Cognitive Biases - Definition, Examples, Impact - A Guide for Product Managers

As a product manager, making decisions is an inherent part of our daily lives. And the decisions we make as product managers have long ranging impacts -- on the success of the product, on the success of the team, and on the priorities that other teams work on.

Therefore, it is critical to make the best decisions possible

Research has shown that our decision-making processes are affected by various cognitive biases. These biases are mental shortcuts or tendencies for people to deviate from rational thinking. 

Understanding and being aware of these biases is crucial as they can greatly impact the quality of our decision-making. 

In this article, we will explore some of the most common biases that can influence our decision-making, how they influence our decisions, and how product managers can avoid or leverage these biases.

10 Cognitive Biases you should be aware of:

The IKEA Effect:

The IKEA Effect suggests that when individuals invest their time, effort, and labor into a particular task or project, they develop a sense of pride and attachment to the final outcome. 

This bias can be observed in various situations, such as when individuals construct furniture, build models, or even they cook a meal from scratch.

It is named after the furniture retailer IKEA, known for its do-it-yourself assembly model. 

One explanation for the IKEA Effect is that when we invest resources, whether it is time, energy, or money, it creates a sense of ownership and personal investment in the outcome. As a result, we tend to perceive the value of the end product as higher than it may objectively be.

How it can impact decision making:

The implications of the IKEA Effect can be seen in both personal and professional settings. 

For example, in a personal context, individuals may spend hours assembling furniture or completing DIY projects, and as a result, overvalue the final product. This bias can lead to a greater sense of satisfaction and pride in their accomplishments, but it can also cloud their judgment in assessing the true quality or value of the object.

In a professional context, the IKEA Effect can impact decision-making processes. When individuals spend time and effort on an idea or project, they may become overly attached to it and maybe resistant to feedback or alternative perspectives. This bias can hinder collaboration and prevent individuals from considering alternative, potentially better solutions, or even sunsetting ideas when they should.

How to bypass or leverage the IKEA effect:

To mitigate the potential negative effects of the IKEA Effect, it is important to maintain a sense of objectivity and seek feedback from others. 

Involve a diverse group of people in decision-making to ensure that multiple viewpoints are considered, reducing the chances of being overly influenced by personal investment. 

Seeking external evaluations and objective assessments to get a more accurate understanding of the value or quality of your product.

The Curse of Knowledge Bias:

Have you ever found yourself assuming that others understand something as well as you do, only to be met with confusion or misunderstanding? 

This is known as the curse of knowledge, and it can have a significant impact on decision-making.

The curse of knowledge, first identified by psychologists Daniel Kahneman and Amos Tversky, refers to the tendency for people to underestimate the gap in understanding between themselves and others. When we possess a certain level of knowledge or expertise in a particular area, it becomes challenging to imagine what it's like not to have that knowledge. We assume that others possess the same level of understanding, leading us to overlook the need for clear communication and explanation.

How it can impact decision making:

This bias can have serious consequences. 

For example, think of a time when you explained a concept to someone only to receive a blank stare in return. You might have assumed that the other person simply wasn't paying attention or lacked the intelligence to grasp the idea. However, in reality, they might not have had the same background knowledge to understand your explanation fully.

In a consensus decision-making process, the curse of knowledge bias can be particularly detrimental. When decision-makers assume that everyone is on the same page, they fail to provide adequate information or seek input from others. This can result in decisions that are not fully informed or fail to consider alternative perspectives.

How to Bypass the Curse of Knowledge Bias:

Here are a few strategies to help mitigate it:

1. Practice empathy: Put yourself in the shoes of others and try to imagine what it's like not to have the same level of knowledge as you. This will help you communicate more effectively and be more open to hearing different viewpoints.
2. Seek feedback and clarification: Instead of assuming that others understand your message, actively seek feedback and ask if they have any questions or need clarification. Encouraging open dialogue can break down barriers and ensure everyone is on the same page.
3. Use plain language: Avoid using jargon or technical terms when communicating with others who may not be familiar with them to enhance understanding and minimize miscommunication.
4. Prioritize effective communication: Recognize that it is your responsibility to convey information clearly and in a way that others can understand. Take the time to think about how you can communicate complex ideas in a simplified manner or provide additional resources for further understanding.

Remember that true collaboration and effective decision-making require considering the perspectives and knowledge of all involved parties. 

Fundamental Attribution Error (FAE):

Have you ever made assumptions about someone's character or personality based solely on their behavior in a particular situation? 

