Michael
@envies
The Knowledge Project with Shane Parrish cover image

#139 Laurie Santos: The Pursuit of Happiness

The Knowledge Project with Shane Parrish

The Influence of Reference Group Bias on Perception and Decision Making

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Reference group bias significantly shapes perceptions and decision-making processes by emphasizing relative comparisons over objective standards. When individuals experience a change in status, such as a promotion or a financial increase, their reference points shift accordingly. For instance, a professor at an Ivy League institution will benchmark their salary against peers at similar institutions rather than an absolute figure. This tendency to compare oneself relative to others means that, after becoming wealthy, individuals may no longer compare their earnings to past salaries but instead to wealthier peers, which can lead to feelings of inadequacy. Our cognitive biases favor negative comparison, as we tend to focus on reference points that induce feelings of dissatisfaction rather than those that promote positivity. This phenomenon extends beyond income to other domains, such as athletic performance, where comparisons are made to extraordinary examples that create a sense of inferiority. Consequently, individuals often overlook reference points that could inspire or affirm their accomplishments, perpetuating a cycle of negative comparison.

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