Common biases in decision-making

It's been said that "no problem in judgment and decision-making is more prevalent and more potentially catastrophic than overconfidence."

The anchoring bias is a tendency to fixate on initial information and fail to adequately adjust for subsequent information.

The rational decision-making process assumes we objectively gather information, but we don't. We selectively gather it. The confirmation bias represents a specific case of selective perception: we seek out information that reaffirms our past choices, and we discount information that contradicts them.

More people fear flying than fear driving a car, but if flying on a commercial airline really were as dangerous as driving, the equivalent of two 747s filled to capacity would crash every week, killing all on board. Because the media give much more attention to air accidents, we tend to overstate the risk of flying and understate the risk of driving.

Another distortion that creeps into decisions is a tendency to escalate commitment. Escalation of commitment refers to staying with a decision even when there is clear evidence it's wrong.

Most of us like to think we have some control over our world and our destiny. Our tendency to believe we can predict the outcome of random events is the randomness error. Decision-making suffers when we try to create meaning in random events, particularly when we turn imaginary patterns into superstitions.

A tendency to prefer a sure thing over a risky outcome has important implications. Risk-averse employees will not leave their comfort zone, doing their jobs normally rather than taking a chance on innovative or creative methods.

This is the tendency to believe falsely, after the outcome is known, that we'd have accurately predicted it. When we have accurate feedback on the outcome, we seem pretty good at concluding it was obvious.