7 Deadly Sins – Illusory Correlation

Or ‘magical thinking’ as Massimo Piattelli-Palmarini calls it.  This is about making positive correlations even though the supporting data is weak.  Sometimes we notice only data that supports our hypothesis and ignore data that doesn’t.

An example of magical thinking goes like this. We come across a few people who exhibit a certain symptom and also a certain illness, and we associate that symptom with the illness, such that if we see that symptom, then we decide that the illness is also present.

You see someone with red spots, and you diagnose measles.

We forget that sometimes the same symptom appears for a different illnes.  Or the illness is present without that symptom.

7 Deadly Sins – Overconfidence

Massimo Piatelli-Palmarini writes in his deliciously written book “Inevitable Illusions” about the 7 deadly sins of our cognitive illusions.

His first sin is overconfidence. This is where we feel certain about our knowledge of something, but our knowledge does not really warrant such confidence.

He describes experiments where subjects are asked to answer questions and then rate how confident they are about each answer.  Experiments show that our confidence leads our knowledge.

We think we know something more than we really know.

The results of the experiments also bring about something sobering: we are most overconfident in areas we are more knowledgeable about.  That is, the difference between the level of our overconfidence and knowledge in these areas is bigger than the difference between our level of overconfidence and knowledge in other areas - hence we tend to make mistakes of overconfidence in our areas of expertise.

On Issues Versus Risks

Whenever you find yourself in an introductory presentation on risk management, you can expect to hear a question like: “What’s the difference between an issue and a risk?” The expected answer seems to be always: “A risk is something that may or may happen, while an issue is something that has already happened.” 

Correct enough, but this description falls short of conveying any relationship between the two.

Here’s one I coined, I like, and plan to use and re-use: “Issues are the risks you failed to manage, now come to haunt you.”

The sentence makes clear that many of the issues that you face could have been mitigated if only you had done proper risk management.  The assertion is not always true of course.  Some issues just come from unpredictable circumstances, and no risk management is that perfect.  So surely,  there are exceptions, but the strong assertion of the sentence emphasises just that – that exceptions are the exception.

I believe I originally picked up this relationship from Bill Duncan.  A few years ago he quoted someone he knew who said that in a good risk management process, all the issues that arise will have been previously identified in the risk register.  So it’s not my original idea, but I like the “now come haunt you” bit, which is mine.