Bounded Rationality (& 3 Tips to Limit Its Effect)

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Today’s post has to do with:
Bounded rationality, or when a person places limits on optimization and rationality.


In a perfect world (or in economics), people would act completely rationally with all necessary information and time to make the best decisions which, according to rationally and economics, are ones which promote an individual’s interests.

But, as we’ve seen, this world is far from perfect.

There’s not all the time in the world to make decisions. We can’t think of every option or possibility at once. Sometimes, we have emotions or programming that mess with our frame of mind. Other times, we don’t know all the angles.
It’s easy, even with the best inentions, for a person to make a decision that isn’t rational or in their best interest.

Have you ever fumbled a decision?

Screwed up?

Done something… less-than-great?

I have!

That’s not to say that our not-best choices are irrational; it’s that we have bounded rationality. There are limits to our cognitive abilities. We are only one human in an infinite universe.

Are you omnipotent?

Omniscient?

Telepathic?

I’m not! (But I’m working on it…)

So, what do we do about this bias, aka: limited perspective (especially considering that it can affect optimal performance)?


Here are 3 tips for expanding the bounds of your rationality:

Get Informed

When you have better information, you can make better decisions. It’s that simple.

Remember in math class when they’d ask Suzy has three apples, and Johnny has four brooms. Who’s taller? and you’d look at the paper, up at the teaher, down at that answer choices, and – OH, THANK GOD – there’d be a Option D: Not enough information.

Don’t Suzy-and-Johnny yourself! (Unless, like, that’s your thing… consenting adults, and all…)

Do yourself a favor. Gather information from multiple sources. Ask questions that may contradict your beliefs. Get as much knowledge as possible.

Plan

When I was in college, we would watch game film of upcoming opponents. We’d look at their tendencies, lineups, who hit best from where, who the setter seemed to like, which blockers didn’t move well to the left or right… all sorts of stuff.

We did that to prepare as best we could for the next match. Since we as humans can’t know everything, we formed a plan to cover as many contingenies as we could.

Do the same when it comes to making decisions.

Since time stops for no one, planning for multiple possibilities helps prevent time from being too much of a negative factor.

Planning also reduces the impact of uncontrollable forces. How to Plan

Be In Touch With Your Guiding Principles

When you have a deep sense of your larger philosophy, you can rely on that to guide your decisions when all else fails.

What are your guiding principles?