Decision Making

We make decisions hundreds of times a time, but whether those decisions involve what to eat for breakfast, or how to invest millions of dollars, our decisions are influenced by many biases. Here are six scenarios displaying different decision-making biases, let’s see if you can figure them out! (options are anchoring, escalation of commitment, confirmation bias, status quo trap, gambler’s fallacy, and availability heuristic)  

 
a)

















b)

c)

d)

e)

f)

ANSWERS:

a)      a) Status quo trap:  This man is exhibiting the status quo trap because he is choosing the alternative that keeps things the same.  Even though he might like the new drink more, he doesn’t want to “rock the boat”.  It’s only natural that we don’t like change—which leads us to avoiding new choices.  In order to minimize the effects of this bias, you should consider which option you would choose regardless of which option you normally choose.  Look to the future, not the past!

b)    b)   Escalation of commitment:  The poker player in this cartoon is a victim of a very common bias—escalation of commitment.  If we invest time and/or money into a project, we tend to continue supporting that choice even if it is clearly failing.  Instead of realizing that the time and money already spent are sunk costs, we feel the need to keep trying to make up for our losses.  However, this can lead to even more loss, which leads to a bigger commitment, and the cycle continues.  In order to reduce escalation, you should set a limit in advance (for example, this man should have decided how much money he would spend before he started gambling).  Also, the person making the original decision should not be the only person involved (for instance, the gambler should have friends who can offer an unbiased opinion and tell him when he should stop gambling).  Remember, don’t have a failure-fearing attitude.  It’s better to lose some money than all of your money!

c)      c) Availability Heuristic:  This cartoon is a classic depiction of the availability heuristic.  Even though train wrecks are very uncommon, the news created a very vivid picture in this man’s head.  According to this bias, we are more likely to base judgments on ready available information (info that is very vivid or has occurred recently).   Negative occurrences create more vivid images than positive ones, which is why this man is not thinking of all of the times he’s gone on the train safely.  To try to avoid this bias, you should take a disciplined approach to your judgments.  Use statistics and facts instead of memories to make your decisions.

d)     d)  Gambler’s fallacy: Pictured is a man displaying gambler’s fallacy.  Because he has three daughters, he tells his pregnant wife that their soon-to-be fourth child must be a boy; this shows the tendency to inaccurately predict the behavior of randomness.  In truth, the man should recognize the fact that having a boy or girl yields an equal 50-50 chance.  In this, chance can be predicted by mathematical probabilities, not past outcomes.

e)      e) Anchoring: In this scenario, a husband is talking to his wife about purchasing a new car.  The wife is reluctant to make any more large purchases at this point in time.  Noticing this, the husband bailed on the new car request, and instead focused on purchasing a new motorcycle, since it is cheaper than the car.  Despite the wife’s reluctance, she agreed to have her husband buy the motorcycle, much to her surprise.  In essence, the husband used the car as an anchor to influence his wife’s decision about the motorcycle.  In this, the car creates a standard by which her response was influenced. 

f)       f) Confirmation bias: Pictured are two men displaying confirmation bias.  The man on the right wearing the donkey is watching MSNBC, while the man on the left wearing the elephant is watching Fox News.  In this, humans have the tendency to seek out information to confirm rather than object one’s point of view.  So, the democrat, just as the republican, will naturally flip to the news channel that is consistent with their beliefs. In order to stay clear from this bias, consider getting information about decisions from varied sources.