Daniel Kahneman, Cass Sunstein, and Olivier Sibony (henceforth KSS) argue that inconsistency in human judgment is widespread, not well appreciated, and very costly. Sentences differ for similar crimes. Underwriting decisions differ for similar loan applicants. Hiring decisions differ for similar job candidates. Performance evaluations differ for similar employees.
I found their book worth reading, although if you read my review you will see where I quibble.
The pandemic response comes to mind immediately.
As someone who makes hundreds of decisions per day in “similar” situations and is interested in the theory of error in decision making I have always found KSS to be out of their depth in this. Similar is not identical. They make the rookie mistake of thinking similar means identical. As Yogi Berra said ” In theory there is no difference between theory and practice. In practice there is.” (FWIW this is an example of how useless snopes is. They try to date the quote to 1986 yet it was attributed to Yogi Berra prior to 1986.)
Amen.
Even using examples of baseball pitches as Arnold does puts you into the wrong mindset. A baseball pitch has what, two criteria to determining if it is a ball or a strike? How many dozens or hundreds of criteria go into estimating things like sentencing for crimes? How similar are these similar crimes, similar defendants, similar situations that they expect to be ruled exactly the same way?
It is getting to the point where every Sunstein book is essentially “Look how dumb people are. I am sitting way over here and have never even done what they do, and I can already tell you all these ways they are doing it incorrectly. Why can’t they see how simple it really is when you ignore all the detail?” I was actually surprised Holmes wasn’t a coauthor on this one, too, as that is usually his formula as well.
“unwanted variability’ is an unwelcome, judgmental description of what is instead simply ‘variability.’
Noise is very important in many systems because it prevents them from being ‘gamed’ and maliciously manipulated. Noise in systems is a feature that allows for robustness. It also decreases requirements for coordination and control. It allows options to be explored.
Of course managers dislike noise. That’s a facet of management – that you dislike noise. Many people have significant experience with managers that should cause them to dislike managers more than they dislike noise.
“A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines.” – Emerson.
Whether noise is socially undesirable (causes a welfare loss) depends on whether decision outcomes are path-dependent or more like a Markov process (memoryless). If I am unfairly not hired by Firm A, but the nearly identical Firm B correctly hires me, little harm is done. But if Firm B hears that Firm A passed on me and thus does not hire me either, it’s bad. Similarly if ”wrong” decisions have long-lasting impacts. I don’t know which is closer to reality (path-dep or Markov).
The propositions, as well as the flow of the language that presents them – the theses and the style combined – strikes me as a sophomoric and overthought attempts to create a self-help book for managers with no people skills. The entire tenor is a faux social science that delivers a scientistic set of rules for a sliver of management professionals who may be looking for content for the next (dreaded) presentation.