What Is The Hanlon’s Razor And Why It Matters In Business

Hanlon’s razor is an adage, often quoted as such:

               “Never attribute to malice that which is adequately explained by stupidity.”

In other words, there is a tendency for individuals or businesses to assume malice when that malice is in fact stupidity.

Hanlon’s RazorHanlon’s Razor is a philosophical principle and a form of adage that suggests that one should not attribute to malice what can be adequately explained by stupidity or ignorance. It implies that people often make mistakes or act without malicious intent, and attributing negative motives may not be accurate. Instead, it encourages giving others the benefit of the doubt.
OriginThe principle is named after Robert J. Hanlon, who is not its originator but helped popularize it. Variations of this concept can be traced back to earlier sources, including a 1774 epistolary novel by Johann Wolfgang von Goethe. Hanlon’s Razor encapsulates this idea in a concise and memorable form.
Similar ConceptsHanlon’s Razor is related to other aphorisms, such as Occam’s Razor (“the simplest explanation is usually the correct one”) and the principle of charity (interpreting others’ statements or actions in the most favorable way possible). These principles share the idea of approaching situations with a bias toward simpler, more benign explanations.
ApplicationHanlon’s Razor is often applied in problem-solving, interpersonal relationships, and communication. It reminds people to avoid making hasty judgments about the intentions of others when misunderstandings or errors occur. It promotes a more empathetic and constructive approach to resolving conflicts and improving communication.
CautionWhile Hanlon’s Razor encourages a charitable interpretation of others’ actions, it doesn’t imply that malicious intent is impossible. In situations where there is evidence of harmful intent, it is important to address those concerns appropriately. Hanlon’s Razor is a guideline for everyday interactions rather than a rule without exceptions.
Psychological BiasHanlon’s Razor aligns with the idea that humans tend to exhibit a fundamental attribution error, where they attribute others’ actions to inherent personality traits rather than external factors. Recognizing this bias can lead to more understanding and less unwarranted suspicion.
InfluenceHanlon’s Razor is frequently cited in discussions about human behavior, communication breakdowns, and online interactions, where misunderstandings and conflicts can arise. It serves as a reminder to approach such situations with a mindset of patience and a willingness to consider alternative explanations.
ConclusionHanlon’s Razor is a practical and often wise approach to interpersonal interactions, reminding us to avoid jumping to conclusions about the motives of others. It encourages empathy, understanding, and more effective communication by attributing errors and misunderstandings to factors like ignorance rather than malice.

Understanding Hanlon’s razor

Variations of Hanlon’s razor go back as far as German writer Johann Wolfgang von Goethe, who equated malice and stupidity with incompetence. However, the adage was named after Robert J. Hanlon, who submitted the quote for inclusion in a joke book. 

In the modern context, Hanlon’s razor is a somewhat philosophical concept. Indeed, the principle of a razor in philosophy is one that allows the individual to eliminate or “shave off” unlikely explanations for a particular phenomenon. 

When Hanlon’s razor is not taken into account, the individual or business who has a bad experience assumes that the world is against them. That the world or the individuals it consists of are malicious and intent on doing them harm. 

Instead, Hanlon’s razor advocates that problems and bad experiences are part of life. In the vast majority of instances, there is no malice behind them.

In marketing and business relationships, Hanlon’s razor is one of a suite of mental models that govern specific thought processes attached to examining a problem.

What causes Hanlon’s razor?

Hanlon’s Razor is not caused by any specific factor and, to some extent, has emerged as a heuristic to help individuals interpret the actions of others in a more empathic manner. 

Nevertheless, the tendency for people to assume that hurtful actions are directed toward them can be explained by two cognitive biases. 

These include the affect heuristic and the spotlight effect.

The affect heuristic

The affect heuristic is a mental shortcut where an individual’s emotional response to a situation or stimulus influences their decision-making and judgment. In essence, decisions are made based on the gut feel of the situation as opposed to a more objective or rational analysis.

When the individual assumes malice is directed toward them, it usually invokes a powerful emotional response that clouds their thought processes.

The spotlight effect is a phenomenon where individuals tend to believe they are being observed and scrutinized by others more than they actually are.

The effect relates to one’s appearance, behavior, and actions and the false belief that either of these characteristics is the focus of someone else’s attention.

