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Diversification Bias

Spreading our resources thinly across numerous options instead of concentrating on a few.

Diversification Bias

Peter, a college student, was known for his ambition. He had a goal to get into a prestigious graduate school, and he was determined to do everything it took to achieve it. When it came time to prepare for the entrance exams, Peter faced a tough decision—he could either focus on one or two exams that he knew he could excel at, or he could spread his efforts across several different competitive tests to increase his chances of success.

Peter decided to take the latter approach. He enrolled in prep courses for three exams, each requiring different approaches and study habits. He figured that by diversifying his efforts, he’d increase his chances of scoring well on at least one exam, just in case he wasn’t able to perform well on the others. But this meant that he didn’t have the time to dedicate to any single exam.

As the exam dates approached, Peter found himself overwhelmed. The pressure of balancing multiple study schedules left him exhausted and unprepared. When the results came in, he had passed all three exams, but none with the exceptional scores he had hoped for. His scattered focus had cost him the opportunity to excel in any one of them.

This highlights Diversification Bias, the tendency to spread efforts or resources across several options to avoid risk, instead of concentrating on a few high-value pursuits. While Peter’s instinct was to play it safe by casting a wider net, it ultimately led to mediocre results across the board. Had he focused on just one or two exams, he could have maximized his chances of securing a top score, showing how overextending ourselves can often backfire.

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Tendency to value limited or scarce resources more highly than those that are abundantly available.

Small Win Bias – Gratification Bias

Tendency to prioritizes or value short-term rewards over long-term benefits.

The Cheating Bias

Dishonest behavior by getting influenced to do so when observing others, leading to unethical practices.

Sisyphus Effect

Tendency to give up when there is no gratification or visible meaning / output to efforts.

The IKEA Effect

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Dunning Kruger Effect

Overestimating one’s knowledge due to a lack of understanding about the complexity of a subject.

Decoy Option Effect

Influences preferences by introducing a less attractive intermediate option, subtly steering choices towards more profitable alternatives.

Confirmation Bias

The tendency to search for, interpret, favor and recall information in a way that confirms or supports one’s prior beliefs or values.

Spotlight Effect

The tendency to believe that we are being noticed more than we really are.

Anchoring Bias

People rely heavily on the first piece of information (the “anchor”), even if it’s irrelevant.

Current Mood Bias

It is a distortion in cognition and decision making due to the present emotional state.

Prestige Bias

The tendency to favor the opinions of individuals or groups with higher social status or authority even when not in the same field.

Social Desirability Bias

Tendency to respond to or behave in a way that is socially acceptable or desirable, rather than expressing their true opinions or behaviors.

Recency Bias

The tendency to better recall recent information and events while ignoring older information.

Restraint Bias

The tendency to overestimate the level of control we have over our impulsive behaviors.

Survivorship Bias

The tendency to focus on the individuals or things that have “survived” or succeeded, while overlooking data from those that have not.

Response Bias

Tendency to provide inaccurate or false answers during surveys or interviews.

First impression Bias

The tendency to form lasting opinions based on initial experiences.

Omission Bias

Tendency to avoid taking action due to fear or uncertainty, even when not taking action could be more harmful.

Bundling Bias

The tendency of buying things that are sold together, even if we don’t need everything in the bundle. Think of this as the “package deal effect.”

Distinction Bias

In decision making, we tend to overvalue the minor differences between two almost similar options when we examine them together.

Projection Bias

Individuals overestimate the prevalence of their own thoughts, beliefs, preferences, and knowledge in others.

Salience Bias

Our tendency to focus on items or information that are more noteworthy while ignoring those that do not grab our attention.

Pessimism Bias

A tendency to believe things will go wrong even when there is no evidence to support it.

Optimism Bias

Tendency to overestimate the likelihood of positive outcomes and underestimate the negative ones.

Bandwagon Effect

It refers to our habit of adopting certain behaviors or beliefs because many other people do the same.

Framing Bias

Equivalent information can be more or less attractive depending on how it is presented, influencing our decisions.

Recall Bias

Individuals do not accurately remember past events or experiences or leave out details while reporting about them.

Group Think Bias

A group of individuals reaches a consensus without critical reasoning or evaluation of the consequences or alternatives, simply doing or agreeing because everyone else is.