Monday, February 25, 2013

"We are all prisoners of our own experiences": Sorting Out the Signal from the Noise.

I've referred to Nate Silver's book "The Signal and The Noise" a couple of times in the last few postings.  Although Silver's book is fundamentally about using data to make predictions, I believe it is an important contribution to a very important leadership skill..that of critical thinking.

Silver has gained notoriety in the USA for his ability to accurately predict the outcomes of US elections.  A simple summary of the book's contents would be he describes how we select data, interpret data, evaluate risk and uncertainty and how we use data to make decisions and predictions.  In addition to political forecasts, he uses a wide variety of entertaining examples including US professional baseball, hurricane prediction, earthquake prediction, economic forecasts, weather forecasts, climate change, chess and poker to make his points.  For those who love quantitative analysis, there are an abundance of "crunchy" data-driven examples.

Although leaders aren't necessarily in the "forecasting business" in the same way a weather forecaster or a political pollster is, anticipation is an important leadership function.  The larger the organization and the more senior the leader the longer the time horizon requiring some level of forecasting.

In addition to the "correlation does not imply causation" point I made in the last blog here are some examples from the book especially pertinent to leaders:

On data selection:
"The story the data tells us is often the one we'd like to hear, and we usually make sure it has a happy ending"

"The blind spots in our thinking are usually of our own making and they can get worse as we get older"

"We tend to latch on to data that supports our theory"

"When we can't fit a square peg into a round hole we usually blame the peg"

"We all have beliefs and biases, forged from some combination of our experiences, our values, our knowledge and perhaps our political or professional agenda"

"We will never make perfectly objective predictions.  They will always be tainted by a subjective point of view."

On confidence:

"Over-confidence is a huge problem in any field in which prediction is involved"

"We must accept the fallibility of our judgment if we are to come to more accurate predictions"

"Most of us are over confident when we make predictions"

"In many walks of life, expressions of uncertainty are interpreted as a sign of weakness"

"We often mistake the unfamiliar for the improbable."

"When a prediction about a complex phenomenon is expressed with a great deal of confidence, it may be a sign the forecaster has not thought through the problem carefully."

The leadership lessons and tips that emerge from these insights:

Critical thinking is a skill that comes from isn't a God-given talent or the product of a massive intellect.  Some tips on practice:

-State your own assumptions as well as challenging those of others.  
-Publicly test your  assumptions and beliefs.  "This is my experience which led me to this opinion".  "What's your reaction to what I'm saying?"   
-Inquire of others..."Help me understand" "What causes you to conclude?" "I'm coming to a different conclusion", "Say more about this" "Is there an alternative explanation?"


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