Exploring the impact of cognitive biases on decision-making, this chapter discusses sample size neglect, availability bias, and the planning fallacy. Learn how recognizing and addressing these biases can enhance decision accuracy and improve outcomes.
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Welcome back to the Business English Skills 360 podcast for today’s lesson on cognitive bias. These are factors that affect our ability to make good decisions and reasonable judgments.
Cognitive biases are factors that can negatively impact our decision-making and judgments. We make numerous decisions daily, ranging from significant ones like hiring employees to minor ones deciding where to go to lunch. These decisions often rely on intuition, information, and others’ perspectives. However, biases, which are unconscious tendencies, can lead to suboptimal decisions.
One common bias is the confirmation bias, where we focus on information that supports our existing beliefs and ignore contradictory evidence. This can cause us to become entrenched in incorrect views. Another is the sunk-cost fallacy, where we stick to a decision due to prior investments, even when it’s not the best choice.
The halo effect and horns effect are biases where one trait of a person influences our overall perception of them, often leading to misjudgments. For example, attractiveness can be wrongly equated with competence, while negative traits can overshadow a person’s capabilities.
Intuition can sometimes mislead us, making data crucial for decisions. However, biases like sample size neglect, where we draw conclusions from insufficient data, can still occur. Availability bias makes us overestimate the likelihood of recent events, such as fearing flying after hearing about a crash despite its relative safety.
The planning fallacy leads us to underestimate the time needed for tasks, often because we consider only the best-case scenarios. Recognizing these biases is the first step to mitigating their effects.
