How good are your heuristics?

Both people and organizations rely on heuristics to help predict outcomes.  What is wrong with that?

   I get that business executives can be hesitant to put up more structured decision-support systems for cause of fear.  What I don't get is how people are not interested in understanding the disarray out of which problems arise, leading them to better decision making capability.  Instead they rely on heuristics that often lead them wrongly or guide them to a more feeble or breakable decision.  No one can really say what causes people to do this, but one can show correlations to heuristics that govern group behaviors.

   I get that most folks here it GAIN think they have pretty good heuristics for choosing the activities and innovations they pursue.  But I wonder if anyone considers how to measure or correlate the outcomes to the structures of the decision making process?  I doubt if the group has examined exactly what their decisions are based upon.  Of course they are based on "good business instincts" but to rely on that is a cop out because it leaves those instincts unexplained and unexamined.

There is rather recent paper about heuristic traps and avalanche accidents that helps to clarify this notion.

In a review of 41 avalanche accidents involving avalanche aware victims, … 83% were due to decision-making errors rather than subtleties of the terrain or snowpack. These and other results have fostered a growing emphasis on decision making skills and human factors in avalanche education. … In this paper, I present evidence that four heuristic traps – familiarity, social proof, commitment and scarcity – have played key roles in recreational avalanche accidents.

   As I read that paper, I got to thinking about those heuristics traps (that are worth repeating here) -- familiarity, social proof, commitment and scarcity -- and how they apply to business innovation.  

   As for myself, I found it rather easy to see how the first three heuristic traps correlate to and affect outcomes of participation @GAIN.  I guess that is the consultant in me, a role I have often played: it is easy to look into something  from outside the bindings of familiarity.  The trap of scarcity is not as easy to transpose to outcomes at GAIN though it transposes readily to economic and investment activity.  

   I pasted the abstract and a link to the paper below for anyone that is interested.  I offer this suggestion in order to appreciate the subject in this environment:  After or while reading it, replace the context of the routine complexity in the outcome of a ski trip, with the routine complexity in the outcome of decisions regarding resource allocation, where such resources ( time, attention, capital ) are scarce. This will give you a sense of the significance here and now.

Abstract:

Even though people are capable of making decisions in a thorough and methodical way, it appears that most of the time they don’t. A growing body of research suggests that people unconsciously use simple rules of thumb, or heuristics, to navigate the routine complexities of modern life. In this paper, I examine evidence that four of these heuristics – familiarity, social proof, commitment and scarcity – have influenced the decisions of avalanche victims. Using a quantitative method to define the level of hazard exposure in 598 avalanche accidents in the United States, I compare the behavior of the victims when heuristic cues were present to their behavior when these cues were absent. Key findings of this study include: 1) evidence that social proof, commitment, and scarcity traps were significant in many accidents, 2) evidence that group size influenced susceptibility to certain heuristic traps, and 3) evidence that the level of avalanche training in victims influenced their susceptibility to heuristic traps. These findings strongly support the idea that tools for managing heuristic traps are essential for effective avalanche education.

Anyone one interested in this sort of thing can read the full paper here.

The study does more than just remind me that decision-making has serious consequences.  What constitutes good intuition leading to good decisions?  Do you know... really?