The Art of Thinking Clearly: Better Thinking, Better Decisions

See also Intention-to-Treat Error (ch. 98); The Law of Small Numbers (ch. 61)

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59
IF YOU HAVE AN ENEMY, GIVE HIM INFORMATION
Information Bias
In his short story ‘Del rigor en la ciencia’, which consists of just a single
paragraph, Jorge Luis Borges describes a special country. In this country, the
science of cartography is so sophisticated that only the most detailed of maps will
do – that is, a map with a scale of 1:1, as large as the country itself. Its citizens
soon realise that such a map does not provide any insight, since it merely
duplicates what they already know. Borges’ map is an extreme case of the
information bias
, the delusion that more information guarantees better decisions.
Searching for a hotel in Miami a little while ago, I drew up a shortlist of five
good offers. Straight away, one jumped out at me, but I wanted to make sure I had
found the best deal and decided to keep researching. I ploughed my way through
dozens of customer reviews and blog posts and clicked through countless photos
and videos. Two hours later, I could say for sure which the best hotel was: the
one I had liked at the start. The mountain of additional information did not lead to
a better decision. On the contrary, if time is money, then I might as well have
taken up residence at the Four Seasons.
Jonathan Baron from the University of Pennsylvania asked physicians the
following question: a patient presents symptoms that indicate with a probability of
80% that he is suffering from disease A. If this is not the case, the patient has
either disease X or Y. Each of these diseases is equally bad, and each treatment
results in similar side effects. As a doctor, what treatment would you suggest?
Logically, you would opt for disease A and recommend the relevant therapy. Now
suppose there is a diagnostic test that flashes ‘positive’ when disease X is
present, and ‘negative’ when disease Y is detected. However, if the patient really
does have disease A, the test results will be positive in 50% of the cases, and
negative in the other 50%. Would you recommend conducting the test? Most
doctors said yes – even though the results would be irrelevant. Assuming that the
test result is positive, the probability of disease A is still much greater than that of
disease X. The additional information contributes nothing of value to the decision.
Doctors are not the only professionals with a penchant for surplus information.

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Managers and investors are almost addicted to it. How often are studies
commissioned one after the other, even though the critical facts are readily
available? Additional information not only wastes time and money, it can also put
you at a disadvantage. Consider this question: which city has more inhabitants –
San Diego or San Antonio? Gerd Gigerenzer of the Max Planck Institute in
Germany put this question to students in the Universities of Chicago and Munich.
Sixty-two per cent of Chicago students guessed right: San Diego has more. But,
astonishingly, every single German student answered correctly. The reason: all of
them had heard of San Diego, but not necessarily of San Antonio, so they opted
for the more familiar city. For the Chicagoans, however, both cities were
household names. They had more information and it misled them.
Or, consider the hundreds of thousands of economists – in the service of banks,
think tanks, hedge funds and governments – and all the white papers they have
published from 2005 to 2007, the vast library of research reports and
mathematical models. The formidable reams of comments. The polished
PowerPoint presentations. The terabytes of information on Bloomberg and
Reuters news services. The bacchanal dance to worship the god of information. It
was all hot air. The financial crisis touched down and upended global markets,
rendering the countless forecasts and comments worthless.
Forget trying to amass all the data. Do your best to get by with the bare facts. It
will help you make better decisions. Superfluous knowledge is worthless,
whether you know it or not. Daniel J. Boorstin put it right: ‘The greatest obstacle to
discovery is not ignorance – it is the illusion of knowledge.’ And next time you are
confronted by a rival, consider killing him – not with kindness but with reams of
data and analysis.