Base Rate Fallacy

Base Rate Fallacy Is LIke An Illusion

I took a lot of statistics, quantitative analysis, and math courses in university. I think it was a function of going to three schools during every available semester and building up a boatload of credits before LSU gave me a diploma and made me leave the state. I still remember the day I learned partial differential equations (I finally could understand the footnotes in my economics texts). With all of that, I was not exposed to the idea of a base rate fallacy (known also as base rate bias) until several years later when I was working in the garment industry. Twice this week I have run into scenarios that are examples of base rate fallacies which suggest that many people either don’t understand the concept or are blinded by raw numbers (a shiny object phenomenon). 

 

Thinking Fast and Slow by Daniel Kahneman Re-read Week 24: Chapter 24 The Engine of Capitalism

Optimism is both a great driver of progress and problematic.  In this chapter, Kahneman explores the concept and impact of optimism bias. This bias causes a person to believe that they are less likely to experience a negative event. For example, most software engineers believe that they have never met a problem they can’t solve — an unrealistic assessment in any complicated environment. Another typical example, most drivers think they are better than average — a statistical impossibility. A third example that we have commented on before, estimates chronically fall prey to optimism bias. The list of examples could go on nearly forever. This effect is driven by the propensity of individuals to exaggerate their abilities.    

 

SPaMCAST 531- Balancing Control and Self-Organization, Cognitive Biases – Essays and Discussion

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SPaMCAST 531 features our essay on Balancing Control and Self-Organization to Avoid Heat Death.  Control and self-organization represent a classic Goldilocks and the Three Bears problem. We discuss whether there is a solution. Interested in more on this topic?  Other blog entries include:

Balancing Control and Self-Organization to Avoid Heat Death –https://bit.ly/2UnzfGu  

Balancing of Autonomy with Alignment – https://bit.ly/2Sg1xFy  

VUCA, Heat Death and Gray Goo – https://bit.ly/2RhlGq8

In the second spot this week we hear from Jon M Quigley who brings his Alpha and Omega of Product Development to the cast.  Jon discusses the impact of cognitive biases on product development. Fighting biases is an important role for product owners and developers alike. The fight is rarely easy.

Re-Read Saturday News
This week we begin our re-read of The Tipping Point by Malcolm Gladwell. We are re-reading this book because it is important for any person involved in leading or participating in change (this is all of us).  Dust off your copy or buy a new copy.

Current entry:

Week 1 – Plans and Introduction –https://bit.ly/2S8PPwc

Next SPaMCAST
SPaMCAST 532 will feature our interview with Julia Wester.  Julia returns to the cast to discuss her passion for the topic of spectrum thinking.  Rarely is using binary thinking the most effective path; however, it is rare to use spectrum thinking to address problems. Julia provides a path to more effective decision making.

 

 

SPaMCAST 469 – Consensus Decision-Making, Cognitive Bias, TameFlow

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SPaMCAST 469 features our essay on consensus decision-making.  Consensus decision-making is one of the most prevalent decision-making tools in organizations today. But, consensus decision-making has it plusses and minuses. We came to a consensus and decided to discuss the topic.

Our second column this week is from Kim Pries (The Software Sensei).  Kim revisits the topic of cognitive biases.  Biases can blind us unless we are vigilant. Kim’s advice is to ask for data rather than just allowing our biases to decide for us.

Our third column is via Steve Tendon, who will bring us part 2 (2 of 3) of our discussion of chapter 20 of Tame The Flow: Hyper-Productive Knowledge-Work Performance, The TameFlow Approach and Its Application to Scrum and Kanban  (buy a copy here).

Upcoming Appearances

Metricas 2017

I will be keynoting on Agile leadership and delivering one my favorite presentations, Function Points and Pokémon Go
29 November 2017
Sao Paulo, Brazil

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e-Read Saturday News

This week we re-read Chapter 5 of Actionable Agile Metrics for Predictability: An Introduction by Daniel S. Vacanti. Chapter 5 is titled, Flow Metrics and CFDs. The chapter puts the ideas of flow metrics and the power of cumulative flow diagrams together to provide a boatload of information..  Buy your copy today and read along!

Previous Installments

Introduction and Game Plan

Week 2: Flow, Flow Metrics, and Predictability

Week 3: The Basics of Flow Metrics

Week 4: An Introduction to Little’s Law

Week 5: Introduction to CFDs

Week 6: Flow Metrics and CFDs

Dead Tree Book

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A Call To Action

I am looking for leaders of Agile PMOs for a special podcast and for background interviews.  Please contact me to discuss the topic at spamcastinfo@gmail.com or t.cagley@premiosgroup.com.

Next SPaMCAST

SPaMCAST 470 features the return of Ben Linders. Ben and I discussed his new book, What Drives Quality.  We explored the definition of quality, who owns quality and what teams can do to deliver quality.  If you are into excellence in value delivery, this interview will inform and delight you..  

Shameless Ad for my book!

