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Making Smarter Decisions

15th November 2016

Every day we face decisions, from the trivial to extremely important.

Too often, we simply go with our gut feeling and do what feels right.

The problem with that approach is it leaves us open to a variety of behavioural and psychological biases that affect the way we think and can lead us to poor choices.

By just being aware of the things that lead us down the wrong path and some ways to get it right, we can all learn to make better, more rational decisions.

Here are 5 Tips for smarter decisions:

1. The “best” option

Searching for the “best” option is usually a waste of time. People put too much value on having a wide variety of choices.

According to studies, we can spend so much time seeking out options that it outweighs any benefit of having additional choices.

When researching options, set a time limit for yourself, and make sure you’re not just procrastinating to avoid the decision.

2. “Better” information

We overestimate how often people act on better information.

People have a tendency to imitate others’ choices, even when they get different information.

This effect can be particularly strong and lead us to keep making the wrong choices because we overestimate how much people are acting on better private information, and underestimate how much they’re simply following others.

Don’t mistake other people’s choices for real information in every case.

3. Information bias

“Confirmatory bias” makes us overconfident for the wrong reasons.

When presented with uncertain information, people tend to interpret in a way that confirms what they already think or want.

This bias actually makes people overconfident in their choices without good reason.

If you have a preference for a certain choice because it’s easier or more familiar, make sure you’re not shaping contrary information to support it.

4. Information overload

Information overload can hide the most important facts and can be overwhelming.

It’s easy to get so much data that it’s difficult to pick out what’s relevant and important.

Focus on important information, not just getting more of it.

5. Trusting data

Blindly trusting data is as bad as ignoring it.

Big data has been revolutionary for a number of industries. New sources and analytics tell us more than ever about customer preferences and activities.

Accepting what the data tells you blindly is as bad in a way as ignoring it.

The best attitude to take is “informed scepticism.”

Know what the data means, but trust your judgement.