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Noise: A Flaw in Human Judgment. By Daniel Kahneman, Olivier Sibony, and Cass R. Sunstein
Kahneman, Sibony, and Sunstein have written a book that is
both valuable and frustrating.
This book presents multiple ideas related to human judgment
and decision making: (1) a review of studies that have described the
variability in judgments in many domains, (2) approaches for reducing that
variability, (3) an approach for making decisions when there are multiple
factors that should be considered, and (4) an appeal for better procedures in
the legal system. According to the
authors, the book offers an understanding of the psychological foundations of
disparities in judgments, which are here classified as noise and bias.
The book’s strengths include its review of the literature on
the variability of judgments and its distinction between noise and bias. It presents examples of judgments from many
domains (including medicine, business, and the legal system). It strongly supports systematic
decision-making processes (a topic that is important to me) and emphasizes the importance
of accurate judgments. It acknowledges
the difficulties of reducing noise.
Finally, its notes provide references to original studies that provide
context and details to the book’s discussion.
The book describes a range of best practices for judgment
and decision making: employing persons who are better at making judgments,
aggregating multiple judgments, using judgment guidelines, using a shared scale
grounded in an outside view, and structuring complex decisions. The first three items are meant to reduce
judgment errors due to noise and bias.
The last item is a practical multi-criteria decision-making process that
(a) decomposes the decision into a set of assessments, (b) collects information
about each assessment independently, and (c) presents this evidence to the
decision-maker(s), who may use intuition to synthesize this information and
select an alternative. In an appendix,
the authors use their recommendations, for the book provides a checklist (a
guideline) for evaluating a decision-making process.
When discussing ratings, the book wisely recommends that
“performance rating scales must be anchored on descriptors that are
sufficiently specific to be interpreted consistently.” Scales with undefined terms such as “poor”
and “good” and “excellent” should be discarded unless they are well-understood
in the group of persons who are using them as a common language.
Unfortunately, two weaknesses (one minor, one major)
frustrated me. The first is the fact that
the text contains no superscripts, citations, or other marks that indicate the
notes that are available in the Notes section at the end of the book. In the Notes section, each note has only a
page number and a brief quote that suggest the text to which the note
applies. This unreasonable scheme reduces the value of the notes' many citations and explanations by making them harder to find and use.
The second weakness is more significant. The book does not distinguish between
judgment and decision making. It tends
to treat them as the same thing. Indeed,
a note explains that the authors “regard decisions as a special case of
judgment” (page 403).
For example, the book discusses the judgments that an
insurance company’s employees make. One example
is a claims adjuster’s estimate of the cost of a future claim, which is indeed
a judgment. The other example is the
premium that an underwriter quotes, which is a decision, not a mere
judgment. It is based on numerous
judgments, of course, but the underwriter chooses the premium amount. The book states that making a judgment is
similar to measuring something, which is appropriate, but then goes on to say
that the premium in the underwriter’s quote is also a judgment, which is not
appropriate, because it is the result of a decision, not a measurement.
Elsewhere, the book claims that “an evaluative judgment
determines the choice of an acceptable safety margin” for an elevator design
(page 67). This is inappropriate,
however, for choosing the safety margin is a decision, not a measurement.
The book states that the process of judgment involves
considering the given information, engaging in computation, consulting one’s
intuition, and generating a judgment; that is, judgment is “an operation that
assigns a value on a scale to a subjective impression (or to an aspect of an
impression)” (page 176). This is not the
same as decision making. Decision making
is a more comprehensive process that defines relevant objectives, identifies (or
develops) alternatives, evaluates the alternatives, selects one, and implements
it. In this process, judgment is an
activity that may be used to evaluate the alternatives. The book provides a relevant example that
shows the distinction: job candidates get ratings, but only one gets
hired. The ratings are judgments, but
choosing and hiring someone is a decision.
Those seeking to improve decision making in their
organizations will find many useful suggestions in this book, but they should
keep in mind that decision making is a process, not a judgment.