How to overcome Heuristic Bias?
“The world makes much less sense than you think. The coherence comes mostly from the way your mind works.”
― Daniel Kahneman, Thinking, Fast and Slow
There is always an energy cost to our cognitive brain. Though our brain constitutes 2% of our body mass, it consumes 20% of all the calories. So evolution has found a shortcut to reduce energy consumption, called a heuristic.
What is heuristic? It is a simple rule our brain uses to come up with quick judgements.
Heuristic helps us make most of the judgments in our day-to-day life, mostly accurate. However, it has its fallacies, leading to wrong judgments.
Here are the three most common innate heuristics and biases and what we can do to minimize the fallacies.
Availability heuristics
The availability heuristic describes our tendency to use information that comes to mind quickly and easily when making decisions about the future.
Examples, which animals kill humans the most? Snakes or Mosquitoes? Most may say it is snakes, but as per statistics, Mosquitoes are responsible for killing 1 million humans per year compared to 50 thousand by Snakes, which is 20 times more than Snakes.
In our corporate world, we are familiar with the yearly appraisal cycle. If an employee made any mistake just before the appraisal, it would adversely impact their appraisal ratings. Managers fail to see overall contributions, and they can recollect only the recent incidences.
How to overcome availability heuristics bias?
- Don't rely on the memory. Step back and look at the overall picture. immediate memories can cloud your judgment
- Take some time for judgment. Don't rush in and decide with the limited information.
- Try to collect more information. Let's expand our horizons. This will help us look at things holistically.
- Don't get carried away by the outliers. Some surprise events hog our memory. Instead, they carve out an undue proportion of our decision-making process, depending on data and trends.
Anchoring and Adjustment heuristics
The anchoring and adjustment heuristics describes cases in which a person uses a specific target number or value as a starting point, known as an anchor, and subsequently adjusts that information until an acceptable value is reached over time.
For example, a used car salesperson can offer a very high price to start negotiations that are arguably well above the fair price. Setting an anchor price at the onset of negotiation will determine the deal's outcome.
Many products use this strategy. Take the case of Apple, and they use good, best, and better pricing strategy. To make people agree to a price range, companies structure the range of the product with price options. Once you start comparing options, you are in for a vicious trap. You don't think anything beyond the options that you compare.
How to overcome anchoring and adjustment heuristics bias?
- Stop comparing, step back and ask the questions, what is your need? If this product suits your need. Try to avoid the seller's narrative. Sellers always position their products based on which product they want to sell. Don't let your mind waver.
- Try several different models, do research, and get additional information to help you make a better decision.
Representativeness heuristics
The representativeness heuristic involves estimating the likelihood of an event by comparing it to an existing prototype that already exists.
For example, during the early outbreak of Covid, countries of developed economies were very confident of their health system. They underestimated it. Once they started seeing the rising death toll, they thought many people from the developing and underdeveloped world would die on the streets. But to our surprise, developing and underdeveloped countries coped better than their developed counterparts.
How to overcome representative bias?
- If a problem has past reference points, you can use past data. However, don't confine yourselves to the narrow view. Instead, try to broaden your view.
- If the events do not have a historical predicament, it is better not to look past them. It is better to construct our view and judgment from scratch.
