Base Rates: The Safe Way to Make Smarter Decisions and Prevent Recklessness
Base rates give me the same comfort a visit to my grandparents gave me when I was young.
Yes, just like my nan and grandad, base rates are safe and packed full of wisdom. When I want fact over opinion on stuff I know little about, the mental model of base rates is where I go. The concept is to use historical data as it relates to your decision and use it as a baseline for deciding.
When we don’t know better, base rates enable us to make smarter decisions.
When we don’t know better, base rates prevent us from making reckless decisions.
What are Base Rates?
Base rates in decision-making explain known probabilities established from historical data. A simple example is knowing what the temperature in London in May will be. Historical data tells us the temperature ranges from15 to 19 degrees with it becoming warmer later in the month. This information forms a base rate for you to make many decisions, from what to wear, what to eat and even when and where to eat.
Of course, base rates won’t always be right. But in a quest to always be brilliant, sometimes avoiding stupidity is easier. This is where base rates can be rather helpful.
Before I show you how powerful base rates can be, I need to warn you about our cognitive biases.
Our mind has a wonderful capacity to use its judgement when it feels like it. These instincts have given us the ability to intuitively know when to freeze-or fight. But they also make us susceptible to adopting fallacies when we shouldn’t.
The Danger of the Base Rate Fallacy
The base rate fallacy is the moment we accept a story over data.
The fallacy occurs when we take a ‘one-off’ event over more creditable information. We use unique stories to justify doing something the base rate says we shouldn’t.
“I smoke because my nan smoked all her life and died when she was 98.” “My friend always drives without a seatbelt, and he is still alive!”