Base Rate Neglect

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⏱️ ~ 8 minutes 49 seconds read

Billy Beane, Brad Pitt’s money-in-the-bank confident and typically well-chiselled character in "Moneyball" is what you might have called a contrarian.

He shattered the conventional wisdom of baseball scouting and changed the game forever with his success.

I couldn't give two swings about baseball, even though I am a definite “Stan” for Brad Pitt. 

But what makes the story of Billy Beane so intriguing is like many contrarians; it's a powerful example of overcoming what psychologists call 'Base Rate Neglect'.

Which is [draws deep breath]… a decision-making error in which information about the rate of occurrence of some trait in a population or factual statistic related to an event (the base-rate information) is ignored or not given appropriate weight in favour of individual descriptions, anecdotal evidence and stereotypes. Phew 😮‍💨 

Baseball? Stereotypes? Brad Pitt?... Huh? 🤔 

OK, so what made Billy Beane such a success was, rather than relying on anecdotal hype, watching highlight reels or sitting through hours of games in person ( 🥱 sorry baseball lovers) - Beane embraced data-driven analysis (through an Ivy League graduate Peter Brand, played by Jonah Hill) to uncover hidden gems in player performance statistics.

He overcame the very powerful natural instinct that humans have to stereotype, band-wagon and reach assumptions of character or outcome, and instead used the base-rate information and stats about the actual player to scout and recruit them. And win games.

Spoiler Alert (but seriously Moneyball came out in 2011, come on now)

Billy Beane used it to extraordinary success, taking the Oakland Athletics on a then record-breaking 20 consecutive wins. Although he did finally fall painfully short of a World Series win, he did turn down an offer to manage the The Boston Red Sox. 

Who then promptly deployed his exact methods of scouting and go on to win the World Series two seasons later. Cheeky Sox. 😁 🧦

TOM’S MAJOR AND THE WHY 🔬

Billy’s approach is backed up by oodles of research too. A particularly famous example of which was a study conducted by Kahneman and Tversky in 1973, where participants were given a very specific personality sketch of a graduate student named Tom.

Even though participants knew that engineers were three times more common than librarians at the school, 95% thought Tom was studying to be a librarian. They made this guess based on his personality sketch (being shy and liking to read), ignoring the strong chance that he was actually an engineer.

Like all psychological biases, base-rate neglect is the brains powerful tendency to quickly and crudely categorise and calculate using as little cognitive effort as possible. Which is perfectly fine for 99% of your decisions, but on the big calls, it pays to push back hard against that.

But why does it happen? Psychologists believe there’s two major factors at play that affect the strength of base-rate neglect.

1️⃣ Relevance - Before we make a decision we intuitively categorise information given to us into a spectrum of relevancy. The more specific and individuating the information we place a higher value of relevancy. Whereas the more generic and known, we deem it irrelevant, trivial and therefore less valuable to us. After all, were all unique little snowflakes huh?

2️⃣ Representativeness - Our minds run on heuristics, without them we’d be paralysed by decisions all day. The representativeness heuristics is the tendency to judge probabilities based on the extent to which something (an object or event) is similar to the prototypical exemplar of the category it falls into. Huh? In short, if it looks like a duck, quacks like a duck, then it's likely to fly and taste fantastic roasted with pumpkin and almond salad.

So how does this show up in the world (outside of baseball scouting)?

Once you realise what it is, you start to see it everywhere in human behaviour.

🚗 🛩️ The old car-travel vs. air-travel fallacy. It’s true, we’ve all sat through a little turbulence and thought “bloody hell, this could be it” and tightened the seatbelt juuuuuust a little. When in reality, nipping down to the shops in the car is far more likely to be the way to meet your maker.

🎟️ 💰️ Billions are spent on lottery tickets every year. It’s no coincidence that local winners show up on the local news. Lottery winners create powerful optimism and generate base rate neglect. When you see Kevin the store manager from Craigieburn celebrating his win, it’s very normal to believe just that little bit more that you’re next.

❤️‍🩹 If you’re told just 10% of the population have a high risk of a certain disease, you assume it’s very unlikely to be you. However, later that day you're lined up with 10 others and told one person has the disease. You start sweating.

🎒 Conversely, when you hear that Silverberch Girls accepts the top 6% of applicants, you assume little Brittany is a shoe-in because afterall, she’s “brilliant”. The reality is 94% of these “brilliant” kids are off to Burrambagi Primary next year.

HOW TO SEE THE ‘REAL’ WORLD 🙈👀

OK so now we know why and how it shows up in the world. Let’s get to the good stuff: how you can put this bias to work in your marketing.

One of the most commonly experienced marketing examples is something we’ve probably all fallen foul of: the "Now 50% extra free!" labels on packaged goods.

If you're like me, you probably hold it gleefully in the supermarket aisle grinning to yourself, “heck yes, you clever bastard, half of this is free. Into the basket with you!”

