What is Action bias?
Action bias is the tendency to favor doing something over doing nothing, even when inaction would produce a better outcome. It arises because people associate activity with progress and feel more regret about bad outcomes caused by inaction than by action.
How it works
When facing uncertainty, people feel compelled to act because passivity feels irresponsible. Soccer goalkeepers, for instance, almost always dive left or right during penalty kicks, even though standing still would save more goals statistically.
Applied example
An investment manager who trades frequently during market volatility, believing activity will protect a portfolio, often underperforms a buy-and-hold strategy because transaction costs and mistimed trades erode returns.
Why it matters
Recognizing action bias helps decision-makers distinguish between situations that genuinely require intervention and those where patience or restraint produces better results.
