The Dangers of Categorical Thinking
Bart de Langhe and Philip Fernbach
Types of Categorical Thinking
Compression
Amplification
Discrimination
Fossilization
Two Types of Missteps
Interpretation
Missing or ignoring critical information
Over-emphasizing differences
Action
Acting on arbitrary distinctions
Focusing excessively on a threshold
Case Study:
Generations
Divides people into groups based on age cohorts
Often correlates with certain attitudes and beliefs
Does
not
determine every factor of a person
Leads to oversimplifications in marketing strategy
Solution: combine with other classifications
Case Study:
Belgian Bailouts
After the 2008 financial crisis, the Belgian government bailed out BNP Paribas
Retained stock as prices climed
Resolved to sell at a threshold price
The price got within cents of the threshold, but never got there
The government still holds these shares
Solution: take "staged" actions instead of binary actions
Mitigating Categorical Thinking
Be aware of it
Analyze data continuously
Audit your beliefs
Chose staged plans
The Dangers of Categorical Thinking
https://hbr.org/2019/09/the-dangers-of-categorical-thinking