Action Bias
How you can win more by doing less.
This article does not just tell you why your impulsivity is controlling you; rather, it tells you how you can control your impulsivity to win more by doing less.
CONTENTS
1. Definitions and Context
2. Studies
2.1 Anthony Patt and Richard Zeckhauser
3. Examples
3.1 Everyday Decision Making
3.2 Businesses
3.3 Economics
3.4 Football
3.5 Fantasy Premier League (FPL)
4. Conclusion
[1. Definitions and Context]
Simply put, action bias describes the human tendency to favour action over inaction. Behavioural economics believes this tendency stems from the human need for control.
In order to gain control of a situation, we act on impulse, thinking that we have found the solution to our issues.
Imagine this: You’re sitting by your laptop when you notice that the screen is blank. Nothing’s working. “Oh no,” you think, and you start panicking as you wildly click on buttons. “Maybe the space bar will work? Maybe escape?” even if you have no logical reason to think so.
We’ve all been here; we’ve all wanted to control this situation of uncertainty by exerting, what we think is, control over it.
However, actions do not always help the situations we find ourselves in. And this is the magic (or downfall) of action bias.
There are many reasons for our susceptibility to action bias. Take, for example, societal norms.
We may do something for others or act in a way we believe others expect, even if it's not statistically or instinctively correct.
Let’s talk about instant gratification. Who do you think society will applaud more in the moment: an instant unethical millionaire or a self-made, honest, hard-working millionaire who has made their money over a decade?
As long as their unethical ways are not overly apparent, it’s always the instant millionaire, for better or worse.
Such irrational worries about what others will think of you—something that is ultimately outside of your control—may lead you to take action that sacrifices long-term success for short-term success. Why? For a fleeting moment of approval from society before they move onto the next person.
But that's not all. Look at the presence of action bias in overconfident individuals.
Let’s look back at the computer example. If a first-year, ultimately clueless in the grand scheme of things, computer science undergrad student sees that their computer isn’t responding, they may think it’s a menial issue. “I’m getting a degree for working with computers after all!” They may be more susceptible to the overpressing of buttons, simply because they believe in their own ability to make the 'right' decision.
Of course, the opposite applies as well. If you have low self-confidence, you may not take action when needed, which opens its own can of worms.
“But Adi, you’ve told us about how we wish for control and not why. You’ve also given me a mild existential crisis, but I forgive you.”
So where does this desire for action and control stem from?
We inherently believe that doing something is always better than doing nothing. We believe that our failures, if they were to occur, would be less harshly judged if people thought we had made an effort to rectify the situation. If the instant millionaire tried one last get-rich-quick scheme to get to a million dollars, he would be applauded for his efforts. Meanwhile, the decade-long millionaire does not take action because he knows that the issue will rectify itself, and society chases after him with their pitchforks.
Is that “right”? No. Is it what is likely to happen? Unfortunately, yes.
Often, taking action is what makes rectifying the situation an even harder task.
To sum up what I mean, think of inaction as anticipated regret. People worry that the regret resulting from inaction, which leads to a negative outcome, might be greater than the regret stemming from taking action, even if the action leads to a proportionately more negative outcome.
[2.1 Anthony Patt and Richard Zeckhauser]
The paper I will refer to was authored by Anthony Patt, an environmental scientist, and Richard Zeckhauser, an economist, representing two closely related fields at the core of the paper's subject matter.
Patt and Zeckhauser examined the bias exhibited by policymakers and individuals, favoring immediate action to address environmental issues. This initial statement might seem broad, but they followed it with the observation that, in many cases, delaying decisions to gather more information would have been more effective.
Funnily enough, this was one of the rare cases wherein a policymaker actually made a decision, but they should have held back. The pressures of expectations mounted on them, perhaps?
They also discussed how politicians often prioritise flashy legislation over more effective alternatives to gain attention. This practice makes it seem like significant action is being taken when, in reality, the return on investment is minimal.
City A may benefit from covering up potholes in Region B, but Region B doesn’t get the same attention as Region C. “Let’s fix the potholes in Region C!”
In such cases, we tend to perceive any action as positive, leading to praise for often meaningless actions without substantial progress.
