Human psychology is a complex beast. Scientists are still trying to figure out exactly why we think the way that we do. But there is one thing that at this point science is very sure of: our brains make a lot of mistakes. In fact, most of our decisions are made irrationally, under the influence of emotions and biases. These influences have become psychology facts that are well-supported by current research.
The book Seeking Wisdom: From Darwin to Munger presents 28 of these psychology facts and how they cause our brains to make mistakes. Understanding them will help you to think more rationally and make better decisions.
“If you want to avoid irrationality, it helps to understand the quirks in your own mental wiring and then you can take appropriate precautions.”
— Charlie Munger
#1 Bias from association
We tend to associate our judgement about things with how they make us feel rather than their objective value. When you walk into a high-end jewelry store, you’re surrounded by well-dressed salespeople, pleasant service, and oftentimes free alcohol. Those things are designed to make you feel good, which triggers your brain to associate the store with happy feelings, to buy more expensive jewelry. Yet the value of the jewelry has not changed at all, it’s only the setting around it that arouses your feelings and raises the price you’d be willing to pay.
How to fix it: Judge things based on their true value. Ask yourself: “what is this really worth on its own?”
#2 Following rewards and running from punishment
People are very susceptible to the influence of rewards. We will continuously repeat behaviours if we are rewarded for them, especially in the short-term. A player will continuously play roulette at the Casino if they keep on winning, even if prior wins were all about luck. On the other hand, we tend to avoid things that make us feel pain. Regular exercise is good for you in the long run but doesn’t feel good at the present moment, so many people avoid it altogether.
How to fix it: To decide if you should do something, look at the long-term value instead of the short-term rewards or punishment, especially on the scale of months and years.
#3 Self-interest and incentives
The brain will justify anything if there is enough incentive to do so. People will lie if it means making more money or cheat if it means more pleasure. Your lawyer will often prefer that your case goes to trial since it means more guaranteed money for them. People at work will always say that their boss’s idea is amazing (even if it’s crap) to increase their chances of a future raise.
How to fix it: When dealing with anyone always ask yourself: what are their interests? What are their incentives for acting this way?
#4 Self-serving bias
People tend to overestimate their own abilities and their future outlook. We may go into a job interview thinking that we totally deserve the job and that the company is stupid for not hiring us. But there certainly could be one slightly better candidate for the job. Still, we think that our abilities should be favored due to this bias.
How to fix it: Be confident in your abilities and do your best, while taking into account the facts of the real-world to help you succeed.
#5 Self-deceiving and in denial
The brain will distort reality in order to reduce pain. If a person has certain beliefs about climate change (or not) they will fight to the bitter end to convince themselves it is true. They’ve already made the commitment and wouldn’t want to feel the pain of public humiliation by admitting that they were wrong. So they convince themselves that they are right and everyone else is stupid. We are all susceptible to self-deception as our long-term beliefs often become set in stone, leaving little room for learning new things.
How to fix it: Regularly challenge your own beliefs and ideas to ensure that they still hold up. You can get help with this by spending time with people who have different beliefs and ideas than you.
#6 The tendency to remain consistent
We prefer to remain consistent with our past actions, even if those actions are not in line with our current best interests. People usually find it hard to make career changes because they subconsciously believe that they are now defined by it. Bob started out as an accountant, so now he’s an accountant for life. He will pass on other better opportunities by convincing himself that he is an accountant.
How to fix it: Your past is done and should not hold you back from improving your future. Make your decisions based on the benefit for you right now and in the future.
#7 Bias from deprival
We feel a strong desire for things that we like and have been taken away from us. We feel pain after a breakup, regardless of whether the relationship was good or not. It feels like we have “lost” something and the human brain hates losses more than anything. This often leads to quick and poorly chosen rebounds to mask the pain. A breakup might lead to a terribly chosen new partner. A job loss might lead to binge eating. It’s a slippery slope.
