You probably think you are in complete control
of your decisions and thoughts….But how often are they guided by something else? Something you
don’t even notice occurring deep within your mind… Here are 21 cognitive mind traps, fallacies, biases and other phenomenon
that exist within your brain. Strange things that are hard
wired into all human minds. You may go through your entire life or well
into adulthood completely unaware that you are carrying around these thinking errors and mental
shortcuts that influence your day-to-day thinking. You can’t turn them off or
delete them from your brain, But being one of the few people that can
notice when they arise in your mind and knowing situations they are likely
to act upon your decision making is one of the first steps to becoming a
more thoughtful and rational thinker. This 2 part series is mainly inspired
by the works of Nobel Prize winning psychologist Daniel Kahneman and his
amazing book “Thinking Fast and Slow”. Survivorship Bias During World War 2, Navy Researchers conducted a
study on the damage done to aircraft by enemy fire that had returned from missions, they concluded
and recommended that armor needed to be added to these areas with the most damage. At first this
seems like the most reasonable course of action, “We need to place more armor where
the planes are getting hit most” However, a mathematician by the name of Abraham Wald was quick to point out an
error the researchers had made. They were researching data only from the
planes that had survived their missions, and the bombers that had been shot
down were not included at all. Wald proposed they change their
initial decision and do the opposite, armor the areas where the surviving planes
had not been hit as these were in fact the areas that were causing fatal damage to the
other bomber planes that had not survived. Survivorship bias is a logical error where the
data that we are presented with is representative of only a subset of the population that has
already survived some kind of filtering process. More simply, we tend to focus on those things that
survived a process and overlook ones that failed. People may say things like “They made much
stronger and more beautiful buildings in this time and age, ignoring that this is one of
the only buildings to have survived so long, and that 99% of the buildings of that
time and age were probably flimsy and ugly but are now completely invisible to us. Here is another example. You move to a new town. You see many
successful restaurants in the area and come to the conclusion that if all
these restaurants are successful, you could very well do the same. What is
invisible to you are all the restaurants that failed in the years prior. When you are only
focusing on the “winners” , Survivorship bias causes you to underestimate the challenge
and overestimate your chances of success. Everywhere you look there are successful actors
and actresses. In reality your chances are a fraction above zero of becoming successful.
But no one is interested in all the failures, so the burial ground of all the
failures is largely invisible to you. Society and Media only focuses on the winners. Try googling “Actors that never made it.....
Or people who failed in life after dropping out of college” and you won't have
much luck finding anything useful. For every rock star, there are thousands of people
in the “cemetery of failure” who never made it” For every Startup business, there
are thousands of failed startups. Everyone should chase their dreams,
but don’t let survivorship bias trick you into thinking the challenge is
easier than it seems. Be careful of your overly optimistic beliefs that
are caused by invisible failures. Are you only focusing on the person
or thing that survived a process? Self-Serving Bias You received an A on the test due to
your hard work. However, you failed a test because the teacher is
unfair and doesn’t like you. For the CEO, all the great things
that happened to the company that year were a direct result of
his/her brilliant decisions. If the company has a bad year. The economy, interest rates and government
policies are to blame. According to the self-serving bias, our
failures are due to external forces, but our successes are the
result of our internal actions. For most people…The natural reaction to a negative outcome is to find an
excuse for it and blame others. To combat this, the first step is to simply become
aware of the bias.Try to practice humility and always seek accountability and feedback on
your strengths and weaknesses from others. Self Serving Bias is also closely linked to… Fundamental Attribution Error We judge others’ behavior on their
personality or fundamental character, but we attribute our own
behaviors to situational factors. If Simon is late to work, it’s because
he's a lazy person and doesn’t take his job seriously. If you're late to work,
It's the traffic and weather’s fault. Try to catch yourself in situations
where you are judging someone else on their personality in a way that you would
blame external factors in the same scenario. Hindsight Bias You have probably encountered
people who are constantly saying, "I knew that was going to happen…” “I knew that stock was going to fall…” “I knew she was going to lose the election!…”
“I knew Jack and Mary were going to break up…” They are always experts
after the event has occurred. This is hindsight Bias, otherwise
known as the “I told you so” phenomenon. When we look at past events,
everything seems clear and inevitable. Imagine you are a computer
with a virus (the hindsight bias) that causes you to write over past
information. As a result of this virus, you are unable to reconstruct
previous states of knowledge. We think our memories are clear, but in reality
we are poor at remembering the past accurately. The hindsight bias is a memory
distorter. Memories of what you actually said or believed before
the event are distorted to try and make your past opinions or beliefs more
inline with what actually transpired. Here is an example. This is what you actually
believed before an election… The results you observed
get updated in your brain. The virus gets to work and now
when you go back to that memory it has been distorted. And the memory
distortion always distorts in your favor. This causes people to misremember
things they said, their past opinions, and makes people overconfident in explaining
all the reasons why something happened. The events leading up to World
War 2 at the time, on the ground, probably looked something like this,
but after the fact, with hindsight, people put it all into a neat sequence of
events that people should have seen coming. Hindsight bias is especially harmful
to decision makers, doctors, coaches, CEO’s and financial advisors, because
onlookers don’t judge the person on the soundness of their decision making but
on whether the outcome was good or bad. We blame good decision making
that led to a bad result. But we praise bad decision
making that led to a good result. It is easy for us to blame When we
know all the facts of what transpired we oversimplify the past, when at the time
there was doubt, uncertainty or complexity. “Don’t worry Mel, the mistake seems obvious now, but it is just hindsight. You
could not have known in advance” “I knew this exact thing was going to happen” “Are you sure? …. I remember you
saying something quite different” Availability Bias “Cape town is safe, I know a guy who lives
there and has never had any problems with crime” “Smoking isn’t so bad, My uncle has
smoked for 50 years and he is still alive” Humans are notoriously poor
at thinking statistically, even when they are educated. We create a picture
of the world using the examples that most easily come to mind. This is illogical, of
course, and not in line with reality. We use statements like these to try
to prove something, but they actually prove nothing at all. When we speak like
this, we succumb to the availability bias. Plane crashes on the news are easy to recall, Safe
flights are hard to recall. The availability bias can lead us to an irrational fear of flying.
