9 Types Of Biases Guaranteed To Make Your Business Fail

Your business relies heavily on your ability to make smart decisions and trust our own judgement. However, through life experiences, you may have developed your own types of biases which skew your perception.

Decision making that is influenced by cognitive biases can be detrimental to your business because biases lead to flawed logic. The worst part of cognitive biases, are that you could be making irrational decisions without any awareness.

The best way to avoid making a bad business decision is to learn the types of biases that are common, and recognize when you may be susceptible to them.

In this post I will answer the following questions:

    • What is a cognitive bias?
    • What are examples of types of biases?
    • How can I overcome types of biases?
    • How do cognitive biases affect my business?

Types of Biases

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What Is A Cognitive Bias?

A cognitive or psychological bias is a type of thinking that uses illogical rationale. Your own prejudices and limiting experiences can contribute to biases without your knowing.

Everyone has cognitive biases, but the severity of effect can range from person to person. You can help to limit your own biases by educating yourself on what they look like, and putting forth effort to make yourself aware of when you are using them.

 

Types of Biases

What Are Examples Of Types Of Biases?

Bias Blind Spot

The tendency to see ourselves as less biased than others

This is probably a bias you were having before reading! The truth is, we all have biases, and it’s critical to acknowledge that they are there.

 

Groupthink Effect

The tendency to do or believe things because many other people do or believe the same

If you want to differentiate yourself from others, you have to step outside of your comfort zone. Straying away from the norm can be a frightening, but to rise up above everyone else, it can be a risk worth taking. Sticking only to what you know will leave you stagnated, frustrated, and mediocre at best!

Try to avoid information overload. While inspiration is a great tool for creativity, too much #inspo will cloud your own ideas.

 

Confirmation Bias

Seeking information that supports what we already believe

You might as well throw away the drawing board with this one. If you already had all of the facts, wouldn’t you have achieved your goals already?

Be humble, admit when you are wrong, and play devil’s advocate. By looking at the same problem in two, three, or even ten different viewpoints, you will be able to be more objective when making decisions.

 

Pessimism Bias

Even when of equal intensity, things of a more negative nature have a greater effect on you than neutral or positive things

Negative thinking is a ticking time-bomb for your business. If you believe something will go wrong, it’s more likely to happen. The rationale behind this is that you are less likely to take action to prevent that bad thing from happening, because you believe there’s no use!

Don’t let this bias get the best of you. Stay hopeful. Stay positive.

Related: Positive Thinking for Business Success

 

Types of Biases

Optimism Bias

The belief that you are at a lesser risk of experiencing a negative event compared to others.

Entrepreneurs face challenges, mistakes, and mess-ups. To believe that nothing bad will happen is the BIGGEST mistake you can make. Planning, predicting, and taking action will allow you to prepare for the worst (but also hope for the best!).

 

Curse of Knowledge  

When better informed people find it difficult to think about problems from the perspective of a lesser informed person

This can be harmful to your business if you are not able to put yourself in the shoes of your customers. As experts, it is hard to think about what your readers or clients don’t know as it may come as second-nature to you.

Make it easy for your ideal clients to understand your message. Take the time to do research on what they are struggling with, what they need, and what they want. It’s better to give more information on your topic, than not enough.

 

Hyperbolic Discounting

Having a stronger preference for more immediate payoffs

This can be devastating for your business because long-term goals are paramount for any business to continue to grow. While growing sales numbers can be rewarding, without a long-term plan in place there will be a point of plateau. This could mean your business could crumble. Slow and steady wins the race!

 

Stay Positive.

Stop limiting beliefs about your business, and start thriving.

Download this free workbook with three different exercises to help maintain a positive business mindset.

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Irrational Escalation

Justifying increased investment in a decision, based on cumulative prior investment

This is another very common type of bias. When starting a business, there will be many investments to make (time, money, opportunity, etc.) The more invested you become, the more likely you will be to continue down the path you are heading. However, if you realize that the path you are on is harmful, or is not as efficient as another path, start moving in the other direction.

