BUS610: Business Intelligence and Analytics

"Don't try to stop me!  I'm having a thought!" 

I was driving to work this morning, thinking about analytic confidence (as one does), and I had a thought.  An interesting thought.  Before I tell you what it was, you need to take the one question survey at the link below to see if my thought has any merit (I will post the results as a follow-up to this post):

Which statement seems more clear to you?

Did you take the survey?  If not, go back and take it!

And now?  

OK!  Thanks!

People are often confused by the difference between an estimate and confidence in that estimate.  This confusion is driven, to a very large part, by the way the terms are often (mis)used in formal analytic writing.  It is not uncommon to see someone talk about their confidence when they are really making an estimate or, less commonly, to use estimative language to convey confidence.  

The two concepts, however, are very different.  The estimate communicates what you think is likely (or unlikely) to happen in the future.  Confidence speaks to the likelihood that something is mucking up the process used to establish that estimate.  

This is where the New England Patriots come in.  For example, I think it is very likely that the New England Patriots will win their next game (Note:  I am using the term "very likely" here the same way the DNI does).  I watch football but am by no means an expert.  I don't even know who the Patriots are playing next week.  I just know that they are usually a good team, and that they usually win a lot of games.  So, while I still think it is very likely that the Patriots will win, my confidence in that estimate is low.  The process I used for deriving that estimate was so weak, I won't be surprised to find out that they have a bye next week.

On the other hand, it is easy to imagine a forecaster who is steeped in football lore.  This hypothetical forecaster has an excellent track record derived in large part from a highly structured and efficient process for determining the odds of a victory.  This forecaster might say exactly the same thing I did - the Patriots are very likely to win their next game - but, because of a superior process, this forecaster has high confidence in their estimate.

It is important to convey both - the estimate itself and analytic confidence - when communicating the results of analysis to a decisionmaker.  To do anything less runs the risk of the decisionmaker misinterpreting the findings or assuming things about the process that are not true.  

It is also important to note that the "analytic confidence" mentioned here differs significantly from the far more commonly discussed notion of psychological confidence.  Psychological confidence is a statement about how one "feels" and can often be caused by cognitive bias or environmental factors.  There is no reliable relationship between forecasting accuracy and psychological confidence.  

Analytic confidence, on the other hand, is based on legitimate reasons why the analysis is more likely to be correct.  For example, analysis derived from facts presented by reliable sources is more likely to be correct than analysis derived from sketchy or disreputable sources.  In fact, there are a number of legitimate reasons for more rather than less analytic confidence.

It is, of course, possible, for analytic and psychological notions of confidence to be consistent, at least in the context of an individual forecast.  I, for example, "feel" that I have no reason to be confident in my estimate about the Patriots.  I also know, as I go down the list of elements responsible for legitimate analytic confidence, that very few are present.  Low applies to both my psychological and analytic variants of confidence, in this case.

That is not normal.  Overconfidence bias is typically the cause of feelings of confidence outpacing a more rational assessment of the quality of the analytic process.  Underconfidence, on the other hand, is typically caused by over-thinking a problem and is more common among experts than you might think.

Now to my thought.  Finally.

One of the big problems with analytic confidence is communicating it to decisionmakers in an intuitive way.  Part of this problem occurs, no doubt, because of the different meanings the word "confidence" can have.  Most people, when they hear the word "confidence" used in casual conversation, assume you mean the psychological kind.  Adding the word "analytic" in front of "confidence" doesn't seem to help much, as most people don't really have a notion of what analytic confidence is or how it differs from the more commonly used, psychological type of confidence (They don't want to know, either.  They have enough to remember).

The classic solution has been to ignore analytic confidence completely.  This is wrong for all the reasons discussed above.  Occasionally, however, analysts elect to include a statement of analytic confidence, typically at the end of the analysis.  Part of this is due to the "Bottomline Up Front (BLUF)" style of writing that is common to analysis.  The logic here is that the most important thing is the estimate.  That becomes the bottomline and, therefore, the first thing mentioned in the paper or briefing.

What if we flip that on its head?  What if we go, at least in casual conversation, with the analytic confidence first?  

Thus you had my two formulations:

• "It's a low confidence estimate, but the Patriots are very likely to win this week".
• "The Patriots are very likely to win this week.  This is a low confidence estimate, however".

These two statements say exactly the same thing in terms of content.  However, I think the form of the first statement better communicates what the analyst actually intends.  In other words, I think the first statement establishes a slightly different context.  Furthermore, I think this context will likely help the listener interpret my use of the word "confidence" correctly.  That is, the first statement is better than the second at suggesting that I am using confidence as a way to highlight the process I used to derive the estimate and not just how I feel about it.  

Another reason I think the second statement is inferior is because I think it sounds confusing to the casual listener.  It is theoretically better (the bottomline is definitely up front) but, unless you are steeped in the arcana of analytic writing, it cannot be easily interpreted and could lead to confusion.

That's the reason for the quick poll.  I just wanted to see what you thought - to see, in the words of Gertrude Stein, if there was any there there. 

Source: Kristan J. Wheaton, https://sourcesandmethods.blogspot.com/search?q=confidence
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