Decision Making and Psychological Traps

Following our discussions at our last ABP class, we were urged as leaders to take note of psychological traps we may have, as they usually have a way of clouding our personal and workplace decisions. All humans are prone to making mistakes and our conscious and unconscious mental prejudices play a big part in the decision outcomes.

These prejudices, also referred to as psychological pitfalls, can produce subpar decisions. We can make better choices that are more logical and in our best interests by becoming aware of them and taking measures to avoid them. Some of the typical traps are listed below:

Confirmation bias is the inclination to look for evidence that supports our pre-existing views or viewpoints while ignoring evidence that challenges them or shows a different outcome. As a consequence, the circumstance may not be fully or accurately assessed, which may contribute to poor decision-making as the decision team is blind-sided on some facts.

An erroneous reliance on the first piece of knowledge we are given when making a choice is known as a “anchoring bias.” Even if the original information is incorrect or irrelevant, it can still affect our later judgments.

Overconfidence bias: This pitfall refers to the tendency to exaggerate our skills, expertise, and judgment. As a result, we may make risky decisions, overestimate our odds of success and underestimate possible drawbacks.  In this instance, it is best to check yourself and even ask for expert opinion to avoid putting your company on a path of big or avoidable losses.

The Sunk Cost Fallacy is the leaning to continue funding a choice or project based on the resources already committed, as opposed to evaluating the situation at hand, possible future results and cutting losses now. This may result in irrational choices, ongoing funding of failed initiatives, and a refusal to write off already incurred expenses.

Groupthink is a trap that develops when a group’s wish for unity or uniformity takes precedence over logical thought or decision-making. As a result, the group may make poor choices or take actions that do not accurately represent the variety of views present. Sometimes it is best to query situations or be the outlier as that may save the day for your personal or business endeavours.

Framing bias: When information is presented or framed in a biased manner, it impacts how we perceive it and how we make decisions. As a result, choices may be made using knowledge that is partial or inaccurate.  I will share some more thoughts on the framing bias in my next post.

Availability bias: When we choose to depend on information that is widely available or easily attainable rather than searching out all relevant information, we fall into this pitfall. This could lead to incomplete or incorrect evaluations of a circumstance, which would lead to bad decisions.

Hindsight bias is the disposition to think, after the fact, that we would have chosen correctly if we could go back and make the choice. This may result in future choices being made with excessive confidence and a failure to learn from prior errors.

In summary, psychological pitfalls can significantly affect how decisions are made. We can become more conscious of our mental processes and make better, more informed choices by identifying these biases. We can avoid slipping into these psychological snares by taking the time to collect and assess all available information, taking into account all options and possible results, and seeking out different points of view.

htuR #EMBA28