The term “spotlight effect” was coined by psychologists Thomas Gilovich and Kenneth Savitsky in 1999 and is based on their research on social cognition. The effect is a type of cognitive distortion or egocentric bias that causes the individual to rely too heavily on their own perspective.

Examples of Hanlon’s razor in business

British Airways

When British Airways experienced an IT shutdown in 2017 that affected 75,000 passengers, consumers widely assumed that the airline was acting against them. 

Theories ranged from budget cuts to the outsourcing of work to India, or a combination of both. However, the shutdown was later determined to have been caused by a simple power malfunction.


There is a widespread belief that Apple tries to force people to upgrade to the latest iPhone by slowing the performance of older models. 

Yet Apple revealed that the slower performance was due to an update that decreased the load on older batteries and thus their tendency to cause these older model smartphones to crash.

Wells Fargo

In 2016, it was discovered that Wells Fargo employees had opened millions of unauthorized bank and credit card accounts for customers and, in the process, caused serious financial harm and impacted customer credit scores. 

The scandal resulted in heavy fines and penalties for Wells Fargo and its brand reputation also suffered. Some suspected that the scandal was the result of a deliberate strategy to boost sales and profits at the expense of customers.

However, the investigation that followed concluded otherwise. It was found that the scandal was due to a combination of unrealistic sales targets, inadequate training, and employee incentives that encouraged unethical behavior. 

Despite their unethical behavior, it was found that most staff were not malicious in their intentions. Instead, they were told to follow a flawed business strategy with too much emphasis on meeting sales targets and not enough on customer service and acceptable standards of conduct.


Theranos was a healthcare company that promised to revolutionize blood testing with its proprietary technology. However, in 2015, it was revealed that the company’s technology did not work as advertised and that it had also misled investors and customers about product efficacy.

This scandal resulted in the dissolution of Theranos and criminal charges against founder and CEO Elizabeth Holmes. Perhaps understandably, many were quick to conclude that the end of Theranos was the result of a fraudulent scheme by Holmes and her associates. 

However, as time passed, it became clear that a combination of factors was present. These included a lack of proper scientific validation, inadequate oversight and governance, and an organizational culture characterized by secrecy and deception. 

While there were undoubtedly intentional acts of fraud committed, the root cause of the problem was a systemic failure to prioritize scientific rigor, transparency, and ethical behavior. 

In other words, Hanlon’s Razor assumes that the scandal was more likely to be due to incompetence and ignorance rather than deliberate malice.

The benefits of Hanlon’s razor thinking

Improved relationships

Say for example that a potential joint venture partner does not return a business’s calls. The business could assume the worst and conclude that the other party is acting maliciously toward them – souring the relationship in the process.

Alternatively, the business who practices patience may receive a phone call in a few days explaining that a family member was taken ill and that the partner was still looking forward to a joint venture in the future.  

Better resource allocation

Instead of spending time and money planning for the worst-case scenario, businesses can divert resources to the less malicious (though far more likely) cause of a bad experience.

This encourages fact-based decision making, which investor Charlie Munger advocates as essential to dismantling and then solving business problems that can often be governed by emotion.

Hanlon’s Razor vs. Occam’s Razor

Occam’s Razor states that one should not increase (beyond reason) the number of entities required to explain anything. All things being equal, the simplest solution is often the best one. The principle is attributed to 14th-century English theologian William of Ockham.

Similar to Hanlon’s Razor, Occam’s Razor proposes a simpler explanation for complex scenarios.

Indeed, Occam’s razor tells us that (all being equal) among the possible solutions, the simplest is the one that better fits a specific scenario.

Of course, Occam’s Razor is a heuristic, which means it fits well in complex scenarios with high ambiguity and uncertainty.

Thus, when a business is presented with several solutions to a problem, its best course of action is to choose the solution with the fewest assumptions.

In business, assumptions, especially wrong ones, can be very expensive.

The Occam’s Razor tries to minimize the cost of carrying wrong assumptions, underlying a business.

Hanlon’s razor examples

Here are some more examples of Hanlon’s razor at work.

The media and Apple

Media companies make money by treating negative events as a commodity, creating outrage among consumers, and then selling advertising space to consumers.

In fact, the media has become so skilled at subtly referencing malicious intent that many consumers are today extremely quick to be offended.

