10 reasons people make stupid decisions ..
December 15, 2006 5:54am CST
Have you ever wondered why most of the people you know (and probably your elected representatives) insist on making dumb decisions when they are so clearly wrong? Below are ten reasons that they act like idiots without even knowing it. And as they say in poker, if you can't spot the sucker at the table, then it's probably you... 1.He's just a moron. (attribution error) - Is the driver that cut you off a jerk? Or is he a good guy who didn't see you because he's distracted by something else going on in his life. Judging by the finger that you chose to hold up, you think he's a jerk. That's about par for the course, as most people tend to over-emphasize personality-based explanations for the actions of others. A NewYorker article by James Surowiecki discusses a classic experiement where "subjects shown a person shooting a basketball in a gym with poor lighting and another person shooting a basketball in a gym with excellent lighting assume that the second person hit more shots because he was a better player." So maybe it's better to withhold judgement about a person until you've actually talked to them. Even if they did cut in front of you in line at McDonalds. 2. Lets go hard 8! (illusion of control) - We all know that there’s no difference between my chances in craps if I have the dice or someone else at the table does, right? As explained in Wikipedia, Ellen Langer from Harvard famously showed that people rolling the dice in craps threw harder on average when going for high numbers and softer when going for low numbers. And they tended to bet more when they were rolling relative to others. This may be one reason that people know gambling doesn't pay on average, yet gladly gamble their own money. It should also cause you to question the confidence of your co-workers who know they will hit an aggressive deadline even though there are many factors out of their control. 3.If everybody else think so… (conformity) - People make decisions based on what they think and not what everyone else thinks, right? Well, a famous experiment by Solomon Asch, explained on Answers.com, had one participant and several experimenters in disguise were asked to announce their judgement about the length of several lines (such as which line was longer then the other, etc.) The experimenters in disguise were instructed to give incorrect answers to these easy questions. Surprisingly, a third of respondents gave wrong answers because of the pressure of their peers. Are these types of pressures enough to get people to do things that they know are wrong (shoplifting, accounting fraud, genocide...)?4.Watch out for sharks. (availability bias) - People are suckers for recent and memorable events. So much so, that they think these types of events are more likely to happen than they actually are. 5.Mine mine mine! (endowment effect) - Why is it so hard for people to throw, give away or sell things that are past their prime? One theory is that people tend to place a higher value on objects they own relative to objects they do not. As explained on behaviouralfinance.net, an experiment by Kahneman, Knetsch and Thaler found that randomly assigned owners of a mug needed to be paid around $7 for it, while randomly assigned buyers were only willing to pay around $3. So it's likely that your neighbor values things they already have more than they would if they didn't already own them. If you have ever tried executing a trade in fantasy football right after the draft, you understand this irrationality well. 6.I’m #1! I’m #1! (dysfunctional competition) - Have mixed feelings when you find out your co-workers get a promotion that you weren't even interested in? You're not alone. People's happiness is often a function of what they have relative to others. Your co-workers might be just as happy with you getting a pay cut as they would with getting a raise themselves. In a Q&A with Max Bazerman from Harvard, "When I ask people whether they would prefer a) $7 for themselves and for another person or b) $8 for themselves and $10 for the other person, people choose "b." However, when people are simply given "a" or "b," "a" makes them happier."7. That’s easy. (overconfidence) - According to a famous survey of drivers conducted by Ole Svenson in 1981, 80% of respondents rated themselves in the top 30% of all drivers. And anyone who doesn't see that as a strange finding probably rated themselves in the top 30% in math also. While overconfidence is definitely a good thing in many situations, it probably means people don't work on their weaknesses as much as they should. Do overconfident drivers practice safe driving given their lack of abilities? Do overconfident doctors, discussed in this HealthDay article, get the proper training? Do overconfident public officials realize when they are making bad foreign policy decisions?8.That just proves my point. (confirmation bias) - Isn't it a coincidence that no matter what happens in the world, politicians can spin it to show why that confirms their opinions? A cynical explanation is that politicians twist the truth to get what they want. But a more subtle explanation is that our brains tend to search for and interpret information in ways that support our pre-exisiting opinions 9.Me me me! (egocentric bias) - Putting yourself in another person’s shoes is harder than it sounds for most people 10. We’ve come this far… (sunk cost bias) - We all know that the past is past and we can’t get back money or time that we already spent. But many people irrationally take sunk costs, time, money, or other resources which have already been spent and can't be recovered,