“The task is…not so much to see what no one has yet seen; but to think what nobody has yet thought, about that which everybody sees.” ― Erwin Schrödinger

This is part-4 of the multi-part series on cognitive biases and how to get beyond them. Here are Part-1, Part-2, and Part-3.

Here are the biases discussed so far:

1. Confirmation Bias

2. Hindsight Bias

3. Negativity Bias

4. Impact Bias and The Inaccurate Simulator 

5. The False Consensus Bias or “most people are like me bias”

6. Attention Bias And The Tunnel Visioning Effect

7. Optimism bias Or the Wishful Thinking bias

8. Distinction bias

9. Anchoring bias

Let us get on with the cognitive biases:

10. The Endowment Effect

“Impossibility only lasts until you find new unbelievable hard evidences.” ― Toba Beta

The endowment effect or bias happens when you demand a lot more value to give up what you own. Your value of giving up something in comparison to your willingness to pay for it is out of proportion.

In other words, we demand more than we would be willing to pay for something because we own it. 

 A research article titled “The Endowment Effect, Loss Aversion, and Status Quo Bias” by  Kahneman, Knetsch, and Thaler explains this bias (Journal of Economic Perspectives, 1991). 

The authors describe the bias by giving the example of a wine-loving economist friend. The economist purchased some high-quality Bordeaux wines at $10 a bottle, a low price point. Soon thereafter, the wines increased in value to $200 a bottle at an auction. 

The interesting point about this example is that the economist would occasionally taste his own wines. But he refused to sell his wines at the auction price. He was also not willing to buy more wines at the auction price either. 

In 1980, Thaler called this bias “the endowment effect.”

This effect was also called “the status quo bias” by Samuelson and Zeckhauser in 1988.

Let us look at economist example above. The bias places the economist in a state of status quo or a preference for the current state. This preference makes him unwilling to either buy or sell the wine. 

The authors also point out that as described by Kahneman and Tversky (1984), this bias is a possible manifestation of loss aversion.

This state of aversion to loss happens when the value of getting an object is less than the disutility of letting it go. 

We find it hard to sell something because we perceive a greater value in the object than what it may be worth. 

What can we do about this bias?

The authors suggest:

“The amendments are not trivial: the important notion of a stable preference order must be abandoned in favor of a preference order that depends on the current reference level. A revised version of preference theory would assign a special role to the status quo, giving up some standard assumptions of stability, symmetry and reversibility which the data have shown to be false. But the task is manageable.”

Action Tips:

1. Understand that we may have a problem of letting go of things because we perceive a greater value in them than the reality.

2. We may also have a loss aversion mechanism in place that bolsters the endowment effect and keeps us locked in a current status quo.

3. Ask yourself if the status quo and being locked into the perceived value and endowment is enhancing your life quality? Perhaps this bias is making you feel stuck. After all, what is the use of having things when you cannot enjoy them or do not allow others to enjoy them. 

4. Imagine the freedom that you would receive by getting a reasonable price for your object. And you can use the resources to enjoy other pursuits that you fancy. 

“The most important thing in communication is hearing what isn’t being said. The art of reading between the lines is a life long quest of the wise.” ― Shannon L. Alder

11. Functional Fixedness

“Human beings tend to be unable to estimate how biased they are.” ― Jean-François Manzoni

In my post on Motivation, I wrote the following:

“In his TED talk, Dan Pink, the author of Drive, presents you with Karl Duncker’s candle problem. You are given a candle, thumbtacks in a box and matches. The objective is to attach the candle to the wall and prevent the dripping of wax on the table.

Many people try to attach the candle to the wall using thumbtacks but it does not work. Some people try to melt the side of the candle and attach it to the wall but that does not work either. 

The idea is to overcome “functional fixedness” and eventually people figure out a creative way to thumbtack the box to the wall and place the candle inside.

The trick is to have the insight to use the box as a candle-holder instead of just as a holder for tacks.”

Let us look at this cognitive problem in greater detail. 

In a study titled “Innovation Relies on the Obscure: A Key to Overcoming the Classic Problem of Functional Fixedness” by Tony McCaffrey in the journal Psychological Science (2012), the author analyzes this idea further. 

The author says that insight problems demand that we see a different solution, something that is normally overlooked.

He gives the example of a toy insight problem where you have two steel rings that are weighty, a long candle, match and a two-inch cube of steel. Your goal is to fasten the two steel rings with the available materials. 

What should you do? The wax melted from the candle cannot hold the rings together because it is not strong enough to do the job. 

To come to a solution, you will have to notice that the wick of the candle can function as a rope to fasten and tie the rings together.

This is an unconventional use for the wick. Once you figure this new function for it, you will find ways to scrape the wax away at the edge of the provided cube. 

He adds that this kind of insight based problem solving happens in real life. Mechanical flight is a classic example.

