3 Mechanisms That Bias Our Decision-Making: Representativeness Bias

Every single person has a mental model.

When assessing the likelihood of an event, the individual bases the event’s probability upon its similarity to that model.

This is called representativeness bias.

Last week, we talked about availability bias, one of the three mechanisms that bias our decision-making.

Availability bias involves one’s perception of an event’s frequency based upon its vividness and frequency in the forefront of one’s mind.

Now, let’s take a look at how this second mechanism – representativeness bias – distorts judgment and decision-making.

Marriage & Divorce

One example of representativeness bias involves marriage.

Many people’s mental model of marriage is that of a lifelong partnership. Not often does a couple enter into a marriage with a view of divorce.

Due to their mental model of eternal love, only around 5 percent of couples in the U.S. sign a prenup, despite around 50 percent of marriages ending in divorce, according to research by Harvard Law.

Somehow, most don’t consider they’ll be part of the statistic and, so, don’t plan for it.

In this way, the power of representativeness bias is stronger than the logic of probability.

Representativeness Bias in Business Decisions

Culture, of course, influences our mental models, and so representativeness biases are grounded in culture.

Let’s look at another example of how a business decision revealed representativeness bias, likely to the detriment of the business.

The global insurance company, Allianz, had built business in eleven African countries. Although profitable, the business was small and, in March 2014, Allianz reviewed their strategy on the continent.

They narrowed their way forward down to two roads: 1) apply aggressive growth through acquisition, or 2) wholly sell off the business.

The board of Allianz was presented with a growth strategy. They rejected it.

Their view was that Africa’s corruption was too extensive and might put the insurance company at reputational risk.

However, Allianz continued to do business throughout Eastern Europe.

According to the Transparency International list – an index of worldwide national corruption – several countries in Eastern Europe, in which the insurance group remained, rated equally corrupt as their African counterparts.

The West’s mental model of Africa considers the entire continent as one monolith of extreme corruption, thereby biasing judgment in lieu of logical probability.

In dismissing growth based on representativeness bias, the company may have lost out on a successful business venture and the profitability that accompanied it.

Tune in next week for anchoring bias.

China and the Marriage Buyer’s Market

You might think there are universal norms regarding love and marriage, but that is certainly not the case.

Last week, we discussed Japan and the norm of marrying for economic advantage over love. In neighboring China, this idea is also ingrained.

And parents considering marriage prospects take the matter so seriously that, in Shanghai, Beijing, and other Chinese cities, “Marriage Buyer’s Markets” exist.

People’s Park Marriage Market

In the Marriage Buyer’s Market in Shanghai’s People’s Park, a summary outline of daughters and sons, alike, are presented by their parents on cardboard signs.

Similar to a job fair, other parents in search of proper partners for their children are invited to walk around, perusing the signs, which enumerate the pros of marrying the daughter/son in question and attempting to matchmake the best prospects.

Some selling points you might see on signs:

  • Born in the year of the dog/171cm/12.000 Yuan salary
  • Own apartment/76sqm/188cm

Chinese marriages are still dowry-based, like in India; but unlike India, the dowry is paid not by the bride’s parents, but by the groom’s, and is termed “bride prices.”

As detailed in The Economist:

“Most of China is patrilocal: in theory, at least, a married woman moves into her husband’s home and looks after his parents…The groom’s parents…are expected to pay for the wedding and give money and property to the couple. These bride prices have shot up, bending the country’s society and economy out of shape.”

This makes shopping for the right partner all the more difficult. If the groom’s family is unable to afford the bride prices, then he is not considered a good match. Moreover, with the male-to-female ratio being 105:100 according to a 2017 census, the gender imbalance in China makes the chances of finding a mate even slimmer.

The bride may also have difficulty. In fact, those women of high income and education who haven’t married before the age of 30 are christened with the derogatory term, “leftover women.”

What this all boils down to is that love is not the currency for successful marriages in China; horoscope, property, and income are.

As one Chinese mother summed up the culture’s values and norms regarding marriage:

“First you build your life, and only then also your love.”

Love Happiness vs. Team Happiness

In this way, the West’s focus on love equating a happy life differs from the Chinese focus on economic teamwork equating the same.

The perfect Chinese mate is someone to help you stay afloat financially, raise a family, and succeed mutually in the balancing act of life…and, perhaps most importantly, not be considered “leftover.”

And searching out this perfect mate is not a private concern; it’s a familial affair.

As Wlada Kolosowa, a journalist for the German magazine, Spiegel, sums up:

“In the Western world, love is a matter between two individuals; in China, it is a union between two families.”

Next week, we’ll talk about two-generation families versus extended-generation families. Stay tuned.

Marriage for Economic Advantage in Japan & How Saving Face Impacts Job Loss

The norm in the West is that one should marry for love.

But imagine growing up in a culture where economic advantage was given priority.

This is largely the case in Japan.

History Repeats Itself

Prioritizing economic advantage in marriage is not unique to Japan and other Asian countries; in fact, it was once a Western norm, as well – and pretty recently, at that.

People were often coupled in European countries according to class and, thus, economic advantage.

If you’ve ever read a Jane Austen novel, then you know that locking down a wealthy suitor, preferably one with plenty of property, was much more advantageous to a young woman (and her parents) than finding someone she loved.

It was only at the beginning of the twentieth century that “love marriages” were more commonly sought.

But Confucius saw it differently. He placed economic advantage above love, and in this, the Japanese agree.

Head of Household

One way in which Japanese society differs from the West is that women are more often the heads of household when it comes to finances.

While Japanese husbands have long been responsible for bringing home the bacon just like everywhere else, women are largely in charge of this bacon.

So, what happens when a man should lose his job in Japan?

Well, this is seen as a huge failure on his part – and a personal one, regardless of whether the firing was only an economical company decision.

Job Loss & Suicide Rates

Whereas in a love marriage, a wife would be expected to support her husband through such a crisis, in Japan, not so.

If a Japanese man loses his job, he also loses his social standing…and he may lose his wife too.

Because of the fact that the man would no longer be fulfilling the primary task in the economic marriage compact – making money – he would not expect support from his wife.

Instead, he might expect to lose honor, lose face, and feel the powerful shame that accompanies that loss. This is one of the reasons that suicide rates in Japan after job loss are incredibly high.

According to National Jobs for All Coalition:

“From 1953 to 2003, each 1 percentage point increase in the cyclical component of the male unemployment rate led to a 5.39 percentage point increase in the cyclical component of the male suicide rate. This effect is 38 times larger for Japan than for the United States.” 

Moreover, Japanese companies are very reluctant to fire staff, because of this societal loss of honor and the resulting shame. Layoffs, in fact, are considered taboo. So, instead of firing employees, companies may demote those who are ineffective but keep them on the payroll.

However, don’t consider this act too merciful; although they refrain from firing ineffective employees, they also try to make the office more uncomfortable for them – think smaller, windowless offices without air-conditioning. In fact, they have places called “boredom rooms,” where they essentially try to drive staff to voluntarily quit.

In this way, Japanese norms and values reverberate throughout their culture, with the need to save face permeating up into the very policies and procedures of company culture.

Next week, we’ll continue our tour through marriage in Asia by exploring the “marriage buyer’s market” in China.