Monday, July 13, 2020

Upcoming Book: Noise

I look forward to the publication of the upcoming book "Noise" by Kahneman, Sunstein, and Sibony.
A 2016 HBR article by Kahneman and colleagues gives a sense of the potential scope of the work. A brief description of the concept is below and the article itself is worth reading for people interested in applying these ideas in organisational contexts.
Professionals in many organizations are assigned arbitrarily to cases: appraisers in credit-rating agencies, physicians in emergency rooms, underwriters of loans and insurance, and others. Organizations expect consistency from these professionals: Identical cases should be treated similarly, if not identically. The problem is that humans are unreliable decision makers; their judgments are strongly influenced by irrelevant factors, such as their current mood, the time since their last meal, and the weather. We call the chance variability of judgments noise. It is an invisible tax on the bottom line of many companies.
The core of the idea is to understand how inconsistent decisions arise in environments even in cases where information is relatively consistent across similar decision-making units. The authors distinguish noise from the more common idea of bias along the lines of the diagram below. They propose a range of ways in which organisations can audit the extent to which their decision-making processes can lead to noisy outcomes. The concept of "noise audits" is a very interesting one and likely to find traction in a range of settings where people are frustrated at a lack of predictability in assessment and evaluation setttings. 


The book is not available yet to review but it is worth at least engaging with the HBR article and the ideas contained there. I have mentioned it in a number of recent lectures and post here so people who attended these sessions have a reminder and the relevant links. Kahneman, Lovallo, and Sibony's HBR article "The Big Idea: Before you make that big decision" is one of my favourite pieces to discuss in executive education sessions and bundles a remarkable amount of literature into a very accessible treatment of 12 psychological factors to consider when making large-scale decisions in organisational contexts. I posted previously on the key articles I have used in undergraduate contexts in this area and I will post at a later stage on the main articles I have used for exec contexts. I hope that Noise will be a key reference in this regard in the future.

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