John D. Sterman (2000) wrote: “People are poor intuitive scientists, generally failing to reason in accordance with the principles of scientific method”. Sterman then goes on to explain his thinking with examples:
- We do not generate sufficient alternative explanations or consider enough rival hypotheses.
- Our judgements are strongly affected by the frame in which the information is presented.
- We suffer from overconfidence in our judgements, wishful thinking and the illusion of control.
- We violate basic rules of probability, do not understand basic statistical concepts such as regression to the mean or Bayes’ rule.
- Memory is distorted by hindsight, the availability and salience of examples, and the desirability of outcomes.”
In other words, data can be biased because people are biased. Even scientists are biased. For instance, Hogarth (1987) discusses 30 different biases and errors documented in decision-making research.
Further evidence that highlights the importance of methodology in the difficult process of managerial decision-making.
This is probably why analytical thinking is the skill that will be most in demand in the business world between now and 2027, according to WEF Future of Jobs 2023 and 2025.
- Sterman, J. D., 2000, Business Dynamics, Systems Thinking and Modelling for a Complex World, Boston, McGraw Hill, p.30.
- Hogarth, R. M., 1987, Judgment and choice, 2nd Edition, New York: Wiley.
- World Economic Forum (2023), Future of Jobs Report 2023: Insight report, Figure 4.6 p.43