Our latest financial psychology term describes how we can sometimes fall prey to errors in decision-making about others. The American Psychological Association defines fundamental attribution error this way:
the tendency to overestimate the degree to which an individual’s behavior is determined by his or her abiding personal characteristics, attitudes, or beliefs and, correspondingly, to minimize the influence of the surrounding situation on that behavior (e.g., financial or social pressures).
Your neighbor who is still unemployed after a year is “lazy.” The guy who cut you off on the road this morning is a “jerk.” The passenger next to you on the plane who won’t make eye contact with you is “shady.”
Or: the client who fails to write you back about your proposed plan is “inconsiderate” or “irresponsible.”
Are we all willing to label folks so quickly without knowing more information? Unfortunately, many, if not all of us, unknowingly engage in this error in decision-making. When we decide that clients have certain personality traits with limited information, we may be engaging in this cognitive bias.
The problem? Once we think we’ve nailed down a client’s personality, we have difficulty changing our minds about their profile, even if our first impressions were inaccurate.
Learn more about this cognitive bias and what it means for working with others (and how to prevent it!) in this article from the Harvard Business Review.