If so, you may have fallen victim to the Fundamental Attribution Error (FAE). 

The Fundamental Attribution Error refers to people’s tendency to attribute the behavior of others to internal, dispositional factors rather than considering situational influences. In other words, we often underestimate the impact of external factors such as the environment, circumstances, or social pressures on someone's actions.

But we behave differently when it comes to ourselves. We attribute wrong decisions or bad behavior to external circumstances.

How it can impact decision making:

One way the FAE can impact decision-making is by causing us to overlook situational influences. For example, if a coworker fails to meet a deadline, we may immediately conclude that they are lazy or incompetent. However, we fail to consider the possibility that they may have been overloaded with work, facing technical difficulties, or dealing with personal challenges that hindered their productivity. By solely attributing their behavior to their character, we overlook important contextual factors that may actually be responsible for their actions.

In addition, the FAE can also cause us to make inaccurate judgments about others' intentions or motivations. When we attribute negative behavior to a person's disposition, we are more likely to view their actions as intentional or malicious. This can lead to a lack of trust and even strain relationships unnecessarily. By failing to consider alternative explanations for the behaviors we observe, we limit our ability to make fair and objective decisions.

The impact of the FAE also extends to consensus decision-making processes. When faced with a group decision, individuals influenced by this bias may unfairly attribute the success or failure of the decision solely to the participant's individual abilities or character traits. This can lead to a reluctance to seek external opinions, favoritism, or scapegoating. The FAE hinders the group's ability to objectively assess the situation and make informed decisions based on a comprehensive understanding of the factors at play.

How to bypass the Fundamental Attribution Error:

Overcoming the Fundamental Attribution Error requires a conscious effort to consider multiple factors before making judgments. Here are a few strategies to help mitigate the impact of this bias:

1. Consider situational factors: When observing someone's behavior, remind yourself to consider the external factors that might be influencing their actions. Step back and ask yourself if there could be other reasons for their behavior beyond their disposition.
2. Seek additional information: Rather than jumping to conclusions, try to gather more information about the person or the situation. Ask questions, listen attentively, and seek to understand their perspective and the context in which their behavior occurred.
3. Avoid instinctive judgments: Resist the temptation to make quick assumptions or immediately label someone based on one isolated incident. Recognize that people's behavior can vary significantly depending on the circumstances.
4. Foster empathy and understanding: Remember that we all have our own struggles and challenges. Cultivate empathy by putting yourself in the other person's shoes and considering the factors that may be influencing their behavior.

By consciously challenging the Fundamental Attribution Error, we can make more informed judgments, foster understanding, and build stronger relationships. It is through open-mindedness and a willingness to see beyond initial impressions that we can truly appreciate the complexities of human behavior.

Bandwagon effect:

The bandwagon effect is a cognitive bias that describes the tendency for people to adopt certain beliefs or behaviors because of the popularity or widespread acceptance of those beliefs or behaviors. It is the idea that "everyone else is doing it, so it must be right."

This bias stems from our innate desire for social acceptance and the fear of being left out or viewed as different. When we see a large number of people endorsing a particular belief or engaging in a certain behavior, we feel compelled to follow suit.

This can happen even if the belief or behavior doesn't align with our own values or rational judgment

How it can impact decision making:

It can sway our opinions, preferences, and choices, even if they don't align with our own values or rational judgment. We may find ourselves conforming to the beliefs or behaviors of the majority simply because we don't want to stand out or be seen as an outsider.

This bias can be seen in various aspects of life, from fashion trends and consumer behavior to political ideologies and social movements. Advertisers and marketers often capitalize on the bandwagon effect by using phrases like "join the millions" or "everyone is using it" to create a sense of social proof and encourage people to jump on board.

How to bypass the Bandwagon Effect:

Here are a  few effective strategies to bypass the bandwagon bias:

1. Be Aware of the Bias: Remind yourself that following the crowd is not always synonymous with making the right decision.
2. Question Your Motivations: When faced with a decision, take a step back and ask yourself why you are inclined to adopt a particular belief or behavior. Is it solely because everyone else is doing it? Make a conscious effort to separate your own desires from the influence of others.
3. Seek Diverse Perspectives: Exposing yourself to a range of opinions and viewpoints will allow you to make a more informed and independent decision.
4. Do Your Own Research: Instead of relying solely on the opinions of others, take the time to conduct your own research. Look for credible sources of information, such as academic studies, reputable news outlets, or recognized experts in the field. Base your decision on facts rather than the influence of the masses.
5. Evaluate Alternatives: Make a habit of considering alternative viewpoints and options to make a more well-rounded and independent decision that aligns with your own values.

