Sunday, July 10, 2011

More on Biases and Fallacies

Bias can take many pernicious forms, all of which lead you away from true insight. As both a writer and as a reader, you'll want to understand as much as you can about every type of bias our brains can use to trick us. Here are a few of the most important ones:

Narrative Bias: Assuming that there's a logical explanation for something--or even an explanation at all.

If you've ever been at a job interview and explained the progression of your career, you've engaged in an act of narrative bias. Some of us believe that there's a pre-planned logic to our careers, the rest of us know that we're just backfitting a story after the fact.

Survivor Bias: Judging the members of a sample by looking only at the sample members you are able to see.

A typical example: the existing universe of investment funds has a collective performance record that looks much better than it really is. Why? Because the mutual funds with the worst performance were all closed down and removed from the sample. Ignoring this bias can be costly in more ways than one.

Outcome Bias: Judging a decision by information known after the outcome, not by the information available at the time the decision was made.

Decisions in war, politics, economic policy and investing are often judged years afterward by people armed with information the original decision-makers never had. Is it fair to judge them this way? Not really.

Causality Bias: Thinking two events that occur together cause each other (also known as post hoc ergo propter hoc).

This bias crime occurs constantly in media articles about medical studies and health reports. Showing a link between certain foods and a higher cancer risk tells you nothing about whether those foods actually cause a higher cancer risk.