What’s Behind Irrational Decisio

We’re defined by our decisions, good ones or bad ones, indiscriminately weigh on our scales and collectively produce correspondent results about our identities. Being aware of the gravity of our decisions doesn’t make it any easier for us, as an alternative, we are encumbered and hindered in the process to deliver wise options, especially under circumstances when we are left to shoulder the responsibility by people, the decision leeches, who craftily avoid making choices and claim that we’re more reliable decision-makers. Examples of group decisions left to us could be restaurant choices, family finances, decorating plans, shopping decisions, and whether to say “Yes” or “No” to an opportunity. And that pretty much explains why we dread making such decisive calls. Even under a more preferable condition when all the external and internal pressure vanishes, we still fail to address the issue properly. Why is that so?

Let’s pretend we’re shopping in a supermarket. Say there’re two brands of beef available on the shelf, but with different description, one reads “25% fat” and the other “75% lean meat”, which should we take? Despite the fact that both brands are selling identical beef from the same manufacturer, over 80% of the consumers chose the latter one coz “it sounds like a healthier choice”. Turns out that we’re easily tricked by the way thing are presented to us or described by ourselves, which is also known as anchoring effect or focalism. Anchoring occurs when, during decision making, we rely too heavily on an initial piece of information offered (considered to be the “anchor”) to make subsequent judgments. Once the value of this anchor is set, all future negotiations, arguments, estimates, etc. are discussed in relation to the anchor, and thus the cognitive bias. For example, the initial price offered for a used car, set either before or at the start of negotiations, sets an arbitrary focal point for all following discussions. Prices discussed in negotiations that are lower than the anchor may seem reasonable, perhaps even cheap to the buyer, even if said prices are still relatively higher than the actual market value of the car. We fall victims to anchoring and adjustment when we assess probabilities intuitively, starting with an implicitly suggested reference point (the “anchor”) and making adjustments to it to reach our estimate.

Now, try again. Let’s say we’re on a game show, winning $1,000 in the first round when we land on the bonus space. We can either take a $500 bonus guaranteed or we can flip a coin. If it’s heads, we win $1,000 bonus; if it’s tails, we get no bonus at all. In the second round, we’ve earned $2,000 when we land on the penalty space. We can either take a $500 loss, or we luck at the coin flip. If it’s heads, we lose nothing; if it’s tails, we lose $1,000 instead. What should we do? Plan A: take the guaranteed bonus and flip the coin or Plan B: flip the coin first and then take the penalty? the first one sounds more logical and less destructive, right? Let’s see whether it stays valid in our mathematics calculation. 

What’s Behind Irrational Decisions?

Surprisingly, the odds and outcomes in both rounds are exactly the same, meaning there’s no difference between Plan A and Plan B. But why does Plan B sound more scarier and push us to choose Plan A? The answer lies in a cognitive psychology and decision theory, named loss aversion, a tendency to prefer avoiding losses to acquiring equivalent gains: it is better to not lose $5 than to find $5. Under rational economic theory, our decisions should follow a simple mathematical equation that weighs the level of risk against the amount at stake. 

But studies have found that for many people, the negative psychological impact we feel from losing something is about twice as strong as the positive impact of gaining the same thing. When we’re playing safe, we’re probably clinching to our possessions or what we already have at the moment like we’re gonna lose them, which is intolerable and unacceptable, and respond in a way that’s more or less like the chevalier, risking everything to secure the king and queen, not realizing that amongst what we have excluded might be the best options. 

Those cognitive bias that arises from heuristics, problem-solving approaches based on previous experience and intuition rather than careful analysis, block our way to rational thinking. And these mental shortcuts can lead to irrational decisions, not like falling in love, but logical fallacies that can easily be proven wrong.

But why do we have them, those bugs inside our head? Throughout human history, survival depended on making quick decisions with limited information. When there’s no time to logically analyze all the possibilities, heuristics can sometimes save our lives.

But today’s environment requires far more complex decision-making, and these decisions are more biased by unconscious factors than we think, affecting everything from health and education to finance and criminal justice. We can’t just shut off our brain’s heuristics, but we can learn to be aware of them. Remember, situations involving probability and numbers in general are notoriously bad for applying heuristics.

Follow those steps to avoid making ludicrous decisions:

i. Slow down the decision-making process if possible to allow ourselves more time to run a careful scrutiny;

ii. Be careful about the description and interpretation of the targeted event/people/item;

iii. Check our prerequisite and focus on other considerations to avoid anchoring;

iv. Stay alert to our heuristics and other cognitive bias;

v. Don’t be ashamed to ask for help from others or experts when we need to.