HBR IdeaCast Why Smart People (Sometimes) Make Bad Decisions
May 25, 2021
Daniel Kahneman, a Nobel laureate and emeritus professor at Princeton, teams up with Olivier Sibony, a strategy professor at HEC Paris, to explore the intriguing concept of 'noise' in decision-making. They explain how noise, distinct from bias, leads to inconsistent judgments even from the same individuals under similar circumstances. The duo shares strategies for combating noise, emphasizing the importance of structured decision-making processes and independent evaluations to improve organizational outcomes. Dive into their insights for enhancing decision integrity!
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Bias vs. Noise
- Bias is a tendency to swing in one direction, like consistently underestimating costs.
- Noise is random variability in decisions made by different people or even the same person at different times.
Noise is Undue Variability
- Noise is variability in judgments that shouldn't exist, where judgments should agree but don't.
- Noise exists wherever there is judgment, and there's more of it than you think.
Intrapersonal Noise
- Noise isn't just between people; the same person makes different judgments in similar circumstances at different times.
- Judges give consistent sentences on the same day but vary over time if they don't recognize the case.