When Apple launched Siri in 2011, consumers observed that the service was unable to search for abortion clinics.

Almost immediately, Apple was vilified for taking a discriminatory stance or exhibiting so-called “Bible Belt” family values.

Soon after the issue was made public, Apple spokeswoman Natalie Kerris told The New York Times that the reason behind the error was because Siri was simply not sufficiently developed:

These are not intentional omissions meant to offend anyone. It simply means that as we bring Siri from beta to a final product, we find places where we can do better, and we will in the coming weeks.

The COVID-19 pandemic

Hanlon’s razor is also evident in the implementation of COVID-19-related public policy.

From the outset of the pandemic, governments have had to craft and implement legislation with no known precedent and in a very short space of time.

With that in mind, many governments around the world have implemented policies and procedures that have done more harm than good.

The United Kingdom’s decision to enter lockdown later than other European countries cost it dearly later in 2020, while the Australian government’s failure to contain an infection on a cruise ship caused a significant outbreak in Sydney.

With the benefit of hindsight, we understand that both decisions caused needless injury and death.

But this did not stop some in the public sphere making the outlandish suggestion that the government was looking to reduce the elderly population.

The non-malicious explanation is clearer, simpler, and more realistic.

Faced with a complex, dynamic, and novel virus, government officials were not equipped with the knowledge or information to make the correct decision every time.

Team building

Great teamwork is built on trust which itself relies on individuals assuming that others will not do them harm, possess good intentions, and are working toward the same goal.

Hanlon’s razor can be used to identify many of the common biases that distort the way people interact with others. One of the most prevalent is the availability bias or heuristic.

The availability bias describes the tendency for a team member to rely on readily available information rather than what is most relevant or contextual.

In a workplace setting, this can manifest as an assumption that we play an overly prominent role in the lives of others. 

When a colleague is rude, for example, it’s because of something we did. When a colleague is upset, it’s directed at us.

When we consistently make the connection between ourselves and the behavior of others, we tend to label their words or actions as malicious.

In reality, of course, the colleague may simply be having a bad day and their bad temper has nothing to do with us.

Hanlon’s razor encourages employees to become rational thinkers, develop healthier relationships, and become more productive in the workplace.

Key takeaways:

  • Hanlon’s razor argues that in most cases, it is better to assume that a negative event occurred because of stupidity or incompetence rather than malice.
  • Hanlon’s razor is one of several mental models of thinking that businesses can use. It advocates a fact-based decision-making response to internal or external negative events.
  • The benefits of Hanlon’s razor include better relationships with key stakeholders and smarter problem-solving resource allocation.

Case Studies

  • Facebook’s Cambridge Analytica Scandal: Many believed that Facebook intentionally sold user data for profit. While there were serious oversight and privacy issues, the primary cause seemed to be a combination of lax data sharing policies and third-party misuse, rather than an intentional effort by Facebook to harm its users.
  • Google’s Wi-Fi Data Collection: In 2010, Google’s Street View cars inadvertently collected personal data from Wi-Fi networks. Some speculated this was a deliberate act of surveillance. Google acknowledged the error, indicating it was an unintentional outcome of their data collection process.
  • Samsung Galaxy Note 7 Explosions: When these phones began exploding, there were theories about sabotage or intentional harm. In reality, it was a battery design flaw and a rush to market that led to the issue, not a malicious intent.
  • Boeing 737 Max Crashes: Some conspiracy theorists suggested these were intentional acts. Investigations, however, pointed towards flawed software and inadequate pilot training.
  • Zoom’s Security Issues: In 2020, as Zoom’s usage skyrocketed due to the pandemic, the platform faced “Zoombombing” incidents. While some assumed malicious intent or negligence, the rapid and unexpected growth of the platform led to security oversights which the company then worked to address.
  • Tesla’s Autopilot Incidents: There have been accidents involving Tesla’s Autopilot feature. While critics suggest that Tesla willingly puts a dangerous product on the road, the company stresses the feature’s beta nature and the need for driver supervision, pointing towards misuse rather than intentional harm.
  • Snapchat’s Poorly Received Redesign: In 2018, Snapchat released a significant app redesign which faced massive backlash. Some users believed the company was trying to push them towards certain content or advertisers. In reality, it was a misjudgment in understanding user preferences.
  • Microsoft’s Windows 8 User Interface: Microsoft’s radical redesign in Windows 8 was often criticized and led to theories about the company trying to force users into a new ecosystem. The simpler explanation was that Microsoft misjudged the market’s readiness for such a change.
  • Uber’s Greyball Tool: Uber was found to be using a tool to deceive regulatory authorities. While this does lean more towards intentional deception, the company’s rapid growth and “move fast” culture might have led to decisions without fully considering their ethical implications.
  • Fitbit’s Skin Irritation Incident: Some users of Fitbit’s Force wristband reported skin irritations. While there were claims of the company knowingly using harmful materials, the issue was attributed to users reacting to certain materials, and not a case of the company intentionally causing harm.

