Very often we just do what our instinct tells us.
The problem with this approach is that it leaves us open to the influence of a variety of behavioral and psychological predispositions that affect our thinking and can lead us to wrong decisions.
But by being aware of the things that lead us on the wrong path and armed with some ways to improve the situation, we can make better and more rational decisions.
Finding the "best" option is usually a waste of time
People attach too much importance to having a wide variety of options.
In fact, according to research by Simone Botti of London Business School and Christopher Hsie of the University of Chicago, we spend so much time looking for different options that it outweighs any benefits of additional choice.
When looking for additional options, set a time limit for yourself and make sure you don't procrastinate to avoid making a decision.
We overestimate how often people act on the best information
People tend to imitate the decisions of others, even when they have different information.
Matthew Rabin, a behavioral economist based in Berkeley, developed this concept - its effect can be very powerful and lead us to make poor decisions, because we overestimate how many people act on more accurate personal information, and underestimate how often they just follow for the decisions of others.
Don't mistake other people's decisions for real information.
Confirmatory predisposition makes us overconfident for wrong reasons
When presented with inaccurate information, people tend to interpret it to confirm what they already know or want. This "affirmative disposition" actually makes people overly confident in their decisions, even though there is no real reason for this.
If you feel inclined towards a certain choice because it is simpler or more familiar to you, make sure you do not match conflicting information to your views.
Trustworthy people tend to trust others even when they shouldn't.
Due to the principle of “false consensus, ” we tend to think about what we would do in a given situation when deciding whether to trust another person.
This point of view is quite stable and resists the facts, even if we receive information that contradicts it. If you are an extremely reliable person, make sure that you do not extend your qualities to those who may not deserve it at all.
Information overload can hide the most important facts from us
Information overload can overwhelm us.
In our time, it is so easy to obtain a huge amount of information that it becomes difficult for us to extract important and relevant facts from it. Focus on important information, not increasing its quantity.
Our minds keep pondering difficult decisions while we sleep.
Research by Maarten Bose has shown that when it comes to difficult decisions, sometimes it's better to let our subconscious mind take on some of the burden.
The active process of weighing difficult decisions continues even when our mind is not purposefully focused on the task, which can lead to better solutions. To do this, you have to distract your conscious mind by sleeping or working on something else.
Looking from someone else's perspective helps us make wiser decisions.
A study by Tal Eyal of Ben Gurion University and Nicholas Epley of the University of Chicago found that people view themselves very differently from others, which prevents us from accepting other people's perspectives.
People evaluate themselves in many details, on a more microscopic level, but they look at others in a much more generalized way. They look at themselves in the long term and other people in the short term. By switching this mechanism when you look at someone else's point of view, you can gain a better understanding of their reaction to a particular decision.
Regularly assessing the probabilities of different outcomes increases your understanding of risk
A Wall Street Journal study found that weather forecasters have the highest risk sentiment ever recorded. Forecasters are forced to constantly evaluate probabilities and percentages, and they also receive frequent feedback, which helps them to be more realistic with their predictions.
Don't be afraid to rate something on your own internal scale and get feedback.
Closing your eyes can help you come to a more ethical decision.
When faced with a difficult decision, people often close their eyes for a moment to focus. Judging by the researchers' data, this does indeed have a real positive effect on decision making.
A study by Eugene Caruso of the University of Chicago and Francesca Gino of Harvard showed that closing our eyes increases the mental simulation of a decision, which enables us to respond more positively to ethical decisions, more negatively to unethical ones, and take less materialistic actions.
Even rational people often believe in a "streak of luck"
The mistaken belief in the “lucky hand” leads people to overestimate the strength of the “streak, ” whether it be sports, finance, or gambling.
This is one of the reasons why people often choose actively managed funds, even though they are less profitable in the long run. Behavioral economist Matthew Rabin found that people underestimate short positions but overestimate long ones.
When things are going well, be especially vigilant.
A small reward can help you make tough decisions.
When you make a tough decision, such as whether to invest in a short-term but less profitable option, or a longer-term, but more profitable option, it will be easier for you to opt for a long-term decision if you give yourself a small fraction of the reward for it up front.
We believe our current tastes will never change
When we think about the future, we tend to take what is happening in the present and stretch it beyond reason.
A similar effect can lead to bad long-term decisions, we start to consume too much in the early years of our lives, form bad habits, and save less.
Think about what your habits might be bad for your future.
Many people are wrong to take the point of view of others.
Researchers at the University of Chicago have described three barriers that prevent us from knowing exactly what others are thinking:
You should do this actively. Sometimes this happens subconsciously, but more often it takes some effort.
Going beyond your own point of view is difficult enough, which is why most people avoid it.
Avoid stereotypes and rumors that can distort your image of others.
Subconscious stereotypes affect how we perceive and act in relation to others
Even if we are aware of stereotypes, we sometimes fall prey to them.
Recent research has shown that people perceive people with shaved heads as more powerful, dominant, and strong, in part because we associate bald heads with masculinity and age, both of which are associated with strength in our minds.
Always research your assumptions. Are they based on facts or stereotypes?
Our body tells us when we are about to make a hasty decision.
Our body has a physical response to panic and stress. Our adrenaline level rises, we begin to breathe more often, we feel tension in certain parts of the body.
In such situations, we tend to make quick judgments that may turn out to be wrong. When you notice that your body is experiencing these sensations, close your eyes, take a few deep breaths, and pause briefly to contemplate your next action.
Blind trust in the information received is as harmful as ignoring it.
Big data has proven to be revolutionary for many industries. New sources and a wealth of analytics tell us more about shopper preferences and behavior than ever before.
But blindly accepting information on faith is just as wrong as ignoring it.
The best attitude is what is called "knowledgeable skepticism." Know what the data is telling you, but trust your own judgment.
Making vague decisions can lead to better results
When we make decisions, we often feel like dividing things into black and white, right and wrong, and generally to be extremely precise.
This need for 100% accuracy can lead to wasted time and unnecessary decisions. Sometimes it's easier to figure out how to get closer to a goal than to figure out how to hit the bull's-eye.