Avoiding Bad Decisions: Why We Make Bad Choices and How to Fight Back
We do irrational things all the time, make stupid choices that we regret later. It’s not like we consciously decide to act like a fool. Rather, in those moments when we are making a decision, we seem to be quite pleased and reasonable with our choice. It’s only later we realize how distorted our sense of reality was.
But we don’t stop there. We don’t learn from those mistakes. We live with the experience of a terrible decision, blame ourselves or others for not thinking out right only to repeat the same mistakes again.
Most of us have heard some version of these:
“I made a terrible career choice. Only it seemed like a perfectly rational decision at the time.”
“I was super upset about not getting a promotion though I deserved it. I handled my frustration by bad mouthing my manager. I now realize I could have handled the situation better.”
“I knew that my team was making a bad choice, but I went along with the popular opinion. It costed my company a lot of money. If only I had gathered the courage to speak at the time.”
“I kept on investing more time and energy into a project that was bound to fail. I should have quit sooner.”
Our life is nothing but a sum total of our decisions. They determine the costs we accrue for the benefits we gain. They impact our experience by directing our focus and energy in a specific direction while taking it away from something else. They control how we spend our time, how efficient we are in doing things that matter to us and ultimately they feed into what we achieve. From health to relationships to professional and personal growth, our decisions form an integral part of our overall well-being.
Mark Manson, author and blogger wrote “Everything you do in life is a trade-off. Anything you say, do, or pursue has a cost and a benefit. Those costs and benefits may not always be immediately apparent—sometimes the costs and benefits are dislocated in time, the benefit being immediate and the cost in the distant future. Sometimes the costs or benefits are subtle and psychological. But nonetheless, there is always a trade-off.”
He adds “We like to believe that we can find a life of only pleasure and no pain, of only success and no failure, of only acceptance and no rejection. But this is impossible. Gain and loss are simultaneous. For everything you say or do, there is an infinite number of alternative choices you must forgo in order to say or do them.”
Our imperfection combined with the fact that the future is unknown can lead us to make very bad decisions. But instead of feeling helpless, we can invest in our decision making abilities. We can learn to make better decisions to make a positive impact in our own lives and the people we work with.
An understanding of why you make bad decisions will profoundly enhance the success of all your future decision-making by preventing you from making choices you end up regretting.
6 reasons why we make bad decisions and how to avoid them
1. We seek social approval
We do make a lot of bad decisions because of our beliefs, because we are ignorant, because we refuse to put in the effort or otherwise ignore signs that are right in front of us. But, we also make bad decisions when we know what’s better. Regardless of our beliefs or knowledge, within certain social contexts, we may choose what’s easy over what’s right.
We know what a perfectly good choice is, but cave into the social context in which the decision is made. When everyone around you is saying something and you have something entirely different to say, it may be hard to make the right decision for yourself:
- Think of a decision in front of an authority figure like your boss. Do you express your disagreement or nod in agreement with the most popular decision?
- When part of a group discussion, do you find your thinking swayed towards the collective opinion?
Stanford University sociologist, Mark Granovetter calls this threshold model of collective behavior, which states that individuals’ behavior depends on the number of other individuals already engaging in that behavior. Threshold is the number or proportion of others who must make one decision before you decide to go with their opinion. Different individuals have different thresholds that may be influenced by factors like social economic status, education, age, personality, etc.
People who don’t give in to social context are the ones who don’t need approval from others to tell them what a good decision is. Even if it means opposing and standing to everyone else, they aren’t afraid to do it. They don’t give in to peer pressure and groupthink. They aren’t afraid to stand out. They place more emphasis on being right than being liked. They don’t make decisions based on social approval.
To catch yourself, ask these questions:
- Do you believe it’s the right decision or others do?
- Are you trying to please others or worried that you will upset them if you don’t agree with their viewpoint?
- Are you concerned that you will need to defend your decision?
- How different would it be if you were the primary owner for making this decision and others count on you to do the right thing?