Staying on a path simply because of prior investment could lead you to losing it all (if you haven’t already). Don’t dig yourself into a deeper and deeper hole. Take the loss and move forward!

 

Anchoring Bias

The reliance of judgement on the first piece of information presented

Although it may not be obvious, research practices are important in any form of business. You need to know the cost & risk factors, best practices, likely time for completion, and much more. When you rely too heavily on one piece of information, it can skew your perception, decision making, and possibly the outcome.

Get the facts, and learn all that you can before making big decisions.

 

 

Types of Biases

How Can I Overcome Types of Biases?

Because most types of biases go undetected, in our subconscious, it is important to take the time to think critically about your thoughts. This not only will help your mental state, but will also allow you to think more clearly.

Generally, people who rush into decisions end up basing their reasons on an illogical system from a cognitive bias.

 

Do Your Research

Before making any big decisions, you first need to know what you are getting into. Look at what experts in your field are saying, and search for the facts (backed by science). If there isn’t much scientific research in your field you should look to the experts.

Many experts share their knowledge on Skillshare. I honestly love their website because there are SO many people in the field of blogging, photography, entrepreneurship, creativity, programming, graphic design, and many more. In fact, a Skillshare class helped me make my first income online!

Use this link to get a two-month free trial.

Related: Is Skillshare Worth It? Pros and Cons of Skillshare

Related: How I Earned My First $120 Online with Passive Income

 

Get A Second Opinion

Hooray for diversity! One of the main reasons diversity is critical in any business is to help balance the strengths and weaknesses of each other. People who have different worldviews and experiences can help to give an alternate opinion that could snuff out biases you may have.

Unfortunately, diversity isn’t quite as spread out among business as it should be, but this is mainly due to other people’s biases! (See how this works???)

Surround yourself with people who challenge your views. Try not to be easily offended. Everyone is entitled to their own opinion which means you are also entitled to yours.

 

 

Give Yourself Time To Think Clearly

Emotions and time pressures can lead to irrational decisions because it forces your default way of thinking to take over. Don’t let this happen! Take a breather, give yourself time to become level headed.

Related: 5 Styles Of Meditation For Any Intention

Subject Yourself To New Experiences

If you ever need an excuse to travel, here’s one! New experiences will give you a broader insight on how others think, and can challenge your own thoughts and beliefs. Diving into other people’s culture will surely ignite questions and observations that could lead to very eye-opening thoughts.

Traveling is a way that you can live the life of someone else, even if just for the day. If you follow the same routine over and over again, you can easily become stuck in your patterns, and never see outside of your own bubble.

 

Write A Pros/Cons List

This is a logical solution to figuring out most problems. It forces you to think critically, think of both sides of the issue, and visually see the differences. Writing down your thoughts is a great way to comprehend information because it involves higher level thinking to be able to produce a thought onto paper.

 

Awareness, Awareness, Awareness!

Learning about types of biases, and how they can affect your decision making will always be the best defense against their unfavorable outcomes. Before making any large decisions, take the time to think through where you got your information, how you are feeling, where your resources are from, and practice recognizing cognitive biases before they start.

Types of Biases

How Do These Types Of Biases Affect My Business?

Cognitive biases can undermine your ability as a leader in your business. They can affect your judgement, your image, and your finances.

Every day, you make hundreds (maybe even thousands) of decisions. From “should I get out of bed this morning?” to “which next step should I take to grow my business?”, every decision starts with a thought, even if that thought is happening in your subconscious. 

It is extremely important to unbias yourself (as much as possible), and make decisions based on facts instead of feelings. The creative and passionate side of your business should be seen on the front-end, not on the back-end.

Biases can affect the type of talent you hire, returns on your investment, your brand, your partnerships and affiliations… literally every single decision you make! So take the time to make good decisions, and not those based on flawed logic.

 


Which type of bias are you most likely to face?

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