How to fix it: If you have recently lost something like a significant other, job, or anything else that used to bring you pleasure, focus on slowing down first. Don’t take any action for at least 48 hours or more if you’re still feeling emotional. Take the time to let your brain reset and come back once you’re in a position to think rationally.
#8 The do-nothing disorder
If we can’t come to a decision, we tend to just take the default option and do nothing. Our brain likes to minimize the effort to conserve energy. If you see a job that pays 5% more, your brain might end up ignoring it to avoid the effort of moving, even if that 5% can be quite large in the long run. People stay in mediocre relationships for this reason too, they figure it’s just not worth the effort to move.
How to fix it: Look at the long-term value of your actions. In the short-term, a 5% difference in salary or quality of life doesn’t look like much. But long-term, it adds up big.
#9 Being impatient
The brain values current rewards more than future ones. It makes sense from an evolutionary point of view, as you and I could be dead next week! But it’s certainly a well-understood concept that delayed gratification in work, finances, physical fitness, and every other category bears sweeter fruit. Long-term compound interest always brings the biggest rewards.
How to fix it: As is becoming a theme in this article… long-term thinking is very powerful. Measure the value of your actions based on the long-term results.
#10 Envy and jealousy
This is the classic case of seeing someone who is more successful than us and thinking “they just got lucky” or “they cheated.” Life is competition, so when we see someone who is “winning” in that competition, we subconsciously envy them. Our brain doesn’t like people who are doing better than us. We avoid working with them, saying nice things about them, and associating with them altogether.
How to fix it: Rather than looking at others with negative envy, focus on your own self-improvement to achieve whatever success you want. Once you do, envy won’t ever cross your mind since you’re preoccupied with your own endeavours.
#11 Distortion from small contrast
We tend to underestimate the impact of small differences. For example, an improvement of 1% in your daily life will look very small on the micro-level. But, if you compound those 1% daily improvements over a time period of one year, then you get to be 37 times better after 365 days! The same thing goes for small differences in investment fees, physical exercise, diet, or doing the little things for your friends and family.
How to fix it: Keep compound interest in mind. Look for the small changes and small improvements you can make in your daily life. They will compound big over time.
#12 Anchoring bias
Anchoring is one of the most well-known biases in all of psychology. It says that we tend to over-weight initial information, using it as a subconscious reference for future decisions. For example, when interviewing for a job, many recruiters use what is called a “low-anchor” where they start off with a (sometimes almost insulting) low-ball offer. What they are doing is trying to “anchor” the starting point of the negotiation to a low number, to get you at the lowest price possible. Check out the Ghandi study below for another example of this.
How to fix it: Completely ignore the anchor. Evaluate things like job offers on their own without considering the given information. Do your own objective research beforehand.
#13 Over-influence by recency
We are influenced the most by the most recent information rather than the best information. A major plane crash might make flying seem very scary. But the chances of a plane crash happening in today’s day is very very low. The recent information on the news about a plane crash doesn’t make it any more dangerous than it was before. In fact, it usually makes flying less dangerous since manufactures and pilots will revise and improve their safety measures.
How to fix it: Look at all the data, not just the most recent points. One negative point in your decision-making process or experiences should never overshadow hundreds of other positive points.
#14 Abstract blindness
We only believe what we see and are usually blind to abstract yet still present information. Take an example of a news headline: “22-year-old Florida man wins $150 Million dollar jackpot!” We only see that some lucky 22-year-old won the lotto and we didn’t. We have to think a bit harder to remember the abstract information that millions of other people didn’t win. The same idea goes for seeing successful entrepreneurs and couples in happy relationships.
How to fix it: Things aren’t always as they appear to be. When you’re shown something that looks great on the surface (often from a marketing angle), think about the deeper details before making any kind of serious judgements about it.
