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Posts Tagged ‘bias

Spend a Five or Break a Twenty? The Denomination Effect

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I’m sure many of us understand the denomination effect on a visceral level. If you’ve ever been in a store, saw something you wanted, but hesitated to buy it because you’d have to pull out a big bill, you’ve experienced this effect. Why did you hesitate? Because you knew that breaking that $20, $50 or $100 bill made it that much easier to spend your change.

Perhaps that’s why prices near a dollar amount, particularly $4.99, $9.99, $19.99, and $99.99 are so attractive to the consumer’s eye. You’re trading one physical item (a printed piece of paper) for another (perhaps a flash drive) and getting a tiny bit of money back. I wonder how much of the attractiveness of prices just below a currency denomination depends on the fact that you’re getting some change back as opposed to the first number being one less (e.g., $19.99 versus $20.00). I bet the two phenomena are intertwined in some interesting psychological ways.

You also see the denomination effect at work in gambling, but the effect works differently there depending on the game and situation. Knowledgeable poker players experience the reverse effect, becoming less likely to get involved in hands when they have fewer chips in their stack. They hesitate to invest in a hand because, when you are low on funds, the relative value of each chip goes up. Other players can use this hesitancy to their advantage and bet big to drive the small stacks out of a pot, but the small stacks can make a modest bet to induce a bluff raise from a big stack, but the big stacks can raise and hope the small stacks will think they’ve fallen into their trap, but…

You get the idea. Poker’s fun, but bring aspirin.

Where the Illusion of Psychic Powers Might Come From

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Humans build cognitive models by taking in the world and learning how to interpret the input. Children learn language inductively by listening to their parents and other speakers, gradually building up their comprehension and productivity. That strategy never fades — we all take in information about our surroundings and use it to make judgments.

Of course, the world is a busy place, so our brains avoid taxing our cognitive resources by learning what is safe to ignore. The vast majority of sensory inputs never reach our conscious minds, but our brains process environmental inputs and use them to guide our thoughts. This result isn’t surprising on an anecdotal level, given that we all have insights and “feelings” that we can’t pin to a specific input. What’s interesting is how¬†Piers D. L. Howe and Margaret E. Webb from the School of Psychological Sciences at the University of Melbourne tested this “knowing without knowing” process.

Howe and Webb presented subjects with 1.5-second glimpses of one photograph, followed by a one second blank gap, and then another 1.5-second look at another photograph of the same person. Some pairs of the photos were identical, but some had subtle differences, such as hair position, clothing change, and so on. Subjects were asked if the photos were identical or different. Even though the differences were subtle and exposure relatively quick, subjects were able to detect that the photos were different even though they were often unable to articulate the difference.

The authors conclude that this “knowing without knowing” process could explain the “sixth sense” phenomenon, where individuals seem to gain information without specific input. Their article, published in the online journal PLOS ONE, provides significant evidence in favor of the theory that our subconscious processes information in a way that lets us make decisions about situations and individuals without understanding why we had those thoughts.

This result is exciting, but also a bit sobering. Security professionals have long known that their instincts serve them well. If something “just don’t look right” (JDLR), even if they can’t articulate why, they should pay close attention. Situations change, though, particularly in social settings so we have to be on guard against mental models that bias us against groups or situations where no threat exists. It’s a tough balance, but it’s all part of being human.

Test what you know, but avoid congruence bias

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A few posts ago I discussed confirmation bias, where individuals interpret everything they experience as reinforcing their existing beliefs. It’s not surprising that humans fall prey to this trap. We have to make sense of our surroundings, so we develop mental models to do so. They’re our models, based on our mental, so it’s no surprise we think highly of them.

No model of the world can capture all of its complexity. We can model industrial processes at a certain level, but we can’t get all the way down to the interactions of individual atoms. Fortunately, we don’t have to to generate accurate depictions of reality. As statistician George E. P. Box noted, “All models are wrong, but some are useful.”

Many humans realize they will move through life more effectively by testing and updating their mental models, but you need to test your model correctly. If you test your mental models and other hypotheses through direct testing, rather than testing possible alternative models, you are experiencing congruence bias. You’re testing your model, which is great, but you’re not entertaining other ways of approaching the problem, which is not so great. In The Structure of Scientific Revolutions, Thomas Kuhn argued that scientists work within a paradigm, which is the dominant framework for creating, testing, and determining hypotheses at a given time. When experimental results aren’t as expected, scientists can either work to shore up the existing paradigm or create a new one.

My wife, Virginia Belt, is a director and formerly taught acting at Willamette University in Salem, Oregon. She emphasizes the need for actors to try different tactics to get what they want. Think of the young child who tries everything he can think of to have you buy him a treat at the grocery store or the cat that really, really (really) wants a piece of sausage from your pizza. You can take the same approach to life. If you find your model isn’t working well any more, such as after a promotion at work, joining a new improv group or entering into a new relationship, try different tactics to see what does work. Ginny always exhorts her students to make positive choices, to focus on what they want rather than what they don’t want. If you call Domino’s and say you don’t want anchovies, you’ll either get no pizza because you haven’t given them enough information or get a pizza that costs $50 because it has every other available topping on it.

