Topic 25: Cognitive Bias

You have $500, but you desperately need $1000; nothing less will do. You go to the casino. Question: should you bet all your money in one go? Or should you split your

$500 into, say, ten lots of $50, and bet those one at a time?

If you are well-versed in the fundamental principles of probability, you will know the answer to this. To have the most chance of walking out with $1000, you should bet all your money in one go. The more gambles you make, the lower your overall probability of reaching your target.

Trouble is, most people are not masters of probability. They do not have expert knowledge of calculations to determine the answer to rely on; instead they fall back on their hunches, or ‘intuition.’ Now the interesting part is that most people’s intuitions here go the same way, which happens to be the wrong way. Most people say they would break the $500 into smaller amounts, and bet those one by one. They sense that this approach is ‘safer’ – which in one sense it is, because if you lose on the first bet, you still have some money to bet with, and hence a chance of reaching your goal. The trouble is that this kind of safety is not what matters most in this artificial situation.

People unwittingly sacrifice some likelihood of attaining what they really need to satisfy some basic emotional needs. This is an example of a cognitive bias:

Cognitive biases are universal, innate tendencies for humans to think

in certain ways, ways which often result in poor judgments.

All of us, in the first instance, do our thinking with the brains we have, which are the brains bequeathed to us by an evolutionary process stretching over millions of years. That process shaped our brains to help us survive in the particular contexts in which our ancestors found themselves. It gave us some extraordinarily subtle and powerful cognitive abilities, such as the ability to recognize in a flash that a slender, twisting shape in a tree is a snake, not a branch.

Evolution did not, however, build into our minds the abstract laws of logic and probability, or the ability to apply such laws to any situation whatsoever. And it did not build into our minds the particular capacities we would need to respond correctly to every situation we encounter in the modern world, a world different in so many ways from the environment in which we evolved.

Consequently, those innate, built-in, fast, and intuitive modes of thinking which work so well so often also, reliably, lead us astray in certain situations which can occur quite frequently in the environment we now inhabit. In casinos, for example. Casinos are institutions designed to ruthlessly exploit the mismatch between the minds nature gave us and the mathematical principles which in fact govern our financial well-being.

Research on Cognitive Bias

Cognitive biases have been studied quite closely for decades now; this study was given a major boost by the pioneering work of famous psychologists Daniel Kahneman and Amos Tversky. The research community has identified literally dozens of cognitive biases, affecting our thinking in many different domains, from judging probabilities to identifying causal relationships and explaining other people’s behavior.

There is, of course, considerable debate in most cases about the precise nature and extent of the supposed bias; you would expect nothing less from a vigorous research enterprise. Yet the general lessons are clear:

- Our minds are riddled with biases, some quite subtle, others very strong, but all typically invisible unless we reflect on our thinking with special care.

- These biases are universal (they affect everyone), and innate (they are with us from birth, and are ‘wired in’ to the structure of our brains.

- In some cases, biases can be overcome with special training. In most cases, however, they are ineradicable features of our thinking. With training we can learn to circumvent or compensate for them, either as individuals or as communities. Indeed, the whole of science itself can be seen as a vast, sophisticated mechanism for achieving genuine know- ledge in the face of the limitations inherent in our cognitive equipment.

- The advanced critical thinker is familiar with most or all cognitive biases; actively monitors her thinking to detect their influence; and practices and applies relevant techniques for ameliorating the sinister effects of these invisible and unwelcome mental tenants.