BookYol

Concept

Base-Rate Neglect

Base-rate neglect is the tendency to judge how likely something is by how well a description fits it, while ignoring how common that category is in the first place, its base rate.

Daniel Kahneman and Amos Tversky demonstrated it with a sketch of a fictional graduate student, Tom W, written to sound like a stereotypical computer science student: orderly, fond of neat systems, not very sociable. Asked which field Tom was most likely studying, people ranked the fields by how closely he matched each stereotype and barely considered that far more students were enrolled in some fields, such as the humanities, than in computer science. Kahneman calls the shortcut representativeness: System 1 answers the hard question of probability with the easy question of resemblance. The description is vivid and the base rate is a dull statistic, so the description wins. Yet the base rate is often the most informative fact available, and descriptions are usually less reliable than they feel; participants were even told that Tom's sketch came from psychological tests of uncertain validity. Kahneman's remedy is a disciplined, two-step version of what statisticians call Bayesian reasoning. First, anchor your judgement on a plausible base rate. Then ask how much the specific evidence should really move you away from it, and move less than your first instinct suggests. In practice it means asking, before you listen to the story: out of all the cases like this one, how many turn out this way?

A real-life example

Tolga wants to open a café on a busy street in İzmir's Alsancak. The location, the passing trade and his coffee all feel right, and he is sure it will work. Before signing the lease, he walks the street with a friend who has lived there for years and counts the cafés opened in the last five years and how many are still open. Fewer than half are. He still opens his café, but with a shorter lease, more savings in reserve and a cheaper fit-out.

How to use it

  1. 1Before judging a specific case, ask how often cases like it turn out this way, and write that base rate down first.
  2. 2Then ask how reliable the specific evidence really is; a vivid description is not the same as a strong one.
  3. 3Move away from the base rate only as far as the evidence justifies, and usually less than your first instinct wants.