I am still reflecting on the power of language of behavioral economics in illustrating how our emotions, perceptions and assumptions influence our decisions, and some times not for the better. Here is a quick non-scientific 5-point checklist for you to use to take stock of how something other than just the facts are influencing your decision-making.
Think of a reasonably important decision you made in the past 12 months. One about which you can be objective. Ready? Now check off the items you recognize in your decision-making. I was interested by I found when applying this to several decisions I made of the past year.
1. Anchoring: Making decisions on irrelevant information rather than evaluating the decision based on the big picture.
2. Confirmation bias: Looking for information that supports a decision you want to make rather than exploring the process and cons of a decision. We have all done this at least once in our lives.
3. Gambler’s Fallacy: Not understanding the laws of probability. It is the “this time it will be different” thinking. Just become a coin has land heads-up 20 times in a row that does not mean it will land tails-up on toss 21.
4. Herd Behavior: Constantly following the latest trends because everyone else is doing it. As your Dad might have said to you “Would you jump off a cliff if everyone else is do it?” The right decision for someone else, or everyone else may not be the right or best one for you.
5. Hindsight bias: Thinking that an unexpected, unpredictable event was obvious, after the fact. This can lead to overconfidence, thinking you can always predict what will happen. You can’t, you won’t. Don’t put that sort of pressure on yourself; you are not omnipotent.
Make the best decisions you can with the information you have at hand, but make sure the information is relevant and real then roll with the outcome. If you have taken in the big picture, weighed your emotions with the relevant facts, you will have made the best decision you can, and more often than not, good things come from that sort of decision-making.