Top 5 biases in decision making


Decision Making Decision Biases

by Coegil Blogger

Top 5 biases in decision making

  • Biases in decision making degrade the effectiveness of the decisions you make.
  • There are five key bias types in decision making and learning to identify these types of bias can help you avoid getting wrapped up in these blinded decisions.
  • Normalizing your research process with insights, predictions and actions through Coegil can help you avoid bias in your decision making.

Biases are difficult to avoid as they are human nature. And yet, in research, biases materially degrade the quality and effectiveness of your decisions, if left unchecked.

To help you ensure your research is effective in aiding you in great decision making, here’s a look at the top five biases in decision making and how to avoid them.

Confirmation bias

Confirmation bias is research designed to prove one’s own theories or hypothesis to be true. It’s research for the sake of saying that you did the research or just to back up your hypothesis with at least a few facts.

While at times research does reinforce hypothesis, there’s a danger in only doing research to prove what you already believe. At that point, you might as well just not do the research and make the decision.

Availability heuristic

This bias in decision making is when someone relies on things that they already know to make a decision. So anything that comes to mind from their previous experiences or past research gets passed off as research without true reference in the decision-making process.

In these scenarios, decision-makers tend to weigh heavily on their most recent experiences and knowledge to inform their decisions. It means that no outside information is brought to life, which is risky to rely on.

Sunk-cost fallacy

Once someone has made an investment in something, it’s difficult for them to mentally shift focus. That “sunk cost” in the original decision leads them to believe that it’s riskier to change courses because they need to somehow earn that investment back before looking at other avenues.

The trouble with this type of bias is that it means ignoring facts and statistics that you learn along the way after making a decision and that you invest even more money in a decision that isn’t the best choice.

Bandwagon effect

The bandwagon effect is much like how it sounds. The more people that get behind one way of thinking or one decision, the more prevalent that way of thinking becomes.

It’s all about following the trends, even if there isn’t research and statistics to back up that decision making. The bandwagon effect is somewhat like groupthink and blinds decision makers to making the most popular decision over the soundest decision.

Framing effect

The framing effect happens when people make decisions based off of how the topic or answer is framed. This means that if something is framed as a gain instead of a loss, they’ll make the decision to take that route.

In a business setting, an example of this is a public relations decision where a company gets tons of media exposure, but the media exposure is poor. Because the decision was framed as getting exposure in general instead of what type of exposure the company would receive, it might sound like a good idea.

Removing bias and improving the quality of decisions

Not all decisions include bias. Some are backed by strong research, facts and statistics. There are steps you can take to try and remove bias from your decision-making process.

The first step is to normalize your research. Start with insights, make predictions based on those insights and then take action from what you have learned in your research.

The next step is to use true data and research to back up your insights and predictions. This means removing the facts and figures you think you know when you embark on a decision-making research project.

Now that you have sound research insights, make sure that your actions are based off of predictions and forecasts that ladder up from your insights.

Finally, ensure that you aren’t missing something by having others review your research and decision-making process to avoid blind spots or gaps in your research.

Coegil makes it easy to make great decisions based on research. And the more you use Coegil, the easier your decision making gets. Plus, you don’t have to go it alone. With a network of skilled researchers, Coegil ensures your team isn’t missing gaps in research by approaching projects from an unbiased standpoint.

Learn more about Coegil on our product page.

 

Coegil Observations is prepared by and is the property of Coegil Holdings, Inc. (“Coegil”) and is circulated for informational and educational purposes only. There is no consideration given to the specific needs, objectives, or tolerances of any of the recipients. Additionally, Coegil’s actual positions, in any form, may, and often will, vary from its conclusions discussed herein based on any number of factors relevant to Coegil. Recipients should consult their own advisors before making any decisions based on this report. This report is not an offer to sell or the solicitation of an offer to buy the goods, services, securities, or other investment instruments mentioned. Coegil research utilizes data and information from public, private, and internal sources. While we consider information from external sources to be reliable, we do not assume responsibility for its accuracy. The views expressed herein are solely those of Coegil as of the date of this report and are subject to change without notice. Coegil may have a significant interest in one or more of the positions, goods, services, and/or securities discussed. Those responsible for preparing this report receive compensation based upon various factors, including, among other things, the quality of their work and firm revenues.

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