“Your life is a sum total of the decisions you’ve made until this point” - Jim Kwik - Speaker, Author and Brain Coach 

Think about that quote for a minute. We are using our brains to make decisions since we are born. You and your life is a result of all the decisions you have made. 

How do you think you have done so far? Do you want an improved life? Do you want healthy relationships with friends and family? Do you want to be more successful in your career? Well, you can achieve all that by improving your decision-making skills. 

Caution: This is no magic potion! 

The techniques that I am sharing in this blog post are 100% scientific and backed by robust research. One important aspect I want to highlight is that every human being on the planet has had a different life experience and these life experiences develop our behavioural biases. Behavioural biases are beliefs or behaviours that can unconsciously influence our decision-making process. 

Awareness about some important and most common biases that impact our day-to-day decisions is the first step towards improving your decision-making skills. And the second step is to learn how to leverage the knowledge regarding these biases to make better decisions. 

Bias # 1: ANCHORING

Before I explain, tell me this. Is the height of the tallest tree in the world, more or less than 1500 feet? Take some time to think about it and take a few guesses. And don’t cheat!

The answer is – 380 feet. The tallest tree in the world called ‘Hyperion’ stands tall at 380 feet in California. 

Let’s look at another example: Another instance, when you see a mug at a supermarket priced at $300, you might think that it is very expensive. Let’s say a year or two later you come across the same mug, with a price tag where the price $1000 is slashed and now the mug costs only $300. Wouldn’t you like to buy the nice mug that you are now getting for much cheaper?

This is the Anchoring Bias. It is a cognitive bias that causes us to rely too heavily on the first piece of information we are given about a topic. When we are setting plans or making estimates about something, we interpret newer information from the reference point of our anchor, instead of seeing it objectively. This can skew our judgment. In the first example with the tallest tree, most people get influenced by the 1500 feet data provided at first and provide their answer with reference to that number. 

In the second example with the $300 mug, shoppers get highly influenced by the slashed price ($1000 data provided) and consider the $300 price tag to be a steal. The decision to buy the mug was based on how much cheaper you were getting the mug for, as compared to the earlier price.

How to use the anchoring bias to your advantage?

For marketing professionals, this bias comes in handy for setting the price of a product or setting a sales target for the next quarter. 

On the other hand, if you are shopping for this product or evaluating the sales targets for next quarter, it is your duty to ask ‘WHY’. Why is this product priced this much? Or Why are we setting this as our sales target? Digging deeper into the why will help unveil the anchoring bias being presented to you. 

Bias # 2: SCIENCE OF AVAILABILITY

Are you scared of roller coasters? Your answer would either be a yes or a no. 

Now imagine, just before going to the amusement park, you watched the movie Final Destination 3 and your friend shared an article with you, stating the rise in deaths by roller coasters. Now would you be more scared, less scared or the same? 

If you are like most people, then you are probably more scared of jumping on the roller coaster after watching Final Destination 3.

This happens because of a bias called Science of Availability. This is where we take mental shortcuts to make decisions based on information that is more recent and easily available. Even though the reality is that chances of you falling off and dying on a rollercoaster are close to zero, we assign unrealistic probabilities for events and make our decisions accordingly. Just because of the content we have consumed.

How to use the Science of Availability bias to your advantage

Consume content that would make you and people around you happier & positive. Assign realistic probabilities for future events by consuming content from diverse sources. This will strengthen your information base and help you make a well-informed decision.

Bias # 3: LOSS AVERSION

Here is a great money-making opportunity for you. Let’s play the coin toss game.

●      Game 1 rule – if you win you get $1000, if you lose you pay $1000. Would you play? The answer should be a yes or a no.

●      Game 2 rule – if you win you get $1100, if you lose you pay $1000. Would you play?

Most people don’t want to play either game even though the gains are more for Game 2. Why is that? That is because of Loss Aversion. This is a cognitive bias that describes why, for individuals, the pain of losing is psychologically twice as powerful as the pleasure of gaining. Based on the research, most people said they would play the game if they were offered $2000 on winning.

How to use the Loss Aversion bias to your advantage

Use the concept of loss aversion to influence people and sell your ideas. I’ve taken advantage of this bias to convince my team and especially the sales folks of my ideas by telling them “Hey! If we don’t do this, we will end up losing this deal to our competitor and lose some market share”.

In a personal setting, you can use loss aversion to explain the pros/cons of a dilemma. Let’s say you have a dear friend who is addicted to gambling and it has started to impact their life. You want to convince your friend to quit. Research shows that people are likely to quit due to the fear of losing something (e.g. loved ones) rather than due to gaining something (e.g. a new higher paying job). Your friend is likely to quit by seeing the high stakes of losing something than seeing the amount they would gain.

