_________ bias is the logical error of concentrating on entities that passed a selection process while overlooking those that did not
survivorship bias
Survivorship bias can lead to overly optimistic beliefs because multiple failures are overlooked, such as when companies that no longer exist are excluded from analyses of financial performance.
It can also lead to the false belief that the successes in a group have some special property, rather than just coincidence as in correlation “proves” causality.
The image above is the most famous example of survivorship bias. Back in World War II, the U.S. military had been reinforcing its airplanes’ steel in the places where it looked like they were sustaining the most damage, based on analyses of planes returning from battle. But mathematician Abraham Wald helped them realize that they were missing data from planes that didn’t come back from battle (having been shot down), which would have resulted in completely opposite conclusions about which parts of the plane should have been reinforced.
Choosing only to see what we believe is called __________ bias.
confirmation bias
People with confirmation bias only see evidence to confirm their pre-existing conclusions.
A common example is people seeking out extreme news sources that conform to their existing political beliefs, which further deepens their conclusions.
____ ____ is a mental shortcut where the simplest explanation is considered much more likely to be valid than exaggerated assumptions are.
Occam’s razor
Example: “You have a headache? Oh no, you might have the Black Plague!” would fail the Occam’s razor test.
It is true the black plague has headaches as one of its symptoms, but it’s highly unlikely someone has it in this current day and age. A simpler explanation like dehydration or stress is more likely.
__________ bias is a tendency to rely too heavily on the first piece of information we’d seen, when making decisions.
anchoring bias
Businesses often exploit customers’ anchoring bias when setting prices.
Example: A clothing store might display $1,000 dresses in the front, which make their $300 dresses in the back seem like they are “cheap”
A tendency to inaccurately perceive a relationship between two unrelated events is called an _____ _____.
illusory correlation
In reality, of course, ‘correlation does not imply causation.’
A common example of illusory correlation is the belief that ice cream sales cause an increase in shark attacks. This misconception arises because both ice cream sales and shark attacks tend to increase during the summer months.
However, the correlation is coincidental, driven by the shared seasonal pattern rather than a causal relationship between the two.
Person A tends to like Person B more after they do a favor for Person B, even if they had originally disliked Person B. This is called the ___ _____ effect.
Ben Franklin effect
Example: you have the feeling a colleague at work dislikes you. By asking this person to do YOU a simple favor (like loaning you a book), and then thanking them gracefully, they will now be inclined to like you more.
______ ______ occurs when you do something that goes against a value, belief, or attitude that’s important to you, causing you to feel mental discomfort.
Cognitive dissonance
Our brains automatically invent explanations to help us reduce cognitive dissonance.
Example: You might tell yourself that breaking your diet is OK because you’ve “earned it” by exercising this morning (which is also a form of “moral licensing”) – thereby making your thinking match your actions rather than the inverse.
Believing that mass-communicated media messages have a greater effect on others than on yourself is called the ____-_____ effect.
third-person
Example: You don’t think car commercials work on you. But a few months later, you’re subconsciously drawn to purchase a Ford pickup, not even realizing that you were influenced by that macho cowboy from the Super Bowl ad several weeks ago. You suffer the third-person effect.
A tendency to show more compassion towards a small number of identifiable victims than to a large number of anonymous ones is called _____ ___.
compassion fade
Example: Greenpeace is collecting donations for the pandas in China due to deforestation. It doesn’t get much response. Now they campaign for a single panda named ‘Billie’ living in a tropical forest in China. The donations rise dramatically.
The assumption that a man (or a woman) is ‘supposed to’ perform a specific task is called ____ bias.
gender bias
Example: You hear that a construction worker in your local town won a trophy. You ask “What competition did HE win?”, incorrectly assuming a construction worker is automatically a male.
An inferior third option can change how we decide between two options that are similar in value. This is called the ____ effect.
decoy
Example: You prefer job candidate A more than candidate B. But then once you’ve meet candidate C, you suddenly like candidate B better.
Drawing different conclusions from the same information, depending on how it is presented, is called the _____ effect.
framing
Example: You tend to prefer something that is “90% fat free” over something marketed as “10% fat”, even though the result is the same.
Believing that a person who has experienced success (with a random event) has a greater chance of further success is called the ___-_____ fallacy.
hot-hand
Example: After scratching off two winning lottery tickets, you may think you are “hot” and more likely to win at a third ticket, even though your chances are the same as they were on the other two tickets.
The tendency for unskilled individuals to overestimate their own ability, and the tendency for experts to underestimate themselves is called the ______-_____ effect.
Dunning-Kruger
Example: An amateur chess player signing up to a tournament overestimates their likely performance compared to their competent opponents. Meanwhile, the top-ranked chess expert is more nervous about the competition than they should be.
Believing something because it’s easier to understand or because it has been stated multiple times is an example of the ____ ____ effect.
illusory truth
(the illusion of truth)
Example: A fake Facebook post about a certain politician’s “illegal” behavior has thousands of likes and shares. You see the post everywhere, thus you subconsciously conclude it must be true.
