This week’s “constitutional” hearings reminded me:
People don’t naturally know who they should listen to.
==========
Worse yet, in a majority of instances when a reliable expert is identified, people end up following somebody else’s advice.
That’s what Univ. of Utah’s management professor Bryan Bonner concludes.
==========
Bonner observes that rather than identifying advisers with actual competence, people habitually fall for spurious “proxies of expertise”.
Awhile ago, we reported a study that found when offered two deals on loose coffee beans: 33% extra free or 33% off the price, shoppers almost invariably picked the “extra free” option.
Wrong answer.
Most shoppers considered the offers equivalent although the discount is by far the better proposition … it would take a 50% increase in the “free” quantity for the offers to be equivalent.
The researchers concluded that
Shoppers are generally bad at math … and easily succumb to the “power of free”.
More generally, consumers are notoriously bad at spotting real values.
According to the Atlantic ….
More specifically, here are some more ways consumers end up paying too much …
Current champ is smart and calculating. Is that cheating?
==================
Though I’m not particularly strong at trivia, I enjoy watching Jeopardy
In part as a daily test of whether I can hang in there with the contestants (Answer: not in most categories) … and, largely because – in my stint as a teacher – I became a student f how people think … how they store, combine, and retrieve information. Think: connect the dots.
The current Jeopardy champ — James Holzhauer– is a professional sports bettor … and, he’s setting records.
Holzhauer has won 22 straight games … that’s the 2nd most on the all-time list … the record is 74 by a “normal” guy named Ken Jennings … the average Jeopardy champ only wins 2 or 3 games..
Most impressive is that Holzhauer has already won over $1.6 million about 2/3s of the way towards Jenning’s haul of $2.5 million. Working the arithmetic, Holzhauer has been winning about $75,000 per day … which is more than double Jenning’s daily take.
How Holzhauer is doing it is raising eye-brows in the Jeopardy community. Part astonishment and part calls of “foul”.
So how exactly is Holzhauer doing it?
Yesterday, we channeled the results of a study that found that patients facing major health challenges often select their course of treatment based on isolated success stories they might hear rather than hard data.
Specifically, the study found that when a success story was used to “validate” a low success rate treatment, patients would ignore or dismiss the hard scientific data and be swayed by the anecdote – even if the case history was a remote outlier, not a general case.
Deep in selective attention mode, my eye caught an opinion piece in the WSJ:
The author’s punch line:
“The multibillion-dollar cancer treatment industry appeals to emotion in misleading ads … mounting less a war on cancer than a war on truth —and on vulnerable consumers.”
… unless you’re out of options.
==========
In my Business Analytics course, I had students read a couple of excerpts from a book called Think Twice: The Power of Counter-intuition by Michael Mauboussin.
In a chapter called “The Outside View” the author reports findings from a medical study that investigated the relative importance of hard data and anecdotal evidence when patients select from among treatment options for serious health conditions.
Patients were given the hard scientific data about a treatment‘s success rates and an anecdote about a case history.
Some anecdotes were positive (the treatment was a success), some were negative (the treatment failed or had complications), and some were neutral (neither a clear success nor a dramatic failure).
Below is an extract of the study’s results summarizing the percentage of respondents selecting a treatment given the hard data on its success rate and a related anecdote of a specific case’s outcome.
Let’s drill down …
Interesting piece from the WSJ …
Psychology researchers have studied how people make decisions and concluded there are two basic styles.
“Maximizers” like to take their time and weigh a wide range of options—sometimes every possible one—before choosing.
“Satisficers” would rather be fast than thorough; they prefer to quickly choose the option that fills the minimum criteria (the word “satisfice” blends “satisfy” and “suffice”).
“Maximizers are people who want the very best.
Satisficers are people who want good enough,”
Take the quick test below to see if you’re a maximizer or satisficer…. and see what the implications are..
There’s an interesting parallel, and a lesson for all.
==========
This week, the internet (and most news shows) were ablaze with the question “Do you hear ‘Yanny’ or ‘Laurel’?”
