Every day people make choices – from how to distribute finances to when to arrange a date. The way people think determines their decisions. Sometimes, people’s minds are confused or overloaded, leading to the wrong actions related to the decision-making process. However, some straightforward measures and estimations may significantly simplify the process. Therefore, it is essential to perceive the data and qualitative tools that help to avoid bad decisions.
Among the common mistakes people make is comparing past deals to the present ones. The author claims that people make “errors in estimating the odds that they are going to succeed, and errors in estimating the value of their success” (Gilbert, 2005). As a result, people are prone to spending more rather than earning. People typically rely on the price: when something is costly, they will not buy it; however, when the same amount is offered under different circumstances, they agree it is worth paying. Moreover, the comparison is tricky as people do not gain anything from it but rather spend even more.
Once people start contemplating the thought of making the right choices, they commence analyzing how they can benefit from any purchase. Therefore, they may discover data concerning the product, which will help to assess the real odds of success. Furthermore, comparing to pat must be cast aside and replaced with comparing to the possibilities. People should estimate the total value rather than pieces of it. Gilbert (2005) suggests Bernoulli’s formula figure out the expected value by multiplying the odds and the amount of the gain. These tools will help to make the best decision based on the experience rather than on immediate options.
Gilbert, D. (2005). Why we make bad decisions [Video]. TED.