Follow this simple rule: When making decisions in a social context, try to place yourself away from the social context and then evaluate how you will make this decision if you were to make it independently.
2. We rely on confirming pieces of evidence
The science of behavioral economics tells us that once we have made a decision, even an illogical one, we tend to cling to it. We believe a certain line of thinking is right, filter out dissenting information while seeking information that confirms our original point of view. Psychologists call this confirmation bias.
This bias is so deeply seated in our unconscious thinking that even our illogical reasoning sounds entirely rational to us. We operate with a biased filtered worldview missing critical pieces of information and stamp it with “logic based reasoning.”
Another source, relying solely on our instinct. In his classic Thinking, Fast And Slow, Daniel Kahneman, a psychologist and economist notable for his work on the psychology of judgement and decision-making stresses on the fact that our gut instinct can fail us when we apply familiar patterns of experience to unrelated circumstances or situations. We make quick decisions based on our past experience which is a key source of noise and bias. He asks us to resist premature intuition and says “Intuition should not be banned, but it should be informed, disciplined and delayed.”
To catch yourself, ask these questions:
- Are you relying solely on your intuition to make this decision? What data supports your thinking?
- How are you sure this data is not biased?
- What other dissenting pieces of information have you considered?
- What do others have to say about this decision?
Follow this simple rule: Combine your intuitive reasoning with scientific knowledge and data. Ask others for disconfirming opinions and evidence to enable you to see both sides of the argument and not only the one that appeals to you.
3. We think only a level deep
How often do we optimize for long term gain at the cost of short term pain? Mostly not. We tend to optimize for what looks best in the moment without considering its future implications.
It’s tempting to give in to good outcomes with small upside that are easily accessible and visible to us without weighing in on the potentially large downside of these decisions in the future. Our experiences and beliefs also limit our ability to go beyond the natural and seek hard truths by asking difficult questions, exploring unknown territories, and doubting what may seem like an obvious choice.
A lot of unintentional and unforeseen outcomes can be avoided by looking past what’s right in front of us and evaluating its consequences in the future. Second order thinking is a necessity to think beyond what we know, things we haven’t thought about by applying divergent information and forming new associations and connections.
In Principles, Ray Dalio emphasizes the importance of second order thinking. He writes “Failing to consider second- and third-order consequences is the cause of a lot of painfully bad decisions, and it is especially deadly when the first inferior option confirms your own biases. Never seize on the first available option, no matter how good it seems, before you’ve asked questions and explored.”
To catch yourself, ask these questions:
- Am I making decisions with positive outcomes compounded in the future?
- Is this decision attractive only because it has an immediate effect (first order consequence) positive?
- What can be the potential downside of this decision and its effect later?
- How far can I look to determine how every subsequent decision creates a world of possibilities or limits the outcomes I can achieve?
Follow this simple rule: Step outside your comfort zone and analyze the potential impact of your decision in the future.
4. We refuse to rethink our bad decisions
In Think Again, Adam Grant writes “When we dedicate ourselves to a plan and it isn’t going as we hoped, our first instinct isn’t usually to rethink it. Instead, we tend to double down and sink more resources in the plan. Psychologists call this pattern escalation of commitment.”
He adds “Sunk costs are a factor, but the most important causes appear to be psychological rather than economic. Escalation of commitment happens because we’re rationalizing creatures, constantly searching for self-justifications for our prior beliefs as a way to soothe our egos, shield our images, and validate our past decisions.”
Our ego gets trapped with the decision as we fail to disconnect our identity from the decision we made earlier. Instead of being gritty and persevering on the path that inevitably leads to failure, we need to step back and rethink our choices.
Adam suggests “There’s a fine line between heroic persistence and foolish stubbornness. Sometimes the best kind of grit is gritting our teeth and turning around.”
To catch yourself, ask these questions:
- Am I getting a lot of benefit by pursuing this option for the costs I need to incur?
- What am I willing to give up to continue on this path?
- What else can be worth pursuing if I give this up?
