💰 The Secret To Making Your Customers Think Your Price Is A Bargain, And More!

One of the things I enjoy most about writing this newsletter (or any kind of writing in general) is that it gives me a chance to solidify and formalise my thoughts.

It is like a learning process, a checking process, and a reinforcement process all in one. If I have to write about it, then I have to think about it.

There is an expression that goes along the lines of ‘Something once taught is something twice learned’, meaning that teaching helps you understand the material more deeply.

As a permanent student, I am always learning, and one of my 2024 goals has been to carve out more time in my diary for more specific learning.

I love to read books on all things business, but I also like learning about the topics and skills that may not be immediately associated with business but can certainly be applied there and used in everyday life.

Something that has always fascinated me is BIAS.

Wikipedia says ‘bias is a disproportionate weight in favour of or against an idea or thing, usually in a way that is closed-minded, prejudicial, or unfair. Biases can be innate or learned. People may develop biases for or against an individual, a group, or a belief. In science and engineering, a bias is a systematic error. Statistical bias results from an unfair sampling of a population or from an estimation process that does not give accurate results on average.’

Hundreds of different biases have been identified, falling in to categories such as cognitive bias, prejudices, and implicit bias.

Biases can be conscious or unconscious. That is to say that you may be aware of your biases, or you may be suffering from them unknowingly.

The most common type of bias falls into the category of cognitive biases, of which there have been over 175 different ones identified.

By the way, I really struggled to get my head around cognitive biases initially, but then I realised that’s because I didn’t understand what the word ‘cognitive’ meant! So a little helper for you:

Cognitive, adjective, cog-ni-tive. of, relating to, being, or involving conscious intellectual activity (such as thinking, reasoning, or remembering)

Cognitive biases are repeated, systematic errors of thinking that occur when you misinterpret information in the world around you. They can affect the rationality of your judgement and lead you to make inaccurate or unreasonable conclusions or decisions.

First reported in 1972, cognitive biases are unconscious, usually automatic, and often occur when people are making quick decisions. But the biases often cause these decisions to be incorrect.

Cognitive biases can be caused by a number of things, including flawed memory, issues with paying attention, social pressures, mental shortcuts the brain uses to make decisions or judgements, and more.

These factors can all cause cognitive bias and affect an individual’s decision-making in multiple areas of their life.

In some situations, cognitive bias can be positive. It can help you make quicker or more optimal decisions at times when all the information is not available or a fast decision is needed.

However, in many cases, cognitive biases cause you to misinterpret information and come to an inaccurate conclusion, leading to poor decisions and misjudgments.

So what cognitive biases do you need to understand most to help you avoid mistakes in your business decisions and to make more money?

Confirmation Bias

This is one that, if you are honest, you will know has affected your thinking on plenty of occasions.

It relates to where we seek information that affirms our existing beliefs while discarding information that contradicts them. It is a very tough bias to overcome, but you should actively train yourself to seek out contradictory information and contrarian opinions to ensure you are always challenging your beliefs and ensuring they are as accurate as possible.

Conservatism Bias

This is where people emphasise pre-existing information over new data. This makes decision-makers slow to react to new and critical information. They are effectively living in the past. We all know people like this, where ‘it was always done this way’, and there is no evolution with the times.

When it comes to decision-making, it is essential to carefully look at new information and honestly determine its value.

Sample Size Neglect

This is a mistake made when people give too much weight to a sample size that is too small. If you want to make meaningful use of data sets, then they need to be large enough to be significant. Small sample sizes have a greater amount of variance than there would be in a larger sample size, distorting the information and the ultimate conclusions.

Anchoring

This is something that happens when people fixate on a target number, such as the result of a calculation or valuation. People will tend to remain focused on, and stay close to, these original targets if the outcomes begin to deviate meaningfully from those forecasts.

This bias is often used in sales as a technique called ‘price anchoring’, and is where someone is viewing the value of one item in comparison to the value of another item. Both values may be incorrect, but someone may perceive the second item’s value differently due to the value of the first item than if they had viewed only the second item in isolation.

This is often seen at work in jewellery stores when the salesperson will start off showing a very expensive item, usually well outside the buyer's budget. This has then set the scene, ‘anchoring’ the customer on that price, so anything they are then shown next will be psychologically compared to that price. So if it is cheaper than the anchor item, even if it is wildly outside the customer’s budget, it will still usually feel like good value.

Framing Bias

This is when a person will process the same information differently depending on how it is presented and received. Is the glass half empty or half full? For example, a patient may be petrified if their doctor tells them there is a 20% chance they will die from a certain illness, compared to feeling incredibly optimistic if they are told that there is an 80% survival rate.

Now that you have an understanding of biases, you will most likely be starting to realise how many of them are around you and the times you have been positively or negatively influenced by them.

Whether you are interested in bias or not, you certainly should be learning about it, as it is undoubtedly affecting you every day. Do you want me to research and explain more of them? Reply to this email and tell me how I can help.

A whopping 74% of CEOs are now dead-set on bagging the absolute best talent, regardless of demographics or geography. This swing in mindset syncs up perfectly with what I've shared recently on my social media – the game-changing impact of 'A players' on a business's success. It's not just about finding talent; it's about breaking free from the biases that have held us back. These CEOs are getting it right – realising that true greatness doesn't care about where you're from or what you look like. It's a commitment to excellence, and as I've said before, paying a bit more for an 'A player' is a no-brainer when you're in for a jackpot of returns.

This mindset is a bold reminder that in the fast-paced business world, the real action happens when people roll up their sleeves and actually get on with the work at hand. I'm much like Musk in this respect; let's make things happen, cut the small talk. I prefer deals over discussions.

As you all know, I wrapped up 2023 with a newsletter poll – the most engaging one of the year! I asked you to rate or slate this newsletter, and thankfully, the response is positive. Even those who hated it voted; I guess if you're still here, you must like something, right? 😏 Polls and questions are my way of keeping the conversation alive. Your opinions matter, and I'm all about fuelling success for those hungry for it.

So, I'm starting 2024 with, yes, another poll but also tailoring this week's newsletter to a subject people wanted to hear: My Opinion. Hence, the newsletter on bias - clever, right? So, if you've made it this far down, please humour me and vote for the topics (that you asked for) that you'd most like me to write about (there's no wrong answer here)..............

P.S…… I know some of you are big fans of this newsletter because you email me and tell me about it. But you still aren’t sharing it with your friends! So use the link below to spread the word and you’ll qualify for some goodies soon!