Main Article Presentation

Title & Journal: The Illusion of Knowledge: When more information reduces accuracy and increases confidence Organisational Behaviour and Human Decision Processes Authors: Crystal C. Hall, Lynn Ariss, and Aexanderr Todorov. Affiliation: Department of Psychology, Green Hall, Princeton University Year of Completion/Publication: 2005/2007 Position: Academic, objective article arguing/stating case that more knowledge can reduce accuracy of prediction of uncertain outcomes and simultaneously increase confidence in prediction (For).

Article Summary Human instinct and intuition would suggest that prediction accuracy of uncertain outcomes is based on having more or less information. Four experiments are conducted by a team of researchers aiming to demonstrate that having more knowledge can actually decrease accuracy while increasing prediction confidence. Participants were asked to predict basketball games sampled from a National Basketball Association season. Statistics such as win record and half time scores were provided to all participants to sway their decisions, while half were also additionally given the team names. With the added team names knowledge, participants had increased confidence in their ability to make decisions consistent with their belief that having access to this information would enhance their aptitude for making accurate predictions. However, surprisingly, the contrary turned out to be true. Having access to this information decreased the participants accuracy by reducing their reliance on statistical cues. Some of the experiments revealed that one of the major factors contributing to this underreliance of statistical cues was an underlying bias to bet on teams they thought were more reliable against the statistical odds. A final experiment was carried out in a real life situation where fans were instructed to make bets on teams based on all the possible knowledge they had accumulated. This resulted in a clear demonstration that fans earned less money when betting with the knowledge of team names; as this knowledge is proven to be unsubstantiated. Main Points Pages 1 3 People generally believe that the more information they have, the better their decision will be. People even pursue information that has no consequence to their final decision. Accuracy of Human Judgements is vital for the evaluation of the quality of these judgements. Intuition suggests that having additional information should help users to make better predictions because they have specific knowledge that may not be available to them in any other way. This could also be the reason for their undoing reducing accuracy to make correct predictions due to un-objective assumptions of indicative knowledge (for e.g., knowing team name like Chicago bulls will always win but this is not the case). Studies done in the past demonstrate the negative effects of having knowledge on decisions the more-is-less effect.

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More recent studies however have emphasized the positive effects of not having knowledge on decisions. People exploit their lack of knowledge to arrive at an accurate judgement the less-is-more effect. While the more-is-less and the less-is-more research differ, they both demonstrate that contrary to intuition, more knowledge does not necessarily improve decisions. More information often increases confidence in judgements even when the accuracy of judgements is not affected. This usually results in statistical information provided alongside specific knowledge appear less salient, or important ultimately decreasing the accuracy of predictions. The new information introduces biases that reduce the accuracy of predictions. Pages 4 6

Experiment 1 was introduced. During this experiment, participants predicted games with inconsistent predictorswin record favouring one of the teams and halftime score favouring the other team. The participants for experiment 1 were eighty undergraduate students from Princeton University Participant were randomly assigned to one of two experimental conditions The procedure consists of the participants knowing that each NBA team plays 82 games in each season and that the games to be predicted were randomly sampled from the previous season. Participants were asked to predict which team won the game and to indicate their level of confidence from 0 (not at all confident) to 10 (extremely confident) Participants were provided with information about the number of games won by both teams and the point difference in half time The critical factor to control in this first experiment was that participant were either provided with the team names (e.g. NY Lakers vs. New Jersey Nets) or with labels for the team names (e.g. Team A vs. Team B) The overall design was a 2 (Information: names vs. no-names) x 2 (Fan: fan vs. non-fan) between-subjects design Results depict that neither the experimental condition not the fan status affected accuracy Experiment 2 consists of testing whether the knowledge of team names would decrease the accuracy of predictions, therefore and unfiltered random sample of games in this experiment was used. Participants were also asked about their beliefs regarding how knowing the team names effected their predictions 20/29 games, the team records and the score at halftime were consistent, and the remaining games had inconsistent predictors Procedure: same as in Experiment 1. However, participants were asked at the end of the study in the no-names condition whether they would have preferred to know the team names and whether knowing the team names would have improved their conditions. Vice-versa for those who have negative responses in the latter question. Overall design: 2 (Information) x 2 (Fan) between-subjects design.