In a nutshell, a 1-word audio loop is played … some folks hear the word ‘Yanny’, some hear ‘Laurel’.
Click here if you haven’t heard the audio clip.
==========
What’s up with that?
Reason #13 – The “moral license” that “believers” carry in their wallets
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For the record: I’m neither a denier nor a zealot … so, according to British writer (& phrase-coiner) Matt Ridley, I’m a “lukewarmer”.
========
Below is a post recapping my prior 12 Reasons Why I’m Lukewarm to Climate Change
Let’s move on …
=========
Reason #13 – The “moral license” that “believers” carry in their wallets
It’s oft-noted that most climate change celebrities dart around in private jets and gas guzzling SUVs … … and Al Gore’s mega-mansion(s) consume more energy than most suburban neighborhoods.
Guess what: climate change hypocrisy is prevalent … and there’s a scientific reason why “believers’ don’t walk the talk.
Beware of wolves that doth protesteth too much
==========
New York Attorney General Eric Schneiderman was a very public face of the #MeToo movement.
He lambasted Harvey Weinstein for his “despicable” abusive behavior against women..
He encouraged victims to come forward and vowed to prosecute any and all men who abuse women women … especially those leveraging the power of their high positions.
Apparently, “any and all” didn’t include one Eric Schneiderman.
=============
After his warp-speed resignation, the airwaves were filled with shocked supporters and pundits asking: “How could he?”
The answer is simple and predictable … his behavior was rooted in 2 cognitive biases: “moral license” and “relative behavior”.
We covered the Halo Effect in class this week, so I’ve got an excuse to dust off one of my favorite posts …
======
I’ll explain the picture later, but first, the back story.
A couple of interesting dots got connected last week.
First, I started watching The Voice.
I liked the talent and the bantering among the coaches, but wondered why they used the turning chairs gimmick. You know, judges can’t see the the performers, they can just hear them.
Became apparent when Usher turned his chair and was surprised to see that the high-pitched soul singer was a big white guy.
Hmmm.
=====
Second, for the course I’m currently teaching, I’ve been reading a book called The Art of Thinking Clearly — a series of short essays on cognitive biases – those sneaky psychological effects that impair our decision-making.
Dan Lovallo, a professor and decision-making researcher says, “Confirmation bias is probably the single biggest problem in business, because even the most sophisticated people get it wrong. People go out and they’re collecting the data, and they don’t realize they’re cooking the books.”
What’s this “confirmation bias” that Lovello is talking about?
No surprise, people tend to seek out information that supports their existing beliefs.
You know, liberals watch MSNBC, read the NY Times listen to BBC podcasts; conservatives watch FOX, read the WSJ and listen to Rush.
Behavioral psychologists call the he dynamic “confirmation bias”.
=====
In socio-politics, the confirmation bias tends to harden polarized positions. People just gather debate fodder rather than probing both sides of issues.
In the realm of decision making, confirmation bias has a dysfunctional effect: it leads to bad decisions.
Here’s a classic “framing” question from Kahneman’s Thinking Fast, Thinking Slow …
Here’s the situation:
A woman has bought two $80 tickets to the theater.
When she arrives at the theater, she opens her wallet and discovers that the tickets are missing.
$80 tickets are still available at the box office.
Will she buy two more tickets to see the play?
Most (but, not all) survey respondents answer that the woman will go home without seeing the show.
Let’s try another situation …
Adding visuals to menus (and reports) creates interest and boosts credibility.
+++++++
Studies have shown that adding icons and photos to restaurant menus increase sales up to 30% for the featured items.
The visuals draw attention to the items … if done well, they stimulate diners’ senses.
OK, we’ve all be menu-enticed … that’s not news.
=======
But, did you know that simply adding a visual – a graph or chart or formula — to a report can boost the credibility of a conclusion by 50% or more?
Dan Lovallo, a professor and decision-making researcher says, “Confirmation bias is probably the single biggest problem in business, because even the most sophisticated people get it wrong. People go out and they’re collecting the data, and they don’t realize they’re cooking the books.”
What’s this “confirmation bias” that Lovello is talking about?
