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8 Common Mistakes in How Our Brains Think and How to Prevent Them - Belle Beth Cooper

8 Common Mistakes in How Our Brains Think and How to Prevent Them - Belle Beth Cooper | Bounded Rationality and Beyond |

Get ready to have your mind blown.


I was seriously shocked at some of these mistakes in thinking that I subconsciously make all the time. Obviously, none of them are huge, life-threatening mistakes, but they are really surprising and avoiding them could help us to make more rational, sensible decisions.


Being aware of the mistakes we naturally have in our thinking can make a big difference in avoiding them. Unfortunately, most of these occur subconsciously, so it will also take time and effort to avoid them—if you even want to.


Regardless, I think it’s fascinating to learn more about how we think and make decisions every day, so let’s take a look at some of these thinking habits we didn’t know we had.


1. We surround ourselves with information that matches our beliefs

We tend to like people who think like us. If we agree with someone’s beliefs, we’re more likely to be friends with them. While this makes sense, it means that we subconsciously begin to ignore or dismiss anything that threatens our world views, since we surround ourselves with people and information that confirm what we already think.


This is called confirmation bias. If you’ve ever heard of the frequency illusion, this is very similar. The frequency illusion occurs when you buy a new car, and suddenly you see the same car everywhere. Or when a pregnant woman suddenly notices other pregnant women all over the place. It’s a passive experience, where our brains seek out information that’s related to us, but we believe there’s been an actual increase in the frequency of those occurrences.


Confirmation bias is a more active form of the same experience. It happens when we proactively seek out information that confirms our existing beliefs.


Not only do we do this with the information we take in, but we approach our memories this way, as well. In an experiment in 1979 at the University of Minnesota, participants read a story about a women called Jane who acted extroverted in some situations and introverted in others. When the participants returned a few days later, they were divided into two groups. One group was asked if Jane would be suited to a job as a librarian, the other group were asked about her having a job as a real-estate agent. The librarian group remembered Jane as being introverted and later said that she would not be suited to a real-estate job. The real-estate group did the exact opposite: they remembered Jane as extroverted, said she would be suited to a real-estate job and when they were later asked if she would make a good librarian, they said no.


In 2009, a study at Ohio State showed that we will spend 36 percent more time reading an essay if it aligns with our opinions. "Whenever your opinions or beliefs are so intertwined with your self-image you couldn’t pull them away without damaging your core concepts of self, you avoid situations which may cause harm to those beliefs." – David McRaney


This trailer for David McRaney’s book, You are Now Less Dumb, explains this concept really well with a story about how people used to think geese grew on trees (seriously), and how challenging our beliefs on a regular basis is the only way to avoid getting caught up in the confirmation bias.


2. We believe in the “swimmer’s body” illusion


This has to be one of my favorite thinking mistakes I came across. In Rolf Dobelli’s book, The Art of Thinking Clearly, he explains how our ideas about talent and extensive training are well off-track: "Professional swimmers don’t have perfect bodies because they train extensively. Rather, they are good swimmers because of their physiques. How their bodies are designed is a factor for selection and not the result of their activities."


The “swimmer’s body illusion” occurs when we confuse selection factors with results. Another good example is top performing universities: are they actually the best schools, or do they choose the best students, who do well regardless of the school’s influence?


What really jumped out at me when researching this section was this particular line from Dobelli’s book: "Without this illusion, half of advertising campaigns would not work."


It makes perfect sense, when you think about it. If we believed that we were predisposed to be good at certain things (or not), we wouldn’t buy into ad campaigns that promised to improve our skills in areas where it’s unlikely we’ll ever excel.


3. We worry about things we’ve already lost


No matter how much I pay attention to the sunk cost fallacy, I still naturally gravitate towards it.


The term sunk cost refers to any cost (not just monetary, but also time and effort) that has been paid already and cannot be recovered. So, a payment of time or money that’s gone forever, basically.


