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Three Cognitive Biases That Cost You Money, Stress, and Happiness

Three Cognitive Biases That Cost You Money, Stress, and Happiness

Lets start with a simple question: how many of each animal did Moses take into the ark? If you pounced with the answer “2,” you have fallen into the same trap as most people. (The answer is zero—figure the rest out yourself.) Cognitive biases tell us we know when we don’t, create absurdly optimistic estimates of what we can achieve, and keep us stuck in bad relationships and bad jobs.

Here are three biases and some strategies for getting out of the trap they set.

1. The Sunk Cost Fallacy

Imagine you have a ticket to the movies for which you forked out 10 bucks, but you are attending with a friend who got hers for free.  The weather turns sour and they are re-running Dukes of Hazard.  Which one of you is more likely to cancel?  If you say “my friend, duh,” you are trapped by the sunk cost fallacy.

Your ten bucks is gone (assuming you can’t plead a refund).  Since you are out ten bucks whether you go or not, it should not affect your choice.  What matters is the cost-benefit of braving the weather, and whether your movie features more interesting characters than Boss Hogg. (Unlikely. Still.)

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The sunk cost fallacy traps people in bad relationships, bad investments, and traps countries in destructive, no-win wars.  (“We can’t withdraw because we have spent billions and people have given their lives.”)  What matters is the future—whether you can turn the relationship around, or whether the next billion dollars and young lives will be squandered in vain.

The sunk-cost fallacy is an example of a cognitive bias—a habitual, predictable, way of thinking that leads to error.  Wiki lists over 100; it seems the amazing human brain has many hard-wired flaws.

Some of these flaws may have conferred an evolutionary advantage.  Who knows what the exact conditions were five thousand years ago, but the hard-wiring of our brains may not have changed quickly enough to keep up with the white-heat of cultural and technological evolution that has happened in the last 5000 years (a blink of an eye in genetic evolution).

Conquering the sunk-cost fallacy is very tough.  Who has not poured time and money into something and wished they hadn’t, only to pour more in on the next occasion?  We like to self-justify (to believe that we made good decisions in the past); who likes to say “I was a fool then”?  Then, we look for confirming evidence things are going our way.  “He stopped drinking for a week, and had a job last year.”

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One technique is to create an imaginary scenario.  Imagine you parachuted into the (house, relationship, investment) for free, with nothing invested.  What would you do then?  If the answer is “run for the hills,” then you have your answer.

2. The Planning Fallacy

A second bias which causes enormous stress is the “planning fallacy.”  Humans suck at estimating how long things will take. Partly, we like to believe we are super-human, but mostly we are deluded about how complex things get.  As a writer, I’m constantly amazed that the last 5% of a project takes 30% of the time.  The average overrun on big technology projects is 27%, and many really big ones overrun by one hundred percent or more!  A group of students were asked to estimate how long a term paper would take, their “best case” guess was 29 days, and the “worse case” (excrement hits the fan) was 48 days.  They took an average of 55 days!

tough decisions

    How much stress and misery, I wonder, comes from people in offices saying “I can do it by Friday,” only to find that a couple of more Fridays are required?  We like to people-please, and to look confident and competent, but we are incompetent at estimating how long things take!

    3. Optimism Bias

    Our final bias rears its head in conflict situations, where everyone is sure of their “facts” and confident in their predictions about how different actions will pan out.  This family of biases means we take a rosy view of our knowledge, and a dim view of other’s.  Nobody is as right as they think they are.

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    Professor Philip Tetlock has studied expert predictions over a lifetime.  He found that experts (real experts, not talk radio experts) who were 100% sure of an outcome were wrong 25% of the time.  Further, when they thought an outcome had “no chance,” it happened 15% of the time.  What percentage of people are above average listeners?  96%!

    This “confidence without competence” is one cause of conflict running out of control.  People who are dogmatically sure of themselves beget adversaries who become similarly dogmatic. The next time you are in a conflict situation, make a table with two columns; write the facts (as you see them) in one column, and your opinions and conclusions in the other column. Ask your adversary to do the same (nicely!).  Check off the facts on which you agree, and where you disagree. Do some homework together.

    The difficult part of resolving conflict lies in the area of opinions, interpretations, values and predictions, so you are only part of the way there.  But going through the process of developing a shared set of facts will diminish the polarization, and allow you to get down to business.

    Learning about our biases can help.

    The sunk-cost fallacy keeps us stuck in a miserable past, throwing good time and money away after bad decisions. The planning fallacy creates tremendous stress as we struggle to meet unrealistic deadlines. Optimism biases make us feel sure of ourselves when we have no right to be, which leads us to prolong and exacerbate conflict.

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    We didn’t learn these things in school because they were not well understood, were not part of any college curricula (unless behavioral economics gives you jollies), and certainly far from mainstream understandings of how humans work.

    Learning about our biases puts us back in the game.  Like sharpshooters who correct for wind velocity and direction, knowing our thinking is skewed in a particular direction means we can auto-correct, make better decisions, and get more of what we want in life.

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    Last Updated on January 27, 2021

    How to Use Visual Learning to Work More Effectively

    How to Use Visual Learning to Work More Effectively

    Knowledge is essential to become successful in life, your career, and your business. Without learning new concepts and becoming proficient in your craft, it’s difficult to excel in your chosen career or archive knowledge to pass down to the next generation. Visual learning is one way to do this, and it can be incredibly effective in helping you work better.

    Content comes in various forms, and because how we learn influences how much we know, we need to talk about learning styles. This article will focus on how to utilize visual learning to boost your career or business.

