Cognitive Biases in psychology

 Cognitive Biases & Decision Making

In our lives we're making decisions all the time from early childhood to our last days we need to make decisions all the time that is the nature of human life. And when we make decisions, we usually think that we're using our common sense, our experience, our logic, our learning, and our wisdom.

The fact is that most of our decision making is affected by different kinds of biases called cognitive biases. What are cognitive biases and how do they affect us.

Proximity Bias:

As you see in this picture here, objects that are near to each other are grouped together, there may be no logic no other logic than just the fact that they are near together. We have a common saying a man is known by the organization he keeps. While this may be true of social situations, it doesn't have to be true of any phenomena in the material world. Things just may happen to be close together and they may have nothing to do with each other, but our biases tell us that these things belong together. So as evident in this picture, proximity bias will force us to group these things together even if they don't belong together.

Similarity Bias:

The next bias that affects our judgment is similarity bias, so things that appear similar to each other are grouped together.

As shown in the picture here, the circles even though they're closer to the squares are grouped with other circles because they're similar. Now once again we may be paying attention to a particular feature and based on that we may be deciding that these things belong together, whereas in reality they may not.

So just because two people have offices next to each other does not mean that they're best friends, but in fact in our lives we make a lot of decisions based on similarity bias.

Confirmation Bias:

Now this one is a killer, confirmation bias, have you ever seen two people arguing on politics especially, when they belong to opposite camps. 

The same reason that one uses to support their political leader is used as a disqualification by the opponent and we've seen so much of that in many countries.

Most people follow confirmation bias what does it mean, you accept only the information that confirms your belief and you do not even see the information. It is not that you consciously reject the information against your preferred. Political leader you choose sometimes not to see it and you only pick out information that suits your hypothesis.

You know in scientific method when we make a decision, we say that, if I want to confirm this hypothesis or this idea, I need to find information that rejects it and if I'm unable to find information that rejects it then, I may be comfortable accepting this idea.

But most people choose the opposite of the scientific method and only gather information to support their position. You see that in board meetings all the time. I want to present an idea, I want to persuade people of its value, so, I collect only the information that suits my presentation and I choose not to include information that goes against my idea. In the long run it may hurt the company and it may end up hurting me. But because we usually believe that what we're saying is true therefore, we are blinded by this bias and we choose not to see, however unconsciously we choose not to see the information negating our view. This is a very common bias, it is not only there as said in people arguing over politics, but also present in boardrooms in corporate meetings, in every day decision making.

Example:

A very simple example nine out of ten startups fail in the first year, it is because the entrepreneurs choose only the information that suits them. If they were seriously thinking about it, they would also choose information that went against their idea and then calculate the odds of them being successful.

Unfortunately, most people do not do that, because of confirmation bias, because they ignore information that goes against their idea. We have seen too many such cases of failure right before our very eyes. 

Familiarity Bias:

Another common bias is familiarity bias. People that you see a lot whether it's on tv or on social media you somehow unconsciously equate them with niceness so, it may be a terrible person who's appearing over and over again on television in fact, you get sick of seeing that person on television but when it comes to voting you'll still go out and vote for them.

Even though there may be a nicer but relatively unfamiliar so a person who's appeared only two or three times on television, makes a good speech, makes a good argument, appeals to your heart you would still not vote for them, because that person is not very familiar you will end up voting for a devil who's appearing every second day on television.

So, politicians who understand this bias try and appear as many times as possible on social media and, on television and, so on. Because they know that, that will make them familiar, that will make them a household name and therefore, that will be equated to being good. Even though people know that they're not very good. And it's not just true of politics even businesses use this a lot.

Gambler's Fallacy or Conjunction Fallacy:

Another bias is responsible for the downfall of many a gambler it is called gambler's fallacy and rightly, so it is based on a lack of understanding of statistics, it is based on a lack of understanding of how probability works.

So, let's say there is a gambler, who's tossing a coin a hundred times, he knows that fifty percent of the time the coin will fall heads up and, about 50 times the coin will fall tails up, so far that is the nature of probability, but how easy it is to predict whether it's going to fall heads up or tails up in any single throw the chance is 50, 50.

What happens in gambler's fallacy, is that the gambler tosses a coin, and it says heads then he throws it again and let's say it comes down heads again and then he throws it again and then lo and behold it comes heads again and now, he says throwing it fourth time this time it is bound to be tails not realizing, that every single throw is an independent event and he chooses to add up all of these events as if they're linked together.