Humans could not achieve flight so long as they attempted to emulate the flight movement of a bird. But once they got beyond this functional fixedness, flight became possible. 

McCaffrey also mentions Challoner’s work on insight problems and also real-world inventions. Challoner’s work shows us that innovative problem solving requires two steps.

The first step is to notice a new feature of the problem that is not frequently understood or used. The second step then would be to build a solution on that feature that remains obscure or hidden from plain sight. In fact, he calls it the obscure-features hypothesis of innovation. 

He says:

“The classic obstacle is functional fixedness, which has been described as the tendency to fixate on the typical use of an object or one of its parts (Duncker, 1945). On the basis of my examination of many inventions and insight problems, however, I characterize functional fixedness as the tendency to overlook four types of features possessed by a problem object (parts, material, shape, and size) because of the functions closely associated with the object and its parts.”

How can we get beyond functional fixedness? Many solutions are offered, including some from previous studies.

Here are a few of them:

1. You add new information on the old problem, a process that Ohlsson calls “elaboration” or you reinterpret old information or what is called “re-encoding.”

2. You can use Knoblich’s technique of breaking the materials of the problem into smaller parts or what is termed as “chunk decomposition.”

The author argues, that this is not a complete solution to fixedness because even after decomposing objects, you will still need to see their function in a new way. You will need to get beyond the idea that the wick emits light in the example above. 

3. The author suggests a method called “the generic parts technique.” You will need to create a parts diagram and ask 2 questions through the process.

The first question is to simply ask if you can decompose or break the object further into smaller hierarchies. The second would be to ask if this new level and description can suggest a new use and provide a solution.

This analysis creates a generic description based on the shape and the material of the object. You will result in creating a tree with descriptions and potential uses. These descriptions and uses may allow you to see beyond functional fixedness.

So for the example above, create a diagram breaking the candle into wax and wick. Then you describe the wax and list potential uses. 

Then you describe the wick which is a string and list its uses. Ask questions such as: A wick is made of long interwoven strands that can be used for what?

So the decomposition allows you to describe the hierarchies of an object into parts. It also allows you to observe and analyze the generic descriptions and shapes of parts of the objects. 

The results of the study indicated the following:

• Using GPT allowed subjects to significantly solve insight problems. In these insight problems, functional fixedness is a limiting factor. The control group solved less problems. 
• Subjects were able to find and list additional features that would have remained obscure without GPT. This included the major factor that resulted in an innovative solution. 
• Parts, material, shape, and size are our allies in the quest away from functional fixedness. Describing them and finding uses is beneficial.
• On the whole, GPT is a great innovation promoting technique to have in our toolbox of solving obscure and insight-based problems. 

“The rules of the universe that we think we know are buried deep in our processes of perception.” ― Gregory Bateson, Mind and Nature: A Necessary Unity

12. Projection Bias

“I prefer to rely on my memory. I have lived with that memory a long time, I am used to it, and if I have rearranged or distorted anything, surely that was done for my own benefit.” ― Leon Festinger 

In a research article titled “Projection Bias in Predicting Future Utility” by Loewenstein, O’Donoghue and Rabin, (2003) in The Quarterly Journal of Economics, the authors describe this bias.

They say:

“People exaggerate the degree to which their future tastes will resemble their current tastes.”

The authors say that if you want to make a great decision that is optimal, you may have to make a prediction of future states.

The problem is that we are not able to accurately predict for future states because of several factors.

Among them are daily mood fluctuation, and the possibility of social influences. We may also misjudge the possible change of environment. 

An example they give is making vacation plans. You are making summer vacation plans and it is still winter. Will you choose overly warm places based on your current weather? 

We may engage in this bias while making purchases too. Since satisfaction from purchases can fluctuate, we can overvalue or undervalue a product based on the day and our states.

In general we may over-predict the usefulness of an object. For example, we can overbuy groceries if we go to the grocery store hungry than if we go after a meal. 

What are some ways that you can get beyond this bias? Based on the article: 

1. Become aware and experience of this bias but the awareness may not be enough to get beyond it. We know that going hungry to the store can make us overbuy. But the current emotional state might just be overpowering and we still overbuy. 

2. The authors say that one decision in a certain state may not be enough to diagnose this bias. We may be able to observe many of our decisions based on our plans and actual behaviors. This may allow us to come to a conclusion on the patterns. 

3. Setting up of rules such as “never shop when hungry” is a demonstration of the awareness of this bias. These rules provide a specific moment-by-moment awareness and dealing with specific situations. 

And finally this quote by Adam Smith, also quoted in the article is a great description of the bias. 

“The great source of both the misery and disorders of human life, seems to arise from over-rating the difference between one permanent situation and another. Avarice over-rates the difference between poverty and riches: ambition, that between a private and a public station: vain-glory, that between obscurity and extensive reputation—Adam Smith, The Theory of Moral Sentiments

Now over to you. Let me know in the comments below if these biases sound familiar and how you get beyond them.