The reason we can’t ignore the cost, even though it’s already been paid, is that we wired to feel loss far more strongly than gain. Psychologist Daniel Kahneman explains this in his book, Thinking Fast and Slow: "Organisms that placed more urgency on avoiding threats than they did on maximizing opportunities were more likely to pass on their genes. So, over time, the prospect of losses has become a more powerful motivator on your behavior than the promise of gains. The sunk cost fallacy plays on this tendency of ours to emphasize loss over gain."


This research study is a great example of how it works: Hal Arkes and Catehrine Blumer created an experiment in 1985 which demonstrated your tendency to go fuzzy when sunk costs come along. They asked subjects to assume they had spent $100 on a ticket for a ski trip in Michigan, but soon after found a better ski trip in Wisconsin for $50 and bought a ticket for this trip too. They then asked the people in the study to imagine they learned the two trips overlapped and the tickets couldn’t be refunded or resold. Which one do you think they chose, the $100 good vacation, or the $50 great one?

Over half of the people in the study went with the more expensive trip. It may not have promised to be as fun, but the loss seemed greater.


So, just like the other mistakes I’ve explained in this post, the sunk cost fallacy leads us to miss or ignore the logical facts presented to us, and instead make irrational decisions based on our emotions—without even realizing we’re doing so:


The fallacy prevents you from realizing the best choice is to do whatever promises the better experience in the future, not which negates the feeling of loss in the past.


Being such a subconscious reaction, it’s hard to avoid this one. Our best bet is to try to separate the current facts we have from anything that happened in the past. For instance, if you buy a movie ticket only to realize the movie is terrible, you could either:

a) stay and watch the movie, to “get your money’s worth” since you’ve already paid for the ticket (sunk cost fallacy)

b) leave the cinema and use that time to do something you’ll actually enjoy.

The thing to remember is this: you can’t get that investment back. It’s gone.


Don’t let it cloud your judgement in whatever decision you’re making in this moment—let it remain in the past.


4. We incorrectly predict odds


Imagine you’re playing Heads or Tails with a friend. You flip a coin, over and over, each time guessing whether it will turn up heads or tails. You have a 50/50 chance of being right each time.


Now suppose you’ve flipped the coin five times already and it’s turned up heads every time. Surely, surely, the next one will be tails, right? The chances of it being tails must be higher now, right?

Well, no. The chances of tails turning up are 50/50. Every time. Even if you turned up heads the last twenty times. The odds don’t change.


The gambler’s fallacy is a glitch in our thinking—once again, we’re proven to be illogical creatures. The problem occurs when we place too much weight on past events, believing that they will have an effect on future outcomes (or, in the case of Heads or Tails, any weight, since past events make absolutely no difference to the odds).


Unfortunately, gambling addictions in particular are also affected by a similar mistake in thinking—the positive expectation bias. This is when we mistakenly think that eventually, our luck has to change for the better. Somehow, we find it impossible to accept bad results and give up—we often insist on keeping at it until we get positive results, regardless of what the odds of that happening actually are.


5. We rationalize purchases we don’t want


I’m as guilty of this as anyone. How many times have you gotten home after a shopping trip only to be less than satisfied with your purchase decisions and started rationalizing them to yourself? Maybe you didn’t really want it after all, or in hindsight you thought it was too expensive. Or maybe it didn’t do what you hoped, and was actually useless to you.


Regardless, we’re pretty good at convincing ourselves that those flashy, useless, badly thought-out purchases are necessary after all. This is known as post-purchase rationalization or Buyer’s Stockholm Syndrome.


The reason we’re so good at this comes back to psychology: Social psychologists say it stems from the principle of commitment, our psychological desire to stay consistent and avoid a state of cognitive dissonance.


Cognitive dissonance is the discomfort we get when we’re trying to hold onto two competing ideas or theories. For instance, if we think of ourselves as being nice to strangers, but then we see someone fall over and don’t stop to help them, we would then have conflicting veiws about ourselves: we are nice to strangers, but we weren’t nice to the stranger who fell over. This creates so much discomfort that we have to change our thinking to match our actions—i.e. we start thinking of ourselves as someone who is not nice to strangers, since that’s what our actions proved.


