PODCAST: Freakonomics

Freakonomics is one of my favorite podcasts. As it says in its introduction it's all about the "hidden side of everything" .

Episode 267: How to Make a Bad Decision -

This episode is one of the most fascinating I have ever listened. It explores the idea of the Gambler's Fallacy. It's a misconception that we see with coin flips, slots, and many other events. People will say "Oh so there were 3 heads, the next must be a tail", but in reality, it's an independent event: the odds are just 50/50. So, order could affect the way we make decisions. The episode uses the example of loan officers, pitchers, and federal judges. This has enormous consequences on how we organize our system and for those that receive these judgments. Here is some of the wild data that shows this phenomenon.

In baseball, they analyzed Umpire judgment calls and found that they were in fact fallible. For a pitch right outside the strike zone, the umpire gets those right about 64 percent of the time. That's an error rate of 34 percent! Just seeing two strikes, makes the next 5.5 percent less likely to be called a strike.

They also looked at loan officers and looked to see how the order affected their decision process and saw that they got it wrong roughly 8 percent of the time simply because of the sequence. This job based experiment also added incentives that greatly reduced the effects of the gambler's fallacy.

The last example was asylum appliactions. In that they saw that having 3 yeses reduces your chance of a yes by 3 percent. This may not seem like a lot, but when it comes to the fate of entire families, order could make a difference.

This makes me think about all the decision-makers in my life and how I can take advantage of a system that is so focused on order. Should I do my interview at this time because they will be more likely to accept me? It's something important though to think about when we also think about how we made judgements and trying to prevent things like this from happening. Moskowitz, the researcher, offers to make the order random as to reorder the sequence. However, most people's brains have a hard time makings something truly random. It's why at the end of the day, making decisions will always be flawed, but its important we recognize that because it's truly part of being human.