Posted by Our brains are incredible problem-solving machines… but they can really do a number on us sometimes!
They have to process an overwhelming amount of data every second, so brains look for shortcuts wherever they can. It’s a bit like your computer storing cookies whenever you visit a website. Small bits of information are saved on your hard drive so that the next time you visit, the site loads faster and remembers your preferences.
Your brain does something similar with mental shortcuts: it saves patterns and assumptions to help you make quick decisions without having to start from scratch every time.
These shortcuts, or biases, are like those cookies: usually helpful for speed and efficiency, but sometimes they cause glitches if they’re based on the wrong information.
Understanding these common thinking errors is a powerful way to make better choices, both in everyday life and big decisions. So this week I’m exploring some of the classic thinking errors, and sharing my tips on how to overcome them.
Confirmation bias
Confirmation bias is when you’ve got an idea, or decision, stuck in your head, and suddenly everything you see seems to support it. It’s easier to stick to what we already believe (or want to believe) than to challenge ourselves by looking at alternate viewpoints.
It’s because our minds want to avoid mental discomfort. Changing your choices can be like admitting you were wrong, which is never very easy, so instead we cherry-pick the ‘right’ information and ignore anything that doesn’t fit.
Let’s use my deal in Spain as an example: I’d seen a site and fell in love with the idea of turning it into a big luxury shopping complex, long before I had any information to back up whether it could work or not.
Everyone told me it was a fantastic idea, except a property advisor who said he wasn’t so sure about it. That didn’t fit in with my thinking! So, what did I do then? Sad to say, I ignored him and I found another advisor, who told me it was an amazing idea. Fast forward a couple of years and the deal was a complete meltdown.
Because I’d already decided that I wanted to go ahead with it before I had evidence to support the decision, I was looking for proof to support what I had already decided to do, rather than the other way around.
Anchoring bias
If you’re in a negotiation, have you ever noticed how the first number someone throws out kind of sticks in your head? That’s anchoring bias. Our brains use that first piece of info like a mental anchor — everything else gets judged around it, even if it’s not the best starting point, and will then be what you refer back to.
Our brains like these quick reference points because making decisions from scratch every time is exhausting. But sometimes that anchor can mess with our judgement if it’s way off.
Say you’re looking to get a property valued. The agent takes a cursory look and tells you it’s worth 2mil, easy. Great! But then they come back and say actually, that figure is probably closer to 1mil. That’s still a lot of money, but because it’s cut that first price in half, it feels wrong.
I had something similar happen to me once when I was selling a flat – I had a number in my head and any offers below that were an insult. I wasn’t thinking clearly enough to assess whether my initial figure was wrong and these offers were actually fair.
Availability heuristic
The availability heuristic sounds complicated, but it’s pretty simple. Basically, it’s when we assess how common something is based on how easily we remember examples of it happening.
So say for instance you see a handful of reports on the news about plane crashes, you might overestimate how dangerous flying is – not because planes actually crash more often, but because those dramatic crashes are easy to remember. The reality is that you’re much more likely to be injured driving to the airport than on the flight itself.
It’s another shortcut our brain is making. If something comes to mind quickly, you assume it must happen frequently, when really what you remember easily isn’t always what happens most often – it’s often just what was most recent, dramatic, or personally meaningful to you.
The problem is that it can make you worry about rare events while ignoring more common risks, or to make decisions based on vivid memories rather than actual probabilities – a bit like after the 2008 crash when people were reluctant to invest or start trying to buy property again, even though crashes of that scale are (thankfully) rare.
Overconfidence bias
Overconfidence bias can really cause you problems if you’re not wise to it. Everyone wants to think they’ve got it together and know what they’re doing, but sometimes that confidence gets ahead of the facts.
Confidence feels good. It motivates us to act and take risks. But it can also blind us to uncertainty or the limits of our knowledge. When I started out and had a couple of flukes early on (like, really good deals, once in a lifetime events), I thought that I could do no wrong.
As a result, I decided that gut instinct was all I needed to assess a deal, instead of doing my due diligence and digging into the numbers. I had the golden touch and that was enough! And of course, it soon became very clear that in fact, I’d just been very lucky, and my overconfidence was about to get me into a lot of hot water with a handful of disasters.
Loss aversion
No one likes losing, and our brains are wired to make losing feel twice as painful as the great feeling you get from winning feels. That’s loss aversion. From an evolutionary angle, avoiding losses was a survival move. It’s better to keep what you have than risk it all… a bird in the hand is worth two in the bush, after all!
But what that means in this day and age is that you might find yourself holding onto an asset that’s completely draining your resources, just because cutting it loose feels like admitting failure, even though dropping it would free you up to focus on better opportunities.
I once held onto a property for 12 years that should have been sold much earlier (actually, we should never have bought it at all). When it became clear that the deal wasn’t working out as planned, we could have cut our losses and sold for a relatively small loss.
But the thought of taking that hit felt terrible – even though it would have been the smart move. Instead, my partner and I kept hoping it would turn around, convinced that selling would mean ‘losing.’ By the time we finally let it go, what could have been a manageable loss had turned into something much more painful.
Going the long way round
So what can you do to stop your brain making these mental shortcuts? The key is to take some time to reflect and start looking for patterns. If you notice that you’ve tended to have similar reactions time after time, ask yourself why you have those reactions and question your assumptions.
Put your ego to one side and look for diverse opinions. Different viewpoints help counteract your own biases, so don’t dismiss them out of hand if someone’s telling you something you don’t want to hear.
Sleep on important decisions: give yourself space to properly assess a situation and gather the necessary facts. Look for the cold, hard data, and always use evidence over your intuition to support your choices.
Our minds will always try to make sense of a complex world using shortcuts – you can’t undo millions of years of evolution in 5 minutes! – but those shortcuts sometimes lead us off course. Being aware of thinking errors like the ones I’ve talked about here is the first step toward clearer, smarter thinking.
So next time you make an important decision, pause and ask yourself: Is your brain playing tricks on you?