While it is true that if you through this coin 100 times, it's likely to be 50 times heads up and, 50 times tails up, it could also be 49 times one way and, 51 times another way or vice versa, or it could even be 48, 52, could even be 60, 40, but the probability is lower the chances are lower the chances of one head and 99 tails are very low.

Based on this kind of reasoning he is treating, every individual throw as if it is part of a larger whole, it is also called conjunction fallacy. Because he is joining the probabilities of separate events so, the gamblers say things like third time I'm bound to win, there is no logic in the world and there is no law of probability that actually can affirm that. Statements like I have already lost 10 times, 11th time I'm bound to win or if you get three heads the fourth time has to be a tale.

Statements like these become a gambler's downfall. Unfortunately, the facilities the bookies that support this whole gambling exercise, make some room in the probability of an occasional win and that is what keeps a gambler hooked. But you can see that the logic or the lack thereof is what proves to be the gambler's downfall.

It is no big surprise then that in many countries and in many religions gambling is not allowed, because it creates misery around people's lives. So many people in some countries, who were actually, addicted to gambling and needed psychological help, they needed to understand that losing frequently did not mean that they were going to win big. Unfortunately seeing winners on television, you know again familiarity bias, made them believe that they had a fair chance as well at that very, very low probability event that is another example of cognitive biases.

Anchoring Bias:

Finally, a bias that you may be surprised by and that is called anchoring bias. Why you would be surprised by it, it's fascinating. The first example give you is a common sense one nothing to be surprised by, but the second example gave you will surprise you.

Example 1:

So, let's look at anchoring bias, the first example or the commonsense example is you being given a number, so you say, this cup here costs 100 rupees, here's another cup this one cost 120 rupees, they're of a similar quality but this one with 120 rupees has some excellent features this one is a luxury item.

So, you might be tempted to go for the one worth 120 rupees because, you set your standard at 100 rupees, you have no way of knowing what value the cups really are. Maybe the actual value of this cup is 10 rupees and of this other luxury cup is 40 rupees but because, first I present to you this cup is 100 rupees worth and this other one is 120, you anchor your mind at this price and easily fall for the 120 rupees worth.

The anchoring guy, you know the salesman says, it is actually worth 10,000 rupees but I'm only selling it to you for 100. you may fall for it because he's anchored the price at 10,000 creating a very big sense of value in your head and then bringing it down. It's usually easy to see through these kinds of gimmicks.

Example 2:

But there is the surprising part of this gimmick that, most people don't know about, and these sharp salesmen use it cleverly.

For an example and that is an example of the anchoring bias.

I'm a salesman and I come to you and I'm chatting with you, and I introduce myself I talk about country's politics, and I say do you know that Pakistan suffered from hundreds of billions of dollars of corruption, and you say yeah okay I agree with you and Pakistan still probably suffers from hundreds of billions of dollars' worth of corruption what has that person done.

He has anchored your mind in billions of dollars without you becoming aware that he's playing a sales trick with you your mind is now thinking of a very large scale of money thousands or hundreds of billions of dollars then you say here's this book costs eighty dollars it's a bargain and you think your mind was floating in hundreds of billions of dollars right and you say eighty dollars you say, this looks cheap sounds cheap. You fork out eighty dollars without realizing that he's played a trick on you and this drink is called anchoring bias.

So, the salesman played a trick on you and the trick was that he made you raise your scale of measurement to billions of dollars without making a direct link like the previous salesman's example who's saying this cup is worth 100 this cup is worth 120 it's a bargain please buy it here what he's doing is using something totally unrelated so that you don't see through that you're not even aware that he's playing a sales trick on you and the chances are most of you don't know about this.

So I'm alerting you if somebody does that kind of mathematical game with your head be alert if somebody mentions large numbers such as millions and billions before they actually, sell you a product with 80 realize that they're playing an anchoring trick with you and what you should immediately do is say something like well i thought this book was worth twenty dollars even if you don't think so it's smart to bring your own mental scale down to tens of dollars so that you can negotiate in a fair and logical way so as you can see these cognitive biases affect our judgment they affect our decision-making ability they are very important not just in business psychology and organizational psychology they're also important in running of our everyday lives and every day decision making and problem solving.