Key Highlights

  • Hanlon’s Razor: “Never attribute to malice that which is adequately explained by stupidity.” It advises against assuming malice when a negative event or outcome can be attributed to incompetence or ignorance.
  • Understanding Hanlon’s Razor: The principle of a razor in philosophy allows individuals to eliminate unlikely explanations for a phenomenon. Hanlon’s razor suggests that problems and bad experiences are part of life and are usually not driven by malicious intent.
  • Causes of Hanlon’s Razor: It is not caused by any specific factor but can be related to cognitive biases such as the affect heuristic and the spotlight effect.
  • Examples of Hanlon’s Razor in Business:
    1. British Airways IT shutdown was caused by a power malfunction, not malice.
    2. Apple’s slower iPhone performance was due to battery optimization, not intentional forced upgrades.
    3. Wells Fargo’s unauthorized accounts scandal resulted from unrealistic sales targets and inadequate training, not a deliberate strategy.
    4. Theranos’ downfall was attributed to systemic failures and lack of transparency, not just deliberate fraud.
  • Benefits of Hanlon’s Razor Thinking:
    1. Improved relationships by assuming positive intent and practicing patience.
    2. Better resource allocation by focusing on fact-based decision-making rather than worst-case scenarios.
  • Hanlon’s Razor vs. Occam’s Razor: Both propose simpler explanations for complex scenarios, but Occam’s Razor focuses on choosing the solution with the fewest assumptions.
  • Examples of Hanlon’s Razor in Other Contexts:
    1. Media and Apple: Siri’s limitations were not due to malicious intent but an ongoing development process.
    2. COVID-19 Pandemic: Government decisions were often based on limited information and not a malicious agenda.
    3. Team Building: Assuming positive intent fosters trust and healthy relationships among team members.

