The Danger of Anecdotes in Decision Making

Data is everywhere today and we have more information available at our fingertips than we ever have in the history of mankind.  We create data every time we interact with our smartphones, turn on the TV, or hop in our car and drive to work.  The amount of data created is expressed in numbers that are not normal for humans to comprehend as we have trouble quantifying exponentials in our heads.  For examples of this human flaw, ask a financial advisor about the challenge of explaining compound interest to a client or a computer science professor leading a lecture on Moore’s Law.  But why do we still gravitate towards anecdotes to explain concepts to get our points across to our intended audience?

Merriam-Webster defines the word as “a usually short narrative of an interesting, amusing or biographical incident.”  We understand stories and can relate to them.  We connect better with one another and retain more information through stories.  Amazon has banned PowerPoint in meetings in favor of dialogue and narratives.  Social researcher and famous author, Brené Brown, has explained that we use stories to express our feelings instead of looking objectively at the facts.  Behavior economists have also made the argument that cognitive bias plays a role in our overreliance on understandable heuristics over data.  Even Jesus spoke in parables to explain concepts to his followers which we still remember some 2,000 years later.

However, anecdotes can be dangerous when used in decision-making without supporting data.  We oftentimes use personal examples when assessing a problem or arguing in favor of our point of view.  We assume we are rational and everyone thinks similar to us.  This can be dangerous when conducting market research or making investment decisions.  A personal experience or strongly held belief is really just a sample size of one.  Surrounding yourself with people who have different perspectives is a way to combat this type of thinking.  This is also an undervalued benefit of having a diverse and inclusive team.  We need to be aware of these traps and learn to seek the data points that support our statements. 

Combining data with storytelling is where the real magic happens.  Starting with data and combining primary research (interviews or surveys) with empirical evidence is the best method to support decision making.  Unlike a supercomputer or AI model, we humans need anecdotes to grasp a deep understanding of what the data is revealing to us.

Key Takeaways

  • Be aware of your personal biases and experiences when evaluating opportunities.  
  • Anecdotes are a powerful method to communicate key ideas but must be backed by data and not unconscious biases.

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