Remember, the path less traveled often leads to the most authentic and fulfilling outcomes.

Dunning-Kruger effect

People affected by Dunning-Kruger bias are not competent enough to recognize their own incompetence. This ignorance often leads to an overestimation of their abilities and a misplaced sense of confidence.

The bias operates on a two-fold dynamic: individuals with low competence tend to overestimate their abilities, while competent individuals may underestimate their skills. 

This happens because those with low competence lack the necessary skills to recognize their own limitations. In contrast, those who are highly competent understand the extent of their knowledge and skills and are therefore more likely to underestimate their abilities.

How it can impact decision making: 

In the professional world, people affected by this bias may avoid seeking guidance from others, because they are confident that they possess the necessary knowledge. Consequently, they may make poor decisions. 

In personal relationships, the bias can lead to misunderstandings and interpersonal conflicts due to the individual's inability to recognize their own shortcomings.

How to bypass the Dunning-Kruger bias: 

With awareness and deliberate action, it is possible to bypass this bias and make better decisions in various aspects of life. 

1. Cultivate Self-Awareness: Product managers should cultivate self-awareness. Identify your strengths and weaknesses, and then work on them. Do this often to know if you’re getting better at your opportunity areas.
2. Embrace a Growth Mindset: Know that you can always get better. By believing in the capacity for growth and improvement, you are more likely to seek knowledge, challenge yourself, and remain open to feedback.
3. Seek Expert Opinions:  As product managers, it is crucial to seek input from experts and individuals with knowledge and experience in the area of interest. Consult with mentors, experts, and colleagues who can provide guidance and insights. Their expertise can act as a reality check and offer valuable perspectives on your abilities and limitations.
4. Continual Learning and Skill Development: Never rest on your laurels or become complacent with your current skills and knowledge. Make a conscious effort to expand your understanding, enhance your skills, and stay informed about advancements in your field. Continually becoming better at your job is extremely important to succeed as a product manager.

Overcoming the Dunning-Kruger effect requires ongoing effort and a commitment to personal growth. 

False Memories: 

False Memories are a fascinating phenomenon. While we often assume that our memories are an accurate reflection of past events, research has shown that our recollections can be very inaccurate.

One of the main reasons false memories occur is due to the reconstructive nature of memory. When we recall an event, we don't retrieve a perfect and exact replica of what happened. Instead, our brains reconstruct the memory based on fragments of information, stored knowledge, and our own interpretations. This reconstruction process leaves room for errors and alterations to occur.

The power of suggestion plays a significant role in the creation of false memories. External influences, such as leading questions, misinformation, or even subtle cues, can reshape our recollection of events. For example, a study conducted by Elizabeth Loftus and her colleagues showed that simply using different words to describe a car accident, such as "smashed" versus "contacted," influenced participants' memories of the event. Those who heard the word "smashed" were more likely to report seeing broken glass, even if there was none.

Another factor contributing to the creation of false memories is the influence of our own beliefs, expectations, and biases. Our brains have a natural tendency to fill in gaps in our memory with what we think should have happened or what aligns with our preexisting beliefs. This can lead to the creation of entirely fabricated memories that feel just as real and vivid as genuine ones.

How it can impact decision making:

If we base our decisions on memories that are inaccurate or distorted, our choices may lead to adverse outcomes. Imagine falsely remembering that a colleague made a critical mistake in a project, which could lead you to doubt their competence and make unfair judgments. 

False memories can also affect eyewitness testimonies, leading to wrongful convictions or false accusations.

How to Bypass False Memories:

Acknowledging that our memories are not infallible can help us approach decision-making with a more critical and cautious mindset. 

Seeking corroboration from other sources, fact-checking, and relying on objective evidence can help verify the accuracy of our memories.

It is also crucial to understand that our memories are malleable and subject to change over time. By recognizing that memories can be easily influenced by external factors, we can be more open to reevaluating our recollections and considering alternative perspectives.

Availability Heuristic:

It refers to our tendency to rely on immediate examples or information that come to mind easily when making judgments about the likelihood of events or the frequency of occurrences.

