Summary (TL;DR): The perfect information heuristic is a state of mind where you assume you have access to all available information. It allows you to more specifically and narrowly define what decision you are trying to make and allows you to look for data that, at first blush, may seem impossible to get. It is effective in counteracting the availability heuristic. Its shortcomings are that it is more work, many times what is available is what matters, and it can give you overconfidence in the decision you ultimately make.
Lastly, one could argue that this “heuristic” is just sound decision making and doesn’t really need to be elaborated on. I don’t have a great rebuttal to that, but clearly, I think it’s worth discussing.
On the Perfect Information Heuristic…
What is it: There is a quote that I am very fond of by Laplace:
“We may regard the present state of the universe as the effect of its past and the cause of its future. An intellect which at any given moment knew all of the forces that animate nature and the mutual positions of the beings that compose it, if this intellect were vast enough to submit the data to analysis, could condense into a single formula the movement of the greatest bodies of the universe and that of the lightest atom; for such an intellect, nothing could be uncertain and the future just like the past would be present before its eyes.”
— Marquis Pierre Simon de Laplace
If the premises are valid then I think the logic is correct. Thus, if one had access to all available information in the universe, one could see the future and therefore make the most optimal decision. While that is impossible, it is still a good heuristic to apply to decision making, especially in countering the availability bias. To more specifically define the perfect information heuristic: it is a state of mind where you assume you have access to all available information, as such, what variables would you examine in making the best decision.
Using the perfect information heuristic for decision making would start as follows:
Pretend as though you have perfect information, specifically define what you are deciding on and determine what variables are the most salient to the decision. …hmm, seems like a “duh” moment. However, the availability bias(1) creeps in due to: specifically defining decisions are nearly impossible, most decisions you make you have some level of information already and, additionally, decision making is circular, as you learn more you redefine what you are looking for and as you redefine you conform to what information is available.
Let’s say you are thinking of going to college (an imprecisely defined decision – for most, college is a means to an end – define what your “ends” are). You have heard over the years that college educated people make way more than non-college educated individuals (people have initial information). So, what happens is you imperfectly define your decision, should I go to school, then you list variables that you know exist: one being do college educated people make more than non-college educated. As you start looking for this information you stumble on all the careers college educated individuals have access to vs non-college educated – this information is available and should be incorporated (decisions are circular). By the end, you confirmed that college educated people make way more than non-college educated and you realized that there are more career opportunities for college educated individuals. So, you may not know what you want to do, but if you go to college you will make more money and have more career options once you ultimately decide on what you want to do. The data supports it and you can safely say you made a deliberate, informed decision.
So, let’s apply the perfect information heuristic to deciding on going to school and why the above is flawed.
Define the decision specifically: Do / should I go to school Perfect information would dictate that you know exactly what you want: I want to be an accountant making $75,000 a year, working at xyz place, living in abc location, etc. Are you going to capture everything, no, but starting with the premise that you could know exactly what you want changes the way you think about the problem. So, you meet halfway:
|Imprecisely defined decision
|Modified Decision (still flawed but better)
|Perfect Information (tons of variables still unaccounted for)
|Do / should I go to school?
|Living at xyz geography is most important and making $>50k a year (which allows me to have a good-sized house and the ability to go to Florida twice a year is important.) Will school help me get there?
|What is the best way for me to become an accountant making $75,000 a year (so I can do xyz with the money), working at xyz place, living in abc location, etc.
Already you can reframe the question from one that society (you need to decide if you are going to college and the answer should be yes) impresses (read: makes available to you) upon you to one that has more relevance to your life. However, let’s say the modified decision you are making is only “I want to make >$50k a year, should I go to school?” In that slight reframing, you now look for ways to make >$50k. From that, you find a stat that most jobs where people make >$50k the individuals are college educated and it lists the careers. You then apply the heuristic to that stat to see what additional information you can get. Start with perfect information and work backward.
Direct, perfect information question: Would I be able to get one of those jobs? (Unanswerable)
Indirect questions, pretending you have access to near perfect information: If they went to college what degree did they get? What companies do they work for? What skills are they performing? Where do they live? How old are they? How long did it take them to get to >$50k? etc. etc. Just throw questions on a page until you can’t think of anything more.
Pair down to importance: Of the above questions, only a few will hold real influence/matter to the decision you are making. Let’s just pick degree and geography as being important factors to you. (after asking those questions you realized you don’t want to be a science major and you don’t want to live in a big city).
Find proxies: The stat listed only showed the careers of college degree holders. It didn’t show the degrees or where those individuals live, so you must find a way to get that information or approximate for that information. Let’s say you trolled LinkedIn and sampled 80 individuals. Of that sample, 65 were science majors and/or lived in a big city. That leaves 15 individuals and maybe three professions that met your criteria.
Re-analyze: Initial stat was way more people with a college education make >$50k a year. Revised, more relevant stat: I would, effectively, be eligible for three professions that require a college education that makes >$50k a year. If I didn’t go to college, I would be eligible for these other five professions that make >$50k a year. Compare those specifically then.
It is more work. If the decision you are making doesn’t appear to have much impact on your life then why expend the energy to make a more optimal decision and, in some cases, get to the exact same answer. And in some, if not many cases, you will get to the same answer. There is wisdom embedded in what society impresses upon people. Questioning for the sake of questioning or being contrarian for the sake of being contrarian isn’t in and of itself valuable. Lastly, in going through this analysis, you may lose the humility that knowing every possible outcome is impossible. You can be wrong and you will be wrong. When you are wrong, be flexible and change. By applying this heuristic the goal is to improve the ratio of good to bad decisions, not to eliminate all bad decisions.
Conclusion: See the summary at the top of the page…
(1) The availability bias, in short, means that individuals will only leverage the information that is immediately available to them regardless of its value. People act on what they can see or measure, even if what they are measuring holds no value. I think this manifests itself in both deliberate and indeliberate decisions. For this post, I will focus on how the perfect information heuristic can help in deliberate decisions where the availability bias rears its head.