[3.1 Everyday Decision Making]
“But Adi, now that we know what action bias is and why we shouldn’t repeatedly yell and break our laptop trying to fix it, where else do we see action bias?”
That is an excellent question. Let me answer with a story of my friend. Let’s call him Billy.
Billy went grocery shopping, intending to shop for the week. He picked up all his groceries and walked over to the checkout aisle. As he stood there, waiting for the person in front of him to finish, he noticed a chocolate bar to his left. "It costs just $2," he thought. “I’m never going to see the result of saving this anyway; I may as well buy it.”
Billy has unfortunately fallen victim to action bias. You see, it was easier for Billy to see the short-term cost of purchasing the chocolate than what saving $2 could lead to.
Billy did not walk into the shop expecting to buy that bar of chocolate, but seeing its low price and his natural craving for chocolate, he did. Even if he did not want to.
Here’s another example. And I’m sorry, Billy, it’s about you again.
So Billy ate his chocolate. Unfortunately, eating it made him feel sick, so he did the natural thing and went to the doctor. He incessantly complained, going on and on about how sick he felt. Now, the doctor did not think that there was a major issue, and deep down, he wanted Billy to go home and come back the next day to see if anything developed.
“But it feels wrong sending Billy away with him complaining like this,” thinks the doctor. “Let me give him a prescription of x medicine instead; it’s quite mild anyway.”
You see, just as inaction can be considered to be anticipated regret, it can also be interpreted as not caring. And when you’re a doctor? That is a major red flag. So in order to take action, to make Billy think he will feel better, and to make himself feel better, the doctor prescribes a medicine to Billy that he may not have needed.
[3.2 Businesses]
Just as Billy did not properly weigh up the short-term vs. long-term effects of buying that chocolate bar, businesses sometimes prioritise quick fixes to address their issues without analysing why the issue came up or whether a long-term fix would be more sustainable.
Take Business A. Business A is well-reputed and is a large producer in Country B. Unfortunately, Business A has seen a dip in quality, and doesn’t know why. Hence, they decide to simply increase production, hoping that an increased output will compensate for the reduced quality. The defective products can eventually be thrown out, after all.
Where it would have been more sustainable to analyse why there were quality issues, Business A simply papered over the cracks. It’s similar to the instant gratification example; however, this is a large business making an equally large mistake.
Would the short-term sacrifice have been worth it in favour of improving quality in the long run? In most cases, it would. It’s just hard to see that.
For a more human-centric example, let’s take a look at meetings. Say Business A has found itself in another crisis: someone is stealing the company’s toilet paper. A travesty, I know.
To counter this, Business A has offered a reward for whoever confesses to the crime. In this manner, they believe that the situation will ultimately resolve itself.
But Business A is jittery. It loves its toilet paper. So, to stop the thief, they hold meetings after meetings to discuss what could be done to find the thief.
CCTV with night vision to find a toilet paper thief, really? Meeting after meeting goes by, and they do not find a ‘eureka!’ moment, only hours of wasted time and opportunity cost. Eventually, the thief confesses and takes his reward.
See what I’m getting at here? Business A didn’t have to take further action for the thief to confess; their original system would have done the trick, and they knew it. But they could not stand the perceived regret of inaction and held meeting after meeting, even though it was pointless.
In an attempt to avoid perceived regret, they increased their opportunity cost and, in hindsight, their actual regret.
[3.3 Economics]
The same concepts can be applied to economics. This example is slightly extreme, but a slightly watered-down version is quite perceivable.
Let’s say Country A’s job market is extremely volatile. When you look up “Country A” online, all you get is a link to Merriam-Webster’s definition of “unemployment.” And the next day, the same link takes you to "employment." That unstable.
The central bank is naturally worried, so it decides to implement a monetary policy, specifically by adjusting interest rates. When there’s high unemployment, the central bank may decide to lower interest rates. If the interest rates are low, the opportunity cost of saving proportionately rises, so businesses may as well invest that money, right? So employment rises.
But the central bank is jittery. They cannot stop adjusting interest rates. So they do it once. And twice. And, oh my god, they've changed the interest rate more often than a teenage girl deciding her Starbucks order.
This tendency for action may not result in a positive outcome; instead, it’s likelier to make Country A’s job market even more volatile. Interest rates change frequently, but beyond a point, they may become excessive and even cause other issues—economic uncertainty reducing spending, thereby conflicting with the interest rates, anyone?
