Business Insider conducted a study on the main causes that lead us to make bad decisions. A good reason to reflect on how to make better choices in our daily lives. These 20 reasons can be useful in all aspects of life, but they are especially relevant in business.
Do you want to know why you make bad decisions? It’s probably due to one of the following reasons…
Anchoring on the First Bias
By default, we tend to trust the first piece of information we receive. This information often becomes the main reference involuntarily, influencing subsequent decisions. In salary negotiations, for example, the initial amount on the table sets a range of possibilities for both parties on which the negotiation is based.
Availability Heuristic
People overestimate the importance of the information they have, which may be incomplete or insufficient. For example, someone might argue that smoking isn’t harmful simply because they know a smoker who lived to 100.
Bandwagon Effect
The likelihood of someone believing something increases the more people around them believe it. This is a powerful form of groupthink and a reason many meetings are unproductive.
Blind Spot
Failing to recognize your own cognitive bias is a bias in itself. People are more likely to notice bias in others than in themselves.
Choice-Supportive Bias
When we make a choice, we tend to view it positively—even if it has flaws. Like your dog, which seems perfect to you even though it keeps chewing your slippers.
Illusory Correlation
A tendency to find patterns in random events. This is common in gambling, such as believing that after a streak of red, red will appear again.
Confirmation Bias
We are more receptive to information that confirms our preconceived ideas. This is why intelligent conversations about controversial or opposing political views are so difficult.
Conservatism Bias
When someone prioritizes prior information when new data emerges. For example, it took people a long time to accept that the Earth was round because they had internalized that it was flat.
Information Overload
Sometimes we continue gathering information even if it doesn’t affect action. More information does not always lead to better decisions. In fact, with just the right amount of information, we often make better predictions.
Ostrich Effect
We believe we are protected if we ignore dangerous or negative information, burying our heads like an ostrich. Studies show that investors check their portfolios less during bad market periods.
Overconfidence
Some of us overly trust our abilities, which leads to unnecessary risks. Experts are particularly prone to this bias because they are generally convinced they are right.
Placebo Effect
When you believe something will have an effect, the mere act of believing can produce that effect. In medicine, many people given fake drugs experience the same symptoms as those who took the real ones.
Innovation Bias
When faced with groundbreaking proposals, we emphasize their usefulness and minimize limitations. This is common in highly innovative environments.
Recency Effect
The tendency to give more weight to the most recent information while discarding older data. Many bad financial decisions are based on today’s market behavior rather than long-term trends.
Prominence Effect
Focusing on the most recognizable features of a person, object, concept, or situation. For example, people afraid of flying focus on the possibility of a plane crash, even though car or train accidents are statistically more likely.
Selective Perception
Allowing expectations to influence perception. Fans of opposing sports teams tend to notice more fouls by the other team during the same game.
Stereotypes
While useful for initial screening, we often overuse stereotypes. Assuming a group will behave a certain way without evidence usually leads to mistakes.
Survivorship Bias
A common error in decision-making is focusing on successful examples, which distorts judgment. Many first-time entrepreneurs fail to grasp the difficulty of entrepreneurship because they rarely hear stories of failure.
Zero-Risk Bias
Sociologists know we like certainty, even if it’s counterproductive. Eliminating all risk prevents harm but also prevents achieving anything significant.
In short, we are predisposed to make bad decisions due to one or more of these factors. However, we can reduce this likelihood by using information wisely to extract all the knowledge at our disposal.
CbC Reporting 
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