Why we can’t estimate or let go
Until the early ’70s, we took our brains to be infallible tools for making the most rational decisions in any given situation. Amos Tversky and Daniel Kahneman discovered that this might not be the case. In their studies they presented our brains in an entirely different light, showing a variety of flaws and faulty mechanisms when it comes to rational thinking. These are what we call cognitive biases. And there are tons of them.
Why should I care?
Today, the amount of daily information that we process is unprecedented in the history of mankind — and we’re doing it fast. When our brains act fast, they start cheating and become prone to biases, meaning that we do as well. All of our daily decisions can be compromised, causing our relationships and work performance to be affected. We can even be biased into spending too much money and living an unhealthy lifestyle. Let’s look at some examples!
The Planning Fallacy
Remember the time you had that homework project due and you reserved way too little time to do it? You probably ended up finishing it late at night which cost you hours of sleep and the quality of the work was, let’s face it, subpar at best. But you learned from it and it has never happened since, right? Well if it did happen more than once, the planning fallacy was responsible.
This bias causes us to underestimate time and financial costs when planning a task. Probably the most famous example of the planning fallacy is the construction of the Sydney Opera House. It was estimated to be completed in 1963 at a cost of $7 million but in the end, it cost $102 million and took 10 more years to finish.
One way to overcome this bias is to use data from a similar task in the past and make a new estimate. If your last project took you ten hours to complete and the difficulty is roughly the same this time around, you probably won’t finish it in five hours.
To sum up, let’s take a look at Hofstadter’s law which states:
It always takes longer than you expect, even when you take into account Hofstadter’s Law.
Let that sink in.
The Sunk Cost Fallacy
Have you ever been to the cinema but then realized pretty quickly that the movie was going to be horrible? Did you leave or did you sit through the whole thing? If you stayed there for the rest of the movie, you probably reasoned that you’d already invested time to go to the cinema and money for the ticket.
The sunk cost fallacy is when you stick with a decision because of all the time, money, and effort invested, even after it proves to be the wrong choice. This original sunk cost often causes even more resources to be wasted.
As with the planning fallacy, there’s also a famous example of the sunk cost fallacy — the Concorde project which kept being funded long after it became obvious that it would never be profitable.
Concorde is a commercial disaster. It should never have been started. On 30 November, 1971, it had cost the British Government an irrecoverable £350 million. If continued, development and production will cost us at least £475 million more (£392 million present value) from 1971–75. Concorde will make little money for its manufacturers and precious little, if anything, for the airlines who buy it. The total liability to the United Kingdom alone could be about £550 million excluding the written off £350 million mentioned above. —The National Archives of the UK CAB 129 160
As you can see, cognitive biases concern us all and they can have some real and costly impacts. There’s probably no way to be a completely unbiased, one hundred percent rational-thinking being, and that’s perfectly fine. It’s just helpful to know that biases exist — so that when you’re planning your next project but you find yourself sitting completely bored in the cinema instead, you should just leave the cinema and start working on that project.
Sources:
- Ariely, D. (2009). Predictably irrational.
- Kahneman, D. (2011). Thinking, fast and slow.
- http://filestore.nationalarchives.gov.uk/pdfs/large/cab-129-160.pdf
This article was inspired heavily by the conference Kritické myšlení a objektivita, which took place in Prague 17/10/2017 with talks from Michael “Valentine” Smith and Lukáš Hána.
