Recency bias is a growing problem for you.
The hold it has over your life is astonishing and it is only going to get worse.
Today, you face two major threats which are serving to compound the recency effect. Each threat is a growing issue in the decisions you make.
To begin with, new information is being produced faster than ever. Technology delivers recently created information with incredible speed and on a vast scale. Added to this, the recency effect is getting worse for you. The creation of information and the moment of decision is shrinking.
You’re excluding historical data—base rates—because new information is more prevalent today.
Historical data gives you factual data, which can give a better baseline than more recent speculative data. As the internet gets quicker and AI becomes more accessible, the exclusion of historical data will only increase.
In this piece, I going to remind you what recency bias is. I'm going to give you some insights into the growing impact of the recency effect on the decisions you make. I will talk about why this is necessary and offer some tips to help you overcome the recency effect.
What is Recency Bias?
Recency bias is the moment our minds focus on more recent experiences or current information when deciding.
It isn’t that we exclude the past, but that more recent history carries more weight when we think about how the future will unfold.
Recency bias is a cognitive bias.
Like all biases, it changes the logic of our thoughts. Formed over hundreds of years, recency bias has taught us to pay more attention to newer signs of danger. In times past, seeing fresh pawprints off track suggests a change of approach from our prey. We can see the grass has become worn where the wild animals normally walk, not 50 yards from this new print. Without recency bias, we might ignore the new pawprint in favour of the base rate information which tells us our prey still walks the worn path.
Many deaths later, recency bias screams at us to pay attention to the new information.
Today, recency bias works in exactly the same way.
The problem is our world has changed. Threats have changed and so has our access to information. The impact on our decision-making is profound. Thanks to significant improvements in our quality of life, the risk of violence in our lives has massively diminished. At the same time, we have access to more information and it all comes to us quicker than ever.
In turn, it is creating more examples of the recency effect.
What is The Recency Effect?
The recency effect is when the most recent information we receive has a stronger impact on our decision-making compared to earlier information.
We are seeing more examples of the recency effect as the availability and speed of information have grown by many orders of magnitude.
More people have more access to current information than ever before.
Recency bias is revelling in the information epidemic we now face. The problem we face is this; as the volume of current information increases, so our ability to access historical data reduces. Our minds can only handle so much information, and confirmation bias only tends to inflate the problem.
It is heaven for our biases, but hell for our decisions.
Millions saw the 9/11 attacks across the world.
In the aftermath of the attacks, there was a heightened fear of terrorism. There was a belief that security measures were necessary to protect against future attacks. This recency bias led to increased surveillance and restrictions on civil liberties. The result was a loss of privacy and increased government control.
Even though less than 100,000 were directly affected, every person watching events unfold around the world felt the same worries as those there.
We all travelled less, worried more about plane security, and became wary of people from the middle east.
It was only the prevalence of the news which increased.
Deaths from terrorist attacks did not increase.
The following Our World in Data chart is interesting. It shows the causes of death in the US during 2016 compared to what we searched for using Google and what we read in the media.
The information age means we face unprecedented demands on our attention. As information becomes more accessible, the price (and profit) of it reduces. This has led to more sensationalism to try and get stories to stand out from the crowd.
It led terrorists to be more sensational in the type of terror they applied.
Of course, our biases responded. The recency effect was profound. Governments changed laws to restrict previous freedoms of movement to keep us safe.
Critically, it also changed us.
The Housing Bubble:
In the mid-2000s, there was a belief that housing prices would continue to rise indefinitely. This recency bias led to a speculative bubble in the housing market, resulting in the collapse of the subprime mortgage market and the 2008 financial crisis.
Information which shows high upsides over a period of time falls neatly into the type of data recency bias jumps on. It feeds us with the confidence nothing can go wrong. We rarely pause to ask ‘what if’, even though base rate data proves economies roll in cycles of growth and decline.
The recency effect shows itself on different sides of the housing market.
- Banks and Lenders—In a market which appeared to show continuous growth, lenders used this current information and reduced the criteria they used to judge someone credit-worthy. This allowed them to sell more loans. It also led institutions to invest and speculate on the bonds which held these loans as assets rather than liabilities.
- Borrowers—also fell for the belief in continuous growth, giving them the confidence to buy several homes and rent them out. With house prices always increasing, they couldn’t fail.
Of course, when you lend to people who can’t afford to pay—and they don’t, the outcome is inevitable. Defaults increase. Which then increases housing stock, thus reducing prices. This in turn reduced the value of the bonds and hence the financial crisis in 2008.
All because of recency bias.
How Recency Bias Affects Decision-Making
So far, we’ve seen how the recency effect transcends the behaviour brought on by recency bias. The examples are quite high-level. They focus on the fallout of the recency effect in relation to government or financial institutions. You might think you're immune.
Sadly, that isn’t the case.
You might not have had a mortgage before 2008, but if you did, you would have probably felt you couldn’t lose. The false confidence created by a news cycle of growth may have caused you to overstretch yourself financially.
