Wherever there is Judgement, there is Noise.

Just finished reading this book: Noise by Daniel Kahneman, Olivier Sibony and Cass R. Sunstein. A must reading for people who regularly make judgements, assessments, and evaluations in their work or private life. In a way, it carries forward the work of Prof Daniel Kahneman in his notable work - Thinking Fast and Slow. In that book Prof Kahneman had talked extensively about the irrationality of human thinking with its associated cognitive biases like Over Confidence, Confirmation and Loss Aversion.

This book begins with the metaphor of a shooting range to explain what can go wrong with the human judgement., particularly the different decisions that people make in organizations. There are essentially two types of errors. Some judgements are biased: they are systematically off target. Other judgements are noisy; as people who are expected to agree end up at different points around the target.

Most organizations the authors mention suffer from both bias and noise.

While bias is a error in a set of judgements in the same direction, it is the noise in the system which is the subject of this book. For example, a faulty weighing scale which shows an extra 2 kilos each time you step on it is bias. A weighing scale which shows a different reading each time you weigh yourself is a noisy weighing scale.

Their conclusion is simple: "Wherever there is judgement; there is noise". System noise is undesirable variability in the judgements of the same case by multiple individuals. . The authors then break up the system noise into two components -

Level Noise: Variability in the average level of judgements by different judges (For example for identical crimes people may face different punishments)

Pattern Noise: Variability in Judges response to cases. For example, one judge may be harsher than others in general but more lenient towards white-collar criminals. Another may be more inclined to punish lightly but more severely when the person is a repeat offender.

The book's central message is while noise at times may be a desirable thing in life. It can build choice and enhance creativity. But noisy judgements can do a lot of harm, and there is need to reduce if not eliminate noise from judgements.

For example, enhancing the quality of judgement in new hires, particularly at top and senior management level could have a huge impact on the performance of the organization. Hiring a wrong CEO could destroy its value.

The authors offer a lot of suggestions to improve Judgements. Their key suggestion for reducing noise is "decision hygiene". They use the metaphor of handwashing to prevent germs from entering our bodies. One of the key principles of decision hygiene is; "Obtaining independent judgements from multiple judges, then aggregating those judgements.". This one is highly effective in interviews. This requirement of independent judgements is routinely violated in organizations when the senior most manager posts his views about the best candidate out of a selection. Very likely, the other managers would go with this opinion, and rather not challenge it with their view. But if everyone is allowed to state their independent judgement and then either it is aggregated or discussed, the outcome would be much better.

A less noisy world would save a lot of money, increase fairness, improve public health and safety and above all prevent any avoidable errors. This is the opportunity that this book is seeking to address. 

A less noisy world would save a lot of money, increase fairness, improve public health and safety and above all prevent any avoidable errors. This is the opportunity that this book is seeking to address.