Transcript Errors and Biases of Human Judgment

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2. Evidence-based management:
Why do we need it?
Reason 1: Mounting criticism
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Managers have to endure a great deal of criticism from
various directions. Misuse of the position of power to
one's own benefit, failure and mismanagement are the
charges most commonly heard.
”Staff in the private and public sectors are addressed on a
daily basis in a language which does not express their own
specific reality but the make-believe world of managers.
This make-believe world is dominated by objectives
couched and repeated in a theatrical rhetoric: top quality,
excellence and continuous innovation”
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Trust me, I’m a manager.
Reason 2: Accountability
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As a result of this increasing social
pressure there is an external drive for
transparency which fosters an upheaval
for ‘objective opinion’ and even
‘objective evidence’.
Reason 3: false information
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 Half of what you learn will be shown to be either dead
wrong or out-of-date within 7 years of your graduation;
the trouble is that nobody can tell you which half
Reason 4: half time value of knowledge
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5 years? 7 years? 10 years?
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But the MAIN reason is .....
Errors and Biases of Human Judgment
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Seeing order in randomness
Mental corner cutting
Misinterpretation of incomplete data
Halo effect
False consensus effect
Group think
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Self serving bias
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Sunk cost fallacy
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Cognitive dissonance reduction 
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Confirmation bias
Authority bias
Small numbers fallacy
In-group bias
Recall bias
Anchoring bias
Inaccurate covariation detection
Distortions due to plausibility
Errors and Biases of Human Judgment
Postgraduate Course
 Seeing order in randomness
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Mental corner cutting
Misinterpretation of incomplete data
Halo effect
False consensus effect
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Reinterpreting evidence
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Group think
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Self serving bias
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Sunk cost fallacy
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Cognitive dissonance reduction 
Confirmation bias
Authority bias
In-group bias
Recall bias
Anchoring bias
Inaccurate covariation detection
 Distortions due to plausibility
Seeing order in randomness
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We are predisposed to see order, pattern and causal
relations in the world.
Patternicity: The tendency to find meaningful patterns in
both meaningful and meaningless noise.
Seeing order in randomness
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We are pattern seeking primates: association learning
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Points of impact of V-1 bombs in London
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Points of impact of V-1 bombs in London
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Errors and Biases of Human Judgment
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 A Type I error or a false positive, is
believing a pattern is real when it is not
(finding a non existent pattern)
 A Type II error or a false negative, is
not believing a pattern is real when it is
(not recognizing a real pattern)
Dr. Michael Shermer
(Director of the Skeptics Society)
Errors and Biases of Human Judgment
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 A Type I error or a false positive: believe that the
rustle in the grass is a dangerous predator when it is
just the wind (low cost)
Errors and Biases of Human Judgment
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 A Type II error or a false negative: believe that the
rustle in the grass is just the wind when it is a
dangerous predator (high cost)
Errors and Biases of Human Judgment
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 A Type I error or a false positive: believe that the
rustle in the grass is a dangerous predator when it is
just the wind (low cost)
 A Type II error or a false negative: believe that the
rustle in the grass is just the wind when it is a
dangerous predator (high cost)
Errors and Biases of Human Judgment
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superstitious
rituals
superstitious
rituals
more stress = more prone to biases
Errors and Biases of Human Judgment
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Errors and Biases of Human Judgment
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Erroneous beliefs plaque both experienced
professionals and less informed laypeople alike.
stress & lifestyle
peptic ulcer
Oct 2005
Peptic ulcer – an infectious disease!
This year's Nobel Prize in Physiology or Medicine goes to Barry Marshall and Robin
Warren, who with tenacity and a prepared mind challenged prevailing dogmas. By
using technologies generally available (fibre endoscopy, silver staining of
histological sections and culture techniques for microaerophilic bacteria), they
made an irrefutable case that the bacterium Helicobacter pylori is causing disease.
By culturing the bacteria they made them amenable to scientific study.
In 1982, when this bacterium was discovered by Marshall and Warren, stress and
lifestyle were considered the major causes of peptic ulcer disease. It is now
firmly established that Helicobacter pylori
causes more then 90% of duodenal ulcers.
The link between Helicobacter pylori
infection and peptic ulcer disease has been
established through studies of human
volunteers, antibiotic treatment studies and
epidemiological studies.
Errors and Biases of Human Judgment
Postgraduate Course
Doctors and managers hold many erroneous beliefs,
not because they are ignorant or stupid, but because
they seem to be the most sensible conclusion
consistent with their own professional experience!
available evidence.