Great decision makers are highly valued in every field of work. To make decisions you have to possess a certain level of knowledge, take on the responsibility for the outcomes, and be able to act fast.
Some of us lack a certain skills therefore making decisions in daily life is more difficult for some people than others. I have recently taken a class called Applied Decision Analysis. The course depicts different qualitative methods that businesses could use to make forecasts, decisions, and predictions based on the past available data. Based on available tools in Excel, you can calculate the error involved in making a particular decision, and you can calculate a certain relationship between different sets of data.
However, when the data is limited and you have to make a decision based on your own judgment and experience even the most objective decisions can be affected by biases.
In this blog I would like to focus my attention on a particular phenomenon called Availability Heuristic, which is also known as Availability Bias.
Would you agree with me that as human beings, when making decisions we often take into consideration our past experience, even when it is hardly relevant to our present and future. Moreover, we are subject to several external inﬂuences and may vary our behaviour as a function of our concurrent feelings and opinions. As a result, our decisions and, therefore, our actions are not often rational.
If you don’t agree with me read further, if you do read further to find out more.
I tend to believe that unpleasant memories fade. Looking back at my childhood, I remember mostly the carefree time, fun summers, and all the great moments with family and friends. I don’t remember many negative memories about my childhood. This particular mind-trick is called Availability Heuristic.
The availability heuristic refers to people’s tendency to determine the probability of an event according to how easy it is to recall similar examples and, instead of analyzing all available data, making a decision based on memory.
Possibilities that are easier to remember will be perceived as being more likely than those that are harder to picture or difﬁcult to understand. Availability heuristic influences more of our decisions. You can encounter it in politics, finance industry, even at a doctor’s office. When someone makes a choice after a recent plane crash news to drive instead of taking a plane is a decision based on Availability Heuristic bias.
Tversky and Kahneman established that people give more weight to examples that are easier to recall or imagine as events that are more likely to occur in the future. (Trvesky, 1974)
An important first step in overcoming those biases is being aware that decisions can be biased. Scientific studies have shown that people with certain personality traits are prone to the availability bias. Schwarz found that people who have great faith in intuition and people who feel powerful tend to be affected more strongly by how easy it is to retrieve memories than by the content they retrieve. (Sanna, 2003)
Topics of biases are extremely interesting and go deep into human psychology. I am looking forward to the discussion on this topic.
Folkes, V. (1988). The Availability Heuristic and Perceived Risk. Journal of Consumer Research. Vol. 15, pp. 13-23
Kliger, D., & Kudryavtsev, A. (2010). The Availability Heuristic and Investors’ Reaction to Company-Specific Events. Journal Of Behavioral Finance, 11(1), 50-65.
Sanna, L., Schwarz, N. (2003) Debiasing the hindsight bias: The role of accessibility experiences and (mis)attributions. Journal of Experimental Social Psychology. Vol 39, 3, (287-295).
Tversky, A. and Kahneman, D. (1974) Judgment under Uncertainty: Heuristics and Biases. Science.