Human psychology is fascinating.

In the Weekend Edition of the Wall Street Journal, February 14-15, 2015, Robert M. Sapolsky writes in his “Mind & Matter” column about an experiment run with two groups of employees from a large international bank. The first group was given a questionnaire to fill out, answering mundane questions, before participating in a contest where they were asked to predict the outcome of a series of coin tosses. Subjects in the second group were given a questionnaire that included job-related questions, specifically included to prime them to think about their professional identity as bank employees. After the coin toss contest, the employees in the second group were found to be about 20% more likely than the first group to cheat when reporting the accuracy of their guesses! The effect of “priming” in research subjects, in this case with questions about their professional identity, is a fact of human cognition well known to psychologists, consistently demonstrating how easily human thinking can be influenced to stray from rationality and accuracy.

So what does this have to do with Data & Analytics? It shows the reliably unreliable nature of human psychology, which can often result in errors of judgment and decision making. It is exactly this weakness in us humans that makes this alternative decision making method so potentially powerful; such is the benefit and strength of using predictive models built using statistical methods from historical data, free from the biases and heuristics used by our brains.

As you ponder the potential benefits of predictive analytics, it pays to keep this lesson in mind. One of the primary reasons that predictive models can lead to better decisions and better outcomes for our businesses is that they transcend the limitations of how we think and make judgments in our own imperfectly human ways.

Wall Street Journal online subscribers can read the article, “When Our Ethics Change According To Where We Are,” here.

Drop me a line at gene@connollyconsultants.com if you’d like to discuss the topic further; understanding how our brains work tells us why predictive models work.

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