Forty years of behavioral science research into the psychology of probabilistic reasoning have revealed the surprising extent to which people routinely base judgments and forecasts on systematically biased mental heuristics rather than careful assessments of evidence. These findings have fundamental implications for decision making, ranging from the quotidian (scouting baseball players and underwriting insurance contracts) to the strategic (estimating the time, expense, and likely success of a project or business initiative) to the existential (estimating security and terrorism risks).
The bottom line: Unaided judgment is an unreliable guide to action. Consider psychologist Philip Tetlock’s celebrated multiyear study concluding that even top journalists, historians, and political experts do little better than random chance at forecasting such political events as revolutions and regime changes.
A body of research dating back to the 1950s has established that even simple predictive models outperform human experts’ ability to make predictions and forecasts. This implies that judiciously constructed predictive models can augment human intelligence by helping humans avoid common cognitive traps. Today, predictive models are routinely consulted to hire baseball players (and other types of employees), underwrite bank loans and insurance contracts, triage emergency-room patients, deploy public-sector case workers, identify safety violations, and evaluate movie scripts. The list of “Moneyball for X” case studies continues to grow.