A concept · How Decisions Fail · Biases
Base-Rate Neglect
Vivid detail makes us forget how rare a thing is.
A test for a rare condition is right ninety-nine times in a hundred, and it has just come back positive. How worried should the patient be? Picture a million people screened. The hundred who have the condition mostly test positive. So do about ten thousand who do not, because one false alarm in a hundred, across a million people, is ten thousand alarms. The positive result points to a roughly one in a hundred chance of illness, not ninety-nine. What did the reading forget?
What Base-Rate Neglect means
Base rate neglect is the habit of judging how likely something is from how well the case in front of us resembles it, while ignoring how common it was in the population to begin with. The fit of a case is felt in an instant; the rate has to be fetched and multiplied, so the fit wins. Owning this changes the order in which we weigh evidence. We ask how common the thing is before we ask how well this case matches it, and we let the evidence move that number rather than replace it. We stop reading a convincing description as if it made all the dull alternatives disappear. Before, the founder who looked exactly like the famous successes was a likely success. After, we remember that most founders with that look fail, because most founders fail, and the look fits the failures just as well.
Base-Rate Neglect examples: where it shows up
- At work: a candidate who matches the profile of past stars is hired on the match, with no thought for how many people matched it and did not shine.
- With money: a stock that has every mark of the last great winner is bought on the resemblance, when the base rate of stocks with those marks is mostly ordinary.
- In the news: a security alarm that is almost always false is eventually ignored by the staff, who have learned the base rate the expensive way.
Where it sits
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Nearest on the sky
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