The human brain is an incredibly powerful processing machine. There are over 86 billion neurons in the brain and recent research suggests that our brains can potentially store up to a petabyte (1000 terabytes) of information! Despite all of this incredible processing power, our brains are still limited in the sense of how much information can be processed in any one moment. We have a finite amount of cognitive resources at our disposal meaning that we don’t always make decisions with all the information at hand.
This has led to our brains creating shortcuts when making certain decisions in order to reduce the amount of cognitive resources needed in a single moment. These shortcuts are called heuristics. While heuristics can speed up our problem and the decision-making process, they can introduce errors. Just because something has worked in the past does not mean that it will work again, and relying on an existing heuristic can make it difficult to see alternative solutions or come up with new ideas. Heuristics can lead to inaccurate judgments about how commonly things occur and about how representative certain things may be. This is how heuristics lead to cognitive biases and thinking errors.
Below are three questions you can ask yourself – if you answer ‘yes’ to any of these questions, you may have made an irrational decision in the past!
Have you ever sat through a movie at the cinema even though from the first few minutes you knew you weren’t going to enjoy it?
Do you consider yourself an above-average driver?
Have you ever been persuaded to buy something on sale because you saw the previous higher price crossed out in place of a lower one?
In the first instance, you may have been on the end of the Sunk Cost Effect! This means that we tend to continue to commit to things that we have spent money on even if it’s irrational. In this example, suffering through a movie just because you paid to see it is a less than optimal decision!
If you answered “yes” to the second question, then you are not alone! A study found that over 90% of people consider themselves above average drivers – statistics tells us this just cannot be the case. This is called Overconfidence Bias and it can lead us astray when we think than we are better than we are or misattribute our success to us and not factors outside our control.
Finally, if you have been persuaded to buy something like in the third example, then you have been the victim of the Anchoring Bias. This means that we are sometimes influenced by the first piece of information we are exposed to when making decisions. In this example, the discounted price looks better because you could see the original price on the tag.
There are two ways that Behavioural Science can help you make better decisions. Firstly, recognise your bias. Now that you know about the Sunk Cost Effect, Overconfidence, and Anchoring you are more likely to realise when they could be influencing you. Secondly, slow down. Heuristics rely on quick decision making. Rather than rushing to make decisions, take your time, think a bit deeper about the properties of the decision and you will be well on your way to making a rational choice.