As anyone who has ever tried anything new well knows, individuals who break away from the pack meet a lot of resistance. Having the strength to break out of congruence bias at a personal level is tough — having the strength to do it in the face of a tenure board is even tougher. Let’s leave the paradigmatic fights for the professionals and focus on our own world views for a while. We’ll be better off in the end.

Memory and the Recency Effect

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It’s tempting to think that knowing about a cognitive bias or logical fallacy makes them immune to it. I’m no exception, but I constantly find myself falling prey to the recency effect, or recency bias. The good news is that I catch myself from time to time — the bad news is that I have no idea how many instances slip through.

The recency effect describes a condition where the most recent information you learned has a disproportionate impact on your opinion about a topic. I find myself watching TV programs or reading articles where the author sets out arguments on an issue and I often think, “Oh, I didn’t know that. I’ll have to revise my opinion.” The rest of the time I think, “Yeah, right” and move on with my day. If the topic’s one I don’t know much about, the information I just learned will affect my view more than it would if I knew a lot about the issue.

As I mentioned in my review of The Gamble, published here and on Technology and Society Book Reviews, the Romney 2012 presidential campaign managers attempted to use the recency effect to their candidate’s advantage. The authors cited a significant body of research showing that political ads sway opinion, but only for a few days at most before viewers’ opinions revert to their personal baselines. The Romney campaign took out a large number of ads in the days before the election in hopes of using the recency effect to their advantage. In fact, the campaign bought the entire available ad inventory in several states. Rather than leave the money in the bank, they bought ads in states they deemed less important.

If you really want to see the recency effect in action, watch the U.S. stock markets whenever major events occur. Every bit of news causes the markets to move as investors try to out-guess each other and make a profit on competitors’ decisions. I’m not sure how much of the action is individual speculators trying to get a jump on the market and others trying to guess the reactors’ reactions (and so on up the chain), but the short-term volatility can be astonishing.

Confirmation Bias Proves What You Already Knew

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Human beings deal with complexities by creating mental models. Our models are necessarily simpler than reality and are based on our experiences. These considerations imply two things. First, models are intensely personal constructs. Second, personal models are difficult to change. When we find something that works, we’re reluctant to change it.

There’s a strong temptation to fit what we see into our models rather than invest the effort (and ego) into admitting our model is wrong, or at least incomplete. Oswald and Grosjean define confirmation bias as “the tendency to search for, interpret and remember information in a way that confirms one’s preconceptions.” You probably know someone who engages in impressive mental gymnastics to fit everything into their world view.

In business, falling prey to confirmation bias can cost you money. If you developed a process that worked for years but doesn’t meet your company’s needs, you must be open to change. If you interpret critiques as personal attacks, you’re much less likely to improve your processes.

You can take advantage of confirmation bias to create interesting characters or “find the game” within an improv scene. Improv scenes run on justifying why something someone else said or did is true and important. If your character’s perspective uses “Yes, and…” to bring everything into his or her world view, you can be an interesting character and entertain your audience. Like in business, you have to be careful not to let your internal game hurt your team’s performance, but it’s a fun approach to take on occasion.

The exercise “Your Place or Mine?” provides an interesting context for justification and fitting incidents into your character’s world view. In this exercise, you and a scene partner play characters in two different locations. For example, one of you might be a fast food worker in McDonald’s and the other an archery instructor on the range. If the fast food worker hands the archer a french fry, the archer could interpret it as a small arrow and shoot it into a target, which the fast food worker could interpret as throwing the food into a customer’s mouth.

Cognitive Biases are Fun!

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George Carlin once pointed out that comedy depends on exaggeration — to make something funny, you must distort one aspect of the situation or description to introduce humor.

If you’re thinking, “I don’t have to exaggerate anything…I make enough mistakes to feed a hundred comics for a year,” you’re probably right. We’re all susceptible to cognitive biases that skew our ¬†judgment. If you’ve read any of Dan Ariely’s work (Predictably Irrational, The Upside of Irrationality, and The Honest Truth About Dishonesty) or read the pop psych literature, you know the human mind is a frighteningly powerful yet flawed instrument.

I have good news: you can identify and minimize the impact of cognitive biases. What’s more, performers can use them to create humorous situations on stage. I downloaded a list of cognitive biases and will do my best to explore how they affect the world where business and funny intersect.

I first thought of writing a series of posts after a ComedySportz gig for health care professional employed by the Oregon penal system. One of their handouts (I always grab the handouts) listed about 120 cognitive biases and logical traps affecting the reasoning inmates and others use to assess their circumstances. I’ll leave the connection between prison, work, and comedy to your fertile brains.

First up? Everyone’s favorite trap: confirmation bias.