Bias # 4: FRAMING EFFECT

Let’s say you went to the supermarket and saw two types of yogurts. One states that it has only 20% Fat while the other states that it is 80% Fat-free. Which one are you more likely to buy? 

Most people actually pick the 80% Fat-free yogurt. And why is that?

This happens because of the Framing Effect. It is where our decisions are influenced by the way information is presented. Because the information is presented in a particular way, it evokes different emotional responses. We see this in advertising all the time. It is framed in a specific way to lure you in.

How to use the Framing Effect bias to your advantage

The next time you have an awesome idea and you want to pitch it to your manager, you can use the Framing Effect to present data in a favourable manner.

But, if you are the manager, then dig deeper into the stats and data being presented to you. Let’s say that you have started a new family business and you have a brilliant idea that can increase sales by 50%. Now, clearly, I am using the framing effect to get the buy-in from my team. My manager is all in. Clearly, he/she is making a decision under the influence of the framing effect. But my director has caught on and isn’t falling for my techniques. Instead, the director is digging deeper and asking important questions such as “how does this impact our cost?” and “what are our competitors doing?” to understand the full picture.

Bias # 5: PRIMING EFFECT

Before we get into this, here is a small task for you. I will give you the first and last letter of a word. You should guess the word. Complete this word while I go and grab a snack. 

Here is the word — S _ _ P

Did you think of SOUP? Ok. Good. 

Now, complete the following word and this time I will take a quick shower while you are at it: 

Here is the word - S _ _ P 

Did you guess SOAP this time?

If so, you got influenced by the Priming Effect. In this bias, when we are exposed to a “stimulus” — a word, image or sound — it will influence how we respond to that related “stimulus”. In the first case, the stimulus was the word ‘snack’ that influences most people to think of SOUP. And in the second case, the stimulus was ‘shower’ that influences most people to think of SOAP. 

How to use the Framing Effect bias to your advantage

Sow the seed early. You can influence someone or a group by exposing them to related stimuli. For example, if you want to influence your friends to visit Portugal with you, then you can, for example, talk about Cristiano Ronaldo in your conversations. Or show them pictures of the Algarve to initiate the priming effect.

This may sound sneaky at first and may not be a popular tactic, but it works like magic! 

Bias # 6: COGNITIVE EASE

Let me talk about a hypothetical investment opportunity for you. Let’s say Park Lawn Corporation is a great company and they are the largest funeral, cremation and cemetery provider. Would you invest in them?

If you said YES: Then you will probably research Park Lawn Corp and buy their shares OR perhaps you are someone who loves death which is a bit creepy, but hey, no judgment.

If you said UNSURE/MAYBE: Then congratulations, that is the correct answer.

If you said NO: Well, then my friend you fell into the trap of a bias called ‘Cognitive Ease’.

Let me explain: Cognitive ease is when we make decisions based on familiarity, ease of understanding and the feel-good factor. It is a shortcut our brain takes when answering difficult questions. I asked you a difficult question and for those who answered NO: Your intuition had an answer readily available for you. Though the answer was NOT an answer to the original question.

The original difficult question was - Would you invest in Park Lawn?

And the easier question to answer instead was “Do I like funerals, coffins, death, etc.?” and your gut had an answer readily available for this – “NO, I do not like funerals and death, so I will not invest in Park Lawn”.

The correct answer was ‘Unsure’ because investment-related questions should NOT be made based on such a limited amount of information. Sure, the funeral industry may not be as hot as the tech industry, but what if I told you that Park Lawn has strong finances, lots of free cash flow, a solid leadership team, and a strong distribution network. Now, you have more information to make a well-informed decision.

How to use the Cognitive Ease bias to your advantage

We all face situations where our friends or family or co-workers ask us to make decisions based on limited data. Sometimes it works, sometimes it doesn’t. But you can improve the quality of your decisions by demanding more data & evidence.

In fact, Psychologist Daniel Kahneman who won the 2002 Nobel Prize for his work in the field of Judgment, Decision-Making and Behavioral Economics famously said: “Delay the decision as much as you can because it allows you the opportunity to collect more data points. Then you can trust your intuition because you can never have all the information” 

Conclusion

Awareness of some of these biases is just the first step towards improved decision-making. Now that you are aware, put this knowledge to work by practicing these at work, school and home in a safe environment. Remember, there are no shortcuts to exponentially improve a skill. And decision-making like any other skill can be strengthened only by practice. The more you practice, the better you will get. For more questions and queries, feel free to reach out to me at omer@omerqadri.com