Do you think that people make rational decisions? According to the Theory of Bounded Rationality, people strive to make rational decisions but are constrained by cognitive limitations.

The rational decision-making process is complex, effortful and time-consuming. Hence, decision-makers that are subjected to limited time, information and cognitive resources impedes their ability to make rational decisions.

As such, it is sensible for the use of heuristics; efficient cognitive strategies that do not require the whole information. However, these mental shortcuts can lead to systematic errors in judgements such as cognitive biases. 

Some Examples of Cognitive Biases

✽   Confirmation Bias

The tendency to seek or interpret information according to our existing beliefs, dismissing and disregarding information that does not align with our beliefs or expectations.

This bias exists to reduce cognitive dissonance – the discomfort we feel from contradicting information. Our brain selectively consumes information that confirms our existing beliefs to reduce potential discomfort and maintain our self-esteem. 

Example of Confirmation Bias:

Alex believes that Taylor has Obsessive-Compulsive Disorder (OCD). Alex may often lookout for cues and behaviours of Taylor to fit the criteria of OCD. Alex may use examples of Taylor arranging her books neatly or keeping her table clean as having OCD, and ignore instances of her being messy to maintain his belief that she has OCD. 

Overcoming Confirmation Bias

• Acknowledge and be aware of its effects 
• Be open-minded and accept new, contradicting or unconventional perspectives
• Expose yourself to different beliefs and ideas  

✽   Hindsight Bias

Being convinced that one accurately predicted an event before it occurred. Hindsight bias occurs to boost self-confidence as it is natural for people to not want to be wrong. When people become aware of outcome information, it is automatically processed into existing memory structures and may hence influence the memory of prior information.

Example of Hindsight Bias:

Sam is watching a football match and believes that team A will win instead of team B because team A has a strong player. However, when team B eventually won, Sam might say that he knew all along that team B was going to win because they had better teamwork. 

Preventing Hindsight Bias

• Focus less on being accurate in our predictions 
• Open-mindedness to the possibility of alternate outcomes. 

✽   Illusion of Control 

People tend to overestimate their ability to control situations and outcomes in order to achieve the desired satisfaction or obtain optimistic outcomes. The opposite of the illusion of control is learned helplessness; if someone has previously been put in situations where they were powerless to change anything, they start to feel like they lack control over their own lives. Ultimately, they give up faster when faced with obstacles in future (Learned helplessness is one of the symptoms of depression).

Example of Illusion of Control:

One example of this occurs in gambling addictions. People who keep gambling, even when they have already lost large amounts of money, or are in debt, continue to do so because they believe that they have special skills or knowledge that will help them eventually win all their money back.

Overcoming Illusion of Control 

• Search for external sources of information (e.g. Existing data which enables more objective thinking) 
• Practicing or engaging in a behaviour before making judgments also allow one to come up with better estimates
• Rely less on instincts and think objectively

✽   Availability Heuristics

The tendency to rely on immediate examples of an event based on its ease of retrievability. In other words, people rely on information that comes to mind easily (e.g. Events that are recent, salient, and emotionally triggering events.) 

Example of Availability Heuristics:

Sandy bought tickets to visit a theme park 2 weeks later. On the day before, Sandy saw a news report about a roller coaster accident in a theme park in the US. Sandy might be nervous to ride one the next day and might ultimately not go to the theme park at all. As the roller coaster accident that had just occurred the previous day (i.e. recent), Sandy probably received news coverage (i.e. salient), and evoked fear responses (i.e. emotionally charged). 

Overcoming Availability Heuristics

• Check for accurate statistical data about the frequency of events
• Avoid relying on events that come to mind easily to make more objective decisions 

To learn more about the other biases, watch the video attached.