No surprise, people tend to seek out information that supports their existing beliefs.
You know, liberals watch MSNBC, read the NY Times listen to BBC podcasts; conservatives watch FOX, read the WSJ and listen to Rush.
Behavioral psychologists call the he dynamic “confirmation bias”.
=====
In socio-politics, the confirmation bias tends to harden polarized positions. People just gather debate fodder rather than probing both sides of issues.
In the realm of decision making, confirmation bias has a dysfunctional effect: it leads to bad decisions.
Adding visuals to menus (and reports) creates interest and boosts credibility.
+++++++
Studies have shown that adding icons and photos to restaurant menus increase sales up to 30% for the featured items.
The visuals draw attention to the items … if done well, they stimulate diners’ senses.
OK, we’ve all be menu-enticed … that’s not news.
=======
But, did you know that simply adding a visual – a graph or chart or formula — to a report can boost the credibility of a conclusion by 50% or more?
Dan Lovallo, a professor and decision-making researcher says, “Confirmation bias is probably the single biggest problem in business, because even the most sophisticated people get it wrong. People go out and they’re collecting the data, and they don’t realize they’re cooking the books.”
What’s this “confirmation bias” that Lovello is talking about?
No surprise, people tend to seek out information that supports their existing beliefs.
You know, liberals watch MSNBC, read the NY Times listen to BBC podcasts; conservatives watch FOX, read the WSJ and listen to Rush.
Behavioral psychologists call the he dynamic “confirmation bias”.
=====
In socio-politics, the confirmation bias tends to harden polarized positions. People just gather debate fodder rather than probing both sides of issues.
In the realm of decision making, confirmation bias has a dysfunctional effect: it leads to bad decisions.
Here’s why repeal & replace is so challenging …
======
Behavioral theorists have long observed that most people are risk adverse and, due in part to an “endowment effect”, they “value” losses greater than gains.
Endowment Effect: People tend to ascribe a higher value to things that they already own than to comparable things that they don’t own. For example, a car-seller might think his sleek machine is “worth” $10,000 even though credible appraisers say it’s worth $7,500. Sometimes the difference is due to information asymmetry (e.g. the owner knows more about the car’s fine points), but usually it’s just a cognitive bias – the Endowment Effect.
The chart below illustrates the gains & losses concept.
=====
For example, would you take any of these coin flip gambles?
Most people pass on #1 and #2, but would hop on #3 and #4.
OK, now let’s show how all of this relates to ObamaCare.
Your answer says a lot about you.
=====
Before you look at the chart below, jot down the channels/shows or web pages that you trust as your primary sources for news.
No cheating.
Done?
=====
OK, now check where your news sources fall along this ideological continuum crafted by Pew Research.
Your news sources align with your political ideology, right?
It’s a psychological dynamic called “confirmation bias” … soliciting and internalizing information that is consistent with one’s current beliefs.
Said differently, confirmation bias is a natural stress-reduction tendency to avoid or resist any information that is contrary to or inconsistent with one’s current thinking.
One of the major solidifiers of our current political polarization is the “echo chamber effect” … we all tend to consult sources and hang with people who share, reinforce and exaggerate our ideological leanings.
So what to do?
Your answer says a lot about you.
=====
Before you look at the chart below, jot down the 3 or 4 web pages or channels/shows that you trust as your primary sources for news.
No cheating.
Done?
=====
OK, now check where your news sources fall along this ideological continuum crafted by Pew Research.
Your news sources align with your political ideology, right?
It’s a psychological dynamic called “confirmation bias” … soliciting and internalizing information that is consistent with one’s current beliefs.
Said differently, confirmation bias is a natural stress-reduction tendency to avoid or resist any information that is contrary to or inconsistent with one’s current thinking.
One of the major solidifiers of our current political polarization is the “echo chamber effect” … we all tend to consult sources and hang with people who share, reinforce and exaggerate our ideological leanings.
So what to do?
Adding visuals to menus (and reports) creates interest and boosts credibility.
+++++++
Studies have shown that adding icons and photos to restaurant menus increase sales up to 30% for the featured items.
