As you know, humans aren’t very rational.
In fact, studies reveal that there are many biases
in our decision-making process.
They cause us to lose money, make wrong choices,
and believe in things which are completely false.
So, here are the top 4 biases that cloud your judgement
and how to correct them.
Number one: The self-serving bias.
A survey once asked people which celebrities would go to heaven.
Mother Teresa topped the charts,
with 79% of people believing that she would be accepted.
And yet there was someone who ranked even higher.
When asked about themselves,
87% of people said that they’d make it into heaven, too.
So, how do we get this delusional?
Well, we attribute any success to ourselves
and blame failure on the external situation.
This is the self-serving bias.
For example, if we charm someone,
it’s because we have a charming personality.
But if we get rejected,
Admittedly, this bias is good
because it protects our self-esteem.
In fact, depressed people showed significantly less self-serving bias.
However, this bias also stops us from learning from our mistakes.
If we don’t take responsibility for our failures,
then we’ll never take the initiative to change.
So, how do you overcome this?
Well, research shows that when you’re with your close friends,
this self-serving bias disappears.
Therefore, make sure you have friends
who can call you out and keep you grounded.
Number two: Cognitive fluency.
Cognitive fluency is how easy an idea is to process and understand.
The more fluent the idea, the more we unconsciously trust it.
Now, the problem is whether something is easy has nothing to do with truth.
This leads to an illusion of truth.
For example, one experiment showed that simply writing a message
in a clearer font will make people think it’s truer.
In another experiment, subjects either read the phrase
“Woes unite foes” or “Woes unite enemies.”
“Woes unite foes” 或 “Woes unite enemies”
Both have the exact same meaning,
but because the first one rhymes and is hence more fluent,
subjects found it more insightful.
Now, this can lead to some bad decisions:
For example, on the first day of trading,
stocks with a pronounceable code rose about 30% more
than those with unpronounceable codes.
The name fluency tricked traders into feeling confident about the stock
without properly assessing its value.
And sure enough, after six months,
those pronounceable stocks fell back to the average,
and any initial profit was gone.
So, next time you hear something that “sounds about right,”
this is exactly when you should start questioning it.
Number three: The sunk cost fallacy.
Imagine you’ve paid twenty dollars to watch a two-hour movie,
and after one hour you’re convinced the movie is trash.
You want to leave, but you feel like it would be a waste of money.
This is the sunk cost fallacy.
See, whether you decide to leave or stay,
In fact, by staying, on top of the $20,
you’ve now wasted another hour of your life.
Therefore, you’d be better off leaving.
This fallacy stems from our intense aversion to loss.
The thought that we’ve wasted resources
motivates us to carry on, even if it’s clearly a lost cause.
Now, this same thing happens in bad relationships.
If you’ve been together for years,
you feel like you’ve invested so much time and effort
that it would be a waste to give up now,
so you hold onto the slim chance that it will get better.
However, this clearly isn’t logical.
If there’s only a small chance of things ending well,
then rationally you’d want to cut it short.
In all cases, you should focus on the future costs and benefits
and not let your previous loss influence your decision.
And number four: The confirmation bias.
Considered one of the most dangerous biases of our minds,
the confirmation bias means you only search for evidence that confirms your beliefs.
This simple bias explains why so many people stick to unscientific beliefs.
For instance, someone who believes that humans are inherently good
will only seek out cases that support this claim.
However, there’s plenty of evidence that humans are inherently bad too,
so they’re only getting one side of the story.
Another consequence is that the framing of a question becomes vital.
For example, people who asked “Are you happy with your social life?”
report being more satisfied with their social life than those asked
“Are you unhappy with your social life?”
Simply because people try to confirm the first question
by searching their memory for happy events,
whereas the second question does the opposite.
So, how can we prevent this bias?
Well, we can actively search for contradicting evidence.
For example, if you think the stock markets will rise,
you should first search why the stock markets will fall.
If you think that acupuncture will work,
you should first search why acupuncture doesn’t work.
This way, your decision isn’t biased.
And those are the top four biases that cloud your judgment.
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and thanks for watching.
As you know, humans aren’t very rational.