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Thinking traps are cognitive shortcuts that serve us well — until they lead us into big mistakes. When you’re in the leadership seat, falling into traps like confirmation bias, loss aversion, or the planning fallacy can create enormous financial and reputational costs. Executives stand to gain significant competitive advantage by understanding and avoiding these common errors.

On the latest episode of Chief’s podcast, “The New Rules of Business,” Co-Founder Carolyn Childers talks to Professor of Psychology at Yale Dr. Woo-Kyoung Ahn about how to steer around common thinking traps. The author of Thinking 101 explains that the first step to avoiding these cognitive errors is to understand why we all make them.

“Thinking errors are a side effect of our highly evolved cognitive systems. For instance, we evolved to deal with what we can see and touch, not statistics and other abstract notions. As a result, we have a tendency to be more affected by anecdotes rather than data,” says Dr. Ahn. “It’s also important to understand how prevalent these errors are. For example, we often think of confirmation bias — the tendency to confirm what one already believes — as something that’s only committed by people who are self-righteous, narcissistic, or belong to the other political party. But anyone can commit this error, including me.”

Cognitive errors are common, but their consequences can be devastating when you’re running a business. The planning fallacy, for example, is the error of underestimating how much or how long it will take to finish a project. Not a huge deal if you’re building a birdhouse in your backyard. But if you’re building the Sydney Opera House and you exceed your budget by 1000% and miss your milestones by 10 years — yeah, that’s going to be a problem.

On the podcast, Dr. Ahn offers practical tips for avoiding these pitfalls. For the planning fallacy, for instance, she advises, “Something will always come up, so multiply the time you think your project or task will take by two.”

For leaders seeking to avoid loss aversion as they trim their budgets, she recommends, “Pretend you’re starting from zero with no ongoing projects. Instead of worrying about what you’ll have to give up, focus on deciding where you want to invest.”

To mitigate the influence of anecdotes and examples, Dr. Ahn recommends applying the law of large numbers. Gather as much data as you can, and you’ll be able to make a more informed, rational decision.

Rational and informed decisions are something we could all use a lot more of, according to the professor of the most popular course at Yale. “It used to be common sense that it’s good to be logical and rational, but we started losing sight of that,” she says. “We stopped understanding why being rational is beneficial not just to other people, but to us and our lives as well.”