But it’s not just the big financial institutions that are susceptible to action bias in this context. Even you and I are. In fact, we’ve probably fallen for the following example:
Imagine this: You’re loving your best life in Country A. The sun is shining, the birds are chirping, and the economy is booming. Yay, economic growth! So you decide to spend your hard-earned income—life is good.
You’ve maximised your utility in the short term, but as the excitement of short-term spending passes you by, you realise that you haven’t considered what happens in the long term. Will the economy remain stable? Will your job, hence your income, remain liveable?
Our tendency to take action may sometimes override our perception of what we cannot see, such as what happens in the long run.
[3.4 Football]
For the first part of this section, I will be referring to pp. 606-621 of “The Journal of Economic Psychology,” particularly, Action bias among elite soccer goalkeepers: The case of penalty kicks (2005).
286 penalty kicks were analysed from all the top leagues. Based on its probability distribution, it was found that the optimal strategy for goalkeepers were to stay in the middle of the goal, i.e. not to move.
Surprising, I know. But this is exactly what action bias is.
Norm theory (Kahneman and Miller, 1986) say that when a goal is scored following inaction, the goalkeeper feels worse than they would have, had they moved.
It makes sense right? Just picture yourself standing in front of goal, trying to save Erling Haaland’s penalty in the 95th minute. He steps up, and he scores! But wait, you just stood there looking clueless?
It’s only natural for the (somewhat) irrational worry of embarrassment to consume you, but should it dictate your actions?
It’s the same with defensive actions. Defenders may succumb to action bias (or just plain old violence) by stepping out and attempting a tackle. Its adverse effects may be mitigated in possession, but outside of it, you simply leave yourself vulnerable to counter attacks.
Managers aren’t exempt to action bias either. Imagine yourself to be… let’s say Pep Guardiola. You tap your head and realise you have no hair left! But you’re also 1-1 in the 89th minute and you’re chasing a goal. You abandon your possession based system and 3-2 buildup, instead you push everyone forward. You’ve gone from a 3-2-4-1 to a 1-2-7 faster than a blink of an eye.
Now, City have enough quality to overpower most other teams. There is a lot of pressure on the defending team when they’re desperately trying to park the bus. Of course, it makes sense for you to increase the tempo, but to drift away entirely from a solid game plan? To make two substitutions just because you’re chasing even if they’re not to the benefit of the team?
Hello, action bias.
[3.5 Fantasy Premier League]
Just as Billy overvalued short-term gains with his chocolate bars, FPL managers often do the same with transfers. Yes, you may gain some short-term EV, but how does this affect you in the long run?
Once again, the following example is slightly extreme, but it’s worth considering at least. You look at your bus team, and you’re satisfied with it.
“I’m getting a green arrow, for sure!” you think, unaware that green arrows are but a myth.
It gets closer and closer to the deadline, and you’re still happy with your team. But wait. What’s that? You have two free transfers?!
"Well, I have to use one; imagine burning a transfer!” you say exclamatorily. So you do. You make a transfer, and contentedly, you step away from FPL for the weekend.
It’s now Monday, your kids are crying, your dog is barking, and someone is trying to rob you as you walk on the street as you check how your FPL team did. We all have our priorities, after all.
You stop. The robber stops. You yell. The robber cowers.
“The player I bought blanked, and the player I sold hauled?! Blasphemy!”
Sometimes, burning a transfer can be optimal. Is it unlikely? Sure. Does it hurt your short-term EV? Probably. But there are times it may come up, and it’s best to know to avoid a similar scenario.
The same concept can be applied to captains and vice-captains. If you don’t change anything from your bus team, you may be tempted to simply swap around your captain or vice captain just to feel like you’ve done something. Action to avoid perceived regret, after all.
[4. Conclusion]
Does this mean action is entirely fallible and it’s best to avoid any form of action? No, of course not. Action is still (and will always be) a good thing, necessitating hard work and dedication.
It’s simply best to know about the concept of action bias and how it could affect us. Distinguishing whether a reaction is needed following an action requires inquisitive and logical thinking, such that you can get close to the best possible outcome.
Even if that includes doing nothing.