Heuristics in Psychology are described as “judgmental shortcuts”, the idea being that they allow us to make decisions with less effort by simplifying the entire process.
Most Heuristics are innate to us as humans, we use them without knowing we do. However understanding them allows us to avoid these cognitive biases better than those who do not understand them, or those who aren’t even aware of their existence.
Some Heuristics can be utilized consciously, and these ones are also very important.
In my own industry, perfectionism is rampant in planning, so utilizing Heuristics like satisficing becomes an important, necessary skill in order to simply get started.
In business decision fatigue is a verifiable problem for the modern business owner, and at this point we become more susceptible to heuristics. Additionally, some heuristics can also be useful for preventing decision fatigue.
So how important are they to know about? In my opinion, extremely.
Heuristics To Be Aware Of:
Escalation of Commitment – This Heuristic is a well-known one. This is a phenomenon where people justify increasing investment (time, money) in a decision based on their prior decisions, and the investment made.
Obviously this is useful to know as sometimes investing more in to something isn’t always wise, but it is our natural tendency to do so.
Familiarity Heuristic – This Heuristic asserts that in situations where we are familiar, we tend to apply the same approach based on the knowledge that it worked previously.
I see this one all the time, the majority of people utilize this Heuristic all the time without knowing it. You can have success sticking to what has worked in the past, but eventually it will catch you out.
Things change, there are variables outside of your control, there’s chance. We fall into the trap of misunderstanding correlation vs causation.
I’ve seen some of the biggest names in my industry make terrible mistakes because of this heuristic that has either caused the results to not come, or be negative in nature.
Contagion Heuristic – This one is all about avoiding people, things or “whatever”, simply because you’ve had, or heard of a bad experience with ‘it’ in the past.
The idea is to prevent yourself from becoming contaminated, e.g. food that touches the ground is a common example of this.
In business this is bad because we might view a service provider, a strategy or person as “bad” merely because of past experience. Whether first-hand or second-hand.
Effort Heuristic – This Heuristic asserts that if we make more effort in gaining something, or creating something that it is inherently worth more.
In short this cognitive bias means that we are more likely to spend our money where we do not think we’ve made a lot of effort to attain it, or that something we’re selling is worth more than it actually is because we put a lot of effort in to creating it.
Avoiding this particular Heuristic is important as it lacks the objectivity that business often requires, and can lead to many poor decisions.
Fluency Heuristic – This one is how you get conned. When something is presented in a way that flows better, has a better “cadence” or is presented more confidently, you’re more likely to believe it whether it’s true or false.
This is why people spend so much money on better writers, copywriters and speakers for their websites, marketing and events.
This can be utilized for your own business in the sense that you can understand that better presented arguments will make you more money, but it equally means that you can be convinced by ideas that might be false just because someone is particularly smooth.
Similarity Heuristic – This Heuristic is all about how we view “similar” things in a way that is based off of other similar things we’ve viewed or experienced.
This Heuristic is used in marketing to promote products and services especially, by comparing your own product or service to another, “but better”, is how people are sold. The Similarity between the two creates those positive associations you have of the other brand, and creates an instant trust or connection with the new brand.
The more similar the situation or the message to the previous good one, the more powerful this becomes. So it’s all to do with repeating positive experiences, and avoiding the negative ones.
It simplifies this decision making, but in so doing, creates a mechanism which is easily manipulated.
Availability Heuristic – If something is easily recalled, we tend to value it favorably to alternative options. Regardless of the merits of those other options.
Basically the first thing that comes to mind is usually the option we will take, so avoiding this is paramount to make the best decision possible. Being aware of the availability heuristic allows you to attempt to make better decisions.