Problem is only 33% of what you're holding in your savvy-shopper hand is actually free. Admit it, it's happened to you too.

So aside from complex mental arithmetic at the checkout, how do brands exploit the base rate fallacy to drive growth and profit?

⚠️ DO NO EVIL WARNING ⚠️

The following depicts how to take advantage of this bias in consumers. Please use this to do some good in the world.

💪 Testimonials - Many a fitness and health brand has capitalised on the bias of base rate neglect by showcasing extraordinary before-and-after transformations of individuals who've achieved a tight butt and cheese grader six pack through their products and programs. 

By focusing on especially relatable “before” cases, these brands ignite the fervent hope within consumers that they too can achieve miraculous results. As we know the more specificity and individualisation of the information - the more weight of relevance we place on it. 

Zooming out, you might see a couple dozen testimonials on a website, which feels like a lot, but it's a drop in the ocean of the thousands of customers that may have used the product. Most of which are more than likely still unhappy with how many pull-ups they can muster.

🔬 Specifics - We know that using specific numbers in copy helps with plausibility and trustworthiness. But this is also true of the relevancy drivers of base rate neglect. The more specific the numbers are, the more value we place on them and therefore less value we place on the reality of the need for the product at all. 

Yes, 14 cyclones generating centrifugal forces of up to 100,000g is just what I need for my studio living room carpet.

🤳 Influencers - the effect of influencers seems obvious (know, like, trust and all that), but the base rate fallacy is even more pronounced with micro-influencers. People on screen, in whom everyday consumers see a little bit of themselves in. 

This empathy triggers base rate neglect where we so deeply value the individualisation of the information (see Ridge wallet plugged in a Youtube video), that we instantly imagine the product integrated directly into our lives before we even ask ourselves the question “Wait. How real is the prospect of my wallet being NFC scanned when it’s welded to my butt?”

Personalisation - A less appreciated but powerful effect of personalization is not just showing you obvious next purchases, history etc. but more importantly, any personalisation will effectively target base rate neglect drivers such as relevance.

Much like testimonials, personalisation jack-ups our sense of relevancy to the product or brand. 

Injected throughout the funnel journey, personalization leads us to believe that the brand really understands our needs. This makes us more likely to use their app or visit their website and try new products or services, even if we don't clearly need them. Hello again AfterPay 👋.

OK, LET’S WRAP THIS UP 🫠 

Ok, that’s quite enough consumer manipulation for one week. It's worth noting that much of what business stands to gain from this bias is by simply being aware of it when it comes to making decisions internally.

On the macro, an example could be overreacting to transient changes in our business. If the base rate statistics show consistent growth over the long-term, it is likely that any setbacks are only temporary and that things will get back on track.

Yet, if we ignore the base rate information, we may feel inclined to over-correct, re-brand, re-tool, re-position and pursue an entirely different (and wrong) market.

On the micro, an example of something I've seen happen on occasion: excitable premature segmentation (oh, stop it you 🙄)

Before getting too excited about an identified customer segment with high average order value or high usage of a feature that usage correlates to smashing your LTV, always check it's proportion within your total user base and the profile against your entire target audience population. 

Otherwise you can end up pivoting all your efforts towards a tiny and practically impossible to target audience. And that suuuuuucks.

From Billy Beane and baseball, making our eyes cross with "Now 50% extra free", to falling in love with an audience you could fit into a phone booth, base rate neglect is a powerful bias you need to get your head around to avoid some pain and use to skim some very tidy gains.

• What other examples have you seen of brands taking advantage of base rate neglect?

• How do you plan to use base rate neglect in your tactics going forward?

If you enjoyed this edition, please forward it to a friend who’s looking to level-up their marketing game - They’ll love you for it (and I will too) ⏭️ 💌 

🧰 Tools To Blow Your Bosses Hair Back

• Hubspot’s Excel Glitterbox: 19 free Marketing & Sales Templates for Microsoft Excel 💻

• Mailcharts: Keep an eye on all your competitors emails and SMS activity 🕵️ 

• Klu.so: Run AI across all your teams slacks, emails and more to never lose “that deck for tomorrow’s meeting” again 🤖

🗞️ Choice Picks from #MarketingNews

• I feel like I saw this in an Adobe “demo” 4 years ago. But I guess it actually exists now, AI is creating complete media plans.

• Google Chrome just got a whole lot cleverer 🤖

• Dry January? Good for you - Guinness, Budweiser and Tanqueray have got just what you need 🍵 

• The human cost of AI. Google just powered down some 2000 ghost workers labeling training data.

• Bit of Google theme today. How Google’s monopoly of search has optimized web sites for bots instead of people.

🧩 The Puzzler

Congrats if you got last weeks puzzler. The answer was ‘Chicago’.

Let’s see how you do with this week.

Hit reply with your answer. Looking forward to this weeks responses.

🙋 Chuckles and Giggles

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