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What are the Common Biases & Errors in Decision-Making?
Some common decision-making errors and biases are as follows:
- Overconfidence Bias – Individuals overestimate or have excessive confidence in their ability to predict or foresee future events. This will cause the decision maker to unsupported or risky decisions.
- Hindsight Bias – This is the tendency of individuals to see past mistakes or occurrences as obvious. After the event has occurred, individuals believe that they did or should have seen it coming. This is important when evaluating others decisions.
- Anchoring Effect – Anchoring is when someone attaches themselves to an initial bit of information. In decision-making, it entails people placing too much emphasis on the single piece of information. This can cause the decision maker to fail to consider other important information.
- Framing Bias – Framing bias is an individuals response to how a situation or decision is presented. This can lead to individuals being deceived or manipulated by third parties.
- Escalation of Commitment – This is a tendency of individuals to continue to follow what has proven to be a negative or unproductive course of action. Also known as the sunk cost fallacy or sunk cost bias, because the tendency is motivated by an unwillingness to admit that they are wrong or accept that resources are lost or wasted (they may be able to recover the investment).
- Immediate Gratification – This is the tendency to make the immediacy of a potential solution to a problem or situation the most important criteria. The result is the failure to consider all available options and settling for a sub-part outcome form a decision that fails to deliver all available value.
- Selective Perception – This is the tendency to see a particular situation or issue from a chosen perspective. This is related to the team-based mentality. We see all situations or issues through a common lens that influences our ability to understand alternative or conflicting points of view or alternatives.
- Confirmation Bias – Confirmation bias is to actively look for information or facts in a situation that supports a particular choice or decision. This approach causes the decision maker to ignore evidence to the contrary. This can also cause a failure to consider contrary information of positions.
- Availability Bias – Availability bias is a focus on immediate information or situations that come to ones mind. The result is that we tend to believe the information or experience that we recall or demonstrative or explicative of a situation or scenario. This comes at the expense of looking for additional information that could lead to a further understanding of the situation. As such, a decision is made on limited or superficial information.
- Representation Bias – This is the tendency to believe a situation is indicative of a greater tendency. That is, it is related to stereotyping. The decision maker believes that the situation represents all of the characteristics of the population of which it is a part. It causes a failure in the perception of ones ability to predict a given outcome or result.
- Randomness Bias – This is the tendency to see a pattern in otherwise random data or information. We increasingly seek to harness new sources of information in the decision-making process. Our search for meaning in information leads to an unreasonable reliance on insignificant results.
- Self-Serving Bias – This is ones tendency to attribute the positive results of a decision or situation to ones own actions or decision. Likewise, it causes individuals to attribute negative consequences to factors outside of our control. This can cause an inability to accurately assess or affect a situation through decision making.