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4 Common Traps That Lead To Bad Decisions

When it comes time to make a decision, you’re up against a lot. Understand your biases so you can make the right choice.

4 Common Traps That Lead To Bad Decisions
[Photo: Flickr user c_pichler]

Let’s face it. As human beings, we’re not always great at making decisions.

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Oftentimes we’re lazy, highly impulsive, prone to distraction, and easily swayed by emotion.

It’s not our fault, though. Blame the brain and the millennia of human evolution for our decision-making shortcomings.

It’s become the new normal for leaders and entrepreneurs to weigh more variables and deal with more moving targets than ever before. We’re under pressure to make on-the-spot decisions, react to stresses and change with bold, decisive action, and wow stakeholders with unwavering confidence in the face of adversity.

Sure, all of these traits are essential in today’s fast-paced, volatile economy. But danger lurks behind those snap decisions and may not be evident until it’s too late to change course.

Because we’re able to think critically and in the blink of an eye apply our cumulative life experiences to challenges we face, we’re susceptible to a whole host of traps that may lead us down sub-optimal paths.

So how do top CEOs make seemingly effortless decisions without so much as a flinch or a worry? Making good decisions is as much about recognizing and avoiding traps as it is about evaluating available options.

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The following are four common traps and biases that you must recognize and overcome to make better decisions.

1. Anchoring

First impressions matter–generally, we judge people, places, and circumstances instantly and without much thought.

Research suggests that our minds give disproportionate weight to these first impressions, and we end up with a bias centered on that perception. Our thinking tends to operate from relative terms more than it does from absolute terms: A jury anchors on the judge’s first sentencing option; a negotiator anchors on the opposition’s first offer; a sales manager anchors on last year’s numbers.

How can you avoid this trap? It’s impossible to avoid anchoring altogether–it’s just the way our cognitive systems are wired. But you can minimize the impact of anchoring by doing a few things:

  • Use varied starting points so you’re less centered on the most recent or most familiar
  • Avoid giving or soliciting opinions too soon
  • Be aware of language used or perceptions given that may inadvertently anchor you or your team

2. Overconfidence

Been on a winning streak lately? Be careful. We have an innate tendency to be overconfident in our judgments, especially when we think we’ve made all the right choices so far. In fact, numerous studies have shown that our levels of confidence consistently exceed our accuracy.

Overconfidence tricks us into making decisions prematurely because we believe we either know the answer or are certain that our answer falls within acceptable ranges.

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To avoid this trap:

  • Examine contradictory information
  • Don’t discount data because you think you know how it’s going to play out
  • Own up to the fact that you might not know as much as you think
  • Allow others to present alternative ideas and solutions

3. Confirmation Bias

Even been accused of having selective memory? Or selective hearing? Do you tend to “turn off” when someone is presenting a dissenting view or opinion?

We all do so to some extent. We become attached to our opinions, instincts, and points of view and try as hard as we can to find evidence that supports them.

In Harvard Business ReviewsThe Hidden Traps in Decision Making, the authors write, “The confirming-evidence bias not only affects where we go to collect evidence but also how we interpret the evidence we do receive.” It’s critical at this stage to de-emphasize supporting information and pay attention to information that may tell a different story.

How can you avoid this trap?

  • Review all the evidence carefully, paying particular attention to data that doesn’t align with your interests
  • Bring on a devil’s advocate to present counterarguments
  • Be acutely aware when you might be taking a shortcut–you may need to look elsewhere for other points of view

4. Sunk Cost Trap

As human beings, we get attached to things irrationally. More bothersome, we get attached to past ideas and choices because we hate admitting that we might have made mistakes.

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In the business world where every decision we make is in full display to be torn apart, dissected, and criticized, it’s hard to admit we made a bad decision. It’s easier to keep throwing good money after bad in the hopes that your bad decision may turn out okay. It rarely works that way. If you keep digging a hole, pretty soon you won’t be able to climb out of it.

To avoid this trap:

  • Remove yourself from the initial decision
  • Ask for opinions of others who weren’t involved and can give you an unbiased analysis
  • Allow yourself to make mistakes, and better yet, admit them and learn from them

Putting It All Together

Once you’ve got the right mind-set, here’s a simple framework for managing your decision-making process just like those CEOs you admire:

  1. Break up the problem into bite-sized chunks
  2. Work on the individual pieces
  3. Reconstruct the issue logically and with awareness of any biases or traps

In truth, there’s no guarantee that the decision you make will be the right one. But you can learn certain behaviors and habits to ensure you approach each decision with clarity and increase the likelihood you achieve your desired results.

Most importantly, once you’ve settled on a decision, make it. Period. Pretty soon you’ll get so good at navigating the murky waters of cognitive bias that your decision-making process will seem effortless.

Scott L. Sind is the author of ActivateThought.com, where he helps people unlock their success mind-set and achieve extraordinary results. Get his free Cheat Sheet for Building a Powerful Entrepreneur Support Network and become instantly better connected.

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