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How more information doesn’t lead to better decisions

I recently applied to refinance a mortgage. Of course, bad mortgages were the tracks which the economic train derailed from. New regulations are inevitable when that happens as elected officials want to show their constituents that they fixed it. I’ve gotten to see some of those new regulations and did we miss the mark. The number of documents required were enormous. I thought my grade school report cards or an eye exam might be next. However, that doesn’t mean better decisions are being made.

Here is an overly simply view of how things went down.

1. Mortgages were being written that shouldn’t have been.
2. Regulators wanted mortgage companies and underwriters to make better decisions.
3. Regulators assumed that underwriters need to dig deeper into more information.
4. Regulators insist that underwriters collect more information
5. Underwriters are busy collecting more information.
6. They have less time to analyze what they have in order to make better decisions.
7. Nothing really changes, and we repeat our mistakes.

What I notice in this is a pattern I see repeated many times:

We confuse having more information with making better decisions.

There are several inputs to making good decisions:

1. The information that is available to us.
2. The criteria or method we use in evaluating our decision.
3. The inputs, challenges, and perspectives that influence the decision.
4. The who, when, and where – the right person making the decision in the right situation or location at the right time.

The approach that the regulators choose only address input #1. This is done under a belief that this is the root of all bad decision making problems. A false belief. Problems with decision making are about more than not enough information.

And when the available information is not the problem, if we throw more information at people we only make the problems worse.

Don’t confuse more information with better decision making.

What experiences do you have with mis-solving decision making problems?