Why Entrepreneurs Should Stay Away From These 12 Biases Biases may hamper your power of decision making and you may never be able to understand the reason and hence we want to discuss its kinds
Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
The human brains are extremely capable. You must have come across articles which tell about how less we perform when compared to what we are capable of. Humans have made systems and processes that run the world, well most part of it, today. But that always means our brilliant brains have certain limitations too. A good example of this would be the biases we are subjected to without much of our control. Biases are genuine limitations in our thinking and reasoning processes. It is most certainly not connected to how smart or stupid a person is.
As solopreneurs we all take a number of decisions on a regular basis. Taking the right decision at the right time plays a big role in any Entrepreneur's emotional hygiene. Cognitive biases are organized errors in our thought processes that severely impact the decisions we take. It could be anything, how you remember a certain event from the past and how you take your next decision about the upcoming event.
Cognitive biases are made subconsciously and aren't always in our control. However, it's always wise to be aware of them. Here are 12 biases every Entrepreneur should keep in mind:
We all have the habit of appreciating anything that goes in line with what we already know. We like people who agree with us or things we approve of. We love reading websites that talk about things in line with what we approve of. This kind of bias makes us uncomfortable when something wayward happens. It offsetting to know that our beliefs were inaccurate. However, it's important to note that this bias keeps us away from gaining a broader outlook.
This is a kind of bias you will face when you work in a group. There will always be times when a decision is approved by a majority of the lot. And there will always be a person who doesn't approve but doesn't say anything about it either. The fear that the majority of the group agrees on something, s/he isn't okay with is off-putting. It's important to note that this bias can dangerously kill new and better ideas.
We tend to always base our judgment on the initial quotation or judgment that was made. It could be when a vendor quotes you $450 for an Advert and then reduces it to $400 the next week. We tend to think it's a better deal when compared to the initial quotation. However, we fail to see the actual value of an Advert in the market as the initial price has already become our anchor.
As per this bias, we have the habit of believing that everybody around us thinks like us. Subsequently, we make decisions keeping in mind our preferences and convenience. Believing that everyone is on the same page as you without confirming with others can be sketchy in a business.
Remember, when you voted for someone just because everyone else was, that was a bias. We usually tend to go with the flow along with the majority of people around us. The sense to reason goes for a toss when a crowd believes in it. A simple example would be Mob mentality. If a crowd of 50 people is creating a ruckus in the public, the rest 250 wouldn't question before joining them blindly.
People usually focus on the negative news more. It could be a downfall, an accident or the stocks crashing. We somehow tend to believe that negative news is more important and of value. We take good news for granted and give more credibility to bad news. We worry when the newsreader talks about future water shortage but don't believe when he talks numbers of diseases that have been fought off.
This is probably the oldest of biases. We, humans, hate change, in ourselves and in our lives. We like to stick to our habits, opinions and even our meals. We tend to make decisions that would require the least of changes in the existing system.
Observational Selection Bias
We tend to notice things that we would have otherwise ignored before. It could be when you brought a certain equipment and suddenly see others doing it too. Whereas, you have just become more alert towards the change whereas the number hasn't probably increased. We choose to see things in our favor.
We usually tend to neglect the adverse effects of things we are comfortable with. You would cross the road any given day, extremely easily. But you would think twice before walking over a bridge. The chances of you being hit on the road don't seem to occur to you. Whereas, the chances of falling off a bridge seem higher to you.
Solopreneurs have the habit of finding instant solutions to problems they face on the way. Fixing the problem immediately seems like the best thing to do. We have the tendency of finding an immediate solution. This makes us skip out on certain crucial aspects before taking a decision.
People usually consider information that is available at hand while making a decision. Not many of us, actually look for new information before important decisions. This can become a problem in the case of subjective information and when other people are concerned.
We all have our own assumptions coupled with the societies, about different ethnicities. We tend to believe a certain person's culture or ethnic background is directly proportional to their decisions making. We take the culture or religion and judge the person's skill set for granted. A simple example is when Entrepreneurs from the east go to the West and try to settle in a new culture. There are biases from both parties that take time to settle in.