Cognitive Bias in Business

The Many Ways Thinking Can Go Wrong


Our brains are incredible creations. They run on about as much energy as the lightbulb in your fridge, yet it’s responsible for making sense out of millions of details all day, every day.

Things go well so often that it can be difficult to remember how wrong your brain can be more often than you might like to admit. This is why I love optical illusions & magic shows so much; they’re a friendly reminder that there are definite limitations to your cognitive abilities.

If you ignore that point in business, however, the results can be disastrous. Think about it: you could have the most amazing tech in the world, but it’s the people who are the most important part of your business. Understanding where things can go wrong is infinitely valuable, so here’s a short list of my favorite cognitive biases to be aware of.

Confirmation Bias

We tend to remember, believe, or notice things that reinforce the things we already think about the world. This means we will ignore anything that challenges those beliefs.

In the business world this creeps up in beliefs about the the right strategies to marketing, employee retention, customer acquisition, and on down the list it goes.

Backfire Effect

This pairs nicely with Confirmation Bias. It’s what happens when you’re presented with information that completely disproves something you believe so you double down on your convictions.

You can show someone the right way to do something, but they’ll often dig in even deeper on the way they’ve been doing things.

False Attribution

“80% of all facts on the internet are made up on the spot.” ~Abraham Lincoln

This happens when someone wants an idea to appear more legitimate than it is, so they attribute it to someone trustworthy.

Correlation Is Not Causation

Post Hoc, Ergo Propter Hoc: “After the fact, therefore because of the fact.” This is the mistake of thinking that one thing happens before another, that the first thing causes the second. Just because two things are related, doesn’t mean they’re causal factors.

Sunk Cost Fallacy

Also known as the Gambler’s Fallacy because you’ve lost too much money to walk away, and you should stay in order to win it all back. “We’ve already come this far, would be a shame to stop now.”

Cherry Picking

Think of this as Confirmation Bias on steroids. This is ignoring thousands of scientific reports and believing a single experiment that suggests the contrary.

Takeaway

We’re all victims of poor judgement, specious reasoning, and illogical choices at times. The trick is to identify it as quickly as possible, and take the appropriate steps to get you back on track.

This can be difficult to identify on your own, so it’s important to get outside viewpoints on all areas of your business.

Posted by Jonathan Pritchard

For the past 20 years Jonathan has been a professional mentalist. He's toured the world, entertained the troops stationed overseas, & amazed audiences on TV. He realized the same psychological techniques he uses on stage are exactly the same he uses in his own business to create an incredible life. Companies & clients hire his coaching services to get a mind reader's thoughts on problem solving, networking, relationship building, and any other dynamic where people are involved. When not on the road, he gets his mail in Chicago, and you can find him practicing kung fu every morning.