Organisational Behaviour and Human Decision Making Crystal Hall, Lynn Ariss, Alexander Todrov

James Ward-Collins
Reference for article: Hall et al, C.C, 2007. The Illusion of Knowledge: When more information reduces accuracy and increase confidence, 10 (2007), 277-290. List of Points Made
Introduction The article demonstrates a series of experiments using the NBA Basketball League to suggest that many financial institutions are incorrect in predicting performance of a business based on an entities name, as opposed to documented and statistical information, the latter which was notably seen to improve the accuracy of ones predictions in decision making. Bias This article drew forth a link between increased knowledge on a field, leading to reduced accuracy in decisions due to personal bias. A series of experiments were conducted, in which participants ranged from both fans and non-fans of NBA were used to determine the influence of information on ones decisions. Experiment 1 This was used to demonstrate how well participants (both fans and non-fans) of NBA would predict who would win or lose a match given only statistical cues the half time score, and the teams season history. This provided an all-round accurate score across both fans and non-fans. It was noted in this experiment, that although fans were not more accurate then non fans, fans were more confidentindicating the game information increased confidence of fans, this brings forth a concept of bias fans believe they are advantaged due to more knowledge in the sport. Experiment 2 This was used to test if the given name of the team, and statistical data combined, would the participant predict against the statistical odds in favour of a teams name. To test whether team names reduced accuracy, predictions were made and led to the following conclusions. Participants who knew the name of the team were less accurate, whether they were fans or nonfans. Once again, fans were found to be more confident and less accurate when given team names, believed to be as a result of a greater assumed knowledge on the NBA. This was a result of knowing team names, and using the irrelevant name of team they support, over the importance of the statistical data. Experiment 3 This experiment proved the detrimental effects of the knowledge of NBA Team Names as a result of knowledge and familiarity. This was implemented as a memory test in which all participants (fans and non-fans) were asked to list as many NBA teams as possible in the order in which they came to mind.

It was noted that the LA Lakers and the Chicago Bulls were the most listed names over the whole experiment the Lakers were the best performing team that year, and the Chicago Bulls were not performing well, however had a popular name due to the fame of renowned player Michael Jordan. This therefore showed that bias of information only could occur when knowledge of Team Names were given, and further demonstrated the in both fans AND non-fans that irrelevant information was detrimental to the task at hand. Experiment 4: Experiment 2 and 3 showed that the knowledge of a teams name was detrimental to the accuracy of ones predictions, and that only the relevant statistics presented on their own, led to greater accuracy upon ones predictions. The final experiment incorporated these, but added predictions to a situation in which money is at stake (10 -30 c per game). If the reduced accuracy when knowing a team name, and the over confidence of fans were to translate into actual monetary losses, this would be evidence of the theory of Hall et al, that Decision Making in business requires only RELEVANT knowledge. Participants were provided with feedback on the accuracy of their decisions, which was given as a means of allowing them to adjust their predictions and presumably reduce the influence of team names on their predictions. Ironically, the participants who were not given team names believed it would have helped their predictions, and those (fans) that were given team names believed it assist their decisions. Contrary to this, it was found that participants with both Statistical Data and Team Names earned 60% less than that of those who only used statistical data. Hindsight Bias The knowledge of the outcomes biases retrospective previous by increasing their relation with the result. The Curse of Knowledge People with more knowledge are unable to predict the knowledge of people with less knowledge, generally overestimating the knowledge of the latter. Those with less but more relevant information are more likely to come to a more accurate conclusion than one with a lot of irrelevant information. Illusion of transparency People over estimate the ability of others to read their internal states. Conclusion The study showed the factors affecting the accuracy of decision making, and demonstrated that when making decisions it is essential to have both; relevant information and to review feedback. It must be noted that the figures behind the problem are more important than the team/person/company at stake. It can be drawn that people prefer to bet on events they are more certain about, than events which they know less about. The following can be drawn from the article:

RELEVANT KNOWLEDGE LESS CONFIDENCE IN THE FIELD MORE ACCURACY IN DECISIONS EXTENSIVE + IRRELEVANT KNOWLEDGE OVER CONFIDENCE LESS ACCURACY

How can this article assist managers in decision making? The article highlights the potential problem a business may have with the information used in decision making which may lead to decreased accuracy as a result. The article presents the importance of relevance in decision making, in a way that only information related to the issue at hand is actually useful within a managerial decision making procedure to achieve the most accurate results. Hall et al pose a valid point that feedback is an important aspect of decision making, through experiment 4, in which the Curse of Knowledge comes forth very strongly in which the fans are more confident, less accurate and see financial losses as opposed to the non-fans who are less confident, more accurate and gain financially. This is a concept that managers should utilise in preparation for goals, and provide teams solely with information that is consistant with the task at hand, to achieve the most accurate outcomes.