The Psychology of Decision Making: Why Smart People Make Bad Choices

We like to think of ourselves as rational beings. We believe that if we have a high IQ and enough information, we will make logical choices. However, history is full of brilliant individuals making catastrophic mistakes—from financial bubbles to failed military campaigns. The truth is that the human brain is not a computer; it is a biological organ evolved for survival, not necessarily for pure logic. Understanding why we make bad choices is the first step toward making better ones.

1. IQ vs. Rationality: There is a Difference

Psychologists have discovered that Intelligence Quotient (IQ) and Rationality are actually two different things. While IQ measures cognitive horsepower (processing speed, memory, and pattern recognition), it doesn't measure your ability to override your own biases.

Dysrationalia: A term coined by psychologist Keith Stanovich to describe the inability to think and behave rationally despite having high intelligence.

This is why someone can be a genius at physics but fall for a simple internet scam. Their "engine" is fast, but their "steering" is off.

2. The Mental Shortcuts (Heuristics)

Our brains process millions of bits of information every second. To cope, the brain uses "shortcuts" called heuristics. While these are often helpful, they frequently lead to predictable errors:

The Availability Heuristic: We judge the probability of an event based on how easily an example comes to mind. This is why people fear shark attacks more than falling coconuts, even though the latter is more common.

Confirmation Bias: We actively seek out information that supports our existing beliefs and ignore evidence that contradicts them. This creates "echo chambers" in our social and professional lives.

3. The Sunk Cost Fallacy

Have you ever finished a terrible movie just because you paid for the ticket? Or stayed in a failing project because you’ve already spent a year on it? This is the Sunk Cost Fallacy. Rational logic dictates that you should only consider future costs and benefits. However, humans are emotionally programmed to "not waste" what has already been spent, even if walking away is the smarter choice.

4. Overconfidence and the Dunning-Kruger Effect

Ironically, the more we know about a subject, the more we realize how much we don't know. Conversely, people with low ability in a task often overestimate their own competence. This is the Dunning-Kruger Effect. In high-stakes environments, overconfidence is the primary cause of bad decision-making. It prevents people from seeking second opinions or preparing for "worst-case" scenarios.

5. Training the "Rationality Muscle"

The good news is that rationality can be improved. Unlike IQ, which is relatively stable, you can train yourself to be more logical.

Slow Down: Most bad decisions happen in "System 1" (fast, intuitive thinking). Try to engage "System 2" (slow, analytical thinking).

Play Devil’s Advocate: Always ask yourself: "What if I am wrong? What would the evidence look like then?"

Use Logic Puzzles: Engaging in Logic and IQ tests on platforms like QuickQuizzer.com helps you recognize patterns of thought and identifies where your reasoning might be failing.

The Humility of Intelligence

True intelligence is not about knowing everything; it is about knowing the limits of your own mind. By recognizing the psychological traps we all fall into, we can begin to make choices based on reality rather than impulse. Whether you are managing a business or just deciding what to have for dinner, a little bit of rational friction can go a long way.