How to avoid the top 6 decision pitfalls? How to avoid decision making pitfalls?

"Avoid the Four Traps of Wrong Decisions": 4 strategies to minimize your decision-making error rate.

Richard Thaler, a pioneer in behavioral economics, was the first to coined the term "mental accounting" and defined it as "the state of mind that deals with and differentiates types of money according to how it is spent, preserved, and spent."

For example, gamblers who end up losing all their winnings, although they always feel that they are not losing, in fact they may be richer than they are now if they take it when they see it. "Knowing what to do" is all the way up in the boardrooms of major corporations, here are just a few examples:

People are more concerned about the costs that directly reflect the profit and loss, and less concerned about the expenses that are used for organizational reorganization.

While the cost of core businesses is tightly controlled, and cost caps are established, there is almost no limit on the cost of new ventures.

Define some expense headings, such as "revenue investment expenses" or "strategic investments". The tendency to maintain the status quo that motivates people to avoid losses, along with the gift-giving effect, has the potential to lead people to develop strategies that go wrong. This can be said from several angles.

First of all, the CEO may not be willing to make a career. Second, the status quo bias also makes it difficult for companies to reallocate assets. Prior to the recent economic downturn, Prudential decided to reallocate its assets across the board and increase its investment in bonds, believing that equity was overvalued.

Most other UK insurers have opted to maintain the status quo and maintain a high share of invested equity.

Today's conservative insurers are struggling to dramatically reduce their solvency ratios. Maintaining the status quo doesn't mean it's wrong. Many investment advisors point out that the best long-term investment strategy is to buy ** and leave it alone (here, behavioral economists have one more piece of advice:

Don't pay attention to the ups and downs of **, so as not to feel uncomfortable when ****). In the financial services industry, prudence and conservatism are also indispensable strategic assets. The challenge for strategists is to discern whether the status quo is the real right thing to do or just a psychological tendency to feel safer.

People often overestimate the degree to which others agree with their views, beliefs, and experiences, known as the false-consensus effect. The results of the study tell us that the reasons for this effect include:

Reinforcing belief tendencies:

A tendency to seek support for one's beliefs and assumptions about opinions and facts.

Selective Memory:

Remember only the facts and experiences that reinforce your own assumptions.

Biased Assessment:

The aim of quickly accepting evidence that supports one's hypothesis and subjecting one's unfavourable evidence to rigorous scrutiny is to exclude them, for example, by being hostile to the motives of our critics and doubting their competence.

Groupthink: In a team-oriented culture, there is pressure to agree with others.