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Volume 15, Issue 1;   January 7, 2015: The Power and Hazards of Anecdotes: II

The Power and Hazards of Anecdotes: II

by

Anecdotes are powerful tools of persuasion, but with that power comes a risk that we might become persuaded of false positions. Here is Part II of a set of examples illustrating some hazards of anecdotes.
Melrose Diner, Philadelphia, Pennsylvania

The Melrose Diner, Philadelphia, Penn­syl­va­nia, is an iconic diner — some say the iconic diner — in South Philadelphia. To really understand the place, read Robert Huber's fascinating 2011 piece from Philadelphia Magazine. Photo by Carol M. Highsmith, courtesy .

We began last time to explore the power and hazards of anecdotes when used as tools of persuasion, examining how two different cognitive biases, the Availability Heuristic and the Focusing Illusion, could lead to disadvantageous outcomes when anecdotes are involved. We continue now with another more complex example of a hazard of anecdotes.

That hazard arises from what information economists call information cascades. Combining information cascades, cognitive biases, and the properties of anecdotes, we can better understand how muddled thinking and wrong ideas propagate through organizations to become the bases for dominant — but tragically incorrect — ways of thinking about issues.

Information cascades occur when rational individuals disregard the contra-indications of their private information and instead mimic the choices or actions of others. For example, suppose you're seeking a restaurant for lunch upon arriving in an unfamiliar town. You see two restaurants, A and B. A is recommended by your travel guide, but it's fairly empty. B is busy, but it doesn't appear in your travel guide. Choosing to lunch in B, despite the travel guide's recommendation, can be an example of the effects of an information cascade, because your decision is influenced by the choices of those who preceded you, despite the information, or lack of information, in the travel guide. B's popularity might actually be the result of a number of similar decisions, following uninformed random choices by the first few diners, rather than an indication of superior dining. [Banerjee 1992]

In most models of information cascades, the decision makers are assumed to act rationally, but in some variations of the concept, that assumption is relaxed. The relaxation of the rationality assumption enables introduction of cognitive biases into the mix, as a means of explaining otherwise mysterious collective behavior.

One cognitive bias of special interest in connection with information cascades is the Availability Heuristic, which leads us to overestimate the likelihood or importance of some attributes of a situation, when those attributes are easy to observe, easy to imagine, or easy to recall. That's where anecdotes can play an important role.

The power of The power of anecdotes
makes some attributes
of a situation easy to
remember and easy to
transmit to others
anecdotes makes some attributes of a situation easy to remember and easy to transmit to others, beyond their actual importance in the situation. In effect, anecdotes amplify the effects of the Availability Heuristic. And in combination with irrational variations of the information cascade, anecdotes and the Availability Heuristic enable irrational choices — muddled thinking — to propagate through an organization in a self-sustaining way, capable of resisting rational attempts to dissuade the group from its poor collective choices.

When this happens in public discourse, and especially when the media is playing a role in propagating misconceptions, the phenomenon is known as an availability cascade. [Kuran 1999] In the organizational analog described above, anecdotes play the media's role. Have you seen this phenomenon in your organization? First in this series  Go to top Top  Next issue: Avoid Having to Reframe Failure  Next Issue

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Footnotes

Comprehensive list of all citations from all editions of Point Lookout
[Banerjee 1992]
Abhijit V. Banerjee. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics 107:3 (1992), 797-818. Back
[Kuran 1999]
Timur Kuran and Cass Sunstein. "Availability Cascades and Risk Regulation," Stanford Law Review 51:4 (1999), 683-768. Back

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