How biased is our thinking? - Chapter 4

What entails the study of heuristics?

For more than 35 years, decision researchers have been demonstrating the biases that corrupt our judgments and decisions. They have been showing that our thinking processes are flawed, inaccurate and unreliable. Heuristics are automatic decision rules, these are strategies we commonly use in thinking and that can bias us. There are different kind of heuristics.

The anchoring and adjustment heuristic

When we have to make an estimate and we don’t know the answer, one strategy is to find a plausible answer and then adjust it up or down. This mental strategy is called anchoring and adjustment. The initial estimate is the anchor. By suggesting a high or a low anchor we can influence people’s judgments.

Example:

Was Mahatma Gandhi greater or less than 9 years old when he was assassinated? Pick one:

• Greater than 9 years old

• Less than 9 years old

Second group:

Was Mahatma Gandhi greater or less than 140 years old when he was assassinated?

• Greater than 140 years old

• Less than 140 years old

It is known that the anchor dramatically altered the subject guesses. The anchoring-and-adjustment heuristic affects real world judgments. Real estate agents also use anchoring and adjustment to manipulate us into bidding more than we should.

Framing heuristic

The way a question is presented can determine the answer. Framing is a cognitive heuristic in which people tend to reach conclusions based on the 'framework' within which a situation was presented

The representativeness heuristic

Example:

Linda is 31 years old, single, outspoken and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in antinuclear demonstrations. Please check off the most likely alternative:

• Linda is a bank teller

• Linda is a bank teller and is active in the feminist movement

Most subjects pick the second alternative, because it seems like a fuller and more accurate description of Linda. It seems like a better representation of the kind of person Linda, while the first alternative is statistically more likely. The representativeness heuristic is one type of heuristic that we use when making judgments. In this particular example, we estimate the likelihood of an event by comparing it to an existing prototype that already exists in our minds.

What is the heuristics-and-biases research framework?

The decision bias research started in the early 1970s. Danny Kahneman and Amos Tversky ran experiments that showed systematic flaws in the reasoning processes of their subjects. They demonstrated that people use heuristics (mental shortcuts or rules of thumb) to make quick judgments, and that these heuristics lead to predictable errors. The heuristics- and biases paradigm that Kahneman and Tversky pioneered caught on quickly. Other researchers added more and more kinds of biases. As many of 60 biases have been identified in the search literature.

Many researchers have interpreted these heuristics-and-biases studies to mean that people are defective decision makers. Fortunately, the fears of decision biases are overblown. The research doesn’t really demonstrate that we are irrational. We use effective strategies in our thinking, but these have some limitations that researchers can exploit.

Kahneman and Tversky showed that, when making decisions, people use heuristics instead of formal statistics. They described heuristics as natural reasoning strategies that usually work but aren’t perfect.

People use heuristics when making judgments. The anchoring-and-adjustment heuristic and the representativeness heuristic are strategies that generally give correct answers when we have to make estimates and we don’t know the exact answers. These reasoning strategies aren’t perfect. When they break down, we see systematic error.

What about our memories?

We may be tempted to say that our memories are flawed. We all know the frustration of failing to remember someone’s name. How damaging are these memory limitations?

Daniel Schacter has argued that the limitations of memory are actually very useful. Here are a few of the seven ‘sins of memory’that Schacter has examined:

• Transcience: In transience, we lose a memory we once had, such as a name or a telephone number. Memories degrade over time. The less a person uses a memory, the more quickly it fades. But do we really want to remember everything ? Sometimes we lose a fact that we later need, but we would do much worse if we held onto everything.

• Absent-mindedness: Sometimes we forgot to do something or to record a fact (such as where we put our car keys), most likely because our attention is directed somewhere else. Absent mindedness may result from the way we focus our attention on some cues and not others; we best remember the cues to which we have attended, and we don’t effectively store in memory the cues we have ignored. If we didn’t have this mechanism for selectively recalling the cues to which we have attended, we would be inundated with irrelevant details.

• Blocking: Sometimes called the ‘tip-of-the-tongue phenomenon, we can’t recall information we want to remember. Blocking affects our ability to remember facts and incidents. Blocking seems to result from memory inhibitions that keep the irrelevant memories bottled up. When the inhibition misfires, we get blocked.

• Persistence: We may continue to remember distressing incidents that we would prefer to forget. Although these traumatic memories can cause us unwanted pain, they also make sure we stay alert to danger, and thus they help us to ensure our survival.

