In this episode of our Rarely Rational series, Madhavi Nadig and Jyothi Sridhar discuss why people love to look for patterns, and when they find these patterns they want to associate a meaning to them.
- While we have heard of women shattering the glass ceiling, there is also a problem of them ‘falling off the glass cliff’.
- Illusion of validity is where in which a person overestimates their ability to interpret and predict accurately the outcome when analyzing a set of data.
- People think they have found patterns and are convinced only by those patterns.
- Confident about the decision made by this perception.
- Reasons for this cognitive bias. Identifying patterns is what the human brain is conditioned to do.
- People love to look for patterns, and when they find these patterns they want to associate a meaning to them.
- Example from Mahabharatha where Yudhishitira might have succumbed to this Illusion of validity. Yudhishtira agreed to play dice with Duryodhana & Shakuni after he won once. Why so over confident despite knowing Shakuni was a master of the dice?
- Daily trading in the stock markets show instances when people fall prey to the illusion of validity.
- Nithin Kamath – Founder of Zerodha said ‘How useful is collecting & analysing tons of data is a question I ask my peers. We have no data team at Zerodha as we believe it doesn’t give useful insights…’
- If you have a list of contacts, then you can’t market your new product to all of them. Position your product and figure out the subset of contacts for whom this product is relevant. Example of illusion of validity in marketing. Already existing users might not be the target audience to every new feature or product that is launched.
- Interesting incident about how statisticians figured out how to reinforce aircrafts and prevent too much damage during the world war.
- Illusion of validity in user research.
- How Interpreting data when data is actually missing can lead to incorrect outcomes.
- Avoiding this bias – by not always looking for data to tell a coherent story.
- Seek out different opinions and interpretations.
- Madhavi’s shares an experience at an Ad-tech company showing how data can change the perception of reality.
- Which is safer? Flights or cars?
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