Decision Traps
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00:02:33 Preferring Simplicity
00:05:52 Relying On Contrast
00:08:16 Avoid All Loss
00:12:46 Reduce Risk
00:16:29 The Resulting Trap
00:21:35 Confirmation Bias
00:25:08 Gambler’s Fallacy
00:27:51 Rosy Retrospection
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• Through no fault of our own, there are many ways our brains can actively fool us into suboptimal decisions.
• The first cognitive bias is a preference for simplicity and a distrust for complexity. Sadly, life isn’t always so simple. This can lead us to prefer the simpler, more direct option over options that are perceived to be more complex and have hidden factors.
• The second cognitive bias is a reliance on contrast and relative value. This makes us susceptible to terrible decisions because relative value is meaningless to us—the only thing that should matter is objective and absolute value.
• The third cognitive bias is a tendency to avoid losses. The psychological harm of a loss is exponentially that of the psychological benefit of a gain—thus, we seek to avoid losses in decisions whenever possible, even when it is illogical.
• The fourth cognitive bias is a tendency to reduce risk. This is similar to the tendency to avoid losses. We act to reduce risk because it feels psychologically more comfortable and less stressful, despite usually being a poorer decision overall.
• Cognitive biases are actually the most natural and instinctual way of thinking, which is bad news for your decision-making muscle. This chapter represents four more common cognitive biases that will cause suboptimal decisions.
• Confirmation bias is when you see or interpret things only to bolster your pre-existing assumptions and beliefs. This can cause, in a word, blindness.
• The gambler’s fallacy is when you try to find patterns in random, chaotic events that you have no control over. There is a lack of using actual evidence.
• Rosy retrospection is when you emphasize the positive nature of a past experience and apply that incorrect assessment to a current situation. Your biased memory calls the shots here, not your wealth of past experiences.
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