Examples of Cognitive Biases That Trick Your Brain Each Day
Cognitive biases are insidious little creatures that subconsciously influence the way we observe the world and make decisions everyday. In this article I take you through four real-world examples of cognitive biases that everyone should know about.
What are Cognitive Biases?
Our brains are bombarded and overloaded with incoming data all the time. Often, they end up being tasked with processing far more information than they can reliably handle. So, in order to keep functioning, our brains take mental shortcuts which filter out some of this incoming information.
These mental shortcuts (or heuristics) allow us to quickly make sense of the complex environment around us. For the most part, they are extremely beneficial. However, there are times when these shortcuts mean that we end up making incorrect assessments. The logical errors in judgement and decision-making that arise from using these mental shortcuts are known as cognitive biases or fallacies.
There are literally hundreds of these error-inducing cognitive effects that most of us are completely unaware of; despite the fact that they influence our lives everyday! Though we cannot eliminate their effects entirely, we can fight back by giving them some conscious attention.
Examples of Cognitive Biases
1. Confirmation Bias
The confirmation bias is our tendency to favour and prioritise information that confirms our already existing beliefs. Our brains do not like conflicting information as it causes discomfort. To defend against this, it will seek out information that supports our views, and ignores information that goes against them.
FOR EXAMPLE: Let’s say you’re a stock market investor. You really like CompanyA because they employed your Father for over 50 years, and he always spoke so highly about the company. CompanyB is their main competitor, and their recent surge in popularity has led to some lay-offs in CompanyA. 90% of the news articles about CompanyB say that the company is destined to keep growing. They will soon take over the majority market share, leaving your beloved CompanyA in a worse financial position than it’s already in.
Yet, you still really believe in CompanyA, and don’t like this conflicting information. So, you do a biased online search for ‘CompanyA is better than CompanyB’. You find the other 10% of news articles that align with your belief that Company A is superior. Having actively sought out information that confirms your beliefs that CompanyA is better, and completely ignoring the 90% of information that shows CompanyB is actually superior, you make a bad decision. You continue to buy Company A stocks, eventually making huge losses. This is the confirmation bias in action.
As Warren Buffett famously put it: “What the human being is best at doing is interpreting all new information so that their prior conclusions remain intact.”
2. Endowment Effect
The Endowment Effect describes the tendency of the brain to place more value on something you own than something you don’t.
FOR EXAMPLE: You’re clearing out your room and you find a first-edition box of collectible cards from your childhood that you had totally forgotten about. You do some research online and find out that similar items have sold for well over €1,000. Instead of selling them, you decide that they are more valuable, and you put them on display in a special case.
Now, let’s imagine that you never decided to clear out your room and instead you’re went to the local game store. A familiar box catches your eye – it’s the same box of collection cards that you had as a kid. Oh, the nostalgia! You walk closer and see that it’s on sale for €1,000. Laughing to yourself, you leave the store without them. You would never pay that much for some cards you had forgotten about, just so they could sit on your shelf.
In the first scenario, you decided that the cards were worth more to you just because you owned them. In reality they weren’t something you would normally value as highly. And, when given the chance you would not have bought them.
BONUS EFFECT: Similar to the endowment effect, the IKEA effect is a cognitive bias where consumers place a disproportionately higher value on products that they partially created.
3. Sunk Cost Fallacy
The sunk cost fallacy is the tendency for people to continue doing something that they’ve invested time, effort or resources into – even when it doesn’t make sense anymore. The initial investment acts as a reason to carry on, even when it seems like a lost cause, makes you unhappy, or leaves you worse off. The greater the investment, the greater our urge to continue becomes.
FOR EXAMPLE: Let’s say you’re a soccer coach for an international team. Last year you spent more money than ever in the club’s history, in order to bring in the extravagant Player A for €100 million. During the transfer window you also picked up Player B for only €20 million.
Player A was meant to be a deadly striker, a great leader and possess lightning pace. However, he has failed to perform during his first six months on the team. He has failed to produce a single goal, and has been sent off for fowl behaviour three times. In the same amount of time, Player B has excelled and proved his worth, scoring 20 times already this season.
The sunk cost fallacy makes it difficult for you to quit something you’re heavily invested in. So, frustrated and disappointed, you continue to give Player A more game time as the investment was so huge, despite the fact that Player B is performing better.
Of course, this idea doesn’t just apply to money. Invested time, energy and emotions can also influence our behaviour. Romantic relationships often fall victim to the sunk cost fallacy, as the longer a couple has been together, the more time and energy has been invested. This makes it harder to break up, due to the time you both have invested in one another. Make of that what you will.
4. Self-Serving Bias
This one is pretty simple, but super easy to fall victim to. The self-serving bias is the tendency to attribute positive outcomes to skill, and negative outcomes to luck.
FOR EXAMPLE: Your brother wins an online game and boasts about how his win was due to his own hard work, dedication, practice and mental agility. However, when he loses the following day, he blames his loss on external factors such as inferior teammates, lag between the server and the console, game glitches and bad internet.
This can also work in reverse for some people, (such as those suffering from depression or low self-esteem), where they attribute negative events to something they did, and positive events to luck or something someone else did.
Which bias affects you the most? What did you uncover about your subconscious behaviour? Let me know in the comments below! 😎
If you’re interested in psychology, make sure to check out my list of the five best free personality tests ✨