The visuals draw attention to the items … if done well, they stimulate diners’ senses.
OK, we’ve all be menu-enticed … that’s not news.
=======
But, did you know that simply adding a visual – a graph or chart or formula — to a report can boost the credibility of a conclusion by 50% or more?
Since Alicia Keys debuted as a coach on The Voice last night, I have a semi-legitimate excuse for reprising one of my all-time favorite posts … topic is a cognitive bias called the “halo effect”.
=======
I’ll explain the picture later, but first, the back story.
A couple of interesting dots got connected last week.
First, I started watching The Voice.
I liked the talent and the bantering among the coaches, but wondered why they used the turning chairs gimmick. You know, judges can’t see the the performers, they can just hear them.
Became apparent when Usher turned his chair and was surprised to see that the high-pitched soul singer was a big white guy.
Hmmm.
=====
Second, for the course I’m currently teaching, I’ve been reading a book called The Art of Thinking Clearly — a series of short essays on cognitive biases – those sneaky psychological effects that impair our decision-making.
Last weekend’s Florida hurricane, prompts the question …
Answer: Based on popular usage, it is 30.812 times more common for Hermine to be a girl’s name than a boy’s name. Source
What’s the ‘so what’?
Well, some names are deadlier than others.
Female-named hurricanes cause “significantly more deaths”
=======
Researchers analyzed over six decades of death rates from U.S. hurricanes and concluded that a severe hurricane with a female name is likely to have a death toll triple that of an equally severe hurricane with a male name.
Say, what?
No, it’s not gender bias … it’s a cognitive bias induced by “Incidental stimuli”.
There are two basic retailer pricing strategies:
· Everyday Low Prices. Think Walmart with relatively constant prices and few sales
· High-Low Prices. Think Kohl’s with very high “regular” prices and frequent deep discounts.
Which strategy works better?
Female-named hurricanes cause “significantly more deaths”
=======
Researchers analyzed over six decades of death rates from U.S. hurricanes and concluded that a severe hurricane with a female name is likely to have a death toll triple that of an equally severe hurricane with a male name.
Say, what?
No, it’s not gender bias … it’s a cognitive bias induced by “Incidental stimuli”.
Adding visuals to menus (and reports) creates interest and boosts credibility.
+++++++
Studies have shown that adding icons and photos to restaurant menus increase sales up to 30% for the featured items.
The visuals draw attention to the items … if done well, they stimulate diners’ senses.
OK, we’ve all be menu-enticed … that’s not news.
=======
But, did you know that simply adding a visual – a graph or chart or formula — to a report can boost the credibility of a conclusion by 50% or more?
When we’re buying something on Amazon, we all glance at the user ratings, right?
5-stars, it’s a keeper … 1 star it’s a bummer.
Real reviews from real users.
What could be more accurate?
=======
Some researchers tried to answer that question.
Since Consumer Reports has been in the quality testing business for decades with a reputation for rigor, objectivity and impartiality … So, to test the reliability of user ratings, the researchers took the Consumer Reports’ scores for 1,272 products and compared them to more than 300,000 Amazon ratings for the same items.
Their findings may surprise you …
Adapted from the Washington Post WonkBlog:
The below chart represents a network of the entire population of a fictional and very small town.
Each circle represents a person. Two people who know each other are connected by a line. People who are not connected by a line have never met.
The day’s political issue: whether baseball caps are fashionable. Each circle is colored to indicate that person’s stance on the issue. Blue circles think caps are fashionable. Orange circles think that caps are not fashionable. (On this issue, everyone has an opinion.)
The town will be voting on whether to officially consider baseball caps fashionable.
A polling firm recently asked whether each person thought that the town would vote to deem baseball caps fashionable.
Assume each person polled based their prediction solely on how the majority of people they know felt about baseball caps (excluding his or her own view).
Did the polling firm find the measure was expected to pass or fail?
According to Chip & Dan Heath in Rotman Management article “The 4 Villains of Decision Making” …
“Research in Psychology over the last 40 years has identified a broad set of biases in our thinking that doom our decision making. If we aspire to make better choices, we must learn how these biases work and how to fight them.”
