Saturday, 4 January 2014

5 traits that make us all bad analysts

Humans are not good analysts. We have learned behaviours that were successful in bygone eras. But in this modern information age,  there are too many analytical short-cuts that we take each day. So here are the top 5 human traits (listed by me) that make us all bad analysts.

1.   We surround ourselves with people who agree with us
It is human nature to prefer people who think like ourselves, or share our beliefs. Ergo, we reject valuable insight from people who may have valid opinions and important alternative points of view. The technical term is confirmation bias. It's one of the reasons for the credit crunch - unsustainable cultures grow when you have too many people doing the same thing without anyone to challenge them. We are also more likely to believe information if it supports our beliefs - no matter how wrong it can be.

2.  We are useless at predicting odds
Ever heard of the gambler who hasn't won a single bet all night, so he crazily puts an enormous sum of money on one random outcome, because he's due a win. Big mistake. The odds of failure remain the same, regardless how often the game is played. This is particularly true when it comes to interpreting results of measurement. Somehow, the data has to be different, because all of the other results went the other way, so we must be due a change. Wrong!!

3.  We rationalise our mistakes
So we've spent a couple of million on a project, and now the results are coming in, it is clear that the decision to instigate it was wrong. Yet the people who made the decision are pushing the project onward, despite everyone telling them it is a waste of time. Psychologists say this is due to 'the principle of commitment' - a deeply held belief that we should always be consistent and avoid cognitive dissonance.

Cognitive dissonance is a big one on it's own. It is the unease that we feel when we are trying to hold on to two conflicting theories. Many people will walk through fire to avoid feeling it and admit that they were wrong.

4.  Memory is more powerful than fact
Our memories - unreliable as they are - have a powerful effect on our beliefs. In fact, when presented with contrary true facts, we are still more inclined to prefer the comfort of our memories.

5.  We make decisions based on comparisons
Although this sounds like common sense, it can be incredibly wrong. For instance, a man may buy a coat for £1,000, because it was cheaper than all the other coats in the shop. Yet if he truly looked at the value for money of that coat, he would realise that it is too expensive. This is called 'the anchoring effect', because it is a tendency to focus on a particular value of one option and compare it to other options, rather than all of the values of each option.

To understand our human weaknesses is to be truly strong. For when we know how fallible we could be, we can structure our decision-making processes to make sure we are not slipping into our natural, human analytical short cuts.

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