#15 The tendency to reciprocate
Humans have a deep understanding of fairness and are biased toward repaying favours and attitudes. If someone is nice to us, we are nice to them; if someone does us a favour, we feel the need to do the same. Sometimes, the favours aren’t equal at all. This is why the salesperson will take their potential client out for dinner before selling them their product for thousands of dollars. The client is pressured to return the nice favour and be fair.
How to fix it: Don’t feel obligated to return a favour just for the sake of it. You can return it if you feel that it was genuine and there is a true, objective reason to do so, but never feel forced into it.
#16 Over-influence from liking
We tend to automatically trust and agree with people that we like and are attracted to. This concept is used all the time in marketing whereby an attractive model is placed beside the product. We also avoid and disagree with people we don’t like. Unfortunately, this can often lead to the rejection of good ideas based on the simple fact that we find the person unattractive or just don’t like their personality.
How to fix it: Isolate your opinion of things and people from their presentation. Judge their value on their own rather than under the influence of other things that are associated with them.
#17 Bias from social proof
Social proof is a very powerful psychological influence. People tend to follow the crowd in their decisions by default, even if their real thought is that it is wrong. Most people see the lives and actions of celebrities as somehow better than all the rest. If a famous movie star donates to a charity, it’s seen as something epic and goes all over the news. But there are millions of people all over the world that donate too.
How to fix it: Judge people’s actions equally, regardless of their background or social status. Make your decisions based on what you think is right. Look for the objective truth and not what everyone else is doing.
#18 Bias from authority
We tend to believe people of authority by default without ever questioning the validity of that authority. When a doctor gives a prescription, most people follow it, even when in many cases natural remedies are just as effective. Kids in school follow the advice of teachers because of their authority position, even if the advice seems a little off or just downright bad. Simply putting in the news headline “experts say” is enough to get people watching to make money off of ad revenue.
How to fix it: Hold everyone’s word at the same level of importance, regardless of their position, until it is proven otherwise that they have more than the average level of wisdom or that what they say is factual.
#19 Forcing it to make sense
We tend to come up with reasons as to why things happen after they have already happened in order to fit the outcome. For example, years after the housing market crash of 2008, it was easy for all the bankers and economists to point fingers and say why everything bad happened. They make it seem like it was very predictable. Of course, it was very predictable in hindsight, but definitely not in the moment. Fyodor Dostoevsky, the 19th Century Russian writer put it best: “Everything seems stupid when it fails.” It’s easy to judge situations when we look backwards at them.
How to fix it: Understand that it is impossible to predict the future with 100% accuracy. Do your best to estimate the possible outcomes and take your best shot. When looking backwards, don’t fully discount the element of luck that plays a role in everything.
#20 Respect the reason
Funny enough, we are more eager to agree with something when we are given a reason for it. There was a social psychology experiment where the experimenter asked people standing in line to use the copying machine if she could skip ahead of them. Once she told them “Excuse me, I have 5 pages, may I use the machine?” nearly every person standing in line agreed. Our brains just want some kind of validation that the thing a person is doing has a reason behind it; once it does, we’re far more likely to let it slide.
How to fix it: When you’re trying to convince someone to do something, give them a reason for it. If someone is trying to convince you, remember to consider the reason’s true value, don’t just take it because it’s there.
#21 Believing by default
It is interesting to observe that we typically believe what we hear by default before we question it later on. We do so because accepting things as true by default is easy. Our brains don’t have to go through all the effort that would be required to disprove something. This is another reason why people believe in authority figures and following the crowd. It’s easy to just assume that what someone says is true and correct, rather than trying to disprove it. This leads to a lot of misjudgment. A lot of people are liars and give out false information for their own gain.
How to fix it: Assume that nothing (unless it is completely obvious) is true until it is proven. Hold people’s opinions, advice, and ideas up for evaluation. As the late Intel CEO Andy Grove used to say “only the paranoid survive.”
