How many data points do you need to make a decision?
3, 30, 300
As the information increases, will your decision become better? NO
A famous research on gamblers revealed that as the information increased, the accuracy remained the same but the confidence increased!
What does that mean?
When we get more information,
our confidence and conviction in our decision increases
We become prone to “Conviction” bias (yes, there is such a thing) which means we become confident of the outcome just because we are confident
Worse is that we increase the size of our bet or the amount, we are willing to invest/spend because we are soooo convinced about it
I recently heard a very successful VC investor, with one of the best track records on Silicon Valley, say when they are 100% confident, there bets have gone wrong
Does this mean you should take decisions without information?
Every decision requires information either logic or emotions – use the information but don’t seek too much information
Because too much information will lead to bad decisions