According to the Heath Brothers – academics & popular authors – there are 4 decision making villains that have to be confronted
Dan Lovallo, a professor and decision-making researcher says, “Confirmation bias is probably the single biggest problem in business, because even the most sophisticated people get it wrong. People go out and they’re collecting the data, and they don’t realize they’re cooking the books.”
What’s this “confirmation bias” that Lovello is talking about?
No surprise, people tend to seek out information that supports their existing beliefs.
You know, liberals watch MSNBC, read the NY Times listen to BBC podcasts; conservatives watch FOX, read the WSJ and listen to Rush.
Behavioral psychologists call the he dynamic “confirmation bias”.
=====
In socio-politics, the confirmation bias tends to harden polarized positions. People just gather debate fodder rather than probing both sides of issues.
In the realm of decision making, confirmation bias has a dysfunctional effect: it leads to bad decisions.
You bet they do …
======
Prof Robert Kaplan of San Diego State University conducted an experiment:
Faculty subjects were asked to grade an essay written by a student.
A photograph of the student was attached to the essay.
The grade given for the essay correlated strongly with a subjective attractiveness scale evaluated by other judges.
What is interesting is that all the subjects received the exact same essay, and the photograph attached to it was randomly assigned.
Bottom line: physical attractiveness causes graders to give essay writers better scores on their essays.
Here’s what’s going on …
Two coinciding events …
In my Strategic Business Analytics course, we’re dealing with “base rates” — the likelihood of something occurring given prior results in relatively similar situations.
And, a couple of weeks ago, Triple Crown winner American Pharoah won the Breeder’s Cup.
So, I thought it would be a good time to flashback to last May, when American Pharoah was heading into the Belmont as the odds-on favorite to win the Triple Crown … a case study in base rates.
=====
Originally posted May, 2014
On Saturday, American Pharoah will try to win the Belmont — capping off his Derby & Preakness wins to capture the oft-elusive Triple Crown.
Based on Triple Crown history, what are his chances?
The simple – but very deceiving answer is 35%.
31 horses have won both the Kentucky Derby & the Preakness …
11 of them have won the Belmont and the Triple Crown.
35% … about 1 out of 3.
That’s not bad, right?
Let’s slice the numbers a little finer …
Adapted from the Washington Post WonkBlog:
The below chart represents a network of the entire population of a fictional and very small town.
Each circle represents a person. Two people who know each other are connected by a line. People who are not connected by a line have never met.
The day’s political issue: whether baseball caps are fashionable. Each circle is colored to indicate that person’s stance on the issue. Blue circles think caps are fashionable. Orange circles think that caps are not fashionable. (On this issue, everyone has an opinion.)
The town will be voting on whether to officially consider baseball caps fashionable.
A polling firm recently asked whether each person thought that the town would vote to deem baseball caps fashionable.
Assume each person polled based their prediction solely on how the majority of people they know felt about baseball caps (excluding his or her own view).
Did the polling firm find the measure was expected to pass or fail?
According to Chip & Dan Heath in Rotman Management article “The 4 Villains of Decision Making” …
“Research in Psychology over the last 40 years has identified a broad set of biases in our thinking that doom our decision making. If we aspire to make better choices, we must learn how these biases work and how to fight them.”
According to the Heath Brothers – academics & popular authors – there are 4 decision making villains that have to be confronted
Two coinciding events this week: I’m prepping my fall course in business analytics — with some emphasis on decision biases — and, AGT is over (finally) and The Voice’s new season started.
So, it’s time to dust off one of my favorite posts …
======
I’ll explain the picture later, but first, the back story.
A couple of interesting dots got connected last week.
First, I started watching The Voice.
I liked the talent and the bantering among the coaches, but wondered why they used the turning chairs gimmick. You know, judges can’t see the the performers, they can just hear them.
Became apparent when Usher turned his chair and was surprised to see that the high-pitched soul singer was a big white guy.
Hmmm.
=====
Second, for the course I’m currently teaching, I’ve been reading a book called The Art of Thinking Clearly — a series of short essays on cognitive biases – those sneaky psychological effects that impair our decision-making.
