How to make better decisions?

Since I was little, decision making fascinated me. “Why do people do what they do?” I always wondered. In the past, I thought I was an analytical person and that I based my choices on probabilities and logic. For years, I lived a rosy illusion about how “rational” I am until I realized: Humans really are biased. These biases play out in how we make decisions.

First, what are the types of decisions that we make?

We can split decisions into three sets. The first set is ones that we can make pretty fast because we know the answer and have already cached it years ago.

An example of this type of decision is your favorite color. If you’re like the rest of us, you’ve chosen a color when you were a kid and decided since to stick with it. You might not even remember what the reason was anymore.

The second set is decisions outside our areas of expertise. We delegate the decision to somebody who’s an expert, or we think they’re an expert. For example when we ask a waiter for their recommendations for dinner.

Another example of this type of decision is when you ask one of your friends about a vacation spot she has visited before where to stay and what to do. You’re delegating decisions to your friend by virtue of her knowledge of the place.

The third set of decisions is one we can take ourselves, but we need some time to ruminate on them. An example of this type of decision is accepting a job offer or buying a house. You can’t delegate the decision to someone else because, obviously, it’s your life. At the same time, you can’t just take it on a whim.

This article is precisely about these hard decisions and how we fall victim to our biases. If we could learn something about our biases, we might be able to catch some of our poor decisions before we act on them.

Now, what gets in the way of making the right decisions?

Heuristics

Daniel Kahneman, a renowned psychologist, talks about heuristics in literature. He describes heuristics as “judgmental shortcuts that generally and quickly get us where we need to go at the cost of occasionally sending us off course.”

Heuristics simplify our decision-making. They are synonymous with rules of thumb or common sense. For example, when someone waves to you, you just wave back without thinking about it.

Cognitive Biases

Cognitive biases are systematic patterns of deviation from rationality in judgment. As these biases are evolutionary, they helped us survive on the savannah. Although we have moved from the savannah to urban cities, our biology hasn’t evolved to cope with our modern life.

As thinking is an energy-intensive activity, we tend to avoid it whenever we can. Cognitive biases help us minimize the effort and conserve energy. Although examples of biases are myriad, in this article, we discuss three major ones: Anchoring, priming, and framing.

Anchoring?

Anchoring is when an individual relies too heavily on an initial piece of information offered (the anchor) when making decisions. Anchoring is a handy tool in negotiations.

When you go to a market to buy a product that you know little about, the first price you hear becomes the anchor. You compare the second or third price to the first price.

Regardless of what you should pay, you will probably choose a product that is somewhat cheaper than your anchor. The anchor becomes all that matters. For that reason, sellers will try to anchor high.

Priming?

Priming is providing a stimulus that influences people’s near-term future thoughts and actions even though these thoughts may not seem to be connected. Priming either introduces new thoughts or brings old ones close to the surface of the subconscious.

Priming makes some thoughts more accessible and more likely to be used over less accessible (and possibly more relevant) views. However, these primed ideas are only active for around twenty-four hours.

I’m primed all the time, whenever I smell the scent of my comfort food, I’d miss my parents. Also, whenever I read a book or learn a new theory, I will want to explain the whole world based on the new information regardless of how much it contradicts my accumulated knowledge.

Framing?

Decision making is in its essence answering a question. Posing a problem in a different wording often yields a different answer for essentially the same question. This is called the framing effect. It occurs when people interpret information based on how it is formatted.

Humans prefer certainty with positive frames. Doctors understand this concept very well, and they tell the story in a way that serves them. For example, a doctor is better off saying: “The survival rate is 70%”rather than “the mortality rate is 30%” to get the patient’s approval for treatment, although the two statements are logically equivalent.

How do we make better decisions?

There’s no silver bullet for following sound logic and making the right decisions. Biases are ingrained in who we are. Nonetheless, we can work on mitigating these biases by being disciplined and training ourselves to not jump directly to conclusions and critiquing our premises. Mitigating our biases also invites open-mindedness and humility into our lives.

Now, the next time you ruminate on a decision for a while before you make it, pause for a minute and consider the biases that went into that decision.