Data Analytics: From Bias to Better Decisions

DATA ANALYSIS can be an effective way to sort through complexity and assist our judgment when it comes to making decisions. But even with impressively large data sets and the best analytics tools, we are still vulnerable to a range of decision-making pitfalls — especially when information overload leads us to take shortcuts in reasoning. As a result, in some instances, data and analytics actually make matters worse.

Psychologists, behavioural economists and other scholars have identified several common decision-making traps, many of which stem from the fact that people don’t carefully process every piece of information in every decision. Instead, we rely on heuristics — simplified procedures that allow us to make decisions in the face of uncertainty or when extensive analysis is too costly or time-consuming. These mental shortcuts lead us to believe that we are making sound decisions when in fact, we are making systematic mistakes. What’s more, human brains are wired for certain biases that creep in and distort our choices — typically without our awareness.

There are three main cognitive traps that regularly bias decision-making, even when informed by the best data. We will examine each in detail