Friday, April 21, 2006

Confirmation bias in politics and business

I keep seeing confirmation bias -- the notion that decision makers seek out information that's consistent with their beliefs and ignore information inconsistent with them. This is of more than academic interest. For example, if you're competing with a company and you know the CEO's biases, then you can more easily predict the competitor's behavior. This predictability can help you craft strategies which exploit the gap between reality and the CEO's biases.

The best recent example of confirmation bias in politics is the decision to go to war in Iraq. According to a leading CIA officer in Europe during the run-up to the war, the administration met with a leading Iraqi foreign minister, Naji Sabri, who told the White House that Iraq did not have weapons of mass destruction. After meeting with the source, the White House lost interest in him. According to the CIA officer,

They didn't want any additional data from Sabri because, "The policy was set. The war in Iraq was coming and they were looking for intelligence to fit into the policy."

Yesterday's New York Times gives a business example -- highlighting the confirmation bias of Enron's Jeff Skilling:

Mr. Skilling's testimony revealed that he increasingly sought validation for what he believed, rather than listening carefully when he was told about problems at the company.

In June 2001, one day before he flew to San Francisco to give a speech, Mr. Skilling sought assurances that everything happening in California's newly deregulated electricity market was on the up and up. Enron has to be "absolutely pure as the driven snow," Mr. Skilling told Richard Sanders, then an Enron lawyer. "So one more time," he said. "We're pure as the driven snow, right?"

A lawyer then told Mr. Skilling about the strategies that traders had used, many of them later found to have contributed to manipulating the market. Mr. Skilling felt comforted that the problems had been handled, he testified this week. Mr. Sanders assured Mr. Skilling that the lawyers had ordered the tactics stopped as soon as they were discovered. "O.K.," Mr. Skilling said. "So we're as pure as the driven snow?"

It does not surprise me that the White House and Skillings operated this way. What would surprise me is to find a leader who does not.


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