The Shark attack story on the news last week, easy to recall. Safe swims at the ocean
are hard to recall. The availability bias can lead you to have an irrational
fear of being attacked by a shark. We estimate the likelihood
of something happening by the information most readily available in our memory. Here is all the information. And here
is the information most available to us which could be something we saw recently,
something in the news or something extreme. Here is an example Your chances of getting attacked by a shark
in Australia are around 1 in 1,000,000. And let’s imagine this is your
perceived risk of that happening. You see a news story about a shark attack
somewhere in Australia you have never heard of. You hear a story about a shark attack
in the same state that you live in. A friend of a cousin tells you his
uncle was attacked by a shark last week. Someone in your family was
attacked by a shark yesterday. The closer you are in proximity to the available
information, the higher you perceive the risk. The facts and reality have remained the same, but the information most available
to us changes how we make decisions. With availability bias we go through life
with an inaccurate risk map in our heads. We overestimate the chances of an
airplane crash, a car accident or a terrorist attack and we underestimate the
chances of dying from cancer or diabetes. Availability cascade A local news story about a razor blade found in
candy leads to mothers in the local community becoming worried, which leads to a news story
about the mothers who are worried, which leads to a national story, which leads to parents
panicking and inspecting their children’s candy, which eventually leads to homemade candy and cakes
not being given to trick or treaters nationwide. This is an availability cascade -
a self-sustaining chain of events, which may start from media reports
of a relatively minor event and lead up to mainstream public panic and/or
large-scale government intervention. People begin to adopt the belief, not because
it’s true or prevalent, but because it’s popular. Put more simply, an availability cascade is
an enormous overreaction to a minor problem. Whenever we encounter minor risks
we either ignore them completely, or completely over exaggerate
them, with nothing in between. A parent may know of this feeling waiting
up at night for their teenage child to come home. They know that there is a 99 percent
chance that everything is fine as usual. But having even a small thought that
something may be wrong available in your mind, sets off a self-sustaining chain
of thoughts that grows into more thoughts about something disastrous having
happened, which can eventually lead to panic and needing to immediately make
contact and make sure their child is ok. When you are watching the news, is it an objective piece of journalism
or just an availability cascade? “This is just an availability
cascade, a nonevent that is being inflated by the media until it fills
our screens and there is public outcry.” Sunk Cost Fallacy You go to the cinema with your friend, after
25 minutes you both realize the movie is awful. You turn to your friend and say “This
is terrible, let’s get out of here” He replies “Yeah it is, but we spent a lot on
these tickets, we can’t just leave now” This is the sunk cost fallacy. You've spent the money either
way, if you stay or go. Another Example… Maybe you have a
girlfriend that is continually unfaithful, but you keep forgiving and accepting her
back. You may say things to yourself like “I’ve invested so much time, energy and love
into this woman, I can’t give up on her now” If you catch yourself saying things like
…. “I’ve come so far....” or ….. “I spent so much on this stock, I can’t sell it
now” when the price is falling….. You are probably encountering the sunk cost fallacy. The sunk cost fallacy can especially plague
investors decision making in the stock market. To be more rational, look at the current status
and forecast of the stock, or relationship and don’t put too much weight into the past
investments of money, time, energy or love. The Framing Effect Which meat would you like to buy? 99 percent Fat Free or 1 percent fat Most people, when asked, go for Option
A even though they are identical. How about now? 98 percent fat free or 1 percent fat? Most people STILL go for option A. This is the framing effect We often draw different conclusions from
the same information depending on how it's presented. Be on the lookout for how different
news outlets frame their headlines and stories and how companies frame their offers. Here we have a small size
popcorn for $3, and large for $7. Which would you choose? In this case a higher percentage are
inclined to go for the cheaper alternative. Now, let me introduce a third
option. A Medium size for $6.5 Studies show that when given these three options, a much higher percentage will choose the large
because they see it as the most valuable option. The small and the large prices are exactly the
same, but the decoy changes your perception, and influences your decision making
towards the more expensive option. When the Economist magazine
gave readers these two options, they were quite disappointed with the
results. Most opted for the cheaper option. When they introduced a third decoy
option, and skyrocketed their sales by 43% The offer was exactly the same, but the print
and web offer now appeared much more valuable. The bills are overdue!
