Pitfalls of Data-Driven Decisions

by Megan MacGarvie and Kristina McElheran

Even with impressively large data sets, the best analytics tools, and careful statistical methods, managers can still be vulnerable to a range of pitfalls when using data to back up their toughest choices—especially when information overload leads us to take shortcuts in reasoning. In some instances, data and analytics actually make matters worse.

Psychologists, behavioral economists, and other scholars of human behavior have identified several common decision-making traps. Many of these traps stem from the fact that people don’t carefully process every piece of information in every decision. Instead, we often rely on heuristics—simplified procedures ...

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