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Results: participants in the names condition were less accurate than participants in the no-names condition. Fans were more confident than non-fans but the effect did not reach significance Experiment 3 relies on students familiarities with the teams even if provided with the records of the season Based on the familiarity index, games that were selected were familiar teams against less familiar teams, and also games that have unfamiliar teams with more familiar teams with worse records. Participants: 116 undergraduate students from Princeton University Participants were randomly selected to choose 1 of the 2 experimental conditions Pages 7 9

Choose a most familiar team in NBA to against other four teams that not so familiar but had a better record in the season with 2 games to each team. Choose a team which have a very good record for the season but not that familiar to participants to against other four teams which very familiar but owning a worse record in the season. Compared the result between Lakers and Timberwolves, and show that Lakers may better in name condition with fans and more confident but Timberwolves faced an opposite situation Depends on a lot factors, the accuracy of predictions will reduced in the name conditions. In this experiment, participants were also provided feedback about the accuracy of their predictions after each game and tried to reduce the influence of name information. Find 20 participants of Princeton University and community volunteered to try to earn money added based on the accuracy of prediction and amount wagered. Take 2 games as randomly sampled for each team. In that 58 games, 37 of them had consistent predictors, 18 of them were not and 3 were unclassifiable. There were 82 games in one season, and participants need to predict all the games. They can know the feedback is their prediction were accuracy or not by using the computer program. Finally, participants completed a questionnaire after the season to making their judgment. Participants only doing great at statistical information. Others were less accurate. Basketball fans still displayed decreased accuracy with the additional information. Participants will earn about 60% more than one who privy to the name information. And the bias will persist the potential learning and adjustment of cause. Proof that providing the team names only increased the confidence of fans, but reduced the accuracy of both fans and non-fans. The interaction of information condition and frequency of watching basketball was significant, and the difference in correlation was statistically significant to confidence. Pages 10 11

It is believed that when participants make prediction, they are less expected to live off the statistical information, if the reduction of salience decreases by the team knowledgeable.

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Participants were less relies on the statistical cues by the name condition than the no-name condition. More importantly, in the name condition reduced the accuracy of predictions by decreasing dependence on the statistical information. Team name inspired the accuracy of predictor. The affection of the team name totally unconcerned by the interception between the statistical cues and the prediction of the participants. The participants prediction can be disturbed by the deduction of accuracy. The similarity of team took the role of decision-making, even though it was unreliable with the team record. The present of the team name contributed to the gamble of the participants. The percentage of judgment winning the game was significant when it is consisted with the statistical cues. The participants were likely to predict more than twice against the statistical odds when the team names provided. Pages 12 13 In a series of studies, we explored how people predict uncertain outcomes in a well-defined domain. In Experiment 1, the statistical cues were inconsistent with each other and the additional information could have reduced subjective uncertainty. In Experiments 2 and 4, participants who were provided with team names were less accurate in predicting than participants who were not provided. Experiment 4 also showed that the decreased accuracy in prediction translates into financial losses in a real betting situation. In Experiment 3, the additional knowledge did not simply introduce random noise in the judgments making the statistical information less salient, but instead introduced systematic biases in predictions. The measure of familiarity of the teams was far from perfect. Although knowledge of team names reduced the accuracy of basketball fans, it also increased their confidence. Knowledge of the teams reduced the accuracy of prediction. People may be better off consulting fewer pieces of information when making decisions in certain situations. The illusion of knowledge is related to at least three other phenomena: the hindsight bias, the curse of knowledge and the illusion of transparency. Illusions of knowledge can be pervasive.

How this topic affects Managers Advanced decision making is a crucial topic that managers must have current knowledge and experience of to make effective strategic business movements and plans. As the main article discussed, intuition would suggest that prediction accuracy of uncertain outcomes is based on having more or less information. The four experiments examined reveal that having more knowledge can actually decrease accuracy while increasing prediction confidence. This is a vital piece of knowledge that managers must understand in the decision making process they do not need ALL the information; they just need information that is pertinent and relevant. We reach the conclusion therefore, that managers (most of the time would) be better off consulting fewer pieces of information when making decisions in certain situations. When managers are faced with real time business opportunities and potential threats, they must be able to react accordingly and make wise decisions without making errors due to unsubstantiated biases.

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