What are Heuristics?

Heuristics are problem-solving techniques that result in a quick and practical solution. In
contrast to business decisions that involve extensive analysis, heuristics are used in situations
where a short-term solution is required.

Although heuristics may not result in the most optimal and ideal solution, it allows
companies to speed up their decision-making process and achieve an adequate solution for
the short term. In situations where perfect solutions may be improbable, heuristics can be
used to achieve imperfect but satisfactory decisions. Heuristics can also include mental
shortcuts that help speed up the decision-making process.

Summary

Heuristics are problem-solving techniques that result in a quick and practical solution.
In situations where perfect solutions may be improbable, heuristics can be used to achieve
imperfect but satisfactory decisions.
Most heuristic methods involve using mental shortcuts to make decisions based on prior
experiences.

Understanding Heuristics
When facing complex situations with limited time and resources, heuristics can help
companies make quick decisions by using shortcuts and approximated calculations. Most
heuristic methods involve using mental shortcuts to make decisions based on prior
experiences.

Some of the most common fundamental heuristic methods include trial and error, historical
data analysis, guesswork, and the process of elimination. Such methods typically involve
easily accessible information that is not specific to the problem but is broadly applicable. It
provides an opportunity to make imperfect decisions that can adequately address the problem
in the short term.
Depending on the context, there may be several different heuristic methods, which correlate
to the scope of the problem. They can include affect, representative, and availability
heuristics.

Types of Heuristics
Affect Heuristics
Affect heuristics are based on positive and negative feelings that are associated with a certain
stimulus. It typically involves quick, reactionary feelings that are based on prior beliefs. The

When people face little time to reflect and evaluate a situation carefully, they may base their
decision on their immediate emotional reactions. Rather than conducting a cost-benefit
analysis, affect heuristics focus on eliciting an automatic, reactionary response.

emotions and
therefore affect their purchasing decisions. One of the most common examples is
advertisements for products such as fast food. When fast-food companies run ads, they hope
to elicit a positive emotional response that encourages you to view their products positively.

If individuals were to analyze the risks and benefits of consuming fast food carefully, they
might decide that it is an unhealthy option. However, people rarely take the time to evaluate
everything they see and often base their decisions on their automatic, emotional response.
Fast-food ads rely on such a type of affect heuristic to generate a positive emotional response,
which results in sales.

Availability Heuristics
Availability heuristics are judgments people make regarding the likelihood of an event based
on information that comes to mind quickly. When people make decisions, they typically rely
on prior knowledge of an event. As a result, we tend to overestimate the likelihood of an
event occurring simply because it comes to mind quickly. Such mental shortcuts allow us to
make decisions quickly, but they can also be inaccurate.

One example of the availability heuristic is stock prices, especially for newly public
companies. Many investors tend to invest in new IPOs in the hopes that the stock price will

fundamentals, the investors remember IPOs that have become tremendously successful, such
as Amazon or Apple.

Although it has been shown that most IPOs underperform, investors tend to overestimate the
chances of landing a successful IPO based on prior examples that come to mind. It
demonstrates a clear example of availability heuristics.
Representative Heuristics
Representative heuristics occur when we evaluate the probability of an event based on its
similarity to another event. In general, people tend to overestimate the likelihood of an event
occurring based on their perceived similarity with another event. When it happens, we tend to
ignore the base rate, which is the actual probability of an event occurring, independent of its
similarity to other events.

An example of the representative heuristic is product packaging, as consumers tend to

associate quality products with their external packaging. If a generic brand packages its
products in a way that resembles a well-known, high-quality product, then consumers will
associate the generic product as having the same quality as the branded product.

Instead of evaluating the quality of the products, consumers are correlating the quality of the
products based on the similarity in packaging.

Availability
The availability heuristic involves making decisions based upon how easy it is to bring
something to mind. When you are trying to make a decision, you might quickly remember a
number of relevant examples. Since these are more readily available in your memory, you
will likely judge these outcomes as being more common or frequently occurring.

For example, if you are thinking of flying and suddenly think of a number of recent airline
accidents, you might feel like air travel is too dangerous and decide to travel by car instead.
Because those examples of air disasters came to mind so easily, the availability heuristic
leads you to think that plane crashes are more common than they really are.

Familiarity
The familiarity heuristic refers to how people tend to have more favorable opinions of things,
people, or places they've experienced before as opposed to new ones. In fact, given two
options, people may choose something they're more familiar with even if the new option
provides more benefits.4

Representativeness
The representativeness heuristic involves making a decision by comparing the present
situation to the most representative mental prototype. When you are trying to decide if
someone is trustworthy, you might compare aspects of the individual to other mental
examples you hold.

A soft-spoken older woman might remind you of your grandmother, so you might
immediately assume that she is kind, gentle, and trustworthy. However, this is an example of
a heuristic bias, as you can't know someone trustworthy based on their age alone.
Affect
The affect heuristic involves making choices that are influenced by the emotions that an
individual is experiencing at that moment. For example, research has shown that people are
more likely to see decisions as having benefits and lower risks when they are in a positive
mood. Negative emotions, on the other hand, lead people to focus on the potential downsides
of a decision rather than the possible benefits. 5

Anchoring
The anchoring bias involves the tendency to be overly influenced by the first bit of
information we hear or learn. This can make it more difficult to consider other factors and
lead to poor choices. For example, anchoring bias can influence how much you are willing to
pay for something, causing you to jump at the first offer without shopping around for a better
deal.

Scarcity
Scarcity is a principle in heuristics in which we view things that are scarce or less available to
us as inherently more valuable. The scarcity heuristic is one often used by marketers to
influence people to buy certain products. This is why you'll often see signs that advertise
"limited time only" or that tell you to "get yours while supplies last." 6

Trial and Error

Trial and error is another type of heuristic in which people use a number of different
strategies to solve something until they find what works. Examples of this type of heuristic
are evident in everyday life.7 People use trial and error when they're playing video games,
finding the fastest driving route to work, and learning to ride a bike (or learning any new
skill).

How Heuristics Are Used

Heuristics play important roles in both problem-solving and decision-making, as we often
turn to these mental shortcuts when we need a quick solution.

Here are a few different theories from psychologists about why we rely on heuristics.

Attribute substitution: People substitute simpler but related questions in place of

more complex and difficult questions.
Effort reduction: People use heuristics as a type of cognitive laziness to reduce the
mental effort required to make choices and decisions.2
Fast and frugal: People use heuristics because they can be fast and correct in certain
contexts. Some theories argue that heuristics are actually more accurate than they are
biased.
Difference Between Heuristics and Algorithms
Though the terms are often confused, heuristics and algorithms are two distinct terms in
psychology.

Algorithms are step-by-step instructions that lead to predictable, reliable outcomes; whereas
heuristics are mental shortcuts that are basically best guesses. Algorithms always lead to
accurate outcomes, whereas, heuristics do not.

Examples of algorithms include instructions for how to put together a piece of furniture or a
recipe for cooking a certain dish. Health professionals also create algorithms or processes to
follow in order to determine what type of treatment to use on a patient. 8