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5 Decision-Making Heuristics Everyone Should Know

The average human makes a whopping 35,000 decisions per day. Should you get up? Or sleep in? Go to work? Or quit and move to the wilderness chopping wood all day? Most decisions may be minor, and we make them unconsciously. Still, it would be insane to go through a structured, rational decision-making process every time we face a more significant choice throughout the day. This is where decision-making heuristics come in, rules of thumb that are crucial to navigating an uncertain world full of options.

What Are Decision-Making Heuristics?

Heuristics are mental shortcuts we use every day to solve complex problems fast and make decisions more effortlessly. The term comes from the Greek heuriskein, which means to discover. German researcher Gerd Gigerenzer defines them as “efficient cognitive processes, conscious or unconscious, that ignore part of the information”. Since heuristics reduce complexity to avoid cognitive overload, they have the reputation of being prone to error.

And it’s true. Mental shortcuts are imperfect. I’ve written a whole post about how misapplied heuristics can lead to poor decisions. Psychologists Daniel Kahneman and Amos Tversky have identified several types of heuristics humans use daily. Each comes with a built-in bias. The three most notable are:

  • Availability heuristics: They cause us to come to decisions based solely on readily available information.
  • Anchoring and adjustment heuristics: They make us judge situations based on the first piece of information we receive.
  • Affect heuristics: They cause us to make decisions based on how we feel in the moment.

It‘s not hard to see how heuristic decision-making, while time-saving, can lead our minds astray. That isn’t the whole story, though. Because Gigerenzer discovered that ignoring information can have its benefits. Some heuristics deliver better results than decisions reached through a lengthy process of logical reasoning or quantitative methods. These “fast and frugal” shortcuts are grounded in empiricism, verified through experience and have little to no downsides.

5 Decision-Making Heuristics

Let’s take a look at five heuristics you can consciously apply for quicker decision-making in everyday situations.

1. Recognition Heuristic

Suppose you got up in the morning and decided against quitting your job. A holiday will do. Australia seems like a nice place. Imagine you had the choice between a ticket to Canberra and one to Melbourne. So you ask yourself: Which one is the larger city and a more exciting pick? You could either do your research. Or use the Recognition Heuristic to decide intuitively based on what city you recognise over the other.

There’s an excellent chance that your choice is correct. In a 2002 experiment, psychologists Goldstein and Gigerenzer had American and German students judge the relative size of two American cities, San Antonio and San Diego. The Americans were correct 62% of the time. The Germans had a success rate of 100%. The Americans recognised both cities and needed to fall back on additional cues. For the Germans, San Antonio was much more recognisable. They could rely on the Recognition Heuristic.

Broadly speaking, the correlation seems to be this: The bigger the city, the more likely it pops up on your radar. Or have you ever heard of Humpty Doo in Australia’s Northern Territory? Interestingly enough, the same heuristic decision-making was successfully applied to the prediction of tennis tournament results. You know little about tennis but want to predict a match winner at the Australian Open? Bet on the player you recognise over the other.

2. Familiarity Heuristic

So you’ve taken that flight to Melbourne. And, boy, are you treating yourself. You’ve booked an insanely fancy luxury hotel for the first time in your life. Walking into the lobby, it strikes you, though: What’s the etiquette? How should you conduct yourself in the polite society of a five-star establishment? You have no time or nerves to google let alone learn hotel etiquette. So you make use of the Familiarity Heuristic.

This mental shortcut is ideal for situations that are overwhelming and cognitively demanding. It prompts you to fall back on behaviours you know from previous similar situations. Perhaps you had a work dinner in an upscale restaurant once. You remember the vibe and the behavioural patterns from back then and apply them to the novel situation. To the very least you look a bit less lost.

The Familiarity Heuristic is related to the availability heuristic as you draw on readily available information. But it’s important to note that research suggests it relies on your past behaviour having been appropriate, habitual and successful. In relative terms, falling back on familiar habits beats learning new behavioural standards when you’re under stress. As long as the situation is routine enough, so there is a precedent.

3. Hesitation Heuristic

Having explored Melbourne, it’s time for dinner. But should you eat at the hotel restaurant? The food is supposed to be excellent. And you have the money. But it’s not exactly casual. Besides, you don’t want to end up paying $50 for a deconstructed avo on sourdough… You don’t even know what avo is. Time for the next mental shortcut.

