A wrecked car idles on the side of the road; four bottles of wine and two handles of whisky are in the back seat—the driver, an adult male, is unconscious in the front seat. The police arrive and call the paramedics. The situation looks bleak.
What do you make of this story? It’s difficult to avoid jumping to the intuitive conclusion without first considering the number of sober drivers who drive with alcohol. Every year, many cars that contain alcohol get into accidents. How many are caused by the driver consuming that alcohol? How many involve sober drivers who just happened to have alcohol?
The mind processes information fast, often generating a clean casual chain with just a few variables—Car crash. Alcohol. Unconscious driver. Drunk driving. But if we want to understand what happens in the world we must consider information that is not immediately apparent. This, however, is difficult.
In 1967, two psychologists presented participants with the following numbers: 147, 724, 947, 421, 843, 394. What do they have in common? Four is in each of them. Now consider another list: 239, 639, 865, 795, 261, 756. What do these numbers have in common? Four is in none of them. “What can we learn from this?” asks Rolf Dobelli in his book The Art of Thinking Clearly. “Absence is much harder to detect than presence.”
An analogous problem occurs when we attempt to understand business performance. If, for example, the price of a stock decreases while the CEO was on vacation, it’s intuitive to connect the two and conclude that the stock decreased because the CEO was on vacation. But this is the stuff of headlines. We must remember all those vacationing CEOs whose companies managed just well without them, even if such news does not make the front page.