Schacter’s conclusion is clear: We would be foolish to rid ourselves of any of these memory features. They are frustrating when they don’t get us what we want, but each one reflects a valuable aspect of memory.

What is meant by the 'gaze heuristic'?

We learn to use something. The gaze heuristic will lead the player to the point where the ball is going to land. For example catching a ball, the gaze heuristic works very well. It takes into account wind, resistance and the spin of the ball.

Unintended consequence

Everybody thinks that biases are always negative. But no one has ever demonstrated that our judgments would be improved if we could be de-biased No one has ever compared what we would lose versus how much we would gain by giving up any of the reasoning strategies.

The heuristics-and-biases research simply shows the systematic errors that can arise from the limitations of our reasoning strategies. Some of the so-called biases have nothing to do with flawed reasoning.

Most important is that no matter how good the reasoning strategy, if it starts with poor data, it isn’t going to produce accurate results. The rule here is that if you put garbage in, garbage will come out. The original heuristics-and-biases research simply showed that people used heuristics even when the heuristics didn’t work well.

Replacement

Claim 2 states that decision biases distort our thinking which assumes there is a right way to think. It assumes that we are capable of thinking in the ‘right’ way except when we use mental strategies (heuristics) that are susceptible to errors.

What can we do to protect ourselves from the limitations without sacrificing the strengths of our mental strategies? A few ways to cope with cognitive limitations are to build expertise, to design more naturalistic judgment strategies that can mitigate the errors, to employ better data formats, and to use choice architects.

How is expertise build?

We can help people build expertise so they can use their reasoning strategies more effectively. If we want to improve decision making, and if we are vulnerable to suggestions about misleading anchors and frames, then we should help people build expertise.

Helping people learn more accurate anchors is more likely to succeed than trying to change the way they think in order to de-bias them. Greater expertise will help people identify good anchors, which will make them less vulnerable to manipulation by anchoring and adjustment.

Put judgments into perspective

We can design methods that will reduce problems that stem from the limitations from heuristics. Take overconfidence, we can benefit from safeguards, particularly if they prepare us to adapt once we encounter trouble. Two strategies:

• Outside view: using previous projects to suggest how long task will take and how many resources they will consume.

• Premortem technique. A postmortem is a procedure done in a hospital to find out why a patient died. The physician benefits, the medical community benefits, and even the friends and relatives benefit from what is learned. However, a postmortem doesn’t help the patient.

After a project has failed managers can conduct a postmortem session to figure out what went wrong. We can move the postmortem to the beginning to help us anticipate problems and to become more realistic about the challenges.

Represent data in ways that support intuition: Many people have difficulty thinking about probabilities. That doesn’t mean that their reasoning is faulty, just that they aren’t skilled at calculating and combining probabilities. Percentages are tough, because they involve ratios and are hard to visualize.

If people could see the same data in a different format, they might come up with more accurate judgments.

Example: When Tversky and Kahneman used frequency data instead of probability data, the conjunction fallacy dropped dramatically.

• Frequency data: How many of 100 participants?

• Probability data: What percentage of participants?

Gigerenzer applied the frequency format to help people make better use of base rates. Heuristics-and-bias researchers have shown that people usually ignore base rates when they make estimates.

Hoffrage, Lindsey Hertwig, and Gigerenzer showed that if base-rate data were provided as frequencies, the counselors would take the base rates into account and would make more accurate judgments.

Why the use of Choice architects?

Richard Thaler and Cass Sunstein are behavioral economists who have used the findings of the heuristics-and-biases research community to design programs that encourage people to make better decisions about things such as retirement savings. Thaler and Sunstein have designed programs to help people make good choices about their finances, their health and their children’s education. Thaler and Sunstein describe themselves as choice architects.

Why does claim 2 matter?

Claim 2 (that decision biases distort our thinking) matters because the concept of bias encourages organizations to overreact to failures by enacting excessive procedures and counter-productive restrictions. It also matters because it affects the way supervisors diagnose performance problems.

For more than 35 years, decision researchers have been demonstrating the biases that corrupt our judgments and decisions. They have been showing that our thinking processes are flawed, inaccurate and unreliable. Heuristics are automatic decision rules, these are strategies we commonly use in thinking and that can bias us. There are different kind of heuristics.