According to Chip & Dan Heath in Rotman Management article “The 4 Villains of Decision Making” …
“Research in Psychology over the last 40 years has identified a broad set of biases in our thinking that doom our decision making. If we aspire to make better choices, we must learn how these biases work and how to fight them.”
According to the Heath Brothers – academics & popular authors – there are 4 decision making villains that have to be confronted
A classic “framing” question from Kahneman’s Thinking Fast, Thinking Slow …
Here’s the situation:
A woman has bought two $80 tickets to the theater.
When she arrives at the theater, she opens her wallet and discovers that the tickets are missing.
$80 tickets are still available at the box office.
Will she buy two more tickets to see the play?
Most (but, not all) survey respondents answer that the woman will go home without seeing the show.
Let’s try another situation …
In prior posts we reported how history is against American Pharoah — How often do Derby & Preakness winners nail the Triple Crown? — and how bettors like long-shots — Biases: The favorite-long shot bias … ».
Today we’ll wrap up Triple Crown Week, excerpting an interesting piece in Wired titled “Science says that American Pharoah won’t win the triple crown”
Here’s the essence of the scientific argument …
In gambling and economics, there’s an observed phenomenon favorite-long shot bias.
Here’s how it works …
On Saturday, American Pharoah will try to win the Belmont — capping off his Derby & Preakness wins to capture the oft-elusive Triple Crown.
Based on Triple Crown history, what are his chances?
The simple – but very deceiving answer is 35%.
31 horses have won both the Kentucky Derby & the Preakness …
11 of them have won the Belmont and the Triple Crown.
35% … about 1 out of 3.
That’s not bad, right?
Let’s slice the numbers a little finer …
OK, here’s a test for you …
Rank the the following by the odds that somebody who is in the group or who is exposed to the risk is likely to die.
Make #1 the highest risk of dying in the next year; make #7 the lowest risk circumstance
And the answer is …
You bet they do …
======
Prof Robert Kaplan of San Diego State University conducted an experiment:
Faculty subjects were asked to grade an essay written by a student.
A photograph of the student was attached to the essay.
The grade given for the essay correlated strongly with a subjective attractiveness scale evaluated by other judges.
What is interesting is that all the subjects received the exact same essay, and the photograph attached to it was randomly assigned.
Bottom line: physical attractiveness causes graders to give essay writers better scores on their essays.
Here’s what’s going on …
Dan Lovallo, a professor and decision-making researcher says, “Confirmation bias is probably the single biggest problem in business, because even the most sophisticated people get it wrong. People go out and they’re collecting the data, and they don’t realize they’re cooking the books.”
What’s this “confirmation bias” that Lovello is talking about?
No surprise, people tend to seek out information that supports their existing beliefs.
You know, liberals watch MSNBC, read the NY Times listen to BBC podcasts; conservatives watch FOX, read the WSJ and listen to Rush.
Behavioral psychologists call the he dynamic “confirmation bias”.
=====
In socio-politics, the confirmation bias tends to harden polarized positions. People just gather debate fodder rather than probing both sides of issues.
In the realm of decision making, confirmation bias has a dysfunctional effect: it leads to bad decisions.
We’ve covering the Halo Effect in class this week, so it’s time to dust off one of my favorite posts …
======
I’ll explain the picture later, but first, the back story.
A couple of interesting dots got connected last week.
First, I started watching The Voice.
I liked the talent and the bantering among the coaches, but wondered why they used the turning chairs gimmick. You know, judges can’t see the the performers, they can just hear them.
Became apparent when Usher turned his chair and was surprised to see that the high-pitched soul singer was a big white guy.
Hmmm.
=====
Second, for the course I’m currently teaching, I’ve been reading a book called The Art of Thinking Clearly — a series of short essays on cognitive biases – those sneaky psychological effects that impair our decision-making.
OK, here’s a test for you …
Rank the the following by the odds that somebody who is in the group or who is exposed to the risk is likely to die.