Additional Examples

Email MiscommunicationA colleague sends an email with unclear instructions, leading to confusion. Instead of assuming malicious intent, Hanlon’s Razor suggests assuming the colleague made an oversight.– Encourages constructive communication and collaboration by giving people the benefit of the doubt in cases of ambiguity or misunderstandings.
Software BugsA software program encounters errors, causing disruptions. Rather than assuming deliberate sabotage, Hanlon’s Razor suggests considering the possibility of coding mistakes.– Promotes a problem-solving approach, where the focus is on identifying and rectifying errors rather than assigning blame.
Late Project DeliveryA project deadline is missed due to poor planning or unforeseen challenges. Instead of assuming a deliberate attempt to delay, Hanlon’s Razor suggests looking at factors like resource constraints or inadequate planning.– Fosters a more understanding and supportive work environment by recognizing that mistakes and challenges can happen unintentionally.
Misinterpreted Social Media PostsA social media post is misunderstood or misinterpreted, leading to online conflicts. Hanlon’s Razor advises considering that the person may have worded their post poorly rather than assuming malice.– Encourages empathy and constructive online interactions by assuming good intentions, especially in text-based communication.
Unreturned Phone CallsSomeone fails to return a phone call or message. Rather than assuming intentional disregard, Hanlon’s Razor suggests considering the possibility of missed notifications or genuine oversight.– Promotes better interpersonal relationships by reducing assumptions of neglect and fostering understanding.
Traffic AccidentsTwo drivers collide in a traffic accident. Instead of assuming malicious intent, Hanlon’s Razor suggests considering factors like distraction or misjudgment as possible causes.– Encourages empathy and civility on the road by recognizing that accidents often result from mistakes rather than deliberate harm.
Missed DeliveriesA package is not delivered on time. Rather than assuming malicious intent from the delivery person, Hanlon’s Razor suggests considering logistical issues or other factors.– Promotes patience and understanding in customer service interactions, recognizing that errors can occur without ill will.
Misplaced ItemsA coworker accidentally misplaces an important document. Instead of assuming theft or sabotage, Hanlon’s Razor advises considering the possibility of absentmindedness.– Encourages a supportive work environment by avoiding unwarranted accusations and maintaining trust among colleagues.
Forgotten AppointmentsSomeone forgets about a scheduled meeting. Hanlon’s Razor suggests attributing it to a lapse in memory rather than assuming disrespect.– Fosters positive professional relationships by giving individuals the benefit of the doubt in cases of scheduling errors.
Social AwkwardnessA person exhibits socially awkward behavior in a business meeting. Hanlon’s Razor advises considering social anxiety or inexperience rather than assuming rudeness.– Encourages empathy and inclusivity in business settings by recognizing that not all awkward behavior is intentional.
Billing ErrorsA customer receives an incorrect bill. Instead of assuming overcharging, Hanlon’s Razor suggests considering billing system errors or data entry mistakes.– Promotes fair and customer-centric business practices by addressing billing discrepancies without assuming intentional wrongdoing.
Unfulfilled Customer OrdersA customer’s order is not delivered as expected. Rather than assuming negligence, Hanlon’s Razor suggests looking into inventory issues or fulfillment errors.– Maintains trust and customer satisfaction by addressing order fulfillment issues with a problem-solving mindset.
Communication DelaysA business communication is delayed, causing inconvenience. Hanlon’s Razor advises considering technical glitches or scheduling conflicts as potential causes.– Encourages effective communication and understanding between business partners by avoiding assumptions of deliberate delays.
Misquoted PricesA customer receives a product or service at a different price than expected. Instead of assuming price manipulation, Hanlon’s Razor suggests investigating pricing database errors or miscommunications.– Upholds transparency and customer trust by addressing price discrepancies fairly and transparently.
Inventory ShortagesA business experiences shortages of a particular product. Rather than assuming withholding stock, Hanlon’s Razor suggests considering supply chain disruptions or production delays.– Promotes effective supply chain management and problem-solving to address inventory issues.
Customer Service ResponsesA customer receives a suboptimal response from customer service. Instead of assuming indifference, Hanlon’s Razor suggests acknowledging the possibility of miscommunication or unfamiliarity with the issue.– Encourages customer service representatives to approach issues with empathy and a commitment to resolving concerns.
Data BreachesA data breach occurs, exposing customer information. Hanlon’s Razor advises considering the possibility of cyberattacks or vulnerabilities rather than assuming internal misconduct.– Fosters a proactive approach to cybersecurity and data protection by focusing on prevention and response rather than assigning blame.

Connected Thinking Frameworks

Convergent vs. Divergent Thinking

Convergent thinking occurs when the solution to a problem can be found by applying established rules and logical reasoning. Whereas divergent thinking is an unstructured problem-solving method where participants are encouraged to develop many innovative ideas or solutions to a given problem. Where convergent thinking might work for larger, mature organizations where divergent thinking is more suited for startups and innovative companies.

Critical Thinking

Critical thinking involves analyzing observations, facts, evidence, and arguments to form a judgment about what someone reads, hears, says, or writes.


The concept of cognitive biases was introduced and popularized by the work of Amos Tversky and Daniel Kahneman in 1972. Biases are seen as systematic errors and flaws that make humans deviate from the standards of rationality, thus making us inept at making good decisions under uncertainty.

Second-Order Thinking

Second-order thinking is a means of assessing the implications of our decisions by considering future consequences. Second-order thinking is a mental model that considers all future possibilities. It encourages individuals to think outside of the box so that they can prepare for every and eventuality. It also discourages the tendency for individuals to default to the most obvious choice.

Lateral Thinking

Lateral thinking is a business strategy that involves approaching a problem from a different direction. The strategy attempts to remove traditionally formulaic and routine approaches to problem-solving by advocating creative thinking, therefore finding unconventional ways to solve a known problem. This sort of non-linear approach to problem-solving, can at times, create a big impact.

