No denying the fact that bad decisions are as much a part of life as are good decisions, however, every one of us tries to minimize the bad decisions and increase the number of good decisions as the former do not bring joy, happiness or success in our lives.
Despite our best efforts, we keep on committing mistakes and make bad decisions. To me, there are two major reasons why most of us make bad decisions and the strange thing is that while making a bad decision we think that we are making a good decision. In the lines below, I shall discuss with you the two domains in which we aren’t able to figure out things properly as a result of which we make bad decisions.
Error in Estimating Odds:
The majority of our decisions are based on the estimation of odds. We are presented with options and among them, we select the ones to which the odds favor. However, it’s the estimation of odds in which we make a mistake and which results in a bad decision. Pertaining to the estimation of odds the biggest mistake made by us is that we rely on the information that comes quickly or easily to our minds. For instance, if you were asked whether terrorism was more devastating than poverty, then your answer would be that terrorism is more devastating than poverty without knowing the fact that poverty causes many more deaths compared to terrorism. The major reason why you would decide for such odds is that terrorism is highly portrayed in the media and your mind has more information on terrorism available compared to poverty. Thus, in estimating odds, we tend to rely and focus on the obvious one, whilst ignoring the real facts, which we don’t know about. Hence, in order to remove the error in the estimation of odds, the need is to understand the problem and the choices at a holistic level and decide upon it, instead of relying on what comes to the mind about the choices.
Error In Estimation of Value:
The other major reason why we make bad decisions is the error in the estimation of value. With all our decisions and the constituent choices, we estimate some value, therefore, when we commit a mistake in estimating the right value, our decision becomes bad consequently. There are a number of factors that impact the value we associate with choices in making decisions.
The first factor that affects the estimation of value is the situation in which the option is presented. For instance, the price paid for a burger under normal circumstances will have a different value for you compared to the value of the same price, which you will pay for the burger when there is no other burger left on the surface of the earth.
The second factor that affects the estimation of value is the comparison. Consider the value which the price for the burger has for you under normal circumstances and then compare the value of the same price paid in a third world country to enjoy an exquisite meal. Therefore, when there is a comparison between two things, we tend to make mistake and prefer which apparently seems beneficial.
The third factor that affects the estimation of value is the time. The kind of value which eating of the burger has for you at the time of lunch won’t be the same if you are offered to have a burger after dinner. Thus, people because of not knowing the difference between the two, estimate the wrong value and make the wrong decision.
Therefore, a combination of error in the estimation of value and odds is what makes us make bad decisions.
Now it’s Your Turn!
Do you have anything to add to the reasons why we make bad decisions? Have you ever estimated the value and odds wrong and committed a bad decision? I look forward to reading your experiences in the comments section.