#22 Limitations of memory
Human memory is limited in a few important ways. Our long-term memory is a lot better than short-term and only a small subset of facts make it into that long-term category. We can only learn so many things in a fixed period of time without having an information overload. We also remember things better when we are in a good mood. Because of these limitations, we are often forced to fill in the blanks in order to make decisions. This is suboptimal, as the way to make the best decisions will always be to have all of the facts, not just some of them.
How to fix it: Slow things down. Wait 24 or even 48 hours before making your decision so you can be sure to remember all the details. You should also pick the most convenient time to make your decision when your head is clear and you’re in a good mood.
#23 Do-something disorder
Blaise Pascal once said, “I have often said that the sole cause of man’s unhappiness is that he does not know how to sit quietly in his room.” We humans are terribly impatient, always feeling the need to do something. For example, people tend to buy and sell stocks more frequently than necessary, even when the best strategy might be to just hold off and do nothing.
How to fix it: Evaluate your options objectively, including the choice to do nothing. Choose the best move based on the facts only, even if that move is to not move at all.
#24 Say-something disorder
People love to talk even if they don’t have anything meaningful to say. If you’re having a conversation among friends, most people in the group will feel that they just have to say something. People have a natural desire to want to be heard, even if what they say doesn’t necessarily add value to the conversation. Talking extra doesn’t really gain you much. In fact, talking too much might increase the chances of you saying something that could get you in trouble.
How to fix it: Always say less than necessary. Listen to people so you can learn more and gain information.
#25 Emotional decisions
As much as we like to think that we are rational beings, emotions always have a strong influence on our decisions. People get married because they feel “in love” even if there isn’t much practical compatibility. They binge eat to relieve stress and feel pleasure, even though it doesn’t benefit them in the long run. Unfortunately, feelings don’t have much practical basis and often lead to rash judgments that feel good in the short-term but hurt in the long-term.
How to fix it: Always consider the long-term implications of your decisions. Short-term decisions can be OK if they are done in moderation and don’t negatively impact your long-term life.
#26 Stress creates clouds
Just as we tend to learn and remember things better when we are in a good mood, stress does the exact opposite. Stress from hard work, information overload, or a high degree of uncertainty clouds our judgement. When we are under stress, our brains tend to think more negatively and act extremely cautiously in anticipation of some kind of danger or pain. Such stress ends up causing longer-term health problems and bad decisions that compound.
How to fix it: Whenever you have an important decision to make or thing to think about, make sure your head is clear first. Take whatever time you need to relax and de-stress. Your future self will thank you for it.
#27 Under the influence
Coffee, alcohol, nicotine, and other highly stimulating substances also cloud our judgement. By taking such substances, you change your energy levels in a very short period of time. The brain doesn’t handle that shock very well, resulting in the distortion of the sense and mental clarity.
How to fix it: Make your decisions when you are in a neutral state. Fully awake and having eaten a healthy diet in recent meals.
#28 Multiple tendencies
Multiple tendencies happen when any combination of the above 27 mistakes happen together and compound on each other. If a person steals something due to self-serving bias and they don’t get caught, then they have just confirmed to themselves that they gain something from stealing without consequences. They are then more likely to steal again, and again, and again. This leads to the consistency bias as stealing becomes a habit, and so on. It’s important to stop such bad habits early on in their tracks, by making such psychological mistakes simply impossible to happen without consequence.
How to fix it: Be careful of the little things, since they add up quick. A mistake here and there won’t kill you, but do your best to stay on track, keeping in mind that things add up big in the long-run.
For more on psychology facts and biases
Loss Aversion: How to Take Calculated Risks
Availability Bias: Don’t Let Your Surroundings Affect Your Decisions
Framing Bias: How to Make Better Decisions
Confirmation Bias: How to Be More Open to New Ideas
Hindsight Bias: How to Be Smart About Reviewing Your Past Decisions
Substitution Bias: How to Make Sure You Don’t Miss the Details