Chapter 2Blinded by Bias

Mistakes and Markets

Artificial intelligence and machine learning is suddenly all the rage, and for good reason. It is the future of this, and most every other industry. If you've been paying attention to the evolution of technology over the past 2.6 million years, you knew it was coming. Wherever human beings have shouldered the bulk of the effort, we have always sought to replace humans with technology that could do the job better, faster, more efficiently and – since the invention of capital – cheaper. It began with the most basic, brute force physical tasks and has progressively involved more nuanced, cognitive processes. Along the way, the progress has been exponential, not linear. Through AI and machine learning, technology is now attempting to improve on how we make decisions, and truth is, it won't require much effort. Not because technology represents some sort of miracle, but because we do such a poor job of it.

More than 60 years of research in the cognitive sciences provides an abundance of evidence proving that humans are prone to mistakes at every stage of the decision‐making process. From defining the problem to be solved, to researching and predicting the relevant external factors that will likely affect our ability to achieve them, as well as assessing and implementing the actions we should take in order to improve our chances of realizing those objectives, we are vulnerable to systematic errors in judgment. Luckily, technology can help ...

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