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Top decision making behaviours that are consistently irrational

In his book Against the Gods: The remarkable story of risk, P.L. Bernstein pointed out the top 10 human decision making behaviours that people continuously making, in error, without realising it. It's a good thing to familiarize oneself with these, as well as other cognitive fallacies, both in order to avoid them, and as an entrepreneur, to know how to best capitalize off of them (in an ethical way, of course). Below are 6 that I thought to be quite pertinent:

 

  1. People overweight new information at the expense of existing information. (The pendulum effect)
  2. People are much more sensitive to negative than positive stimuli. (Think time constraints, the risk of foregoing beneficial experiences etc.)
  3. People are naturally risk-averse and will generally choose a certain gain over a high probability of a superior return.
  4. People are much more sensitive to a loss than a cost. (People would rather keep a cost in order to avoid a loss even though they only differ in terms of perception)
  5. People recoil from perceived risks associated with radical innovation on the grounds that it is safer to fail conventionally than to succeed unconventionally.
  6. People make decisions with assiduous reference to the information that is available to them, even though they may be aware that it is woefully incomplete.

These points will very well apply to the consumer behaviour model, as well as the communication strategy that you choose as an entrepreneur or start-up founder. Here's a link to his book on Amazon if you're interested in more.


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