People make countless decisions daily, from selecting meals to tackling work issues. These decisions are made within the constraints of bounded rationality - the idea that decision-making is limited by available information, cognitive ability, and time restrictions. To navigate these limitations, people often use heuristics, which are mental shortcuts that enable quick decision-making.

Heuristics are simple mental tools that help people make decisions by focusing on key information or drawing on past experiences. While they do not always produce the perfect solution, heuristics provide functional and time-efficient outcomes, particularly in situations requiring quick responses.

For instance, a small business owner managing inventory may use a heuristic like prioritizing restocking items that sell out most frequently. This approach enables them to allocate their budget effectively without analyzing the sales data of every product in detail. This approach guarantees that the business consistently caters to its core customers. However, it may miss emerging trends or niche market demands. In healthcare, a physician might apply an availability heuristic by relying on recent cases to make quick diagnoses. This method can be efficient but may occasionally result in biases.

While heuristics are useful, they are not without limitations. They can sometimes lead to errors or biases. For example, a hiring manager who relies on a heuristic like favoring candidates with specific degrees might inadvertently overlook individuals with diverse experiences that could bring value to the team. Being aware of these potential risks and their underlying cognitive biases, like anchoring or representativeness, can help reduce these risks.