What is cognitive bias and how might it be holding you back in business?
While each and every person is unique, with our own views of the world shaped by our individual lived experiences, we also all function similarly, to a degree. Our brains experience similar patterns of thoughts and behaviors. Meaning, most of us are susceptible to the same quirks, from time to time. One of those is cognitive bias. A cognitive bias is a predictable pattern of error in our perception of reality. It can lead to altered or irrational decision-making and even subjective interpretation of objective fact.
What does any of this mean in business? In this issue of The Pulse, we take a look.
How do cognitive biases work?
Our brains have allowed us to create mental shortcuts – officially known as heuristics –during the decision-making process of our everyday lives. Of course, we don’t use them all the time. Some decisions require a lot of focus and consideration. But for most things, our brains take these shortcuts to avoid the mental overload of having to really process all of the choices we make every day. Which, by the way, can be an estimated 35,000. If you had to think about 35,000 different choices a day, you might not get anything done.
In order to form these shortcuts, our brains rely on our pre-existing experiences and beliefs to help form judgments and predictions. This happens subconsciously, without you intending to do it.
Our brains are more likely to default to taking these shortcuts under certain circumstances, including:
- When we are reaching limited information-processing capacity, such as when we are tired, burnt out, hungry, etc.
- When we are forced to make emotional decisions
- When the decision can help us confirm a conclusion we wish to see confirmed, even subconsciously
- When our decisions might be impacted by social influence or lead to social consequences
That list is non-exhaustive, but does give an idea of how easily our rational side can be overpowered by the need for these mental shortcuts.
Examples of biases.
Cognitive biases fit into such common patterns that behavioural scientists have actually classified them. Here is a list of some examples that may impact your business decisions, specifically:
- Action Bias – in which we prefer any action to no action at all
- Affect Heuristic – in which we rely on current emotions to make a quick decision
- Ambiguity Effect – in which we prefer options we already know
- Anchoring Bias – in which we compare all new information to the first piece of information we received
- Availability Heuristic – in which we think things that happened recently are more likely to happen again
- Choice Overload – in which we have a harder time choosing when we have more options
- Commitment Bias – in which we have trouble changing our mind from past ideas, even when presented with evidence that they’re wrong
- Hyperbolic Discounting – in which we value immediate rewards more than long-term rewards
Once again, this is by no means an exhaustive list – it just provides some examples of how these mental shortcuts could lead us into making an incorrect and ultimately costly choice.
What is the impact of cognitive bias in business?
While the risk of cognitive bias in most of our daily decisions – such as what to eat for breakfast, whether to skip a song on our playlist, or what to wear – isn’t huge, letting it determine your business decision-making isn’t always wise. These mental shortcuts can lead us to misunderstand events, facts, or other people. Meaning, we might make the wrong choices or struggle to think critically.
This could lead to missed opportunities, mistakes with clients or colleagues, and – given the brain’s likelihood to seek the familiar – stagnation in your career path.
How can you steer your brain away from these shortcuts?
We all are impacted by cognitive bias to some degree – it’s quite literally human nature. However, practicing being in the right mindset to make important decisions on the job is important. Some strategies to combat cognitive bias include:
- Being aware of potential biases that might impact a situation, and that you may be more susceptible to
- Consider all possible factors that might influence your decision
- Highlight things that make you uncomfortable and might lead to a snap decision
- Reflect on patterns in past decision-making
- Ask questions and seek out new information; don’t rely on just the initial information given
- Seek multiple perspectives when evaluating a choice
- Look for evidence that may disconfirm your preconceived biases
In conclusion…
Everyone experiences cognitive bias. It’s part of the human experience and protects our brains from becoming overwhelmed. However, it’s important to know when and how to challenge it to thrive in your career.