Bounded Rationality

Bounded rationality is a concept attributed to Herbert Simon, an economist and political scientist interested in decision-making and how we make decisions in the real world. In fact, he believed that rather than optimizing (which was the mainstream view in the past decades) humans follow what he called satisficing.

Dunning-Kruger Effect

The Dunning-Kruger effect describes a cognitive bias where people with low ability in a task overestimate their ability to perform that task well. Consumers or businesses that do not possess the requisite knowledge make bad decisions. What’s more, knowledge gaps prevent the person or business from seeing their mistakes.

Occam’s Razor

Occam’s Razor states that one should not increase (beyond reason) the number of entities required to explain anything. All things being equal, the simplest solution is often the best one. The principle is attributed to 14th-century English theologian William of Ockham.

Lindy Effect

The Lindy Effect is a theory about the ageing of non-perishable things, like technology or ideas. Popularized by author Nicholas Nassim Taleb, the Lindy Effect states that non-perishable things like technology age – linearly – in reverse. Therefore, the older an idea or a technology, the same will be its life expectancy.


Antifragility was first coined as a term by author, and options trader Nassim Nicholas Taleb. Antifragility is a characteristic of systems that thrive as a result of stressors, volatility, and randomness. Therefore, Antifragile is the opposite of fragile. Where a fragile thing breaks up to volatility; a robust thing resists volatility. An antifragile thing gets stronger from volatility (provided the level of stressors and randomness doesn’t pass a certain threshold).


Ergodicity is one of the most important concepts in statistics. Ergodicity is a mathematical concept suggesting that a point of a moving system will eventually visit all parts of the space the system moves in. On the opposite side, non-ergodic means that a system doesn’t visit all the possible parts, as there are absorbing barriers

Systems Thinking

Systems thinking is a holistic means of investigating the factors and interactions that could contribute to a potential outcome. It is about thinking non-linearly, and understanding the second-order consequences of actions and input into the system.

Vertical Thinking

Vertical thinking, on the other hand, is a problem-solving approach that favors a selective, analytical, structured, and sequential mindset. The focus of vertical thinking is to arrive at a reasoned, defined solution.

Metaphorical Thinking

Metaphorical thinking describes a mental process in which comparisons are made between qualities of objects usually considered to be separate classifications.  Metaphorical thinking is a mental process connecting two different universes of meaning and is the result of the mind looking for similarities.

Maslow’s Hammer

Maslow’s Hammer, otherwise known as the law of the instrument or the Einstellung effect, is a cognitive bias causing an over-reliance on a familiar tool. This can be expressed as the tendency to overuse a known tool (perhaps a hammer) to solve issues that might require a different tool. This problem is persistent in the business world where perhaps known tools or frameworks might be used in the wrong context (like business plans used as planning tools instead of only investors’ pitches).

Peter Principle

The Peter Principle was first described by Canadian sociologist Lawrence J. Peter in his 1969 book The Peter Principle. The Peter Principle states that people are continually promoted within an organization until they reach their level of incompetence.

Straw Man Fallacy

The straw man fallacy describes an argument that misrepresents an opponent’s stance to make rebuttal more convenient. The straw man fallacy is a type of informal logical fallacy, defined as a flaw in the structure of an argument that renders it invalid.

Google Effect

The Google effect is a tendency for individuals to forget information that is readily available through search engines. During the Google effect – sometimes called digital amnesia – individuals have an excessive reliance on digital information as a form of memory recall.

Streisand Effect

The Streisand Effect is a paradoxical phenomenon where the act of suppressing information to reduce visibility causes it to become more visible. In 2003, Streisand attempted to suppress aerial photographs of her Californian home by suing photographer Kenneth Adelman for an invasion of privacy. Adelman, who Streisand assumed was paparazzi, was instead taking photographs to document and study coastal erosion. In her quest for more privacy, Streisand’s efforts had the opposite effect.

Compromise Effect

Single-attribute choices – such as choosing the apartment with the lowest rent – are relatively simple. However, most of the decisions consumers make are based on multiple attributes which complicate the decision-making process. The compromise effect states that a consumer is more likely to choose the middle option of a set of products over more extreme options.

Butterfly Effect

In business, the butterfly effect describes the phenomenon where the simplest actions yield the largest rewards. The butterfly effect was coined by meteorologist Edward Lorenz in 1960 and as a result, it is most often associated with weather in pop culture. Lorenz noted that the small action of a butterfly fluttering its wings had the potential to cause progressively larger actions resulting in a typhoon.

