You are wired to make intelligent decisions. All the decisions we make result from what we feel and think is best at the moment we decide. Your decision largely depends on the information you have at that moment, and also the mental pitfalls we fail to avoid.
The issue popped up while writing this previous post on data-driven decision making.
Data-driven decision-making gives us a method to make rational decisions, but our biases could cancel out the whole effort. There are still pitfalls you need to be aware of when making decisions.
The consequences are not as bad as they seem
The major reason we make bad decisions is that we are more afraid of loss than we are pleased with gain. Every decision will almost always require us to predict the future. And we usually overestimate both the pain and good an outcome will do.
But we’re very good at viewing the world in new ways. Ways that make it a better place for us to live in irrespective of the outcomes of our decisions.
To avoid this, find someone who has made the same decision or choice, learn from their experience andsee how they felt. Remember that whatever the future holds, it will probably hurt or please you less than you imagine.
Your personal experience is not the best resource
Anyone above 35 would have figured that experience is a very expensive teacher, sometimes quite ineffective; leaving you with more bad habits than good ones.
The decisions you make are daily can be unrelated. Experience gained from making a decision can bear no relevance in making the next. And may even hinder any rational thinking especially when they hold very painful emotions
Be aware of your emotions
You might think that emotions are the enemy of decision-making, but in fact, they are a fundamental part of any decision. Our basic emotions enable us to make rapid and unconscious choices. Fear leads to flight or fight, disgust leads to avoidance.
Researchers found that:
- When angry, men (not women), gambled more (Organizational Behavior and Human Decision Processes, vol 95, p 107).
- Angry people are less generous (Fessler and colleague Kevin Haley)
- Angry consumers largely do not consider other alternatives; they are more likely to go for the first option. (Nitika Garg, Jeffrey Inman and Vikas Mittal from the University of Chicago)
- depressed people are more realistic
Emotions seriously affect the outcome of any decision making. It is best to make important decisions with a clear head.
Play the devil’s advocate
The confirmation bias is the tendency to search for, interpret, favour, and recall information that confirms or support one’s prior personal beliefs or values. It’s quite easy to spot in an argument but very difficult to avoid.
It’s a problem if we believe we are making a decision by rationally weighing up alternatives, when in fact we already have a favoured option that we simply want to justify.
Trying to disprove your favoured option is the way to go. It can be painful, but awareness of this bias helps us be less dogmatic about our opinions.
Don’t cry over burnt food
We all hate to make a loss, but sometimes the wise option is to stop. It’s like refusing to dispose a piece of old clothing that cost a lot of money.
The sunk-cost fallacy is the force behind bad decisions like these. The reason behind this is the more we invest in something, the more we feel commitment towards it.
To avoid letting sunk cost influence your decision-making, always remind yourself that the past is gone; what is lost is gone.
Beware social pressure
Countless experiments have revealed that figures of authority and peers can sway even the most firm, well-adjusted people to make terrible decisions (New Scientist, 14 April, p 42).
Never assume that a friend or your colleagues know best. If you detect your conclusions are based on what authority would prefer, think again. If everyone agrees to something play the devil’s advocate.
Beware that in situations where you feel little responsibility. This is where we make most of our irresponsible choices.
Limit your options
Most people think that more choice is better than less, psychologist Sheena Iyengar two discoveries’ disprove this.
1)People offered too many alternative ways to invest for their retirement become less likely to invest at all.
2) People get more pleasure from choosing a chocolate from a selection of 5 than when they pick the same sweet from a selection of 30.
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