9-reasons they will tell us why all the thousands of decisions we make every day may not be good, while sometimes these decisions turn out very well.

Many factors play a role in making the wrong decision. In this note, I will talk about these factors.

1. Mental shortcuts

If you have to think of every possible scenario for every decision, you probably won’t get much done during the day. The brain relies on several cognitive shortcuts called heuristics to make quick decisions. 

Heuristics are mental rules or shortcuts that allow you to make quick and accurate judgments. However, these shortcuts sometimes lead to dumb thinking and inappropriate decisions.

Anchoring bias is a good example to explain this issue. In many situations, people rely on the first available information and use it to make a final estimate. For example, if you are buying a house and you know that the homes in your desired vicinage are usually sold at a high price, you should probably use this figure to negotiate the purchase price of your chosen house.

You can combat anchoring bias by providing a range of possible estimates. So if you’re looking to buy a new car, instead of focusing on the average price, think about a range of reasonable prices.

Reduce the impact of mental errors on management decisions

2. Misplaced comparisons

Comparing is one of the tools people use when making decisions. You are usually aware of the prices, and you can compare the options to choose the product with the best price. Now think about what happens if your comparisons are wrong or the alternatives are not equal?

If you could buy a 2 million euros product 500 thousand euros cheaper by driving for 15 minutes and traveling further, you would probably do it. Now, if you can buy a 300 million euros product cheaper by 500 thousand euros, are you still willing to go the extra mile to save money? 

Probably not! Even though you get the same rate discount in both examples, you are less inclined to the second option.

This example shows the wrong comparison. Because you compare the amount saved to the amount paid, 500 thousand euros compared to 2 million euros seems much more than compared to 300 million when the amount is the same.

Usually, people make comparisons when make intentions, without thinking about different options. To avoid making bad decisions, sometimes relying on logic and thoughtful consideration of options is more vital than relying on spur-of-the-moment reactions.

9-reasons why we make bad decisions
9-reasons why we make bad decisions

3. Extreme optimism

Most of the time, people have some kind of innate optimism that causes them to make wrong decisions. When people are told that something is less likely to happen than they expected, they tend to adjust their estimates according to the new information, and when they realize that the risk of something not good happening is much higher than they thought, they tend to ignore the new information. For example, if a person estimates that the probability of dying from smoking is only 5%, and then is told that the actual risk is about 25%, he will probably ignore the new information and stick to his original estimate.

Part of this overly optimistic view comes from thinking that bad things only happen to other people. When people find out something sad or unpleasant has happened to someone else, they look to see what the person did to make it happen. This tendency to blame the victims prevents them from accepting the fact that they are just as susceptible to unpleasant events as others.

Sharot, the researcher who reached these results, called this issue optimism bias. According to this bias, when you are overly optimistic about your own abilities and prospects, you are more likely to believe that your decisions are the best decisions.

Experts may warn that smoking, being inactive, or eating too much sugar and sweets can lead to death, but the optimism bias makes people think that these only kill others, not themselves.

4. Automatic thinking

Sometimes people just jump into action without thinking, especially when doing routine tasks. This automatic thinking can save time and cognitive resources, but sometimes it also leads to wrong choices.

5. Cognitive biases

Confusion caused by cognitive bias

People are prone to systematic cognitive errors that affect how they process and interpret information. Such biases also affect your judgments and decisions.

Mental Shortcuts: 5 Ways Heuristics Can Lead to Poor Decisions

6. Individual differences

Factors such as age and socioeconomic status can also affect people’s choices and decisions. Older people may make different choices than younger people for a variety of reasons, and the options on the table depend largely on a person’s financial situation.

7. past experiences

Most of the time people’s choices are influenced by their past experiences. Many times, people may make decisions based on things that have worked in the past.

8. Tired of making decisions

Many of the decisions we make every day are stressful, and this stress leads to decision fatigue. This fatigue can lead people to make random choices or allow others to choose when they have to make a decision.

9. Multitasking

Trying to do multiple tasks at the same time causes cognitive errors and incorrect decision making.

How to make better decisions?

Prioritize important decisions. This action prevents decision-making fatigue and provides you with the necessary cognitive resources to make the best choice.

Eliminate distractions. If you are constantly distracted by different things, you will have less time, energy and attention to focus on the information and options available. By eliminating these factors, take an important step towards making the right decision.

Consider all options. It’s true that this will take more time, but considering all the options can help you make a better decision.

Take some rest and then decide. When making a decision, the possibility of error is high, especially when you want to make a complex or important decision. Take a break and give yourself time. Then check the issue and make the right decision.

Consult with others. Talking to others is a good way to get different perspectives.