What are important cognitive biases to be aware of?
Cognitive biases are heuristics, shortcuts used by the brain which evolved during the long time humans spent as hunter gatherers in the savannahs of Africa. The shortcuts worked well in the symbolically simple environment of the savannah but these heuristics are ill-suited to the global symbolically complex urban environments we now live in.
Bias towards the seen over the unseen
For example, we are likely to judge a house based on doors, kitchen appliances, carpet or floor boards, and other things we see rather than the frame, insulation, plumbing and other interna structure we do not see. These hidden structures being the more expensive components of the house, and whose good condition is more important in the long term up keep of the house.
Another example, society is likely to reward people cleaning up after a disaster over people who prevent disasters from happening in the first place like regulators who prohit people from building homes in unstable cliff faces.
People who manage risk get booed during the good times and get blamed during the bad times.
We hear about a friend or an uncle who got rich because he bought shares in uranium mining companies, we conclude that buying shares in uranium companies is a good investment. We ignore the large number of people who lost their shirts buying the same kind of shares.
The probability of being robbed in a particular city is low. However, a friend told you she got robbed in that city. We are likely to avoid visiting that city.
We tend to value the testimony of a credible looking witness over a nervous witness, even if closer analysis of the facts reveals that the testimony of the credible looking witness is improbable.
Absence of proof, proof of absence
It is very easy for us to conclude that something does not exist because we can't find proof that that something exists.
In the past doctors could not find anything in mother's milk that made it superior to infant formulas so they concluded that infant formulas are as good as mother's milk. Only later did they realize how wrong they were—to the detriment of children reared solely on infant formulas.
A similar thing happened with fiber in food. And I suspect the same goes for so called “junk” genes. Similarly, just because one cannot prove god does not exist, it does not mean that god exists.
The problem with induction
You may keep finding a lot of white swans. You could even find millions of them. But that won't be enough to conclude that all swans are white. Once you find even a single black swan, your theory that all swans are white is instantly falsified. All those millions observations will be for naught.
Closer to home, just because we did not see house prices go down prior to 2008 does not mean they never will. In fact, they did. Just because shares have been outperforming other investments on the average for many people for the last so many years does not mean they will do so for you or will always keep doing so for those who already got their paper gains.
Favoring the linear, sequential and binary over the exponential, fractal and paradoxical
We are predisposed to easily accept and understand:
•for every action, there is an equal and opposite reaction;
•the bell curve;
•slowly but surely we'll get there; and
•if you're not for us then you're against us.
It is much harder to accept and understand:
•the whole is more than the sum of its parts;
•network effects, tipping points, Matthew Effect, exponential growth;
•skewness, long tails, fat tails;
•revolution and change happens in sudden growth and spurts; and
•I can neither be good nor evil, religious nor atheist like Schrodinger's cat & parallel multiverses.