Make #1 the highest risk of dying in the next year; make #7 the lowest risk circumstance
And the answer is …
Interesting study on cognitive biases from Daniel Kahneman’s Thinking, Fast and Slow …
Patients undergoing a painful medical procedure – think, colonoscopy without anesthesia – recorded their pain levels during the procedure on a range from no pain (zero) to excruciating (10).
Some of the procedures were short in duration … others were longer.
Below is the pain chart for 2 representative patients.
The patients were asked – after the fact—how painful the procedure was.
What’s your bet? Which patient claimed to have undergone the more painful procedure?
Since psychological studies first began, people have given themselves top marks for most positive traits.
While most people do well at assessing others, they are wildly positive about their own abilities.
The phenomenon is known as illusory superiority. (more…)
No, we’re not talking about the defensive pass interference penalty flag that was picked up without explanation in the Cowboys-Lions game.
Everybody is all over that one. So, we’ll pass.
What caught my eye was a piece in SBNation headlined: “Lions fans should be a bit mad at the referees for what happened as they tried to seal a win. They should be just as mad at their coach, though.”
The situation:
Late in the game, the Lions had a fourth-and-1 on the Dallas 46.
At first, they lined up to go for it. But they didn’t.
Instead, the Lion’s punter shanked a 10-yarder …
Retrospectively, a bad call, for sure.
But, coach Caldwell was just going with coaches’ conventional wisdom.
Leading to a broader question: how often is NFL coaches’ conventional wisdom right (or wrong)?
I’ve got something on that …
Interesting study on cognitive biases from Daniel Kahneman’s Thinking, Fast and Slow …
Patients undergoing a painful medical procedure – think, colonoscopy without anesthesia – recorded their pain levels during the procedure on a range from no pain (zero) to excruciating (10).
Some of the procedures were short in duration … others were longer.
Below is the pain chart for 2 representative patients.
The patients were asked – after the fact—how painful the procedure was.
What’s your bet? Which patient claimed to have undergone the more painful procedure?
Last week, Sen. Chuck Schumer caused a stir in Democrat ranks’ by observing that President Barack Obama’s insistence on revamping the healthcare system was, in Schumer’s words, “misguided” and was a major cause of the GOP’s mid-term election romp & stomp.
Schumer is still all for massive healthcare changes.
His observation is strictly political.
His reasoning:
“Democrats were targeting the uninsured, a population that makes up only about 5 percent of registered voters. Only about one-third of the uninsured are registered or eligible to vote.” Source
Schumer’s on the right track, but misses a bigger point: When people are forced to give up something they have, they overvalue the loss and try hard to recoup it.
Think, the higher premiums and changed doctors that millions of folks have had had to endure.
Behavioral theorists have long observed that most people are risk adverse and, due in part to an “endowment effect”, they “value” losses greater than gains.
Endowment Effect: People tend to ascribe a higher value to things that they already own than to comparable things that they don’t own. For example, a car-seller might think his sleek machine is “worth” $10,000 even though credible appraisers say it’s worth $7,500. Sometimes the difference is due to information asymmetry (e.g. the owner knows more about the car’s fine points), but usually it’s just a cognitive bias – the Endowment Effect.
The chart below illustrates the gains & losses concept.
=====
For example, would you take any of these coin flip gambles?
Most people pass on #1 and #2, but would hop on #3 and #4.
OK, now let’s show how all of this relates to ObamaCare.
This came in this week in class … subject was “confirmation bias” … how people naturally lock onto beliefs and only seek or notice that aligns with their going-in position.
One of the antidotes is enlisting a so-called devil’s advocate” to keep things honest.
A what?
You know, we’ve all been there …
You’re in meetings pitching an idea when some jabrone pipes in:
“Let me play the role of devil’s advocate …”
He then blasts your idea with half-baked criticisms.
As you aggressively defend your cherished idea, he backs off:
“Hey man, I’m just playing devil’s advocate”.
“Say, what? You mean your just made up those cheap shots?”
I’ve been reading books on decision making this summer.
A couple have praised the use of so-called devil’s advocates to validate ideas and arguments.
Here’s what they’re talking about …
