.

The illusion of truth shows us a very important fact: our mind makes little difference between illusions and truth. That’s why critical thinking can be only welcomed. Even back in the 17th century René Descartes wrote: “If you would be a real seeker after truth, it is necessary that at least once in your life you doubt, as far as possible, all things.”

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CHAPTER 4

The Influence of the Peak-end Bias on Our Past Experiences

The human brain seems to live its own life. We shouldn’t trust it very much –

what we think is true and what really is true may be, and most frequently is, very different. How exactly do we assess our past experiences? Is our memory selective and is this why we choose to remember the event not as a whole but just some specific moments of it? It seems that the answer to these questions most often is yes. In psychology this phenomenon is called a peak-end rule and it belongs to the category of cognitive biases. Basically it means we remember experiences only at their most memorable moments (either pleasant or not) as well as the final experiences. So it follows that we ignore the major part of the experience, everything that was before and after these particular moments. 15



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The rule was discovered by a Nobel Prize winner Daniel Kahneman. For example, a person will remember a week-long holiday with even a single pleasant recollection and a delightful ending much better than a three-week long vacation with nothing exciting about it. It doesn’t mean the rest of that experience is lost, though – we just don’t use it. Also two interesting observations with quite complicated appellations – duration neglect and temporal monotonicity – were made. Let’s try to explain them in more detail.

The peak-end bias works only for those experiences which are easily divided into the beginning / end. It is also not clear if it works for longer periods of time (research showed people do not seem to remember peaks and ends of even a day-long (yet continuous) experience. They tend to remember the overall impression better than the duration of the event.

It’s logical to suppose the more positive moments will be the better overall impression will become and vice versa. However, duration neglect wins over temporal monotonicity. How exactly? It turns out people prefer experiences with a tendency of positive moments to increase, even if the duration of negative experience will have to be longer and vice versa. They agree to sacrifice their time to worse feelings in the interim in order to get a final impression which will leave them more or less happy and satisfied.

Duration Neglect Temporal

Monotonicity

The peak-end rule confirms people are inclined to think in terms of extremities rather than make moderate, sober judgments on the grounds of complex memories of the event.

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Positive and Negative Memories Since people always assess their past experiences (they are a natural basis of their knowledge, abilities and overall professional and personal identity) it’s crucial they remember the right things – things which can give them a complex overview of their activities and not just a one-liner perspective of a distorted reality. The danger of the peak-end bias is that in case of a failure people stick to negative memories. For example, employees may recollect the failure and the difficulties of performing a task, at the same time forgetting the hard work and efforts that preceded it (which are often equally important to the professional competence, if not more). Needless to say, motivation can hardly flourish which inevitably influences productivity. On the contrary, recollecting positive, pleasant moments results in boosting confidence and motivation and leaves one with a feeling “Yes, I did my best and it was worth it because the result is great”.

Criticism Some criticize the peak-end effect on the grounds it gives simplified explanations of perception of the event. For the sake of objectivity, it has to be said that all recollections shift from episodic to semantic memory in about a week. It means in the course of time we re-assess both peaks and ends. Moreover, emotions we had previously associated with them tend to tarnish. Finally, the mood in which peaks and ends were memorized was really important. And that means that afterwards, when we experience quite different feelings, we again change our impressions.

While what critics say seems to be logical, it nevertheless is clear that the peak-end bias works at least in the short run. These key memories – the most vivid and the final ones – might explain how we assess our past experiences and predict which of them we will be willing to repeat or escape.

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CHAPTER 5

Frequency Illusion or Why Some Words Are Chasing Us

Frequency illusion, or the Baader-Meinhof phenomenon, is a cognitive bias

which describes a curious psychological fact: after learning some bit of new information we start noticing it everywhere else. We can’t help marveling at how it follows us and take it merely as a funny coincidence. Yet there’s nothing coincidental in it and the explanation is really simple. Evidence shows frequency illusion happens just too often to be treated like a mere coincidence. It repeats and repeats, so it’s clear there’s something more about it. Even back in the 16th century Francis Bacon wrote:

“The human understanding when it has once adopted an opinion (either as being the received opinion or as being agreeable to itself) draws all things else to support and agree with it.”

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CHAPTER 5

Why Baader-Meinhof? The name was first articulated by one of the readers of the St. Paul Pioneer Press. In his letter to the editors he explained that after reading about the Baader-Meinhof group (a radical political group in Western Germany) he started seeing the name everywhere.

Pattern Recognition as Our Fundamental Ability Human brains are extremely good at recognizing all kinds of patterns and it’s one of the things which makes them much more powerful than any computer developed so far.

Our ability to recognize patterns means we can categorize everything we see and hear around us – people, images, symbols, sounds, colors, etc. This ability links very closely with our memory, sense, thinking and studying. We take it for granted, yet the moment we open our eyes thousands of cognitive processes we cannot sense are triggered in our brain.

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CHAPTER 5

Frequency Illusion in Action Every day we see thousands of things. Do we remember every last one? Clearly not, no one is capable of that. We only remember things which for one reason or another are interesting to us and somehow stand out from the rest. It can be something new, unfamiliar, but which caught our attention and stuck in our minds. We thus distinguish them from everything else that’s surrounding us. This is called selective attention. We memorize just several facts but are inclined to overestimate their significance – “If I learned and remembered it then it’s really important, isn’t it?”

That single thing seems to appear in the most unexpected places afterwards. But the truth is it had already been there, notwithstanding your knowledge of it! You didn’t know it beforehand and didn’t notice, that’s it. Surely most of us have probably experienced this cognitive bias for at least a few times. Some people even expect things they learned to appear soon afterwards, taking it as a natural consequence.

Encouraging Active Learning Is Important The Baader-Meinhof phenomenon only proves once again we pay attention to things we are looking for. At the same time we overlook countless things that surround us and which we can notice at any moment and for which Baader-Meinhof phenomenon might work as well. Finally, frequency illusion shows us the importance of active learning: the more new patterns we reveal to ourselves the more spacious and beautiful reality can unfurl before us.

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What Cognitive Biases Are Covering Up And Why Decision ... · cognitive traps are very hard to spot. But the moment you learn about them and manage to realize you are susceptible