Understanding Bias & Money Illusion

Unconscious Bias (Stacey Gordon)

Definition: Unconscious bias refers to the hidden mental shortcuts and preferences that shape our actions, judgments, and workplace behavior—often without realizing it.

Key Types of Bias:

• Affinity Bias: Favoring people who share similar backgrounds or interests.
• Halo Bias: Allowing one positive trait to overshadow other qualities.
• Perception Bias: Judging based on stereotypes or superficial traits.
• Confirmation Bias: Looking for evidence that supports pre-existing beliefs.
• Groupthink: Conforming to group opinion rather than thinking independently.

Goal of the Course: Build awareness of these biases, reduce their impact, and encourage fairer, more inclusive decision-making in the workplace. Stacey Gordon’s LinkedIn Learning course is short (under 1 hour), practical, and widely adopted by global organizations.

Money Illusion (Research Summary)

Definition: Money Illusion is a cognitive bias where individuals think of money in nominal terms (the number value) rather than real terms (what money can actually buy considering inflation).

Example: A 5% salary raise seems positive, but if inflation is 6%, real purchasing power has decreased. People often feel richer even when their real income falls.

Impact:

• Affects wage negotiations and employee satisfaction.
• Influences saving and investment decisions.
• Leads to policy misinterpretations when inflation is ignored.

Research Background: The concept was introduced by economist Irving Fisher. Modern behavioral economics continues to show that money illusion shapes financial decisions and market outcomes.

Strategy for Awareness & Better Decision-Making

This strategy combines insights from both Unconscious Bias and Money Illusion to improve decisions in workplaces and personal finances:

• Step 1: Awareness – Conduct workshops and training sessions to recognize bias and teach about the effects of inflation on real money value.
• Step 2: Reflection – Encourage individuals to question their judgments, use feedback tools, and rely on inflation calculators when evaluating financial gains.
• Step 3: Action – Apply inclusive decision-making frameworks at work and consider both nominal and real values before making financial or policy decisions.

Outcome: By addressing hidden biases and overcoming money illusion, individuals and organizations can make fairer workplace decisions, improve financial planning, and build long-term resilience.