The Role of Information is to Reduce Uncertainty

Why do we need to do Marketing research, collect analytics,  perform A/B testing, and conduct experiments?

  1. To find out whether  the Highest paid person’s opinion (HiPPO) is true?
  2. To pick the clear winning option?
  3. To satisfy our ego that we drive decisions based on analytics?

The real purpose of  all these methods of data collection is to reduce uncertainty in our decision making. Decision making after all is about making choices. If there are no choices or you have already made your choice, then there is no real decision making.

If you have options but are not certain which one to go with, then there is uncertainty, or more precisely there is an unacceptable level of uncertainty. If it were acceptable, that is the expected results are not that different, then there is no decision making as well. Just flip a coin and go with it (My article from 2009.)

If the level of uncertainty is unacceptable,  that is choosing the wrong option will mean the difference between life and death or profit and loss – then it may be worth it to reduce this uncertainty provided the cost to get this information is less than the value differential.

Conversely, if the information you have or collect does nothing to reduce uncertainty in decision making then it is irrelevant regardless of how plentiful it is, how statistically significant it is, and how easy or cheap it is to collect it.

How do you make your decisions?

Why do you collect information?