Overcoming the ostrich effect to better your decision making
As I take the first sip of my flat white, an anxious thought enters my mind: I spend much more on coffee than I should. Yet, not uncommonly, I don’t know exactly how much more, as I prefer to remain blissfully unaware of that fact. In an attempt to understand my flawed thinking on the subject I couldn’t help but wonder, could I be avoiding tallying the cost of my monthly coffee spend for the same reason that people tend to avoid getting suspicious moles checked, despise performance reviews at work, and ignore red flags at the start of a relationship?
Ignorance is bliss, right?
It turns out that this behaviour is caused by a cognitive bias called the ostrich effect - a term coined to describe our tendency to avoid potentially useful information because we perceive it as negative or unpleasant.
The Ostrich Effect: What it is and how it affects us
Essentially, negative information causes our rational and emotional minds to conflict. Our rational mind knows that negative information can be useful, but our emotional mind protests, wanting to shield us from anticipated pain.
This effect is most prevalent in financial markets where investors avoid risky positions by pretending that they don’t exist and tend to monitor their portfolios more frequently when markets are up than when markets are down. In our personal finances, we have a similar propensity to check our account balance more when we save, and less when we spend.
Research also shows that individuals who present symptoms or are at risk of hereditary diseases tend to avoid getting tested out of fear of negative results, even though an earlier diagnosis would lead to more effective and less costly treatment.
Ignorance is bliss for now, but not forever
Understandably, ignoring ‘painful’ information offers us a measure of relief. A person at risk of life-altering disease, for example, would rather live their life happily unaware of their illness for as long as it is possible. However, this avoidance strategy offers only momentary comfort.
Forgoing information offers longer term consequences that could be detrimental to our goals, health, and finances. Information feedback is important because it helps us to update our beliefs, avoid costly mistakes and successfully work towards our goals by monitoring our progress. Without it, we lack the necessary inputs to make good decisions. By monitoring our bank balances only when we expect an inflow, or have reached our savings goals, we forgo information that will help us to save or budget better.
Overcoming the urge to put your head in the sand
The good news is that, with a little determination and a few nudges, we can persuade our emotional mind to believe that the cost of obtaining negative information is well worth what it achieves.
Here are a few useful tips I’ve found for combatting the ostrich effect and making better decisions:
Acknowledge your ostrich-like tendencies: Research shows that merely being aware of one’s tendency to avoid information, decreases the likelihood that one would avoid it.
Pre-commit to future desired behaviour: Induce future focused thinking by means of pre-commitment. Set monthly appointments with your financial adviser, dermatologist, or manager to obtain the relevant information before your emotional mind has a chance to object.
Change the way you perceive negative outcomes: Knowledge is power, not pain. Bill Gates attributes much of his success in managing Microsoft to facing negative information head on, using it as a catalyst for change: “Once you embrace unpleasant news not as negative, but as evidence of a need for change, you aren’t defeated by it. You’re learning from it.”
The next time you are tempted to bury your head in the sand, keep in mind that overcoming this urge and committing to gathering all the necessary inputs and information will no doubt lead to you making markedly better decisions for your future.
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