Our caveman ancestors had a simple test for survival – Fight or Flight. In our modern world money is the source of survival. As a result every primitive survival and pleasure-seeking drive is intensely focused on capturing and guarding money. These drives are involuntary and highly emotional emerging more quickly and forcefully than logical analysis.

Rational thinking isn’t 100% reliable either. We often make rapid judgments based on learned patterns and broad assumptions. Quick and easy is appealing. Unfortunately intuitive thinking is filled with biases we don’t recognize.

The best approach requires slow, deliberate and intentional analysis. It isn’t easy which is often why we as humans avoid it.

In order to overcome bias we must be aware of it. Here are some of the more common ones:

AVOIDING PAIN

Humans are wired to avoid pain. As a result we are susceptible to:

  • Loss Aversion: the experience of feeling losses more powerfully than the gratification from gains
  • Over-estimation: the avoidance of highly unlikely yet strongly reinforced negative events – those that are traumatic and repeatedly communicated (thanks Big Media!)

These reasons are why many of us are overly fearful of another financial meltdown. It was traumatic, many of us experienced financial loss and the media repeated the stories incessantly.

SEEKING APPEAL

In addition to avoiding painful events humans are swayed by seemingly positive outcomes that lack credibility. Conclusions drawn feel (not think!) more natural but lead to similarly faulty conclusions. We gravitate towards easy and attractive things and the comfort found leads us to believe truth and desirability. This leads to:

  • Fluency Bias: judging by ease of viewing over substance
  • Halo Effect: belief that a good first impression predicts the future
  • Confirmation Bias: believe only what we want while ignoring contrary evidence
  • Causality Bias: assigning cause and making value judgments

Similarly we prefer to focus on story over credibility. These things explain how we often fall for the “sure thing” so artfully displayed on TV or described so confidently by friends, co-workers and the like. It looked good and there was early success so it must be true!

Have you ever wondered why infomercials show the “before” in black & white vs. the “after” in color? Why is the phone number repeated three times? Marketers love to exploit human bias.

Seeking appeal works both ways. Negative impressions are equally difficult to dislodge once established.

SEEKING ACCURACY

Because we prefer patterns and conclusions over facts we are subject to:

  • Repetition Bias: believing something because it’s been repeated
  • Recency Bias: believing something is likely to happen again because it happened recently
  • Poor Sample Size: overestimating value based upon few examples
  • Herding: following others even if it has no personal relevance
  • Anchoring: clinging to old expectations (such as a prior stock price?!) despite new circumstances

These reasons explain why many people are so panicked over inconsequential negative outcomes. Big Media’s focus on the negligible reminds us of other instances which “proves” negative predictions despite so little evidence. Others are acting so we feel compelled to act too.