The description that follows was chosen from a sample of 100 professionals – 70 lawyers and 30 engineers.
Dick is a 30 year old man. He is married with no children. A man of high ability and high motivation, he promises to be quite successful in his field. He is well liked by his colleagues.
Given this information what are the odds that Dick is an engineer?
When the psychologists Daniel Kahneman and Amos Tversky posed this qusetion to their subjects, most of them judged the odds to be 0.5, or 50%. But the description is useless – it tells us nothing about whether somebody is likely to be a lawyer or an engineer. Therefore, we ought to actually stick to the base rate for our prediction – in this case 0.3 or 30%.
In the absence of the description, subjects did make the right prediction. The presence of irrelevant information distorted their judgement. Dilution is a well studied phenomenon in psychology. It is a judgement bias where people underutilize diagnostic information in the presence of non-diagnostic information.
One of the arguments in favour of following the news is that it helps us stay informed. And yes, it helps to receive the memo when breakthroughs such as a cure for AIDS, Artificial General Intelligence or biodegradable plastic are made. But along with this information, the news tells us about royal babies, celebrity weddings, weather reports from Costa Rica and every bit of information about the stock markets. In search of rare nuggets, the news has us wade through copious amounts of garbage.
As Nassim Taleb says, one would realize information gains by dispensing with the news.