Why Too Much Data Destroys Your Decision Making Abilities

Federal executives have to make countless critical decisions all day long. Each of those decisions is supported by a robust amount of data—enabling leaders to make the best, most well informed decision possible. Or so we thought.

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The study out of Princeton and Stanford took two groups and asked them to make a decision about the following story.

Group 1 read this:

Imagine that you are a loan officer at a bank reviewing the mortgage application of a recent college graduate with a stable, well-paying job and a solid credit history. The applicant seems qualified, but during the routine credit check you discover that for the last three months the applicant has not paid a $5,000 debt to his charge card account.

According to Psychology Today , Group 2 read the same story but with more nuanced information:

Group 2 saw the same paragraph with one crucial difference. Instead of learning the exact amount of the student's debt, they were told there were conflicting reports and that the size of the debt was unclear. It was either $5,000 or $25,000. Participants could decide to approve or reject the applicant immediately, or they could delay their decision until more information was available, clarifying how much the student really owed. Not surprisingly, most Group 2 participants chose to wait until they knew the size of the debt.

Here's where the study gets clever. The experimenters then revealed that the student's debt was only $5,000. In other words, both groups ended up with the same exact information. Group 2 just had to go out of its way and seek it out.

The result:

71% of Group 1 participants rejected the applicant. But among Group 2 participants who asked for additional information? Only 21% rejected the applicant.

Psychology Today’s Ron Friedman goes on to write that the human mind hates uncertainty and that when we detect information is missing our mind sharpens, paying extra attention to what’s not in front of us. The result is that we overvalue missing information—assuming that whatever pieces of the puzzle are missing must be useful.

Friedman goes even further: With all the information available at our fingertips, we’ve become addicted to filling information gaps. Learning, he explains, is associated with the release of dopamine (the same chemical released by cocaine…) and in a world where each click brings new learning (however trivial) we’ve all become information addicts. Whereas we often think of knowledge as power, the truth might be that it’s all that knowledge that makes us powerless.

What’s your take? How do you find the balance between being informed and being overwhelmed?

Read more at Psychology Today.

(Image via Baevskiy Dmitry/Shutterstock.com )