So in the case of our impulse shopping trip, we would need to rationalize the purchases until we truly believe we needed to buy those things, so that our thoughts about ourselves line up with our actions (making the purchases).

The tricky thing in avoiding this mistake is that we generally act before we think, leaving us to rationalize our actions afterwards.


Being aware of this mistake can help us avoid it by predicting it before taking action—for instance, as we’re considering a purchase, we often know that we will have to rationalize it to ourselves later. If we can recognize this, perhaps we can avoid it. It’s not an easy one to tackle, though!


6. We make decisions based on the anchoring effect


Dan Ariely is a behavioural economist who gave one of my favorite TED talks ever about the irrationality of the human brain when it comes to making decisions.


He illustrates this particular mistake in our thinking superbly, with multiple examples. The anchoring effect essentially works like this: rather than making a decision based on pure value for investment (time, money, etc.), we factor in comparative value—that is, how much value an option offers when compared to another option.


Let’s look at some examples from Dan, to illustrate this effect in practice:

One example is an experiment that Dan conducted using two kinds of chocolates for sale in a booth: Hershey’s Kisses and Lindt Truffles. The Kisses were one penny each, while the Truffles were fifteen cents each. Considering the quality differences between the two kinds of chocolates and the normal prices of both items, the Truffles were a great deal, and the majority of visitors to the booth chose the Truffles.


For the next stage of his experiment, Dan offered the same two choices, but lowered the prices by one cent each. So now the Kisses were free, and the Truffles cost fourteen cents each. Of course, the Truffles are even more of a bargain now, but since the Kisses were free, most people chose those instead.


Your loss aversion system is always vigilant, waiting on standby to keep you from giving up more than you can afford to spare, so you calculate the balance between cost and reward whenever possible. – You Are Not So Smart

Another example Dan offers in his TED talk is when consumers are given holiday options to choose between. When given a choice of a trip to Rome, all expenses paid, or a similar trip to Paris, the decision is quite hard. Each city comes with its own food, culture and travel experiences that the consumer must choose between.


When a third option is added, however, such as the same Rome trip, but without coffee included in the morning, things change. When the consumer sees that they have to pay 2,50 euros for coffee in the third trip option, not only does the original Rome trip suddenly seem superior out of these two, it also seems superior to the Paris trip. Even though they probably hadn’t even considered whether coffee was included or not before the third option was added.


Here’s an even better example from another of Dan’s experiments:

Dan found this real ad for subscriptions to The Economist, and used it to see how a seemingly useless choice (like Rome without coffee) affects our decisions.


To begin with, there were three choices: subscribe to The Economist web version for $59, the print version for $125, or subscribe to both the print and web versions for $125. It’s pretty clear what the useless option is here. When Dan gave this form to 100 MIT students and asked them which option they would choose, 84% chose the combo deal for $125. 16% chose the cheaper, web-only option, and nobody chose the print-only option for $125.


Next, Dan removed the ‘useless’ print-only option which nobody wanted and tried the experiment with another group of 100 MIT students. This time, the majority chose the cheaper, web-only version, and the minority chose the combo deal. So even though nobody wanted the bad-value $125 print-only option, it wasn’t actually useless—in fact, it actually informed the decisions people made between the two other options by making the combo deal seem more valuable in relation.


This mistake is called the anchoring effect, because we tend to focus on a particular value and compare it to our other options, seeing the difference between values rather than the value of each option itself.


Eliminating the ‘useless’ options ourselves as we make decisions can help us choose more wisely. On the other hand, Dan says that a big part of the problem comes from simply not knowing our own preferences very well, so perhaps that’s the area we should focus on more, instead.


