When making decisions we are handicapped by loss aversion1 and imperfect information. We often only get to see a single outcome of a decision we don’t get to run that decision out many times, therefore we do not get to see the influence of luck/chance2.
Reasons for poor decision making include 3:
- Cognitive basis
- Using the wrong mental models
- Having the wrong information
- Failing to learn
- We are incentivized often to make the easy choice rather than the right choice.
Common patterns of poor decision making are often captured in fallacies:
References
2.
Duke, A. Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts. (Portfolio, 2019).
3.
Parrish, S. How to Make Smart Decisions Without Getting Lucky. Farnam street at https://fs.blog/smart-decisions/.