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Analysis Paralysis: how too much information can hinder decision-making

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Most people think that business decisions are always taken based on rational analysis of the facts and a thorough examination of all available options before selecting the one with the optimal balance of pros and cons. And because of this, there is often a tendency to think that the more information someone has, the better the eventual decision. More data is seen almost as an unqualified good.

This is especially true with predominantly left-brained people, who are logical and thorough and who like data, facts and information. So facts and figures and data and graphs and pie charts are thrown on to PowerPoint slides 'just in case'. You never know what questions you'll be asked, so it's always useful to have every bit of information that could possibly be needed at hand. The result is usually a set of overly-complex, detailed, crammed-to-bursting slides that only serve to impede decision making instead of facilitating it.

Because as neuroscience comes to understand decision-making better, it is becoming increasingly clear to experts that too much information can lead to poorer decisions being made.

When neuroscientists scanned the brains of volunteers trying to analyze complex problems, they found that the area of the brain responsible for decision making and controlling emotions (it's just behind the forehead and for the medical/Latin buffs amongst you, is called the dorsolateral prefrontal cortex) 'lit up' as the information load was increased. But they also discovered that after a certain point, activity in this area suddenly switched off, almost as if there had been a short-circuit.

It simply stopped working.

Data overload  

And at the same time, because this area is aso responsible for keeping emotions in check, the brain's emotional regions started to run wild, as if someone had let them off the leash. So basically . . . the more information you give someone in the hope that it will lead to better, objective, rational decision-making, the less likely it is to happen. In fact, it's more likely to lead to decisions being made on emotion!

Counter-intuitively ...... the more information people have, the less logical and more emotional their decisions.

A University of Virginia test took a Consumer Reports test which had ranked 45 jams according to a panel of taste experts. They then took the 1st,11th, 24th, 32nd and 44th ranking jams and gave them to a panel of college students, asking them to rank them 1-5. The views of the college students closely mirrored those of the 'experts', with an statistical correlation of 0.55 (as a non-statistician this means nothing to me, but I'm assured it's impressive).

They then gave the jams to a different group of students, only this time they were asked to justify their rankings. They were asked to complete written questionnaires, which forced them to consciously explain their unconscious preferences. This deliberate analysis seriously warped their judgment; the jam that both the experts and the first group of students ranked as being worst-tasting suddenly came out as number one, and the correlation plummeted to 0.11, which means there was virtually no link at all between the experts' rankings and those of the second group of students.

What had happened? Over-analysis of the jam ranking had made the students take into account all sorts of things that weren't really that important. Instead of just going along with their gut feel as to which taste the best, students might give a jam a high ranking because it spreads easily or has a nice smell when the lid is taken off the jar, even though they might not care about either attribute when tasting it on a piece of toast.

In another study MBA students were split into two groups and asked to choose a portfolio of stocks. One group was swamped with information from TV, the financial press and analysts, while the other only saw changes in stock prices. The data-deluged group reaped only half the returns of the second group. Why? Overwhelmed with every minor detail, rumor and piece of financial gossip, they just couldn't separate the useful from the useless.

Think about the last time you went on vacation: how many minutes/hours did you or your partner spend researching every last available fact on Tripadvisor about the various hotels in your chosen destination? Some people take hours or even days, only to end up more confused than ever, and opt for one of the last three they looked at, on the basis that 'we've got to make a decision, so let's just go here .....'.

This is partly because we are conditioned to giving greater weight to the recent than the important. So we tend to pay more attention to the newest information, discounting the relevance of what came earlier.

An alternative to making an emotional decision is making none at all. One Columbia University study found that the more information people had when looking at 401(k) plans (or for non-US readers, retirement plans) the fewer participated. As the number of choices went from 20 to 11, participation dropped from 75 to 70%, and then to 61% when the options increased to 59. In other words, analysis paralysis set in. And those who overcame this, pesevered and did participate chose lower-return options, i.e. made worse choices.

One of the reasons for this is that the brain's short-term memory can only handle roughly 7 items of information (which is why our landlines originally had 7-digit phone numbers). Anything greater than this has to be processed by the brain's long-term memory, which requires conscious effort (e.g. cramming for an exam). If we get too much information and we don't have the time for the required conscious effort (e.g. because an incredibly complex slide doesn't match with the words being spoken by the presenter and is shown for only 20 seconds), the brain struggles to know what is important and what isn't, what to pay attention to and what to disregard.

So when you are planning your presentation, think carefully about which bits of data are needed to make your argument, and sideline the rest. When you are trying to persuade someone to do something (the objective of many presentations), we have already seen that the best flow can be Problem & Solution (see Why pain outweighs gain in persuasion).

Here you create (or remind someone about) a problem, and then tell the audience how your proposal will solve it for them. In effect, you are telling a story. Now you wouldn't include every single minor detail in a story (the height, hair color, build, clothes, complexion, race, sports affiliation, favorite food and TV show, birthday, marital status and religious beliefs of every single character, for example); you'd only include those that were relevant and helped the audience understand what was happening. Too much superfluous detail would be irrelevant and would lose their interest.

The same is true with visual aides. Don't include every single piece of information you have at your disposal 'just in case'. Only include the data that is relevant to making your case. By all means have some back-up material on a spare slide in case you might need it. But don't include it in the main presentation.

And when you are preparing individual slides, keep them as simple as possible. At every stage, ask yourself whether you could still make your point without that bullet point/graph/bar chart/pie chart/table And if you can, don't use it.

Remember: when it comes to information, less is often more.

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