Honey, would you mind paying the bills. It’s not what you say, but how you say it. Would you like to pay by cash or credit card? If the sign showed a cash discount of
5%, people wouldn’t feel that bad about missing out on the “discount” for the
convenience of using their credit card. If the sign showed a credit card surcharge of
5%, people would be inclined to avoid the fee. On closer inspection though,
they are exactly the same thing. There is a 90% chance you
will survive this operation. There is a 10% chance you
will die from this operation. Same outcome. Different frames. The words we use affect the emotions we have
towards making certain decisions. The Clustering Illusion Have you ever seen faces in the
clouds? Jesus on toast or Faces on the rock formations of Mars. The
human brain seeks patterns and rules. For the most part the clustering illusion is harmless, but it does have
real world implications. Investors who rely on technical analysis of
charts, have an uncanny ability to derive all kinds of patterns and predictions from
the data. They often sense patterns, and make risky investments,
where none ever existed. Take a moment to observe
this string of X’s and O’s. Is the sequence random or planned? Even though they are completely
random, people when asked will often come up with all sorts of laws or
rules to explain the pattern of letters. To overcome your sensitivity
to pattern recognition, try to regain your skepticism. If you
find a pattern, ask yourself if it is more likely to be pure chance or am I
falling for the clustering illusion? Exponential Growth If you fold a piece of paper in
half, and then in half again and continue to do that 50 times. How
thick would it be after 50 folds? If you guessed a few inches
thick, you would be slightly off, because the paper would be so thick. It
could nearly reach the sun from Earth. Linear growth is intuitive to
us. Exponential growth, however, is incomprehensible to us. But why
is that so? Because, simply put, It wasn't needed before. Our ancestors
mainly had linear experiences. Let’s use this hypothetical country with
some hypothetical examples of growth. The inflation rate of this country is 5%. Intuitively, if we are being honest, we
have no real idea what that even means. “Only 5%” some people may
remark, “that isn’t so bad!” If instead I told you, in 14 years, your
money will be worth half what it is today, you can understand that without much thought. And
it may actually give you some reason to worry! "The greatest shortcoming of the human race is our inability to understand the
exponential function." - Al Bartlett "The power of compounding is the most powerful
force in the universe." - Albert Einstein To illustrate the power of exponential
growth, if we place one grain of rice on the first square of this chessboard,
two grains on the second square, four grains on the third square, and
so on, doubling the number of grains on each subsequent square. How many grains of
rice would we need to accomplish this task? In the short term exponential
growth isn’t that impressive, but the growth that occurs at a faster
and faster rate over a long term is truly amazing and can quickly become
astronomical and incomprehensible. To complete the task you would need 18
Quintillion grains of rice, which is a number that we can’t even begin to wrap our
heads around and illustrates how quickly a small amount of something can grow when it is
subject to the power of exponential growth. If you want to approximate the time
it would take any process to double, or you need a way to describe something
that is more intuitive, use the rule of 70. 10% returns on investment = your money will
be worth double that in approximately 7 years. 8% percent inflation = Your money is worth half
what it is today in approximately 8.7 years. A country has 5% population
growth = The country will have double the population in approximately 14 years. Of course these growth rates
would need to remain constant, and the world is full of uncertainties
and complexities, however these are much more intuitive than just saying “The
current inflation rate is X percent” Be careful with exponential growth. Never
trust your intuition about exponential growth, because we don’t have any. Where possible try to convert the growth rate into
something linear with a time frame. Barnum Effect For you, the viewer, you may find
it surprising that I know you. You have a great need for other
people to like and admire you. At times you have serious doubts as to
whether you have made the right decision You pride yourself as an independent thinker. At times you are extroverted, affable, sociable, while at other times you are
introverted, wary, reserved. Was I close at giving an accurate
description of your personality? Bertram Forer in 1948, conducted an
experiment whereby people were given the same text of generalized statements
found in astrology magazines. He then told each participant that he had personally
written the statement just for them. 86% found that the text was an accurate
description of their personality. This is the Barnum Effect, when we easily
attribute our personalities to vague and generalized statements, even if they
can apply to a wide range of people. The next time you remark “Omg that is
so me” when reading your horoscope or doing an online quiz on what type of spirit
animal you are, just remember that people are easily fooled by horoscopes, Palm reading
and psychics due to the Barnum Effect.
