#5. Thinking Fast and Flawed

Bounded Rationality in Action

April 2024

You’re out for dinner with friends, and the menu reads like a dissertation. Everyone has ordered so you’re feeling rushed rather than rational. Your brain as you quickly pick the first seemingly familiar meal that catches your eye. 

Understandably, your tastebuds rebel when your flaming food finally arrives.

Ep 4 of Irrational on bounded rationality (BR) offers insight into how our decisions are often limited by incomplete information and our biases, led by what we know at the moment with the information readily available rather than sound reasoning.

BR in everyday life

How often do we:

Jump to conclusions

Have you ever quickly decided something without all the facts? That's confirmation bias at work (Can We Outsmart Disinformation with Behavioural Science?). We tend to cherry-pick information that fits our beliefs, leading to snap judgements and missed chances.

Make impulsive buys

Picture those moments when you've bought something on a whim, driven by emotions rather than logic. Maybe it was a flashy ad or a limited-time deal. But did you really need it, or did the thrill of the moment take over?

Stick with the status quo

Have you ever stuck with something simply because you've already put so much into it? That’s the sunk cost fallacy in action (Don't Throw Good Money After Bad Decisions). Whether it's a failing strategy or a relationship that's lost its spark, we sometimes resist change just because we've invested time, money or emotions. 

Bounded rationality sneaks into our lives daily, but being aware of it is the first step to making smarter decisions.

BR in business

Using BR boost your business effectiveness:

  • Embrace ‘never too many cooks’ | Bring together a diverse team to tackle challenges. Different perspectives shake up assumptions and reveal blind spots. 
  • Let data do the driving | Dive into data and analytics to gain an objective understanding of situations and let these insights inform your decisions. 
  • Nudge, nudge for better choices | Use behavioural science to guide both your team and customers towards better choices. Whether it's through clear labelling, emphasising long-term benefits or setting default options, nudges gently steer decision-making in a positive direction.

Building your toolkit

The brain may be brilliant but it is also biased. Understanding the limitations of your decision-making processes and using these strategies will help you course correct for your own biases, enabling you to make more informed choices. The next time you're faced with a decision take a moment to consider potential biases, gather more information and seek diverse perspectives.

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