Follow this simple rule: When you find it difficult to let go of something, ask yourself: Is it grit, blindness or my own ego getting in the way?
5. We fail to disconnect our decisions from our outcomes
Annie Duke asks this question in Thinking In Bets “Take a moment to imagine your best decision in the last year. Now take a moment to imagine your worst decision.”
Done?
She writes “I’m willing to bet that your best decision preceded a good result and the worst decision preceded a bad result. I have yet to come across someone who doesn’t identify their best and worst results rather than their best and worst decisions. I never seem to come across anyone who identifies a bad decision where they got lucky with the result, or a well-reasoned decision that didn’t pan out. We link results with decisions even though it is easy to point out indisputable examples where the relationship between decisions and results isn’t so perfectly correlated.” In other words, we equate the quality of a decision with the quality of its outcome.
She explains why this happens “When we work backward from results to figure out why those things happened, we are susceptible to a variety of cognitive traps, like assuming causation when there is only a correlation, or cherry-picking data to confirm the narrative we prefer. We will pound a lot of square pegs into round holes to maintain the illusion of a tight relationship between our outcomes and our decisions.” We are not only bad at separating luck and skill, we also refuse to accept that some results can be beyond our control.
Drawing a strong connection between our results and the quality of the decisions preceding them puts us at the risk of making bad decisions every day. We fail to learn from our past decisions as we fail to separate bad decisions from good ones.
What can we do?
She suggests “What makes a decision great is not that it has a great outcome. A great decision is the result of a good process, and that process must include an attempt to accurately represent our own state of knowledge. That state of knowledge, in turn, is some variation of I’m not sure.”
To catch yourself, ask these questions:
- Do I think this decision is good or bad purely on the basis of its outcome?
- Did I follow the right process to make this decision?
- Was I missing critical information that could have led to a different decision?
Follow this simple rule: Instead of trying to make a decision where you are 100% sure, embrace uncertainty. Evaluate different options based on the probability that a specific outcome will occur. Your experience and knowledge of those around you will determine the accuracy of your evaluations.
6. We refuse to sleep over it
When we are tired, hungry or at the effect of decision fatigue, we tend to make some really poor decisions – quitting a job in a haste, approving an overblown proposal, rejecting a potentially good idea, shouting at a coworker. We end up saying or doing things that we would have otherwise not said or done.
Our judgments are not only strongly influenced by when we last ate, the weather outside, or time of the day. Our emotional state also plays a crucial factor in our decision-making. Daniel Kahneman calls this chance variability of judgment as noise. When dealing with peak emotions, our emotions hijack our sense of reality, preventing us from thinking clearly. All of us have made the mistake of sending an angry email to a coworker which only exacerbated the problem as our words didn’t come out right.
To catch yourself, ask these questions:
- Is it the best time of the day to make this decision?
- Do you feel at your best when making this decision?
- Does everything around you feel more intense than normal?
- Are you acting impulsively instead of taking the time to think through the consequences of your decision?
- Are you inclining towards the status quo and resisting the idea of a change since it’s uncomfortable and seems to demand a lot of effort and energy.
Follow this simple rule: Resist the temptation to respond to others or make decisions when you feel emotionally heightened or otherwise feel tired. Sleep over it or give yourself a break to get your thinking function back. Practice walking away from the decision and return back to it when you are able to think calmly and clearly.
Summary
- Learning to catch bad decisions is the only way to enhance the quality of our future decisions and avoid making decisions we end up regretting.
- Even with the knowledge of a perfectly good decision, we can incline towards collective opinion within certain social contexts.
- We stick to our opinion by rejecting disconfirming pieces of evidence and collecting information that matches our point of view.
- We optimize for a small gain in the moment without evaluating the costs we need to incur in future.
- Our ego traps us with a bad decision we made earlier and instead of changing course, we continue investing in it.
- We identify the quality of our decision based on its outcome instead of focusing on the process that leads to improvement.
- When tired, hungry or emotionally charged, we tend to make really terrible decisions.
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