To stop wasting time pondering the right answer, you employ the Hesitation Heuristic: “If you cannot decide, the answer is no.” Championed by Naval Ravikant, it’s a rule of thumb to deal with the plethora of options modern society offers. According to the angel investor, the heuristic is particularly useful for “long-lived decisions”. Those that require a high degree of certainty as they lock you in for a long time.

“If you find yourself creating a spreadsheet for a decision with a list of yes’s and nos, pros and cons, checks and balances, why this is good or bad,” Naval writes, “…forget it. If you cannot decide, the answer is no.” Admittedly, there’s no research backing up this heuristic. It’s probably more of a philosophical contention than an empirical one. So use it a few times and see if it works for you.

4. Imitate-the-Majority Heuristic

It’s Friday night and you’re on a quest to find a decent casual restaurant. One where the locals go. Melbourne is known for its restaurant scene. But where to go for dinner? You could pull out your phone, google ten places and compare them for their merits. Or you use a mental shortcut known as the Imitate-the-Majority Heuristic.

This social heuristic enables you to disregard the information about the thousands of restaurants and cafes in Melbourne by picking the one for which people are lining up on the streets. Granted, long lines in front of popular restaurants are not uncommon in Melbourne. But going with the Imitate-the-Majority Heuristic narrows down your choices significantly. Besides, comparing queues in front of shops is easier than digging through dozens of reviews.

The reasoning behind this decision-making heuristic is that there’s a correlation between popularity and the quality of food. Just be careful; this only works if the popularity is organic. Rent-a-crowd is a practice where businesses hire people to make their establishment seem well-frequented, exploiting the Imitate-the-Majority Heuristic. Also, this heuristic works great for deciding what to do. But I wouldn’t rely too much on it for how to do something due to the risk of losing yourself in mere mimicry and joining a cargo cult. Speaking of cults.

5. Charlatan Heuristic

The restaurant pick was perfect. After a few beers, you make a new friend. He wants to turn you into a real Aussie. See the Sydney Opera House! Cuddle a koala! Surf at Surfers Paradise! Book a $3,000 trip to Uluru! Is he for real or a fake expert only claiming to have special knowledge? In his book Antifragile: Things that Gain from Disorder, Nassim Nicholas Taleb came up with a relevant mental shortcut:

I have used all my life a wonderfully simple heuristic: charlatans are recognizable in that they will give you positive advice, and only positive advice, exploiting our gullibility and sucker-proneness for recipes that hit you in a flash as just obvious, then evaporate later as you forget them.

Only instead of pub acquaintances, the former risk analyst warns of authors writing forgettable how-to books. Ten Steps for Building Muscle, or I suppose, How to Get Better at Writing in 7+1 Steps? While positive advice isn’t inherently bad, excellent advice also comes to you via negativa. What should you not do? Where should you not go? Whom should you not trust? If we follow Taleb’s logic, the absence of memorable negative advice is a powerful decision-making heuristic to recognise false experts.

BONUS: Misapplied Heuristics

In this spirit, let’s end our day in Melbourne with a piece of negative advice. Use heuristics consciously. But don’t use them blindly. That $3,000 offer for a trip to Uluru, aka Ayers Rock? After a few more beers your new “friend” has marked the price down to $2,099. What sounds like a sweet deal may not be one. The reason is the anchoring heuristic, which we briefly touched on in the beginning.

In their 1973 paper Judgment Under Uncertainty, psychologists Tversky and Kahneman described how this mental shortcut leads us to “make estimates by starting from an initial value which is adjusted to yield the final answer.” This can be useful when we’re completely in the dark about a numerical estimate, which is why it’s frequently used by marketers to trick consumers into thinking they found a great bargain.

We don’t consider $2,099 a fair price because we did thorough research on what the service is worth. We consider it fair because we’ve judged the price based on the value first quoted to us. To turn this cautionary tale into a piece of negative advice, we could say: Don’t rely on heuristic decision-making without reflecting on who benefits from you not taking a closer look at all the available information.

Closing Thoughts

Can’t get enough of those mental shortcuts? Check out my article on five more decision heuristics. But remember: Heuristic decision-making isn’t perfect. Even though it’s possible to consciously use it to make quicker decisions and get better answers; without gathering and weighing all the information, or using formal methods such as Structured Analytic Techniques.

As long as we understand the benefits, limitations and risks of mental shortcuts, they’re a decision-making tool worth having in your arsenal. With thousands of decisions per day, we can’t expect to make the ideal choice every single time anyway. We don’t have to, either. Avoiding poor decisions is as important as making the right ones.