Don’t you love an anecdote? It spices up a story. It shows so much truth. It creates relief, confirmation, … They often generate emotion. A life without anecdotes is dull. It’s very human to use an anecdote in conversations and in reasoning. The former is harmless. The latter has never helped anyone. An anecdote works like a sedative. It makes you numb. If you use it for reasoning and decision-making you can get into a lot of trouble. Why is that?

First, anecdotal reasoning does not take into consideration the available information. It’s the one story that you notice and that’s relevant. Take complaints. If you react to one complaint, you might think that the service your company is providing is bad. The specific outrage of a customer might make you think the worst. But you need to look at the whole picture, not at the anecdote Imagine that you have 1000 people dealing with customer service every day, reaching 20 customers a day. That’s about 4,5 million interactions per year. So if Mr X complains, that’s an anecdote. I agree, you need to take the complaint seriously. But the complaint might be a coincidence, or an acceptable deviation from quality. If you base your decisions on this one complaint, you might be in trouble. Statistics not only help you to put things into perspective, but also look for the root causes of what might cause the anecdotally retrieved information.
Second, anecdotal reasoning can lead to harmful decisions. Why did Steve Jobs go for alternative treatment of his cancer? We all think we are special, that we can beat something. We may know people who have been helped by the treatment, so it must be helpful. We seem to neglect that the one who tells the anecdotal story, might have an interest in it. Or you never know about the context of the anecdote.

“Alcohol is bad for you. But my neighbour drinks a lot and he is very much alive. So alcohol cannot be that bad”

Anecdotes in Business

Business is full of anecdotes. And we all savour them. But is it possible that we use anecdotal reasoning in times of 6 Sigma, big data, analytics, … Of course it is. And even more, anecdotes play a great role in daily decision-making. Because it’s natural. Statistical reasoning is less common in business then we think. Like people are able to take health care decisions based on an anecdote, business leaders are able to use the anecdote for decision-making. And what more than a sampling of anecdotes is an audit?

How to avoid anecdotal reasoning

This blog is a plea to integrate more statistical reasoning into business. Here’s how can you do that.

1. Hire people with analytical and statistical skills. Change the mix of people in your company.
2. Ask people with statistical and analytical skills to think with you. It’s important that you invite them to look at your decision in a more scientific, evidence-oriented way.
3. Be very transparent about your reasoning. Explain how you got to your conclusion or decision. Be open for debate.
4. Ask yourself the question on what you have based your decision. Is it your intuition? Was it an anecdote? Should there be no statistical evidence be involved, go out and get it.
5. If someone is selling you something, go for the statistics behind it. If you are confronted with opaque selling, back off.
6. Listen to dissident voices. They help you to formulate and test different hypotheses.
7. Ask questions. If you use anecdotes as basis for reasoning, you might find yourself not asking the necessary questions. If you ask questions, you will find that your anecdotes do not deliver the answers you need.
8. Develop the reflex to check your reaction to anecdotes. Business leaders are people who react to anecdotes like any other person.
9. Look for data. Think about the relevance of the sample you base your decision on. This is valid in all business contexts and functions. Become a statistician.
10. Analyze the data before taking decisions. When general Custer heard that many of Indians gathered at Little Big Horn, he chose to ride with 250 men to find himself confronted to 10 times that many Indians. He made a mistake.

Is there room for intuition? From foresight to insight.

Of course there is room for intuition. Intuition is a great help. It creates foresight. But foresight alone is not enough. Statistical reasoning gives us insight. Anecdotes can be the trigger to curiosity and to reasoning. But when reasoning is restricted to dealing with anecdotes there’s a big risk. Anecdotes can help you, but the help is limited. If you’re not careful anecdotical reasoning might be risky. Statistics are seen as an antidote against the anecdote. But a little bit of anecdote is OK.