When using the availability heuristic, we tend to assume that if something is easily recalled, it must be more common or more likely to happen. For example, if we hear about a recent plane crash in the news, we might start to believe that flying is a dangerous mode of transportation, even though statistically, it is one of the safest ways to travel.

How it can impact decision making:

It distorts our perception of the frequency or likelihood of events. When we can easily recall examples or instances of a particular event, we tend to believe that it is more common or likely to occur. 

On the other hand, if we struggle to retrieve relevant memories, we are more likely to perceive such events as rare or unlikely.

This bias can be problematic because the ease with which we can recall information is influenced by various factors, such as the vividness of the memory, recent exposure, emotional impact, and media coverage (a great example). As a result, our perception of the actual probability of events can become distorted.

Another reason for this bias is the influence of media and personal experiences. The media often highlights rare and sensational events, making them more memorable and accessible in our minds. As a result, we may give these events more weight when making decisions, even if they are not representative of the overall probability.

How to bypass the Availability Heuristic:

By understanding that our judgments may be influenced by the ease of recall, we can consciously make an effort to consider a broader range of information and perspectives.

Secondly, by actively exposing ourselves to a variety of perspectives and data, we can challenge our initial assumptions and broaden our understanding of the probabilities involved. 

It's also essential to critically evaluate the information we consume. Just because something is highly memorable or frequently discussed does not necessarily mean it is representative or accurate. By fact-checking, seeking out multiple sources, and considering the context in which information is presented, we can better discern the true probability of events and make more rational decisions.

Confirmation bias:

Confirmation bias is a cognitive bias that affects the way we interpret and search for information. It refers to our tendency to seek out, interpret, and remember information in a way that confirms our preexisting beliefs or hypotheses.

When faced with new information, our brains have a natural inclination to accept information that supports our existing beliefs and reject information that contradicts them. This bias often leads us to selectively process information, focusing on details that align with our views and disregarding evidence that challenges them.

One of the main reasons confirmation bias occurs is our desire for cognitive consistency. We find comfort in having our beliefs affirmed, even if it means disregarding contradictory evidence. 

How it can impact decision making:

Confirmation bias can have significant implications in various aspects of our lives, including personal relationships, politics, and professional decision-making. In personal relationships, confirmation bias can lead to misunderstandings, as we often interpret ambiguous behaviors or statements in a way that supports our existing beliefs about the person.

In professional decision-making, confirmation bias can result in flawed judgments, missed opportunities, and poor outcomes. When making decisions, we tend to seek out information that supports our initial assumptions rather than actively seeking multiple perspectives and considering alternative explanations.

How to bypass Confirmation Bias:

There are strategies we can employ to bypass this bias:

1. Embrace a growth mindset: Adopting a growth mindset means being open to new ideas, feedback, and different perspectives. Recognize that your beliefs and assumptions may not always be correct and be willing to challenge them. 
2. Seek diverse perspectives: Actively seek out and consider diverse viewpoints and opinions. Engage in conversations with people who hold different beliefs or come from different backgrounds. This exposure to alternative perspectives can broaden your understanding of an issue and help you see beyond your own biases.
3. Verify your beliefs: Rather than accepting information at face value, take the time to verify its accuracy. 
4. Use Devil's Advocacy: Assign someone the role of a Devil's Advocate in important decision-making situations. This individual's job is to challenge prevailing assumptions and beliefs, leading to a more balanced evaluation of the situation.
5. Learn from your mistakes: Reflect on past decisions and outcomes to identify instances where confirmation bias may have played a role. Use these insights to learn and grow, improving your ability to recognize and bypass the bias in the future.

Remember, overcoming confirmation bias is an ongoing process that requires constant self-reflection, an open mind, and a commitment to seeking the truth.

Sunk cost fallacy:

Instead of considering the current circumstances and future prospects, we become fixated on what we have already lost. We convince ourselves that if we give up on our investment, all the time, effort, or money we have put in will be wasted. We feel a strong emotional attachment to our past actions and therefore hesitate to abandon them.

This bias arises from our aversion to losing and the fear of admitting that we've made a wrong decision. We often feel compelled to validate our past actions by sticking with them, even when all evidence suggests it would be more beneficial to let go.

Imagine you have purchased a ticket to a concert that you were really looking forward to. However, on the day of the event, you fall ill and are unable to attend. Although you cannot recover the money spent on the ticket, you might still feel inclined to go to the concert since you don't want that investment to go to waste. This is a classic example of the sunk cost bias in action.