    The Importance of Knowing Your Learning Style

    Knowing your learning style enables you to process new information to the best of your ability. Not only does it reduce your learning curve, but you’re able to communicate these same concepts to others effectively.

    It all starts when you’re able to first identify the best way you learn.

    As a college student, I soon figured out that taking online courses without visual aids or having an instructor in front of me led to poor retention of concepts. Sure, I got good grades and performed excellently in my online exams. However, I discovered that I couldn’t maintain this performance level because I forgot 80 percent of the course content by the end of the semester.

    There are several types of learning styles, which exist as part of the VARK model. To give an idea of how visual learning stacks up against other learning styles, here’s a brief mention of some of the different types of learning styles we have.

    The four most popular types of learning styles are:

    • Visual learning style (learning by seeing)
    • Aural or auditory learning style (learning by listening to information spoken or presented)
    • Read/Write learning style (learning that involves reading and writing texts)
    • Tactile/Kinesthetic learning style (learning by touching and doing)

    For the purposes of this article, we will be focusing on using visual learning.

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    Are You a Visual Learner?

    When it comes to boosting your career, business (or education), a visual learner is one who would most definitely choose shapes, images, symbols, or reading over auditory messages.

    This may mean you prefer to read an actual map when navigating to a new place over listening to verbal directions. It may also mean that you have trouble remembering what your manager said at the meeting because there were no graphs or illustrations to support the points raised.

    Visual Learner Infographic

      Most people who struggle with learning probably aren’t leveraging their best learning styles[1]. The earlier you identify how your learning style can boost your success, the less struggle you will encounter with processing new information throughout your career.

      However, visual learning in particular can really boost your career or business whether it is your preferred learning style or not, and here’s why:

      Several studies have arrived at the conclusion that the brain retains more information with the help of visual aids. In other words, images are directly processed by our long-term memory, which helps us store information for longer periods of time.[2]

      While some lessons can be performed orally, several concepts can only make sense if you have an image with an explanation of sequences (i.e. learning about human DNA).

      Visual learning does use a different part of the brain, and visual cues are processed by the part of the brain known as the occipital lobe.

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      By engaging more parts of the brain during learning, you’re able to have a fuller understanding of concepts and facilitate better interaction with your immediate environment.

      How to Use Visual Learning for Success

      Here are 4 ways to use visual learning to boost your career or business:

      1. Bring Back the To-Do List

      We live in an age where computers have taken over virtually every aspect of productivity and most human functions. However, written lists are making a comeback, and with an endless number of important tasks to complete, having a to-do list of tasks in order of importance can improve your productivity.

      While coming up with a list is initially challenging, adding colors and shapes to written lists that you personally write and manage gives you an extra layer of assurance and aids recall so that you actually get stuff done.

      I have tried this technique in my work as a registered nurse and discovered that adding shapes and colors to to-do lists helps me delegate tasks, recognize where more work is needed, and makes it easy to cross off completed tasks at the end of the day.

      2. Add Graphs, Charts, and Symbols to Reports

      Yes, it seems like more work for you, but graphs enable you to monitor the heartbeat of your business.

      Graphs and charts help you find trends in your finances, make a budget, and analyze data overtime. With the help of free and premium software available on the market, it has become easier to take plain data and convert it to relevant information displayed in different shapes and images in a matter of minutes.

      As an entrepreneur, you can make predictions and allocate funds wisely when you’re able to see whether your efforts are rewarded. You can use colors and charts to delegate actions to members of your team and track performance at the same time.

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      When broken down into monthly, quarterly, bi-annual, or annual goals, graphs and charts communicate what ordinary text cannot.

      3. Effectively Brainstorm With Mind-Mapping

      With mind-mapping, you’re organizing information accurately and drawing relationships between concepts and pieces from a whole, which is a great way to tap into visual learning.

      Think of a mind map as a tree with several branches. For example, the tree can symbolize healthcare, while each branch stands for nursing, medicine, laboratory science, and so on. When you look at nursing, you can further branch out into types of nursing; pediatric, women’s health, critical care, and so on.

      It’s an interesting relationship; the more ideas you’re able to come up with for your chosen subject, the deeper you get and the stronger the association.

      Mind maps really show you relationships between subjects and topics, and simplifies processes that might seem complicated at first glance. In a way, it is like a graphical representation of facts presented in a simple, visual format.

      Mind mapping isn’t only limited to career professionals; business owners can benefit from mind mapping by organizing their online learning activities and breaking down complex tasks into simple actions so that you can accurately measure productivity.

      4. Add Video Streaming to Meetings

      What if you could double the productivity of your team members by video streaming your meetings or adding flash animation to your presentation?

      When you offer video as an alternative method of processing information to colleagues, there is a greater chance of retaining information because we recreate these stories as images in our minds.

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      For organizations that hold virtual meetings, it can also be an effective way to enhance performance as people can see their colleagues in addition to whatever form of video is provided during the meeting.

      Final Thoughts

      The question is not whether visual learning is better than the other learning styles. Each has their merits and situations where they will be most useful.

      The goal here is to supplement your existing dominant learning style with visual learning so that you can experience a significant boost in how you process and use everyday information.

      You might discover that understanding scientific concepts is much easier after incorporating visual learning or that you’re able to understand your organization’s value when projected on a visual screen with charts and graphs.

      The overall goal is to always be learning and to continue to leverage visual learning style in your career and business.

      More About Learning Styles

      Featured photo credit: You X Ventures via unsplash.com

      Reference

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