What mental model is characterized by thinking through problems in reverse – particularly by visualizing what could go wrong instead of what could go right – in order to clarify your thinking?
inversion
Example: When testing out an idea for a new startup, rather than imagining all the ways you can succeed, it can be helpful to “invert” your thinking and visualize all the ways you might fail. Then by methodically invalidating those risks one at a time, you may actually be more likely to succeed.
Your particular scope of knowledge or skills that gives you a competitive edge is called your ___ of _____.
circle of competence
The legendary financiers Warren Buffett and Charlie Munger are adamant about only investing in industries that lie in their circle of competence.
Example: They choose not to invest in most software businesses, because they recognize their limited competence in that area.
If you believe someone is acting a certain way because of their character rather than their situation, you are dealing with a ____ _____ error.
fundamental attribution
Examples:
Bob is late for work. You immediately conclude that he must be untrustworthy, whereas in reality, Bob was simply stuck in an unusually bad traffic jam.
Meanwhile, in the traffic jam, someone cut Bob off, leading Bob to think that that driver was a %&!)@!#, even though that driver was just rushing his wife to the hospital for their first baby.
A process by which people who already have ample resources (money, skill, connections, etc.) tend to receive even more resources than less endowed people is called ________ ________.
preferential attachment
Example: A popular kid is seen to have lots of friends, which makes other kids even more motivated to be friends with them, thus further increasing their popularity.
Attributing positive events and successes to your own character and actions, but blaming negative results to external factors, is called the ___-______ bias.
self-serving bias
Example: A student gets an A+ on a test and attributes it to his hard studying and talent. On a later test next month, he scores a D- and concludes that it was because the test was unfair and the teacher simply doesn’t like him.
The tendency of the people in a group to think and behave in ways that conform with others in the group is called ____ ______ bias.
herd mentality
(aka groupthink or bandwagon effect)
Example: You might choose a crowded restaurant over an empty one because it seems like that’s where everyone cool is going.
When the risk of loss seems worse to you than the joy of acquiring gains of the same amount, you are experiencing ___ _____ bias.
loss aversion
Example: If I give you a $100 bracelet, you’d work harder to keep that bracelet than you might have worked to earn the bracelet in the first place, even though technically the value is the same.
When your brain organizes a series of events into a logical story in order to process a situation more easily, you may be submitting to the _________ fallacy.
narrative
Example: You were in a “bad neighborhood” earlier today, and now you can’t find your wallet. Your brain concocts a narrative that you must have been pickpocketed (rather than more likely explanations like having misplaced your wallet).
When you erroneously think that two events or objects are more correlated than they actually are, you may be suffering from the ____________ ______ bias.
representativeness heuristic
Example: You expect that someone who practices yoga also must be a vegan because those traits seem often to appear together. In reality, fewer than 5% of yoga practitioners are vegan (though that is indeed a higher % of vegans than the general population).
Many stereotypes are caused by this type of representativeness heuristic bias. (Protip: “Heuristic” basically means “mental shortcut”)
When one trait of a person or thing influences you to make an overall judgment of that person or thing, you are suffering from the ______ effect.
halo
A common example is assuming that a good-looking person with a nice smile must also be a good person overall.
A tendency to believe that examples that come readily to mind are more representative than is actually the case is called the _________ bias.
availability bias
(aka availability heuristic)
Example: You happen to see several news reports on car thefts in just the past week, so you conclude that car theft must be more common in your area than it really is.
The tendency for someone to value items they own more highly than they would if they did not belong to them is called the _________ effect.
endowment
Example: You buy a teacup for $2.50. A few weeks later, someone offers to buy it from you, and you feel like it should be worth at least $10.
The tendency to prefer to continue with the action already decided upon, regardless of new information, is called the ______ ___ bias.
status quo bias
Example: You stick to your current cable company even though you see better options, because you are already familiar with the rates, choices, and customer service offered by your current provider.
Believing that you, as a person, will change less in the future than you have in the past is called the ___-__-______ illusion.
end-of-history
Example: A 20-year-old’s prediction of how great a change they will undergo in the next ten years will not be as extreme as a 30-year-old’s recollection of the changes they underwent between ages 20 and 30.
A tendency to see past events as having been predictable before they happened is called the _________ bias.
hindsight bias
Example: After flipping a coin and seeing that it was tails, I feel I totally already knew it was gonna be tails (even though I had no better than a 50/50 shot).
A tendency to judge harmful actions as worse or less moral than equally harmful inactions is called the ______ bias.
omission bias
Example: If I vaccinate my daughter (commission) and she has a rare allergic reaction, I may judge myself more harshly than if I’d simply neglected to vaccinate her (omission) and she got very sick – even if I know that skipping the vaccine is statistically more likely to cause harm.
A tendency to overestimate the likelihood of negative outcomes is called the _________ bias.
pessimism bias
Example: A person skips going on vacation because they imagine their car breaking down, their wallet being stolen, and their stomach getting upset by the local food & water.
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