7. We believe our memories more than facts


Our memories are highly fallible and plastic. And yet, we tend to subconsciously favor them over objective facts. The availability heuristic is a good example of this. It works like this: Suppose you read a page of text and then you’re asked whether the page includes more words that end in “ing” or more words with “n” as the second-last letter. Obviously, it would be impossible for there to be more “ing” words than words with “n” as their penultimate letter (it took me a while to get that—read over the sentence again, carefully, if you’re not sure why that is).However, words ending in “ing” are easier to recall than words like hand, end, or and, which have “n” as their second-last letter, so we would naturally answer that there are more “ing” words.


What’s happening here is that we are basing our answer of probability (i.e. whether it’s probable that there are more “ing” words on the page) on how available relevant examples are (i.e. how easily we can recall them). Our troubles in recalling words with “n” as the second last letter make us think those words don’t occur very often, and we subconsciously ignore the obvious facts in front of us.


Although the availability heuristic is a natural process in how we think, two Chicago scholars have explained how wrong it can be:


Yet reliable statistical evidence will outperform the availability heuristic every time.

The lesson here? Whenever possible, look at the facts. Examine the data. Don’t base a factual decision on your gut instinct without at least exploring the data objectively first.


8. We pay more attention to stereotypes than we think


The funny thing about lots of these thinking mistakes is that they’re so ingrained, I had to think long and hard about why they’re mistakes at all! This one is a good example—it took me a while to understand how illogical this pattern of thinking is.

It’s another one that explains how easily we ignore actual facts:


The human mind is so wedded to stereotypes and so distracted by vivid descriptions that it will seize upon them, even when they defy logic, rather than upon truly relevant facts.

Here’s an example to illustrate the mistake, from researchers Daniel Kahneman and Amos Tversky:

In 1983 Kahneman and Tversky tested how illogical human thinking is by describing the following imaginary person: Linda is thirty-one years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in antinuclear demonstrations.


The researchers asked people to read this description, and then asked them to answer this question: Which alternative is more probable?


1. Linda is a bank teller.

2. Linda is a bank teller and is active in the feminist movement.


Here’s where it can get a bit tricky to understand (at least, it did for me!)—If answer #2 is true, #1 is also true. This means that #2 cannot be the answer to the question of probability.


Unfortunately, few of us realize this, because we’re so overcome by the more detailed description of #2. Plus, as the earlier quote pointed out, stereotypes are so deeply ingrained in our minds that subconsciously apply them to others.


Roughly 85% of people chose option #2 as the answer.


Again, we see here how irrational and illogical we can be, even when the facts are seemingly obvious.


I love this quote from researcher Daniel Kahneman on the differences between economics and psychology: I was astonished. My economic colleagues worked in the building next door, but I had not appreciated the profound difference between our intellectual worlds. To a psychologist, it is self-evident that people are neither fully rational nor completely selfish, and that their tastes are anything but stable.


Clearly, it’s normal for us to be irrational and to think illogically, even though we rarely realize we’re doing it. Still, being aware of the pitfalls we often fall into when making decisions can help us to at least recognize them, if not avoid them.

Via Jim Manske
Troy Crayton's curator insight, October 4, 2013 3:00 PM

Thank you for making us "aware" of this article, Duane....

donhornsby's curator insight, October 7, 2013 9:52 AM

(From the article): Clearly, it’s normal for us to be irrational and to think illogically, especially when language acts as a limitation to how we think, even though we rarely realize we’re doing it. Still, being aware of the pitfalls we often fall into when making decisions can help us to at least recognize them, if not avoid them.

Have you come across any other interesting mistakes we make in the way we think?

Lawrence Lanoff's curator insight, December 30, 2013 12:18 AM

This article is dense, but profound. Worth chomping on if you have some time. 

