What Leads to Bad Decision-Making

People make thousands of decisions each and every day, some big and some small. While some of these choices turn out great, chances are that not every decision you make will be a good one.

When you look back, you may wonder why you made those decisions, particularly the ones that turned out poorly or led to feelings of regret. While it goes without saying that you will probably continue to make bad decisions from time to time, you can gain a deeper understanding of the process behind these sometimes irrational choices.

Many factors contribute to poor choices. Understanding how these processes work and influence your thinking may help you to make better decisions in the future.

Mental Shortcuts

If you had to think through every possible scenario for every possible decision, you probably wouldn't get much done in a day. In order to make decisions quickly and economically, your brain relies on a number of cognitive shortcuts known as heuristics.

One example is the anchoring bias. In many situations, people use an initial starting point as an anchor and then adjust it to yield a final estimate. For example, if you are buying a house and you know that homes in your target neighborhood typically sell for an average price of $375,000, you will probably use that figure to negotiate the purchase price of the home you choose.

In a classic experiment by researchers Amos Tversky and Daniel Kahneman, participants were asked to spin a wheel of fortune that offered a number between 0 and 100. The participants were then asked to guess how many African countries belonged to the United Nations. Those who had gotten a high number on the wheel of fortune were more likely to guess that there were many African countries in the U.N., while those who had gotten a lower number were likely to give a much lower estimate.

For example, you can combat the anchoring bias by coming up with a range of possible estimates. So if you are buying a new car, come up with a range of reasonable prices rather than focusing on the overall average price of a particular vehicle.

Poor Comparisons

Comparison is one tool that people use when making decisions. Because you know what things typically cost, you can compare options to select the best price. You assign value based on how items compare to other things.

But what happens when you make poor comparisons? Or when the items you compare your options to are not representative or equal? For example, how far out of your way would you go to save $25?

If you could save $25 on a $75 item by driving 15 minutes out of your way, you would probably do it. But if you could save $25 off a $10,000 item, would you still be willing to go out of your way to save the money? Even though both examples involve the same amount of savings, in most cases, people are less willing to travel further to save money on the more expensive item.

This is an example of faulty comparison. Since you are comparing the amount you save to the amount you pay, $25 seems like much greater savings when compared against a $75 item than when contrasted with a $10,000 item.

When making decisions, people often make rapid comparisons without thinking about their options.

Optimism Bias

Surprisingly, people tend to have a natural-born optimism that can hamper good decision-making. In one study, researcher Tali Sharot asked participants what they thought the chances were of many unpleasant events, including being robbed or getting a terminal illness. After the people made predictions, the researchers told them the actual probabilities.

When people are told that the risk of something bad happening is lower than expected, they tend to adjust their predictions to match the new information they learned. When they discover that the risk of something bad happening is much higher than estimated, they tend to ignore the new information.

For example, if a person predicts that the odds of dying from smoking cigarettes is only 5%, but is then told that the real risk of dying is closer to 25%, they will likely ignore the new information and stick with their initial estimate.

Part of this overly optimistic outlook stems from a natural tendency to believe that bad things happen to others but not us. When people hear about something tragic or unpleasant happening to another person, they often look for things the person might have done to cause the problem. This tendency to blame the victims protects people from admitting that they are just as susceptible to tragedy as anyone else.

Sharot refers to this as the optimism bias, or our tendency to overestimate the likelihood of experiencing good events while underestimating the likelihood of experiencing bad events. She suggests that this isn't necessarily a matter of believing that things will magically fall into place, but instead overconfidence in our abilities to make good things happen.

Experts might warn that smoking, being sedentary, or eating too much sugar can kill, but the optimism bias leads people to believe that it mostly kills other people, not them.

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Other Reasons for Bad Decision-Making

Several other factors can contribute to poor choices. Both good and bad decisions are susceptible to influences including:

• Automatic thinking: People sometimes engage in actions almost on autopilot without giving them much thought, particularly when performing routine tasks. This automatic thinking can save time and cognitive resources, but can sometimes lead to poor choices.
• Cognitive biases: People are prone to systematic cognitive errors that bias how they process and interpret information. Such biases also affect the type of judgments and decisions that they make.
• Individual differences: Factors such as age and socioeconomic status can also impact the choices people make. Older people may make different choices than younger people for various reasons, and the options open to people often depend on the financial resources available to them.
• Past experiences: The choices people are often very influenced by the experiences that they have had in the past. In many cases, they might base their choices on things that worked previously.
• Multitasking: Trying to juggle too much at once can have cognitive costs, making poor decisions more likely.
• Decision fatigue: The many decisions people make each day can take a toll, creating stress that often leads to decision fatigue. This fatigue can lead people to choose randomly or let others choose when they are faced with a choice.

How to Make Better Decisions

While some of the factors that lead to bad decision-making are difficult to eliminate, there are steps that you can take to help make better choices. Some strategies that can be helpful:

• Prioritize important decisions. This can combat decision fatigue and ensure you have the necessary cognitive resources to make the best choices.
• Eliminate distractions. If many different things compete for your attention, you're less likely to have the time, energy, and attention to focus on the available information and choices.
• Consider all of the options. While it might save time to just focus on the most obvious choice, weighing all the options might help you make a better decision.
• Take a break and come back later. It's easy to get overwhelmed, especially when making a complex or important decision. Take a break and give yourself some time so you can come back to it with a fresh eye.
• Ask for outside input. Talking to other people can be a great way to get different perspectives on the situation.

A Word From Verywell

While it is impossible to make perfect choices all of the time, there are strategies you can use to help minimize bad decision-making. Being aware of some of the many factors that contribute to bad decisions is one of the best ways to become a better decision-maker.