Two Heads Are Better

We all have built in cognitive biases.  Those are helpful in that they provide us with a near instant method to deal with danger. The problem comes when we treat the tendency as relevant at all times and in all circumstances.

There is a formidable list on Wikipedia under list of cognitive biases.

Some are helpful. Like chronostasis. When presented with a new task, the first impression seems longer in time. The brain models an outcome before deciding or acting.  We should work at expanding that ability.

Some are perhaps moderately helpful. The “ambiguity effect” tends to make us select actions where the probability of success is known as opposed to other choices where it is unknown even if possibly better. Think bonds versus stocks. Or new ways versus old ways. People do not like an ambiguous future and act to avoid it.

“Anchoring” should affect how presentations are made. People rely heavily on the first piece of information. All future information will be assessed against the anchor and not necessarily against reality.

“Essentialism” is the process of categorizing all people based on some observed characteristic of a few. It can lead us to irrational places.

My brother-in-law, Jules Besseling, sent along an example recently.

We are advised to not judge all Muslims by the actions of a few lunatics, but to judge all gun owners by the actions of a few lunatics.

Once you see the irony of that it becomes obvious that political operatives understand psychology and use it to alter our world view.  Perhaps it would be wise to assume that anyone promoting any idea knows this material.

None of us is without  biases. We overvalue things that have happened and ignore anything that has not. We make causation assumptions based on coincidence. We believe that things coming after an event are caused by the event. We believe the spectacular or unusual more readily than the mundane.

Most of us have a limited facility for critical thinking.  You would be surprised how much material on the internet is false, often intentionally so.  When things look false, they usually are.  Use Snopes.com more often.

We are all in a hurry and I suppose shortcuts help us. At the same time a shortcut that leads us to a wrong place requires doing the work three times. Once to do it wrong. Another to discover and repair the error, and the third to get it right.

You can overcome sloppy thinking and false beliefs but usually not by yourself. If an action is important, bounce it off a confidante.  Two heads are better because people do not have identical cognitive biases and experience.

Contact: don@moneyfyi.com  

Don Shaughnessy is a retired partner in an international public accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.

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