May 30, 2021 by Giulia
Think you are smart? Think harder
We are all pretty much convinced that our internal monologue and our decision-making process follow quite a straightforward flow, and we always make the best decisions for ourselves. We tell our potential employers that we can make fast and reliable decisions under pressure, we think of ourselves as rational human beings, our minds perfect thinking machines.
What a feeling! Such a calming and reassuring sense of stability.
Sorry… I need to extirpate this idea from your head immediately!
“So you are telling me that I am not a rational person? What do you mean? When I am asked whether I want 1 euro today or 10 euro at the end of the week, I am taking the 10 euro at the end of the week!”
- You, right now, probably
This is true… some of the time. But what happens when you are put under pressure?
Homo Economicus
The Homo Economicus is the term which some economists use to describe a perfectly rational human being, and has been the cornerstone of most behavioural economics theories. People are portrayed as ideal decision-makers with complete rationality, perfect access to information, and consistent, self-interested goals.
But modern behavioural economists, and scientists in the field of neuroeconomics, have demonstrated that human beings are, in fact, not rational in their decision-making.
Here’s an example.
You are super thirsty. You go to the first vending machine and see that a water bottle costs around 2 euros. You look into your wallet and “Oh no, I have only 1 euro!”. A stranger comes to you and offers you 1 euro now or 10 euros at the end of the week.
What do you do?
What this example is pointing to, is that by changing your situation and/or your expectations, you may be pushed to make non-rational decisions.
Skewed decision-making processes happen more often than we would like to admit; or better, more than we can admit! These processes happen so fast and naturally, that often we can’t even realize they happened.
Many of our decisions are driven by biases and heuristics, decision-making shortcuts that speed up our decision-making processes and happen when:
- we are overloaded with information,
- we don’t have all the information, so we fill in the gaps,
- we need to act fast.
Our brain has evolved these shortcuts in order to deal with situations effectively, and avoid getting stuck with pros & cons lists. Thanks Brain!
However, biases and heuristics don’t always work to our advantage, increasing the likelihood of errors and skewed judgments, so we should be aware of them.
Let’s have a look at a couple of these shortcuts in order!
We are overloaded with information
Let me ask you the following question:
Is a person more likely to die in a car accident or from a heart attack?
Cardiovascular disease is the leading cause of death globally. Still, when I was first asked that question (in a course about biases and heuristics!), I could have sworn it was car accidents.
Car accidents are news-worthy in a way that deadly heart attacks are not. This fact makes car accidents more ready to pop into my mind.
This is known as availability heuristic, or availability bias.
It’s a mental shortcut that relies on immediate examples that come to mind when evaluating a specific topic, concept, method or decision. The availability heuristic operates on the notion that if something can be recalled, it must be important, or at least more important than alternative solutions which are not as readily recalled. Subsequently, under the availability heuristic, people tend to heavily weigh their judgments toward more recent information, making new opinions biased toward that latest news.
Well, fair enough, we are drowning in an ever-growing flood of information. If something sticks with you, you better make good use of it! Or do you?
Let’s move onto the next example.
When we don’t have all the information, we fill in the gaps
Imagine this is Lukas, your new work colleague. Lukas is an attractive guy, he is tall, he dresses in a casual style.
What else can you tell from looking at him? What’s your first impression of the person in the picture? What is he like?
From this pic he seems like a nice guy, competent, maybe not super talkative.
But how do I know? I know nothing about Lukas. He could be very well thinking about the murder he committed the night before! Just because he looks attractive and nicely dressed, I started inferring all these nice things about him.
This is called halo effect. It is the tendency for qualities of a person (or company, brand, product…) in one area to positively/negatively influence one’s opinion or feelings for their qualities in other areas. Halo effect is “the name given to the phenomenon whereby evaluators tend to be influenced by their previous judgments of performance or personality.” This constant error in judgment is reflective of the individual’s preferences, prejudices, ideology, aspirations, and social perception.
Well, this is common knowledge: you should not judge a book by its cover.
Still, we do judge books by their covers!
In 1941, social scientist Florence Monahan studied social workers, finding that the majority found it harder to believe that a person was guilty of a crime, if this person was beautiful.These are social workers, whose job involves getting to understand people from all walks of life, what chance do we have? Let’s hope Lukas is not a murderer and move onto the next example.
You need to make decisions fast
Another working day has gone by, and you are finally heading home. You pop quickly to the grocery store to stock up in pantry staples. You enter the premises and move towards the jam & spreads isle, where you discover with horror that your favorite hazelnut & chocolate spread has sold out! Now that your favorite breakfast spread is not available, what are you going to choose?
Shall you go for fruit jams or marmalades for once? They’re healthy!
Absolutely not, you want something more… buttery.
You have used the first heuristic: elimination by aspect. In order to simplify and speed up your decision-making process, you have already thinned the number of options considerably, by using a single “cutoff” aspect. No butter? No party. You didn’t even have to look at their price, or whether they were ethically sourced, etc.
What’s left on the shelves?
Peanut butter, almond butter, other chocolate spreads.
Second round of elimination by aspect: no nut butters, thanks.
At this point, it is pretty clear that you are going for a chocolate spread. Good. The shelves are filled with multiple chocolate spread jars from different & unknown brands. Not so good.
Back to square one.
You are now desperate: “Brain, please do something! I am drowning over here. This was supposed to be a quick errand… “
Suddenly you see a jar that you recognize. It’s the new spread that has been massively advertised for the past weeks. This is your chance. You can end it, right here, right now. You finally pick the spread and go on your merry way.
This is called mere-exposure effect, a psychological phenomenon by which people tend to develop a preference for things merely because they are familiar with them. In social psychology, this effect is sometimes called the familiarity principle. You are not sure whether this spread is going to be tasty, but the fact that you saw it advertised often, made it more familiar than the other options, which was enough to win you over.
So, we’re doomed to make poor decisions?
No, not at all. But avoiding the pitfalls of automatic thinking requires a bit of effort. There are many different biases and heuristics but, once you learn about them, it becomes easier to avoid being swayed by them!
https://www.investopedia.com/terms/h/homoeconomicus.asp
https://betterhumans.pub/cognitive-bias-cheat-sheet-55a472476b18
https://www.verywellmind.com/what-is-a-heuristic-2795235
https://en.wikipedia.org/wiki/Availability_heuristic
https://ourworldindata.org/causes-of-death