How it can impact decision making:

This bias often leads to poor decision outcomes. We may remain committed to failing projects, unprofitable business ventures, or toxic relationships because we are unwilling to let go of what we have already invested. We mistakenly believe that by sticking with these choices, we can salvage something from our past investments.

How to bypass Sunk Cost Fallacy:

It is possible to bypass this bias and make decisions based on logic and future prospects rather than past investments. 

1. Reevaluate your goals: Take a step back and reassess your priorities and long-term objectives. Ask yourself if sticking with the current situation aligns with your overall goals. Often, we find that letting go of sunk costs actually opens up new opportunities and allows us to move closer to what we truly want.
2. Separate emotions from logic: Emotions can cloud our judgment and make it difficult to objectively evaluate a situation. Take a moment to detach yourself emotionally from past investments and focus on the facts and potential outcomes. Look at the situation as if you were an impartial observer and make decisions based on rational assessment.
3. Consider opportunity costs: Recognize that every decision involves trade-offs. By holding on to sunk costs, you might be missing out on other valuable opportunities. Consider what else you could do with your time, effort, or resources if you let go of the past investments. This perspective can help you see the bigger picture and make a more informed decision.
4. Seek objective advice: Sometimes, we need an outside perspective to help us see beyond the sunk cost bias. Talk to trusted friends, mentors, or professionals who can provide unbiased advice. They can help you evaluate the situation objectively and provide insights that you may have overlooked.

Remember, it takes courage and a willingness to let go, but doing so can lead to more rational choices and ultimately greater success and fulfillment.

Hindsight bias: 

The hindsight bias, also known as the "I-knew-it-all-along" phenomenon, refers to our tendency to believe that we could have predicted the outcome of an event or decision, after knowing what actually happened.

The hindsight bias occurs due to a range of cognitive processes. One explanation is the curse of knowledge (detailed above.) Once we are aware of an outcome, our knowledge of it influences how we remember and evaluate the events leading up to it.

Another explanation is the fundamental attribution error (detailed above). This bias can cause us to overlook external factors that may have affected the outcome and instead attribute it solely to the individual's abilities or qualities.

The availability heuristic is also at play in the hindsight bias. If an outcome is easily recalled, we may mistakenly believe that it was highly probable or predictable.

How it can impact decision making:

When we fall prey to hindsight bias, we may overestimate our ability to predict future events or underestimate the role of luck and external factors in past outcomes. This can lead to overconfidence in our decision-making abilities and potentially poor future choices.

For example, imagine a stock market investor who made a risky investment that turned out to be highly profitable. Instead of recognizing the role of chance or good timing, the investor may believe that they have superior knowledge or predictive abilities. This can lead to a false sense of confidence, prompting them to make riskier investments in the future without fully considering the potential downsides.

How to bypass the hindsight bias:

It is possible to bypass this bias with the following strategies:

1. Embrace a Beginner's Mind: Approach each new decision or situation with a beginner's mind, as if you have no prior knowledge or preconceived notions. By doing this, you can prevent the curse of knowledge from clouding your judgment.
2. viewpoints. By embracing constructive criticism, you can gain valuable insights and broaden your perspective, reducing the impact of hindsight bias in future decision-making.

Remember, the goal is not to eliminate bias entirely but to minimize its impact and increase the likelihood of optimal outcomes.

Final Verdict:

In addition to the above, I would also insist that a product manager should create a system for reviewing and challenging their own decisions. This could involve having a team member or mentor review your decision or using a tool like a decision journal to track your decision making process. 

A quick summary with specific tips for a product manager to overcome cognitive biases:

• Educate yourself about cognitive biases. The more you know about cognitive biases, the better equipped you will be to identify and avoid them.
• Be aware of your own biases. Everyone has biases, so it's important to be aware of your own. This can be difficult, but there are a number of resources available to help you.
• Get feedback from others. Talk to your team members, users, and other stakeholders to get their input on your decisions. This can help you to identify and avoid cognitive biases.
• Use data to make decisions. Don't rely on your gut instinct alone. Use data to support your decisions and to identify any potential biases.
• Be open to new ideas. Don't get stuck in your own way of thinking. Be open to new ideas and perspectives, even if they challenge your existing beliefs.
• Keep learning about product management. It is a complicated space, and everyone does it differently. The more you know about it, the higher the chances to succeed. (Here are my top resources to get you started)

By being systematic and reflective about your decision-making, you can help to ensure that you are making the best possible decisions for your product and your users.