#295: Beware of These Two Cognitive Biases in Your Business

Every one of us falls prey to cognitive biases. Not because we’re stupid; but because we’re human!

We’re programmed by our biology to conserve energy. Thinking takes energy. So our brains develop thinking “shortcuts” (or heuristics) to save energy.

Unfortunately, these shortcuts can introduce biases into our thinking. Sometimes, these biases can help us make good decisions. But very often, they lead us to do the opposite.

In this podcast episode, I describe two cognitive biases that can trick us into doing the wrong thing in our business.

The notes that follow are a very basic, unedited summary of the show. There’s a lot more detail in the audio version. You can listen to the show using the audio player below. Or you can subscribe on Apple Podcasts, Spotify, Stitcher, Google Podcasts, Amazon Music or wherever you listen to podcasts.

The Recency Bias

The first bias you should know about is recency bias. According to Wikipedia, recency bias is a cognitive bias that favors recent events over historic ones.

It assigns “greater importance to the most recent event,” which is what makes lawyers’ closing arguments so powerful and persuasive, for example.

The Availability Bias

The second bias you should know about is availability bias (also known as the availability heuristic).

The availability bias is a mental shortcut that assigns greater importance to examples that immediately come to mind when making decisions.

The Problem of Cognitive Bias in Your Business

How can these biases negatively impact your decision making? Let’s look at two scenarios:

Scenario One

Say you hit a rough patch in your business. You try a few things to get back on track, and they don’t work. Which makes you worry even more.

As you think about your business, you put your focus on the most recent outcomes,

which all happen to be negative. They take center stage.

If you’re not careful, you’ll quickly forget all the amazing things you’ve done and achieved in your business over the years. Instead, what dominates your thinking is all the bad stuff that’s been happening over the past few days and weeks.

So you conclude that your situation is hopeless—and forget that you have other options you can try and past success that you can build on.

Scenario Two

Let’s say you have the opposite problem. You’re beyond booked solid and don’t even have time to breathe. You’re stressed and burning out.

Because of your recency and availability biases, you can’t find your way out of this stressful situation. You feel trapped. And you forget all the amazing things about your business that you love.

Why? Because your current situation overrides all that past information.

Use Awareness to Negate Cognitive Biases

I could say a lot more about these biases, as well as dozens of other cognitive biases that lead us to make bad decisions or jump to conclusions.

But the important thing is to be aware of these biases—recency and availability in particular—and how they can impact your mood, mindset, and actions.

Unfortunately, you’ll never eliminate these biases entirely. But if you’re aware of them, you can start to negate them—and make more rational decisions.



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