IKEA Effect

The IKEA effect is a cognitive bias that describes consumers’ tendency to value something more if they have made it themselves. That is why brands often use the IKEA effect to have customizations for final products, as they help the consumer relate to it more and therefore appending to it more value.

Ringelmann Effect 

Ringelmann Effect
The Ringelmann effect describes the tendency for individuals within a group to become less productive as the group size increases.

The Overview Effect

The overview effect is a cognitive shift reported by some astronauts when they look back at the Earth from space. The shift occurs because of the impressive visual spectacle of the Earth and tends to be characterized by a state of awe and increased self-transcendence.

House Money Effect

The house money effect was first described by researchers Richard Thaler and Eric Johnson in a 1990 study entitled Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice. The house money effect is a cognitive bias where investors take higher risks on reinvested capital than they would on an initial investment.


As highlighted by German psychologist Gerd Gigerenzer in the paper “Heuristic Decision Making,” the term heuristic is of Greek origin, meaning “serving to find out or discover.” More precisely, a heuristic is a fast and accurate way to make decisions in the real world, which is driven by uncertainty.

Recognition Heuristic

The recognition heuristic is a psychological model of judgment and decision making. It is part of a suite of simple and economical heuristics proposed by psychologists Daniel Goldstein and Gerd Gigerenzer. The recognition heuristic argues that inferences are made about an object based on whether it is recognized or not.

Representativeness Heuristic

The representativeness heuristic was first described by psychologists Daniel Kahneman and Amos Tversky. The representativeness heuristic judges the probability of an event according to the degree to which that event resembles a broader class. When queried, most will choose the first option because the description of John matches the stereotype we may hold for an archaeologist.

Take-The-Best Heuristic

The take-the-best heuristic is a decision-making shortcut that helps an individual choose between several alternatives. The take-the-best (TTB) heuristic decides between two or more alternatives based on a single good attribute, otherwise known as a cue. In the process, less desirable attributes are ignored.

Bundling Bias

The bundling bias is a cognitive bias in e-commerce where a consumer tends not to use all of the products bought as a group, or bundle. Bundling occurs when individual products or services are sold together as a bundle. Common examples are tickets and experiences. The bundling bias dictates that consumers are less likely to use each item in the bundle. This means that the value of the bundle and indeed the value of each item in the bundle is decreased.

Barnum Effect

The Barnum Effect is a cognitive bias where individuals believe that generic information – which applies to most people – is specifically tailored for themselves.

Anchoring Effect

The anchoring effect describes the human tendency to rely on an initial piece of information (the “anchor”) to make subsequent judgments or decisions. Price anchoring, then, is the process of establishing a price point that customers can reference when making a buying decision.

Decoy Effect

The decoy effect is a psychological phenomenon where inferior – or decoy – options influence consumer preferences. Businesses use the decoy effect to nudge potential customers toward the desired target product. The decoy effect is staged by placing a competitor product and a decoy product, which is primarily used to nudge the customer toward the target product.

Commitment Bias

Commitment bias describes the tendency of an individual to remain committed to past behaviors – even if they result in undesirable outcomes. The bias is particularly pronounced when such behaviors are performed publicly. Commitment bias is also known as escalation of commitment.

First-Principles Thinking

First-principles thinking – sometimes called reasoning from first principles – is used to reverse-engineer complex problems and encourage creativity. It involves breaking down problems into basic elements and reassembling them from the ground up. Elon Musk is among the strongest proponents of this way of thinking.

Ladder Of Inference

The ladder of inference is a conscious or subconscious thinking process where an individual moves from a fact to a decision or action. The ladder of inference was created by academic Chris Argyris to illustrate how people form and then use mental models to make decisions.

Goodhart’s Law

Goodhart’s Law is named after British monetary policy theorist and economist Charles Goodhart. Speaking at a conference in Sydney in 1975, Goodhart said that “any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.” Goodhart’s Law states that when a measure becomes a target, it ceases to be a good measure.

Six Thinking Hats Model

The Six Thinking Hats model was created by psychologist Edward de Bono in 1986, who noted that personality type was a key driver of how people approached problem-solving. For example, optimists view situations differently from pessimists. Analytical individuals may generate ideas that a more emotional person would not, and vice versa.

