Availability

Daniel Kahneman defines availability heuristic as the process of judging frequencies by the ease with which it comes to our mind. We focus on existing evidence and ignore the ones that are absent. He defines this by the term WYSIATI – What You See Is All There Is.

Sherlock Holmes and Dr Watson – WYSIATI

In the Creative Whack Pack, I came across an excellent joke. Sherlock Holmes and Dr Watson were going camping. They pitched their tent under the stars and went to sleep. Sometime in the middle of the night Holmes woke Watson up and said:

Holmes – Watson, look up at the sky, and tell me what you see.
Watson – I see millions and millions of stars
Holmes – And what do you deduce from that?
Watson – Well, if there are millions of stars, and if even a few of those have planets.
Watson – And if there are a few planets like Earth out there, there might also be life.
Holmes – Watson, you idiot, it means that somebody stole our tent.

The lesson I learned from this is; We do not see what is not there in front of us.

Vantage Point – WYSIATI

Few years back, I came across this article Vantage Point: 8 Points of View For Evaluating a Stock by Sanjay Bakshi. In this article he evaluates VST Industries from 8 different angles. He shows the balance sheet of the company and explains the availability bias beautifully. You cannot teach any better. Excerpt from the post.

Take a look at the balance sheet again. What do you don’t see?

Debt! There is no debt!

If this company was financially troubled, you should have seen a lot of debt on the balance sheet. But there is no debt! The absence of debt proves that this company is not in distress.

You see, sometimes what you don’t see is terribly important. That’s a useful principle to keep in mind. Most people overweight what they see and underweight what they don’t see. But you’re not going be like most people, now, are you?

Tornadoes vs Asthma – Vividness

Participants were asked to estimate the frequencies of deaths caused by tornadoes and asthma. What was the result?  Tornadoes were seen as more frequent killers than asthma, although the latter cause 20 times more deaths. What is the reason? From Daniel Kahneman

An event that evokes Emotions and is Vivid, Easily Imagined, and specific will be more available than an event that is Unemotional in nature, Bland, Difficult to imagine or Vague.

The Great Apple Scare – Base Rate Neglect

Alar is a chemical which prevents apples from falling prematurely. In 1989 CBS News ran a 60 Minutes video claiming that 6,000 preschoolers may eventually get cancer from the residues of the pesticide. It got help from actress Meryl Streep, who showed up on Capitol Hill and on TV talk shows to lobby against alar. What happened after that? The apple industry sustained large losses as apple and apple products became objects of fear.

Subsequent research confirmed that that the substance might pose a very small risk as a possible carcinogen, but the Alar incident was certainly an enormous overreaction to a minor problem. The net effect of the incident on public health was probably detrimental because fewer good apples were consumed.

If there are 100 deaths out of 10,000,000 we will have 1 death out of 100,000. How? 100/10,000,000. Our brains focuses only on the numerator and not on the denominator. This is called as Base Rate Neglect. Do we have any incidents like this recently? Of course yes.

Kudankulam, a nuclear power plant in Tamil Nadu, India. In 2012 people residing near the power plant protested against operating the plant. In spite of power shortages in Tamil Nadu why did they protest? They were frightened by the Media and it made them to focus too much on the numerator (deaths). Sanjay Bakshi explains this beautifully

This will happen despite the fact that number of people who have died in nuclear accidents is a tiny fraction as compared to the number of people who die because of lung cancer caused by pollution due to proximity to coal fired power plants. This is insensitivity to base rates. People ignore prior statistical experience in favor of influential stories. Nuclear and radiation accidents have, from 1961 till date, resulted in only 69 deaths. Globally. Nuclear power plants are among the safest things engineers build in the world (Margin of Safety). But try telling that to a person who is contemplating living near a nuclear power plant.

Coca-Cola and Availability

Availability changes behavior and cognition. Coca-Cola understands this principle and hence they try to make their product available in all the places. From ‘Psychology of Human Misjudgment‘ – Charlie Munger

I mean ask the Coca-Cola Company, which has raised availability to a secular religion. If availability changes behavior, you will drink a helluva lot more Coke if it’s always available. I mean availability does change behavior and cognition. Nonetheless, even though I recognize that and applaud Tversky and Kahneman, I don’t like it for my personal system except as part of a greater sub-system, which is you’ve got to think the way Zeckhauser plays bridge. And it isn’t just the lack of availability that distorts your judgment. All the things on this list distort judgment. And I want to train myself to kind of mentally run down the list instead of just jumping on availability. So that’s why I state it the way I do.

Keep In Mind

1. Remember the base rates while taking any decision. Do not just look at the numerator alone.
2. Before making any major decision, have a checklist and go through it.