7 Steps of the Decision Making Process

Mental Shortcuts Can Trip You Up
If we had to think through every possible scenario for every possible decision, we probably wouldn't get much done in a day. In order to make decisions quickly and economically, our brains rely on a number of cognitive shortcuts known as heuristics.1 These mental rules-of-thumb allow us to make judgments quite quickly and often times quite accurately, but they can also lead to fuzzy thinking and poor decisions.
One example of this is a sneaky little mental shortcut known as the anchoring bias.2 In many different situations, people use an initial starting point as an anchor that is then adjusted to yield a final estimate or value. For example, if you are buying a house and you know that homes in your target neighborhood typically sell for an average price of $358,000, you will probably use that figure as a basis 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 subjects were then asked to guess how many countries in Africa 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.
So what can you do to minimize the potential negative impact of these heuristics on your decisions?
Experts suggest that just becoming more aware of how heuristics impact decisions can help you avoid making bad decisions.
In the case of the anchoring bias, coming up with a range of possible estimates can help. 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. If you know that a new SUV will cost somewhere between $27,000 and $32,000 for the size and features you want, you can then make a better decision about how much to offer on a particular vehicle.