Mandela Effect

The Mandela effect is a phenomenon where a large group of people remembers an event differently from how it occurred. The Mandela effect was first described in relation to Fiona Broome, who believed that former South African President Nelson Mandela died in prison during the 1980s. While Mandela was released from prison in 1990 and died 23 years later, Broome remembered news coverage of his death in prison and even a speech from his widow. Of course, neither event occurred in reality. But Broome was later to discover that she was not the only one with the same recollection of events.

Crowding-Out Effect

The crowding-out effect occurs when public sector spending reduces spending in the private sector.

Bandwagon Effect

The bandwagon effect tells us that the more a belief or idea has been adopted by more people within a group, the more the individual adoption of that idea might increase within the same group. This is the psychological effect that leads to herd mentality. What in marketing can be associated with social proof.

Moore’s Law

Moore’s law states that the number of transistors on a microchip doubles approximately every two years. This observation was made by Intel co-founder Gordon Moore in 1965 and it become a guiding principle for the semiconductor industry and has had far-reaching implications for technology as a whole.

Disruptive Innovation

Disruptive innovation as a term was first described by Clayton M. Christensen, an American academic and business consultant whom The Economist called “the most influential management thinker of his time.” Disruptive innovation describes the process by which a product or service takes hold at the bottom of a market and eventually displaces established competitors, products, firms, or alliances.

Value Migration

Value migration was first described by author Adrian Slywotzky in his 1996 book Value Migration – How to Think Several Moves Ahead of the Competition. Value migration is the transferal of value-creating forces from outdated business models to something better able to satisfy consumer demands.

Bye-Now Effect

The bye-now effect describes the tendency for consumers to think of the word “buy” when they read the word “bye”. In a study that tracked diners at a name-your-own-price restaurant, each diner was asked to read one of two phrases before ordering their meal. The first phrase, “so long”, resulted in diners paying an average of $32 per meal. But when diners recited the phrase “bye bye” before ordering, the average price per meal rose to $45.


Groupthink occurs when well-intentioned individuals make non-optimal or irrational decisions based on a belief that dissent is impossible or on a motivation to conform. Groupthink occurs when members of a group reach a consensus without critical reasoning or evaluation of the alternatives and their consequences.


A stereotype is a fixed and over-generalized belief about a particular group or class of people. These beliefs are based on the false assumption that certain characteristics are common to every individual residing in that group. Many stereotypes have a long and sometimes controversial history and are a direct consequence of various political, social, or economic events. Stereotyping is the process of making assumptions about a person or group of people based on various attributes, including gender, race, religion, or physical traits.

Murphy’s Law

Murphy’s Law states that if anything can go wrong, it will go wrong. Murphy’s Law was named after aerospace engineer Edward A. Murphy. During his time working at Edwards Air Force Base in 1949, Murphy cursed a technician who had improperly wired an electrical component and said, “If there is any way to do it wrong, he’ll find it.”

Law of Unintended Consequences

The law of unintended consequences was first mentioned by British philosopher John Locke when writing to parliament about the unintended effects of interest rate rises. However, it was popularized in 1936 by American sociologist Robert K. Merton who looked at unexpected, unanticipated, and unintended consequences and their impact on society.

Fundamental Attribution Error

Fundamental attribution error is a bias people display when judging the behavior of others. The tendency is to over-emphasize personal characteristics and under-emphasize environmental and situational factors.

Outcome Bias

Outcome bias describes a tendency to evaluate a decision based on its outcome and not on the process by which the decision was reached. In other words, the quality of a decision is only determined once the outcome is known. Outcome bias occurs when a decision is based on the outcome of previous events without regard for how those events developed.

Hindsight Bias

Hindsight bias is the tendency for people to perceive past events as more predictable than they actually were. The result of a presidential election, for example, seems more obvious when the winner is announced. The same can also be said for the avid sports fan who predicted the correct outcome of a match regardless of whether their team won or lost. Hindsight bias, therefore, is the tendency for an individual to convince themselves that they accurately predicted an event before it happened.

Read Next: BiasesBounded RationalityMandela EffectDunning-Kruger EffectLindy EffectCrowding Out EffectBandwagon Effect.

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