Sunday, November 30, 2014

Anecdotal Evidence

We as humans, are storytellers, so we like to hear stories, parables, and anecdotes - and learn from them.

Anecdotal Evidence often trumps real data in our everyday experiences.   We ignore statistics and science in favor of stories we have heard.   And this is because of the nature of the human brain - a neural network that "learns" based on experiences.   A set of dry statistics just doesn't make the same impact.

What do I mean by this?  Well consider seat belts.   When I was a kid, no one wore seat belts, literally.  Maybe 5% of the population did, and half of those people were lying.   Many cars did not come with seat belts as standard equipment until the 1960's.  New shoulder harnesses were required on cars in the 1970's - and most people left them neatly tucked up in the roof where they came from the factory.   Others would slice off the belt buckles with a razor and let them wind up into their retraction reels.  No one wore belts, and they all had good reasons (or so they thought) as to why.

When you got a few rednecks together, they would swap stories - anecdotes - about how a friend-of-a-friend would have surely died, had they been wearing their seat belt.   "He was thrown clear of the wreck!" one would say, "And he would have been kilt if he had his seat belt on!"

The other popular scenario was driving into a lake, river, or pond.   The story would go that two people were in the car, one with a seat belt, the other not.   The seat belt jams, of course, and the hapless fool who wore it drowned.  The smart fellow who knew better, escaped the sinking car and swam to safety.   Them seat belts are no good!

A similar and even scarier scenario touted by the ignorant is the car fire.  Once again, the seat belt jams and the idiot who stupidly wore it dies a painful death, while his friend (who heroically tried to unjam his foolish friend's seat belt before he was driven back by the flames) escaped with only burned hands and tortured memories of his friend screaming as he burned to death.  Oh seat belts!  If only he had listened to me and not worn these instruments of death!

But of course, these are all just stories, and none of them are necessarily true.  Statistics are far less interesting. Most accidents occur at intersections, and usually below 30 mph. And many of these accidents are, oddly enough, fatal, if a driver or passenger is unbelted.   Rednecks love a good story, but they don't understand momentum.  When the car goes from 30 mph to 0 mph in 10 feet, the body accelerates forward into the dashboard and windshield at that speed.

If you want to experience this firsthand, sit in a kitchen chair and have a friend take a section of dashboard taken from a wrecked car, and then swing it like a baseball bat at your head, with full force, several times.  It can literally cave your head in.

A relative recently died in such an accident (yes, I know, anecdotal evidence) when she was hit by another car, at about 35 mph, in an intersection.   Statistically, however, this is a common accident.   She did not believe in seat belts and had put a "cheater" buckle in the car to defeat the warning buzzer.   She hit the windshield, of course, leaving a basketball-sized dome in the safety glass.   She was taken to the hospital and appeared to be fine, but while waiting for results of x-rays, died of a sudden blood clot to the brain.  Her accident, far from being an anecdote, is actually a statistically predictable event, if you don't wear seat belts.

And as it turns out, statistically, seat belt buckles rarely jam.  And in an accident involving submersion or fire, you are far more likely to die if unbuckled, as you are likely to be unconscious after the crash and unable to escape.  But the big deal is, of course, you are statistically more likely to survive a crash if you stay inside the car than if you are ejected from it.  Being "thrown clear" of the crash only means either you hit a tree at 50 mph or that your own car (or that of another) rolls over you or you bash your head open on the fender.

And funny thing, though, those rednecks, who all watch NASCAR, never bothered to make the connection that NASCAR drivers all wear safety harnesses, and certainly have no moronic ideas about being "thrown clear of the wreck" even as they are very likely to get into one.   But that is the nature of anecdotal evidence - it is very selective. The users select the data they want to use, and discard that which doesn't fit their world-view.

And we all do it, yes even me.

Eventually, science, logic, and statistics won the day - it only took about 100 years, though.  Today we have seat belt laws in all 50 States and seat belt usage is about 87% nationwide.  Laws help, of course, but also many more people see the light and see the logic of wearing one. Today, if I get in a car without my seat belt on, I feel naked.  And the reason I changed my own mind about belt usage (before laws were passed) was that I got tired of being tossed around inside a car, if I was not belted in.   That and getting into a few wrecks, changed my mind.  Personal experience trumped statistics.

While logic (and laws) took the field in the arena of seat belt usage, anecdotal evidence still reigns supreme in most parts of our lives.   In politics, people love to tell stories about a friend-of-a-friend. Politicians give speeches about "Joe the Plumber" and how he was disadvantaged by nefarious Democratic machinations.  Of course they aren't true.  We are talking politicians here.  And it makes me wince when I hear some politician mention someone by name.   Even Obama does it.   Actually he does it a lot.

And here's a rule of thumb that is probably 99% accurate:  Whenever a politician gives a speech and uses the example of Suzie Homemaker or Willy Worker, and how he talked with them and understood their plight, chances are they are lying to you. Of course, some would use a simpler rule: If the politician opens his mouth, he is lying to you.

Anecdotal data is useful and helpful in illustrating how concepts can work - but can also be dangerous in spreading misinformation. For example, the description of my relative's accident above is an anecdote - but one that illustrates a statistically predictable and common outcome.  The anecdote about being "thrown clear of the crash" and remaining uninjured is less useful as it is based on a scenario that rarely, if ever, happens.

And that is the problem with anecdotes.  They can be truthful or lies - and you can't tell the difference. 

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!