Bounded Rationality and Beyond
News on the effects of bounded rationality in economics and business, relationships and politics
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An empirical investigation into the propensity of reckless decision making within the high pressure environment of Deal or No Deal

Abstract: This paper discusses human attitudes towards risk and the development of expected utility models, laying the foundations for the creation of prospect theory in 1979. It proceeds to analyse the decisions of contestants on the popular TV game show Deal or No Deal to attempt to observe any evidence of differing levels of risk aversion under losses and gains as predicted by prospect theory. The results reveal some evidence of decreased risk aversion in the domains of losses and gains, with contestants displaying behaviour consistent with the break-even and house-money effects. We conclude there may be enough evidence of variable reference points to warrant further investigation, and propose suggestions for further research
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Understanding decision neuroscience: A multidisciplinary perspective and neural substrates - ResearchGate

Understanding decision neuroscience: A multidisciplinary perspective and neural substrates - ResearchGate | Bounded Rationality and Beyond |

Publication » Understanding decision neuroscience: A multidisciplinary perspective and neural substrates. 

The neuroscience of decision making is a rapidly evolving multidisciplinary research area that
employs neuroscientific techniques to explain various parameters associated with decision
making behavior. In this chapter, we emphasize the role of multiple disciplines such as
psychology, economics, neuroscience, and computational approaches in understanding the
phenomenon of decision making. Further, we present a theoretical approach that suggests
understanding the building blocks of decision making as bottom-up processes and integrate
these with top-down modulatory factors. Relevant neurophysiological and neuroimaging
findings that have used the building-block approach are reviewed. A unifying framework
emphasizing multidisciplinary views would bring further insights into the active research
area of decision making. Pointing to future directions for research, we focus on the role of
computational approaches in such a unifying framework.

Understanding decision neuroscience: A multidisciplinary perspective and neural substrates. Available from: [accessed Oct 2, 2015].

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Stochastic Optimal Growth Model with Risk Sensitive Preferences

Abstract: This paper studies a one-sector optimal growth model with i.i.d. productivity shocks that are allowed to be unbounded. The utility function is assumed to be non-negative and unbounded from above. The novel feature in our framework is that the agent has risk sensitive preferences in the sense of Hansen and Sargent (1995). Under mild assumptions imposed on the productivity and utility functions we prove that the maximal discounted non-expected utility in the infinite time horizon satisfies the optimality equation and the agent possesses a stationary optimal policy. A new point used in our analysis is an inequality for the so-called associated random variables. We also establish the Euler equation that incorporates the solution to the optimality equation.
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Richard Thaler with Malcolm Gladwell on Misbehaving - YouTube

Behavioral economist Richard Thaler talks to bestselling author Malcolm Gladwell on the implications of behavioral economics on how we think about the world, from our personal lives to business to society.

They will have you retooling your grocery list and retirement strategies, and lead managers to rethink every aspect of their business.

Recorded May 19, 2015 at 92nd Street Y.

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Richard Thaler and Hal Varian: Behavioral Economics - YouTube

Richard Thaler, Behavioral Science and Economics Professor, University of Chicago; Author, Misbehaving: The Making of Behavioral Economics; Twitter @R_Thaler
Hal Varian, Chief Economist, Google; Twitter @halvarian
George Anders, Contributing Writer, Forbes; Twitter @GeorgeAnders – Moderator

Traditional economics assumes rational actors. Our lived experiences, however, tell us otherwise: real people are often error-prone individuals rather than Spock-like automatons. Whether buying concert tickets or applying for a mortgage, we all make decisions that deviate from assumed rationality standards. We misbehave, and our misbehavior has serious consequences. Dismissed at first by economists as an amusing sideshow, the study of human miscalculations and their effects on markets now drives efforts to make smarter decisions in our personal lives, our businesses and our governments. Thaler and Varian, economists of the information age, discuss the intersection of economics and psychology, and offer innovative strategies to approach an increasingly complex world.

