Bias in Decision Making: Speed vs Accuracy

by | Dec 22, 2020 | Study Insight | 0 comments

How do cognitive-behavioural theories explain how we make decisions?

Speed in decision making can make or break an organization in today’s wildly dynamic business environment. Corporate leaders and project managers need to make decisions quickly and commit to them in the long term. But how do we make decisions? Sometimes speed comes with the expense of accuracy. 

In this article, we will discuss how decisions are cognitively made, and the biases that you should look out for.

Source: The Decision Lab

The Intuitive System 1 vs The Rational System 2

The psychologist Daniel Kahneman created the theory of System 1 and System 2 thinking, arguably, one of the most famous theories in behavioral science. What is the difference between the two?

System 1 thinking is automatic, fast, and not cognitively demanding which leads to an intuitive answer. It operates through the workings of associative memory where different associations (related to the problem at hand) spontaneously come to mind without willful control. In other words, we don’t “do” system 1 thinking, it just happens to us!

On the other hand, System 2 is controlled, slow, and cognitively demanding which leads to a rational answer. The working memory is at play here. Now, at this point, it may seem like there are two choices in making a decision: through System 1 or 2 but this is not the case. System 1 and 2 are (and should be) active simultaneously. The way it works is, the faster System 1 will propose an intuitive answer to problems that require judgments, then, System 2 will evaluate System 1’s response and will either endorse the proposal, override it, or modify it. Therefore, intuition can never force judgment!

However, System 2 tends to be lax. Why? Well, deliberate processing is effortful and requires more motivation. As a result, System 2 tends to just accept System’s 1 response. This can be dangerous because System 1 is more prone to biases and when System 2 corrects this faulty intuition or fails to detect it, wrong decisions are made.

How active is System 2 in Supervising System 1?

Well, for one it depends on the individual. Everyone has different levels of cognitive reflection; some can be more or less susceptible to bias and a way to measure this is through the Cognitive Reflection Test (CRT). Second, it depends on the situation. Like we’ve said before, System 2 is more mentally taxing. So when you’re not in the condition to do so, in simple terms, “the laziness kicks in” and you just accept whatever decision System 1 tells you to do. Such conditions could be when you are tired, distracted, or timely pressed.

So now that we know all of this, what to do next? How can we prevent bias in decision making? Well to start, it helps knowing how our brain makes decisions. We have already ticked that box. Next, we need to be aware of what kind of biases exist. We will cover 5 common biases that impact decision making!

Source: Big Think

1. Availability Heuristic

As the name suggests, this cognitive bias makes us overestimate the importance of issues that are most visible and readily available in our memory. For example, it can be because it is the most recent information that you heard, or the ones closest to you have experienced it. “Because it is the easiest to remember, it must be significant.”

This can lead us to miss-prioritize problems or ignore alternative views and solutions that could have led to more effective decisions. So avoid using this cognitive shortcut!

What to do: doubt your first answer by considering alternative answers and consulting with someone. Spend more time on it to make sure that it is not just your intuition.

Source: Investorwhiz

2. Survivorship Bias

This means paying too much attention to achievements while skimming through failures. This type of bias can cause us to be excessively optimistic; simplifying achievements and wrongly assume that if we imitate the same behavior, we can gain the same victory. 

For example, if you learn about the most profitable startups without spending the same amount of time analyzing the startups that failed, you are likely to end up with an incorrect understanding of the likelihood of success.

What to do: examine situations as a whole instead of taking them at face value. Consider both optimistic and pessimistic viewpoints.

Source: xkcd

3. Confirmation Bias

The confirmation bias has to do with our tendency to place greater emphasis on evidence that confirms our current beliefs. We have an instinctive propensity to do what makes us feel comfortable, so we tend to only listen to or respect the knowledge that aligns with our points of view. This causes us to deny any data that is contradictory to our values. This can be a great pitfall in decision making. 

An example of confirmation bias? Well, the first image that you saw in this article! Another is when you ask advice from different people but only consider those who have the same opinion as you and disregard the other advice.

What to do: challenge your pre-existing views! Ensure that you take data from multiple sources, consider different viewpoints, and speak to people who think differently. It helps to play devil’s advocate and challenge your verdict in as many ways as possible.

4. The IKEA effect

We place too much value on the things we did ourselves. Even if the things we did or are a part of are not that valuable, we still prize them. The pitfall in this? We discount other’s brilliant ideas or work. 

What to do: practice being frank with why you endorse something. Is it the right decision, or does it just enhance your self-confidence?

Source: Medium

5. Anchoring Bias

This bias refers to being overly impacted by the first piece of data or information we get. It relates to the propensity to jump to conclusions based solely on what we encountered early on; it can be difficult to explore choices once your opinion is established. 

What to do: if you know you are behaving quickly, slow down: ask for more time if possible, and consider whether this decision is motivated by a rush to conclude or not.

Source: The Decision Lab

Defeating your cognitive biases in decision making starts by knowing that the problem exists so that you can be more aware of yourself and how you think when you’re in a situation where System 2 would be lax. Choose accuracy over speed when solving complex problems to ensure that you battle human error as much as possible and arrive at the most effective decision.

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