The US Government’s March 2009 paper, ‘A Tradecraft Primer: Structured Analytic Techniques for Improving Intelligence Analysis’, which forms Week 5, Day 2 of the CORTEX MBAnalytics program, nicely complements Harvard Business Review’s recent essay, ‘The Big Idea: Before You Make That Big Decision…’, by Daniel Kahneman, Dan Lovallo, and Oliver Sibony (requires registration, but well worth it). Both pieces set out to counteract cognitive biases—the primer in the context of sense making and analysis, and the HBR essay in the context of decision making. Each provides practical strategies for systemising skepticism.
Business cases for analytics often focus on applications which automate decisions by delegating them to algorithms. One of Analyst First’s consistent contentions has been that, whilst analytics certainly can automate low level operational decisions, it makes others harder. Analytics enables higher value decisions to be made. As the Tradecraft Primer puts it:
This primer highlights structured analytic techniques—some widely used in the private sector and academia, some unique to the intelligence profession. It is not a comprehensive overview of how intelligence officers conduct analysis. Rather, the primer highlights how structured analytic techniques can help one challenge judgments, identify mental mindsets, stimulate creativity, and manage uncertainty. In short, incorporating regular use of techniques such as these can enable one to structure thinking for wrestling with difficult questions.
The techniques covered fall into three groups:
Diagnostic techniques suited for “making analytic arguments, assumptions, or intelligence gaps more transparent”:
- Key Assumptions Check
- Quality of Information Check
- Indicators or Signposts of Change
- Analysis of Competing Hypotheses (ACH)
Contrarian techniques designed to challenge status quo thinking:
- Devil’s Advocacy
- Team A/Team B
- High-Impact/Low-Probability Analysis
- “What If?” Analysis
Imaginative thinking techniques aimed at “developing new insights, different perspectives and/or develop alternative outcomes”:
- Outside-In Thinking
- Red Team Analysis
- Alternative Futures Analysis
Each of these are practically described and illustrated with case studies. The final section, ‘Strategies For Using Structured Analytic Techniques’, locates them along a stylised analytic project timeline:
In ‘The Big Idea: Before You Make That Big Decision…’, Kahneman et al. address “decisions that are both important and recurring, and so justify a formal process”, in other words, strategic decisions. The typical case involves an executive making a decision on the basis of recommendations provided by a subordinate team. Overcoming cognitive biases in this context, the paper reports, has been shown to pay off in the form of better decisions. But although we may each be aware that we are prone to cognitive biases, this knowledge alone is not helpful, because as individuals we are unable to neutralise our own biases. In the organisational context, however, there is strength in numbers:
[M]ost decisions are influenced by many people, and… decision makers can turn their ability to spot biases in others’ thinking to their own advantage. We may not be able to control our own intuition, but we can apply rational thought to detect others’ faulty intuition and improve their judgment.
To do this, Kahneman et al. propose a “systematic review of the recommendation process” consisting of a twelve point checklist of questions, each designed to counteract specific cognitive biases. Executives are encouraged to ask:
- Is there any reason to suspect motivated errors, or errors driven by the self-interest of the recommending team? (Self-interested Biases)
- Have the people making the recommendation fallen in love with it? (Affect Heuristic)
- Were there dissenting opinions within the recommending team? (Groupthink)
- Could the diagnosis of the situation be overly influenced by salient analogies? (Saliency Bias)
- Have credible alternatives been considered? (Confirmation Bias)
- If you had to make this decision again in a year, what information would you want, and can you get more of it now? (Availability Bias)
- Do you know where the numbers came from? (Anchoring Bias)
- Can you see a halo effect? (Halo Effect)
- Are the people making the recommendation overly attached to past decisions? (Sunk-Cost Fallacy, Endowment Effect)
- Is the base case overly optimistic? (Overconfidence, Planning Fallacy, Optimistic Biases, Competitor Neglect)
- Is the worst case bad enough? (Disaster Neglect)
- Is the recommending team overly cautious? (Loss Aversion)
The thinking behind each of these is elaborated and case study examples are provided.
Both papers are recommended in full. Analysts and decision makers may be accustomed to being data driven, but being rigorously and systematically skeptical is a broader discipline—welcoming a diversity of opinions, actively seeking and valuing disconfirmation, and being prepared to challenge accepted organisational wisdom.
Related Analyst First posts:
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