A woman, suffering from unexplained weight gain consulted her GP, who referred her to three different specialists. One concluded she was celiac, a second judged she was pre-diabetic and a third said none of the tests was conclusive.
Welcome to the world of noise, the topic of the new book — Noise: A Flaw in Human Judgment — by Nobel Prize winning psychologist Daniel Kahneman, behavioural economist Cass Sunstein and management professor Olivier Sibony.
Taking in contradictory medical diagnoses like the example above, conflicting judicial rulings, widely divergent underwriting assessments and random-seeming economic forecasts, this book distinguishes two types of error — bias and noise.
Bias and noise
Bias refers to assessments that are systematically off-target, like bathroom scales that routinely add half a kilogram to your weight. But the under-rated component error, Kahneman and his co-authors argue, is the random scatter that constitutes noise.
“In public conversations about human error and in organisations all over the world, noise is rarely recognised,” Kahneman, Sunstein and Sibony write. “Bias is the star of the show. Noise is the bit player, usually offstage.”
Alongside divergent diagnoses in medicine, notoriously noisy outcomes are evident in many areas, such as child custody decisions, market and economic forecasts, personnel hiring decisions, asylum applications, bail rulings and patent decisions.
Noise is everywhere
“Wherever you look at human judgments, you are likely to find noise,” the authors write, noting that a degree of uncertainty is inherent in any judgment, even professional judgment of the kind made every day by doctors, judges and economists.
“A skilled and careful forecaster using the best possible tools and techniques will often miss the correct number in making a quarterly inflation forecast. Meanwhile, in a single quarter, a dart-throwing chimpanzee will sometimes be right.”
Noise is costly
The message of this book is that noise costs us a lot. It can be financially ruinous for companies, it can lead to poor investment decisions, it can affect public confidence in institutions like the judicial system, and it can undermine our sense of fairness.
As to what to do about it, the authors suggest that organisations start by carrying out a “noise audit” of their judgment processes. These can call attention to deficiencies in skill or training and quantify the amount of system noise.
"Decision hygiene"
The authors also suggest the application of “decision hygiene”, based on a set of six principles – including accepting that the goal of judgment is accuracy, not individual expression and breaking down complex judgements into simpler assessments.
“Enforcing decision hygiene can be thankless,” the authors concede. “But like physical hygiene, decision hygiene is vital. After a successful operation, you like to believe that it is the surgeon’s skill that saved your life. But if the surgeon and all the personnel had not washed their hands, you might be dead.”
The ideal of a less noisy world, particularly at the time of a global pandemic and multiplying economic uncertainties, is a compelling one. And it’s an ideal that this fascinating book puts within reach — if we are ready to do the work.