Mastering Software Project Management: Best Practices, Tools and Techniques co-authored by Murali Chematuri and myself and published by J. Ross Publishing. We have received unsolicited reviews like the following: “This book will prove that software projects should not be a tedious process, for you or your team.” Support SPaMCAST by buying the book here. Available in English and Chinese.

 

SPaMCAST 457 – Cognitive Biases and Decisions, Hiring, Learning Organizations

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SPaMCAST 457 features our essay on cognitive biases and their impact on decision making.  If you doubt the impact of biases on decision making, read chapter five of The Science of Successful Organizational Change (current Re-read Saturday Book) and listen to this week’s podcast!

Our second column this week is from Jon M Quigley (The Alpha and Omega of Product Development), Jon continues his theme of learning organizations with penetrating insight on how a learning organization evolves.

Kim Pries (The Software Sensei) anchors the cast this week with a strong argument that if you want to improve the software you are delivering begin by hiring the right people!

We also have a promo for 2017 Agile Leadership Summit:

Mark your calendar for an entirely new class of business conference. More “business theater” than a conference, the 2017 Agile Leadership Summit (September 22nd in Washington, DC) is sponsored by AgileCxO (agilecxo.org). It features an integrated mix of six vignettes on Agile leadership, two fantastic industry keynotes, and onstage jazz musicians who are demonstrating agility, iteration, and excellence throughout. Learn more at http://agilecxo.org.

Re-Read Saturday News

This week Steven dives into Chapter 6 of Paul Gibbons’ book The Science of Successful Organizational Change.   There are a lot of techniques that I see used on a daily basis that are based on pop psychology. Confronting the true believers is often a lot like jousting at windmills. Remember to use the link in the essay to buy a copy of the book to support the author, the podcast, and the blog!   

This week and previous installments:

 

Cognitive Bias in Decision Making

Not all puppies and kittens.

Cognitive biases are important decision-making tools.  The help to make snap decisions based on patterns of behavior that have been successful in the past. However cognitive biases are not all kittens and puppies.  Cognitive biases can also lead us to miss problems we are not trained to recognize or to ignore better solutions to problems we have solved before.  With some rules, effort, and support most of the problems caused by cognitive biases can be avoided. Tools to avoid the downsides of cognitive biases include: 

 

Can You Review Your Own Work? (It’s All About Cognitive Bias)

Need an extra set of eyes?

Paul Gibbons suggested in the introduction to Part One of The Science of Successful Organizational Change that every generation thinks it’s path is shaped by great upheavals.  Much of this perception is due to availability bias. Availability bias leverages the most relevant immediate example to evaluate a concept or idea.  The availability bias is only one of a myriad of cognitive biases that humans have developed to deal with the complexity of the world around us.  Steven Adams recently asked, “What biases/fallacies might a developer fall prey to when testing code that he or she developed?” If we broaden the question to which of the cognitive biases would affect anyone reviewing their own work (based on the 16 we have explored over the past two years), there are several cognitive biases that would suggest that reviewing your own work is less fruitful than getting a different set of eyes.  Some of the leading culprits are:

 

Reciprocity and Priming Biases

Teams thrive on reciprocity.

Biases affect everyone’s behavior in all walks of life.  In a recent Freakonomics podcast, The Stupidest Thing You Can Do With Your Money, Stephen Dubner described the impact of various cognitive biases on the behaviors of many well-known money managers (and nearly 70% of the investors in the world).  The people on teams involved in the development, support and maintenance of software products are not immune to the impact of biases.  After the publication of our essay A Return to Cognitive Biases, Steven Adams asked “What biases/fallacies might a developer fall prey to when testing code that he or she developed?” It is a great question that gets to the heart of why understanding cognitive biases is important for leaders and team members.  We will return to the question after we added two more biases to our growing pallet of biases that we have explored.

 

A Return To Cognitive Biases

Creative thinking can help you combat cognitive biases.

Cognitive biases are shortcuts that people use in decision making.  The shortcuts generated by cognitive biases are typically helpful, which leads to people to internalize the bias. These internalized biases are therefore used unconsciously.  Any behavior that becomes an unconscious response can lead to actions and decisions that are perceived as irrational if the context or the environment has shifted.  For example, a colleague recently related a story about an organization with an emergent product quality problem that occurred after they had disbanded their independent test group. The response was to immediately reconstitute the test group based on the belief that if the independent testing had worked before it would work again. The response was based on a cognitive bias, not a root cause analysis or some form of mindfulness.  

 

Get Rid Of Dynamic Teams: The Premise

Five Dysfunctions of a Team

The use of teams to deliver business value are at the core of most business models.  In matrix organizations teams are generally viewed as mutable; being formed and reformed from specialty labor pools to meet specific contexts. Teams can be customized to address emerging needs or critical problems and then fade away gracefully.  Examples of these kinds of teams include red teams or tiger teams.  This approach is viewed as maximizing organizational flexibility in a crisis.  The crisis generates the energy needed to focus the team on a specific problem.  However, as a general approach, dynamic teams have several problems because of how the organizations are structured and how people interact and become teams.