Why our judgments are so contradictory and how we can change that

In this article you will learn

• Why you should always get a second opinion on critical medical diagnoses?
• Why some court decisions by judges remind you of a lottery?
• Why AI consistently makes better decisions than humans?
• Why your forecasts and estimates can be all over the place?
• How do you sort out this mess?

Summary

• Noise is unwanted variability in judgments and decisions, especially repeated decisions. It is a measure of consistency in your decisions.
• It's unexpectedly strong implications for businesses and entire industries that involve important and repeated decisions, such as insurance, medicine, and law.
• Noise in human decisions is so strong that even computer models of humans perform better than the humans they're modeled after.
• The noise can be contained using many of the same methods required for good decision-making.

Long live the King

One day I'll have his face tattooed on my right arm, that's for sure.

I'm talking about Daniel Kahneman - professor of psychology, behavioral economist, researcher, prolific author, and Nobel Prize-winning economist. Most of you probably know him through his famous book, Thinking Fast and Slow.

He and his co-authors (Olivier Sibony, Cass R. Sunstain) have a new book! It's called Noise: A Flaw in Human Judgment.

I'm a bit of a decision fanatic myself. When I started reading this book, I was excited, but also a little skeptical - along the lines of, "Sure, I'll read the book just because Kahneman is one of the authors, but I don't think there's anything surprising in it." Most books on behavioral economics these days are repetitive - they deal with the same psychological biases and mental models, just from slightly different angles. That's exactly what I expected here.

I wouldn't mention any of this if I didn't have a "But of course I was wrong!" in my pocket. This brilliant book brought up a topic that's always hovered in the air around us, but hasn't been seriously discussed or addressed. I'm talking about Noise.

I'm not going to tell you about the book again here. The goal of this article is to give you a taste of what Noise is and why it's so important so you've enough motivation to spend your hard earned money on this wonderful, if somewhat long, book.