Decision Mistakes
- Part 2

Even more decision mistakes, how they occur and what to do about them...

Same old, same old...

The status quo bias is the observation that people like things to stay the same. This is tied up with two other biases. Humans are loss aversive creatures. They much prefer avoiding losses than achieving gains.

And people also value something more when they own it than before they own it. For example, most people would find it perfectly acceptable to buy something at one price and sell at a higher price.

The status quo bias can lead to decision mistakes were people avoid decisions because they're afraid of consequences or adverse responses. Or they delay them for so long that they actually miss the opportunity.

How good are we?

Named after the visual blind spot, the bias blind spot describes how people usually consider themselves better than average for their good characteristics and worse than average for the negative ones. In the original testing, the subjects even considered themselves less susceptible than average to this bias when it was explained to them!

In a similar vein, the self-serving bias is where people claim more responsibility for their successes than for their failures. It also ties in with the previous bias in that sometimes people

consider that they perform better in areas that are related to their self-esteem. Any resultant decision mistakes will obviously be explained away to keep the sense of identity intact.

Compare and contrast

The contrast effect occurs when something is increased or decreased in importance when it is compared to some recently observed contrasting object. These effects are ubiquitous with humans and also animals. A weighty object is considered heavier than normal when compared with a lighter one, for example.

Allied with this is the focusing effect when people place too much importance on one aspect of an event and then make decision mistakes in terms of predicting future outcomes. For example, many people consider they would prefer to live in a warmer climate because it's more comfortable and pleasant. But they don't consider the different insects nor the potentially dangerous animals and droughts they would have to contend with.

The third bias in this group is hyperbolic discounting when people prefer more immediate payoffs than later ones. This bias is amplified as both payoffs approach the present. The opportunities for con artists, get-rich-quick schemers and even moneylenders to generate decision mistakes is obvious.

Ones we all know!

A few of the more common biases causing decision mistakes and negative effects include:

Omission bias is where we judge harmful actions as worse or less moral than inactions or omissions that are equally harmful. The decision mistakes that this leads to are again indecisions and delayed decisions. It seems we prefer to ask for permission than forgiveness.

Planning fallacy is the tendency to underestimate the amount of time it would take to complete a task. Enough said!

Post purchase rationalization is a tendency to convince yourself by rational argument that your purchase was actually good value, especially after investing a lot of time, money or effort in something. Recent thinking suggests that many decisions are actually made emotionally and the rationalization is done to justify that. So the rationalization may actually be done prepurchase.

Selective perception is where the expectation determines how we perceive the world. We see what we want to see. If you sort for problems that's what you'll find. If you seek out what works, that's what you'll get.

Learn more in Part 1 of decision mistakes...

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