But anecdotes are powerful teaching tools. Jesus used them - parables - to teach basic principles. Why are they so powerful? Again, our brains are neural networks - and are trained by experience. We can learn from direct experience (our own story so to speak) or by watching or hearing about the experiences of others (anecdotes). Only the very smart can look at raw data, such as accident statistics, and then formulate a "story" they can learn from. We can learn from direct experience, indirect experience, or projected experience. Very few are capable of the latter.
The problem with anecdotes is that they can be hijacked. As I noted before, there is a lot of false data spread on the Internet, and very little done to debunk it. Much of the political belief in this country stems from this outright false data - not from actual events or hard data.
Immigrant-haters believe the stories they tell each other about how immigrants get special stores to get free furniture from, free cars, tax holidays, and untold riches in the form of cash grants or monthly payments. None of these anecdotes are true of course - but these "stories" are more compelling that dry sections of United States Code that prove no such freebies exist.
The "birthers" (who still exist, but have yet to go after Ted Cruz) follow the same pattern. They will believe whatever far-fetched tale you tell, but won't look at real evidence. The tall tales that are found only on paranoid conspiracy websites are the real truth - as evidenced by the fact that the mainstream media doesn't report them. On the other hand, actual evidence is always dismissed as "fabricated" - out of hand.
There is a huge danger in this sort of thing - and I have only given two examples of this sort of distorted thinking. Many others abound, on all sides of the political spectrum. Obama is going to take your guns away. The Republicans are going to round up people and put them in detention camps and make Christianity the national religion. 9/11 was an 'inside job'. It goes on and on. And the scary thing is, today, most people believe one or more of these stories.
I have friends that believe this nonsense. Well, not really friends anymore. Hanging around with crazy is not good for your personal psyche. And trying to dissuade them of their beliefs, I have found, is fruitless and time-wasting. Just walk away.
From a financial perspective, anecdotal evidence rules the roost. There are a few people in this country who really "get it" and understand that finances are not all about wishful thinking and the coupon mentality. But most others, don't.
On one credit card discussion group, the topic was which "rewards" card was better - and from their perspective, the name of the game was how to score rewards points or cash-back bonuses. And each regaled the other with an anecdote about how they scored such deals. Contrary stories - about people who didn't pay their minimum balance and ended up broke with 25% interest-rate cards - are shouted down.
Our housing crises was another case in point. When we lived in South Florida, you would hear friend-of-a-friend stories about how so-and-so bought a house for $200,000 one day and sold it for $400,000 the next, without any labor, work, or other investment. Everyone was making money the easy way - and no one bothered to ask, "Who are these fools you are selling these overpriced houses to?"
And they didn't ask, because we all thought the other guy was the fool in this maniacal game of musical chairs. Fortunately for me, I was sitting down when the music stopped.
All the bad deals in your life are sold to you based on anecdotal evidence. If you lease a car, you pay only for the part of the car you want to own! Right? That is the "story" or anecdote they tell you, because it gets you to sign the papers. They don't tell you the other story - that you are paying twice as much as you would to buy the same car, secondhand, and that with excess wear charges and back-end fees, you could have likely bought the same car new for the same amount.
And so on and so on. Payday loans, check cashing stores, rent-to-own furniture - the companies that offer these services, all have a "story" to sell - with the happy smiling faces of customers depicted (usually waving a fan of money). On a rent-to-own furniture truck I saw a new pitch recently - that by renting your $400 television set, you wouldn't have to worry about it breaking. Yes, spend as much as it would cost to buy two or three televisions outright so you don't have to worry about one. Makes sense to me!
Stories are fine and all, as teaching tools, to illustrates how a scenario can play out. For example, I used such anecdotes to illustrate why co-signing a loan is a bad idea. These stories, based on actual experiences which illustrate the very typical scenarios that occur which lead to co-signing, and the inevitable results. Inevitable as according to the FTC, SEVENTY FIVE PERCENT of cases, the co-signer ends up paying off the note.
The stories that low-life lenders tell - about happy-go-lucky people who get their parents to co-sign a loan, which all ends well with junior getting an improved credit history as a result - are just made-up. It rarely plays out that way. Junior defaults, the parents are stuck, and both have horrible credit as a result - and all so Junior can have something he wants but doesn't need - a brand new car.
Of course, a lot of these stories are told as post hoc justifications by folks who have made bad financial decisions - and we all do this. No one wants to confront harsh reality very closely, or we'd just weep all day long. We self-justify bad choices, in order to feel better about ourselves. The problem with these scenarios is that eventually fantasy crashes headlong into reality (as it did in 2009) and people wake up and wonder what the heck happened. If they had been living in reality, they would have seen it.
Anecdotes are great, and can be a great way to illustrate a point. But when someone tells you an anecdote, check the stats to see if the scenario they describe is grounded in reality, or just a fantasy that is not likely to occur.
NOTE: Anecdotal evidence is usually relied upon when one party has no evidence to back up their claims. For example, the NRA likes to trot out stories about people who stopped crimes or defended themselves with guns. While these individual stories may be true, it is also true that in most cases, when you wave a gun at a criminal, they take it away from you and shoot you. And if you shoot first, well, you end up getting sued for "wrongful death" and your life is ruined. And of course, you are far more likely to shoot yourself or someone you know with a gun in your home. Home invasions and home burglaries are just not that common - but suicides and murders (between spouses and family members) are.
Smokers like to use stories like this. "Well, old Grandma smoked like a chimney and she lived to be 80!" they say, as if this negates the vast majority of people who die from cancer, emphysema, heart disease, and the number of other ways cigarettes kill. It also doesn't take into consideration that Grandma could have lived to be 100 if she hadn't smoked.
In tax debates, the GOP likes to trot out "Joe the Plumber" types and then posit that they have been harmed by letting the Bush era tax cuts expire - or that they ended up not hiring new employees or expanding their businesses because their personal income tax rates have gone up. Since most people don't understand the difference between gross revenues and net profits, such arguments "make sense" - not realizing that salaries of hired workers are tax deductions (business expenses).
When you don't have a leg to stand on, a story about a friend-of-a-friend, or your Uncle's brother's nephew, is the way to go. Because it is a nonsense argument - and you can get people to believe nonsense with such arguments!