Avoiding Psychological Traps in Decision Making

As individuals, we make decisions every day, from the simplest to the most complex ones. However, not all of our decisions turn out to be the best, and sometimes, we end up regretting the choices we made. This is because, as we have learned, decision-making is not always as straightforward as it seems. There are several psychological traps that can affect our judgment and lead to poor decision-making.

Yesterday, in our final Analysis of Business Problems class at the Lagos Business School, we had the privilege of learning about these psychological traps from the facilitator, Segun Shogbamu. Throughout the session, he listed and explained the various traps and how to avoid them.

One of the most common psychological traps is confirmation bias. This is when we seek out information that confirms our existing beliefs while ignoring information that contradicts them. This trap can be dangerous because it leads to a narrow-minded approach to decision-making, and we may miss out on important information that could have influenced our choices. To avoid this, Mr. Shogbamu suggested that we actively seek out information that challenges our beliefs and opinions. This helps us to broaden our perspective and make more informed decisions.

Another psychological trap that can affect decision-making is anchoring bias. This is when we rely too heavily on the first piece of information we receive when making a decision. Mr. Shogbamu gave an example of a negotiation where the first offer sets the tone for the rest of the negotiation. If the first offer is too high, it can skew the entire negotiation. Same thing if it is too low. To avoid anchoring bias, he suggested that we take a step back and consider all the available information before making a decision. We should also be aware of our biases and try to minimize their impact on our decision-making.

Another trap that he highlighted was the sunk cost fallacy. This occurs when we continue to invest in a project or decision because we have already invested time, money or resources into it, even if the evidence shows that it is no longer viable. This trap can be costly, both in terms of time and resources. To avoid it, Mr. Shogbamu advised that we focus on the future and the potential benefits of the decision, rather than the past investments. This helps us to make more rational decisions based on the current situation, rather than being influenced by past investments.

The framing effect was another trap that we learned about. This is when the way information is presented influences our decision-making. For example, if a decision is presented in a positive light, we are more likely to choose it over a decision that is presented negatively, even if the options are the same. Mr. Shogbamu suggested that we take a step back and look at the decision objectively, focusing on the facts rather than the presentation.

Additionally, we learned about the Status quo effect which suggests that we often want to stick to what we know instead of going into a world of uncertainty. This can also be referred to as staying within our comfort zone.

Mr. Shogbamu also talked about the recency primacy effect which is the tendency to select the option presented most recently because it is fresh on your mind. He explained that Individuals without neurological impairment tend to show enhanced memory for items presented at the beginning of a list relative to items presented in the middle of the list.

This session was really an eye-opening experience considering how it highlighted the various psychological traps that can affect our decision-making and provided practical tips on how to avoid them. It was obvious from the reaction of my classmates that a lot of us had fallen into some if not all of these traps. Now comes the need for a conscious and deliberate commitment to challenge these traps if we are to realise our objective of becoming better managers. No doubt, decision-making is a complex process, but being aware of the psychological traps can go a long way in helping us make better choices.

Image Credit

Yes No image by Jonathan. (2022). Decision-Making – A Major Skill in Defining Leadership. [Online]. Globsyn.edu. Available at: https://www.globsyn.edu.in/blog/decision-making-a-major-skill-in-defining-leadership [Accessed 2 April 2023].