Noise: A Flaw in Human Judgment

by Daniel Kahneman

People are prepared to trust an algorithm that achieves a very high level of accuracy because it gives them a sense of certainty that matches or exceeds that provided by the internal signal. But giving up the emotional reward of the internal signal is a high price to pay when the alternative is some sort of mechanical process that does not even claim high validity.

Despite all the evidence in favor of mechanical and algorithmic prediction methods, and despite the rational calculus that clearly shows the value of incremental improvements in predictive accuracy, many decision makers will reject decision-making approaches that deprive them of the ability to exercise their intuition. As long as algorithms are not nearly perfect—and, in many domains, objective ignorance dictates that they will never be—human judgment will not be replaced. That is why it must be improved.

the Fragile Families study.

Statistical terms are often misleading to the lay reader, and “significant” may be the worst example of this. When a finding is described as “significant,” we should not conclude that the effect it describes is a strong one. It simply means that the finding is unlikely to be the product of chance alone.

To understand is to describe a causal chain. The ability to make a prediction is a measure of whether such a causal chain has indeed been identified. And correlation, the measure of predictive accuracy, is a measure of how much causation we can explain.

while correlation does not imply causation, causation does imply correlation.

why do professionals—and why do we all—seem to underestimate our objective ignorance of the world?

A different mode of thinking, which comes more naturally to our minds, will be called here causal thinking. Causal thinking creates stories in which specific events, people, and objects affect one another.

the logical end of a chain of events, the inevitable denouement of a foreordained tragedy.

Whatever the outcome (eviction or not), once it has happened, causal thinking makes it feel entirely explainable, indeed predictable.

You would be surprised to find we suddenly switched to Turkish,

Causal thinking avoids unnecessary effort while retaining the vigilance needed to detect abnormal events.

statistical thinking also demands specialized training. This type of thinking begins with ensembles and considers individual cases as instances of broader categories. The eviction of the Joneses is not seen as resulting from a chain of specific events but is viewed as a statistically likely (or unlikely) outcome, given prior observations of cases that share predictive characteristics with the Joneses.

Relying on causal thinking about a single case is a source of predictable errors. Taking the statistical view, which we will also call the outside view, is a way to avoid these errors.

causal mode comes much more naturally to us. Even explanations that should properly be treated as statistical are eas...

Consider assertions such as “they failed because they lacked experience” or “they succeeded because they had a brilliant leader.” It would be easy for you to think of counterexamples, in which inexperienced teams succeeded and brilliant leaders failed. The correlations of experience and brilliance with success are at best moderate and probably low. Yet a causal attribution is readily made. Where causality is plausible, our mind easily turns a correlation, however low, into a causal and explanator...

The reliance on flawed explanations is perhaps inevitable, if the alternative is to give up on understanding our world. However, causal thinking and the illusion of understanding the past co...

Causal thinking helps us make sense of a world that is far less predictable than we think. It also explains why we view the world as far more predictable than it really is.

In the valley of the normal, there are no surprises and no inconsistencies. The future seems as predictable as the past. And noise is neither heard nor seen.

people who are asked a difficult question use simplifying operations, called heuristics.

planning fallacy.

The substitution of one question for the other causes predictable errors, called psychological biases.

Errors are bound to occur when a judgment of similarity is substituted for a judgment of probability,

availability heuristic.

conclusion bias, or prejudgment.

affect heuristic: people determine what they think by consulting their feelings.

regardless of the true reasons for your belief, you will be inclined to accept any argument that appears to support it, even when the reasoning is wrong.

Whether you’re haggling in a bazaar or sitting down for a complex business transaction, you probably have an advantage in going first, because the recipient of the anchor is involuntarily drawn to think of ways your offer could be reasonable.

excessive coherence: we form coherent impressions quickly and are slow to change them.

(Another term to describe this phenomenon is the halo effect, because the candidate was evaluated in the positive “halo” of the first impression.

consumers were found to be more likely to be affected by calorie labels if they were placed to the left of the food item rather than the right. When calories are on the left, consumers receive that information first and evidently think “a lot of calories!” or “not so many calories!” before they see the item. Their initial positive or negative reaction greatly affects their choices. By contrast, when people see the food item first, they apparently think “delicious!” or “not so great!” before they see the calorie label.

In general, we jump to conclusions, then stick to them.

substitution biases, which lead to a misweighting of the evidence; conclusion biases, which lead us either to bypass the evidence or to consider it in a distorted way; and excessive coherence, which magnifies the effect of initial impressions and reduces the impact of contradictory information.

a physically attractive candidate whose good looks create an early positive impression in most recruiters. If

When you answer the question “On a scale of 1 to 10, how good is your mood?” or “Please give one to five stars to your shopping experience this morning,” you are matching:

(The technical term for such prediction errors is that they are nonregressive, because they fail to take into account a statistical phenomenon called regression to the mean.)

substitution and matching do not always govern predictions. In the language of two systems, the intuitive System 1 proposes quick associative solutions to problems as they arise, but these intuitions must be endorsed by the more reflective System 2 before they become beliefs.

people are more reluctant to match predictions to unfavorable than to favorable evidence. We suspect that you would hesitate to make a matching prediction of inferior colle...

We offer the outside view as a corrective for intuitive predictions of all kinds.

When serious judgment is necessary, the outside view must be part of the solution.

an all-time classic article in psychology, published in 1956: “The Magical Number Seven, Plus or Minus Two.” Beyond this limit, people tend to start to make errors

This limit of our discriminating power matters, because our ability to match values across intensity dimensions cannot be better than our ability to assign values on these dimensions.

There is a way to overcome the limited resolution of adjective scales: instead of using labels, use comparisons. Our ability to compare cases is much better than our ability to place them on a scale.

Explicit comparisons between objects of judgment support much finer discriminations than do ratings of objects evaluated one at a time.

“Both of us say this movie is very good, but you seem to have enjoyed it a lot less than I did. We’re using the same words, but are we using the same scale?”

“It is hard to remain consistent when grading these essays. Should you try ranking them instead?”

Much research has been conducted on the difficulties of communication that arise from vague expressions such as “beyond a reasonable doubt,” “clear and convincing evidence,” “outstanding performance,” and “unlikely to happen.” Judgments that are expressed in such phrases are inevitably noisy because they are interpreted differently by both speakers and listeners.

reprehensible;

To test this outrage hypothesis, we asked different groups of participants to answer either the punitive intent question or the outrage question.

the correlation between the mean ratings of outrage and of punitive intent was a close-to-perfect 0.98 (PC = 94%). This correlation supports the outrage hypothesis: the emotion of outrage is the primary determinant of punitive intent.