The impact of 9/11 was—and still is impacting individuals across the world.
When the outcome results in a massive loss of life, our biases are even more attuned to the information we’re digesting. Visits to a big city suddenly come with greater risks. Travelling to a holiday destination by car appears safer than flying in a plane (it isn’t, and it’s not even close!).
Your odds of dying in a car crash are 1 in 114, while your odds of dying in a plane crash are 1 in 9,821. From another perspective, that’s 1 fatal accident per 16 million flights.
Recency bias helps us ignore the base rate data which says flying is vastly safer than travelling in a car. It pushes us to make irrational decisions. The bias is a judgement to focus on more recent events, especially where there is a risk. Our recency bias will lean on the side of the scale which holds more recent information, which we then treat as more relevant.
The consequences of making judgements with recency bias are real.
Factors That Contribute to Recency Bias
There are several factors which contribute to the tendency of recency bias becoming more of a problem.
Add them together, and it isn’t hard to see why recency bias is causing us some decision-making problems.
- Availability: With a lot of new information in a short amount of time, it can be difficult to process and remember it. As a result, we may rely more heavily on the most recent information we have encountered, which can skew our perceptions and judgments.
- Emotional salience: Recent events that have a strong emotional impact can linger in our minds. These can influence our decisions or attitudes. This can be especially true if the events are negative or traumatic.
- Cognitive ease: Our brains tend to prefer information that is easy to process and remember. Recent information is often more readily available in our working memory. It makes it easier to recall and use in our decision-making.
- Time pressure: When we are under time pressure, we may not have the luxury of carefully considering all of the available information. In these situations, we may rely more heavily on the most recent information we have encountered, even if it is not the most relevant or important.
- Contextual factors: The context in which we encounter information can also influence our biases. For example, an overload of information in a short space of time can lead us to focus on what we learnt last. We tend to overlook the full range of information we've received.
In the last twenty years, each of these has grown because of significant changes in our environment. We perceive ourselves to be busier than ever. Speed brings us information which is more recent than ever.
We have become masters at presenting information in concise ways, making it easier to digest. Then there is the context of our positioning and information. Recent events—combined with recent headlines we might have read, change our viewpoint.
These five factors make managing recency bias hard to achieve, but you don't need to despair, there is a way forward.
Overcoming Recency Bias
The impact of recency bias on our decisions is real. With the recency effect, you need to proactively take steps to help manage when making decisions.
The starting point comes from self-awareness.
Self-awareness is taking the time to observe yourself remotely. It is like watching yourself from a drone and visualising your thoughts at the same time. When we make decisions we are working within ourselves, and self-awareness is the scope to work on ourselves.
Being self-aware gives you the opportunity to recognise when you’re making a decision and to think about how you decide. Once you have this awareness, rather than just deciding with your biases in play, you can take steps to limit their influence.
Here are three ways you can achieve this:
- Seek out diverse perspectives: One way to counteract the influence of recency bias is to seek out diverse perspectives and information sources. By considering a range of viewpoints, you can gain a more comprehensive understanding. You're less likely to let recent information sway your choice.
- Use a structured decision-making process: A structured decision-making process can help you avoid relying too heavily on recent information. By breaking down the decision into smaller, more manageable components, you can more systematically weigh the pros and cons of each option. You can check you're considering all relevant factors, not just the most recent ones.
- Take a step back and reflect: Sometimes, the best way to overcome recency bias is simply to take a step back and reflect on your decision-making process. Ask yourself whether you are relying too heavily on recent information. Ask whether you have fully considered all relevant factors. By taking a more deliberate, reflective approach, you can make more well-rounded, informed decisions. These are less likely to be influenced by recency bias.
Recency bias is a growing concern.
There is a significant increase in access to information. Added to this, we have a vast reduction in the time it takes to turn an event into information in your hand.
These two factors are changing the way we make decisions.
The gap between the creation and consumption of information has been shrinking rapidly since before the end of the last century. The irony is that recency bias is blinding us to this fact too. Gone are the days, when news of past events came in newspapers several days later.
This decline in age is causing other problems.
The immediacy of information reduces our perspective of it. Even the news broadcasters can’t judge the importance of each event it reports as it happens. Everything is ‘breaking news’.
Our modern world seems to revel in the factors which have the tendency to contribute to our recency bias.
New information is a drug consuming our attention.
It is hard to escape information today. Status updates bring information on where your friends are, what they are doing and who with. Pictures make the people we follow look perfect.
Our problem is all this information is feeding our recency bias when it shouldn’t.
The recency effect is alive and kicking and growing all the time. That’s why it is an issue for you.
So, never more than now do you need to pay attention to your awareness and practice the steps to limit the impact recency bias is having. The focus on diverse perspectives, following a structured decision-making process and utilizing the power of reflective decision-making has never been more needed than now.
You won’t ever stop your recency bias from working—and nor should you, but you can manage it as it continues to grow.