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Behavioural biases among real estate investment decision makersHas anyone seen my neo-cortex? I'm sure I left it here somewhere

Abstract: Purpose – To examine whether investors in commercial real estate exhibit some important behavioural biases, namely: anchoring, herding, framing/nudging, loss aversion and over-confidence. If so, are there steps that investors and their agents ( fund managers and advisors) could take (a) to temper the effects of their own biases and (b) to exploit the presence of such biases in other market participants? Design/methodology/approach – Analysis of historic data sources at asset and market levels and over different time periods, with focus on identifying the specific biases listed above, singly and in combination Findings – Understanding of behavioural bias merits greater attention. Research limitations/implications – Reliance on inferences from historic data Practical implications – May help develop clearer understanding of market drivers and improved decision-making for market participants. Originality/value – New research within the real estate industry that could help investors understand the highly cyclical nature of commercial real estate investment markets Keywords: behavioural biases – anchoring – herding – framing - loss aversion – over-confidence Article Classification: Viewpoint
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Using Science to Make Government Work Better - MIND Guest Blog - Scientific American Blog Network

Using Science to Make Government Work Better - MIND Guest Blog - Scientific American Blog Network | Bounded Rationality and Beyond |

On September 15th, President Obama issued an executive order that acknowledges something we have known for a long time: Human beings are not rational creatures who reliably fill out tax documents, enroll in savings programs, or apply for loans, as economic models assume they do. Instead, they systematically and predictably make decisions that run counter to their best interests, as centuries of observations suggest and behavioral science research now empirically confirms.

Obama’s order encourages government “to more fully realize the benefits of behavioral insights and deliver better results at a lower cost for the American people,” representing a fundamental shift in not just how we approach public policy but how we understand human nature.

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President Obama signed an Executive Order that directs Federal agencies to use behavioral science insights to better serve the American people. 

President Obama has issued an executive order that will interest the readers of this blog. Read it below.


A growing body of evidence demonstrates that behavioral science insights — research findings from fields such as behavioral economics and psychology about how people make decisions and act on them — can be used to design government policies to better serve the American people.

Where Federal policies have been designed to reflect behavioral science insights, they have substantially improved outcomes for the individuals, families, communities, and businesses those policies serve. For example, automatic enrollment and automatic escalation in retirement savings plans have made it easier to save for the future, and have helped Americans accumulate billions of dollars in additional retirement savings. Similarly, streamlining the application process for Federal financial aid has made college more financially accessible for millions of students.

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Outsmart Your Own Biases

Outsmart Your Own Biases | Bounded Rationality and Beyond |

How to broaden your thinking and make better decisions. 

Suppose you’re evaluating a job candidate to lead a new office in a different country. On paper this is by far the most qualified person you’ve seen. Her responses to your interview questions are flawless. She has impeccable social skills. Still, something doesn’t feel right. You can’t put your finger on what—you just have a sense. How do you decide whether to hire her?

You might trust your intuition, which has guided you well in the past, and send her on her way. That’s what most executives say they’d do when we pose this scenario in our classes on managerial decision making. The problem is, unless you occasionally go against your gut, you haven’t put your intuition to the test. You can’t really know it’s helping you make good choices if you’ve never seen what happens when you ignore it.

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The power of free

The power of free | Bounded Rationality and Beyond |

Two of the most powerful words in the English language are “free” and “sex”. While the latter is a bit racy, the former presents an opportunity all brands should capitalize on.

The psychological impact of ‘free’

In studying people’s response to free offers, behavioral scientist Dan Arielyfound that free, “only had an upside. It creates an emotional reaction. It makes us value it more.” He goes on to add, “We don’t think of zero as having any downside. It’s a category by itself and we think about it very differently.” Free has a special appeal. That said, considering how often the word is used in advertising and marketing, consumers have started to become skeptical of things that seem too good to be true.

Many believe nothing in this world is free, and that ‘free’ usually comes at a price. In some cases, sharing a piece of personal information such as your name, email or mailing address is sufficient. In 2014, customer experience solutions firm SDL published a study which found that 55 percent of its 300 Millennials surveyed interacted with brands on social media in exchange for free products. Around 62 percent did so in order to receive discounts. Consumers understand the price of ‘free’ and are happy to pay it.

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