Know Your Nuggets: Frequency Illusion

By Bob Sullivan
Writer

November 16, 2018

Editor's Note:  For me, it’s whenever I cross into a new state on the freeway. Suddenly, all I see are license plates for that state, even though all the cars are the same as they were moments ago. For others, maybe it’s a new song they keep hearing over and over (parents who suffered through “Let It Go” and everyone during the holiday season get a pass) or an idea or a person or even a shape. There’s always that thing which seems like it’s following you, that you can’t escape, that you just keep coming across.

Bob does a good job in the latest edition of our Know Your Nuggets series explaining what that’s all about and showing us how it applies to the business world. Read it and then come across it over and over and over again …

Perhaps the first time you heard a friend talk about going to Asheville for a vacation, you thought she was talking about the Grand Old Opry and Nashville. Soon after, the beautiful North Carolina town and brewery hotspot starting popping up all over your life. You heard from other friends or colleagues who visited. You saw a news story saying it's a great place to retire. You saw a TV ad about Asheville.

Suddenly, it seemed like Asheville was everywhere, chasing you down!  What's going on?

There are two possibilities. Perhaps you are a trendsetter and you discovered Asheville right as it was about to break out. That's unlikely, unless you are a travel writer or brewmaster. 

More likely, all those mentions of Asheville were floating around your life already. You just didn't notice them — until you were primed to do so.

This "trick" our brains play on us is called "frequency illusion," and it probably sounds familiar (Editor’s note: Or it will now that you’re reading about it). You hear about a band, or a type of food, or a political movement, and then suddenly it seems to appear everywhere. The playful name for this experience is “Baader-Meinhof,” the name borrowed from a German terrorist group. Back in the 1990s, a reader of the St. Paul Minnesota Pioneer Press noted that, out of the blue, the paper made several mentions of the seemingly obscure group; the reader called this "Baader-Meinhof phenomenon." The name stuck.

Only later, in 2006, did linguistics professor called Arnold Zwicky coin the academic term, “frequency illusion.” He says it’s the work of other well-known cognitive biases: selective attention and confirmation bias. As we move through our days, we are exposed to thousands of pieces of information, but we can only focus on a select few.  Most of what we see and hear never really penetrates our consciousness. Our brains have to work this way. Otherwise, we'd live lives of constant distraction.

As we move through our days, we are exposed to thousands of pieces of information, but we can only focus on a select few. 

So when something "new" does break through the noise, we are then primed to notice that new thing. The word or idea or product breaks through over and over, when earlier we would have missed it. Then, noticing that thing also seems to confirm our hunt, prove to us that we are onto something. One day, you decide it’s time for a new car and you want a Subaru Forrester. Almost immediately, you notice how many Subaru Forresters are on the road.

That's a relatively harmless example, but here's one that's far more nefarious. Someone gives you a "hot" stock tip. You then proceed to notice mentions of the company all over the Internet, and maybe even in communication with friends. That *must* mean the stock is a great buy. Better get in now!

Don’t do it! It’s a (cognitive) trap! The road to investment hell lies in such frequency illusions. 

Financial advisors often warn investors to avoid a similar phenomenon called "recency bias," which is a tendency to overweight recent events when making a decision. That's one reason people panic sell when the market has a bad day, even when the longer trend is positive, or buy a stock which announces a good quarter or new product, even though the firm’s long-term prospects are dismal.

Recency bias can bedevil corporations in lots of ways. It's easy for managers writing annual reviews to focus far more on a worker's prior month or two, rather than an entire 12-month body of work. Plenty of executives have a bad habit of listening to the last person who gets their ear right before a meeting — often eschewing painstakingly prepared background material.

Frequency illusion and recency bias can hit anyone, but if you think you're special — if you overestimate your ability to spot trends early on — you might fall hard for it. Overconfident traders make this mistake on Wall Street constantly, victimized by inflated egos and convinced they're among the first to spot new stocks, when in reality, they are in the middle of the pack. As we learned in "illusory superiority," (Editor’s note: This nugget coming soon.) a majority of people think they are better than average, which often gets them in trouble. 

That force is hard to resist, Zwicky points out. After all, we rarely have to luxury to examine our everyday experiences the way a scientist would. Instead we “generalize from our own perceptions (and) take ourselves as the measure of all things.”

“We’re set up to be illuded,” he warns in an essay on the phenomenon.

We rarely have the luxury to examine our everyday experiences the way a scientist would.

Frequency illusion obviously has great applications for marketers. If their message can break through the noise surrounding consumers, even just once, odds are good there will be a nice multiplier effect, thanks to the Baader-Meinhof phenomenon.

On the other hand, organizations can easily be led astray by bad decisions born of frequency illusion. There's an old newsroom saying that "three examples make a trend." Reporters who can find three of anything can usually get a story pitch past an editor. Problem is, once you have one or two examples, you set about turning over rocks trying to find the requisite three. That doesn't prove a trend, it just proves if you look for something hard enough, you'll find it.  Confirmation bias in action.

Organizations can easily be led astray by bad decisions born of frequency illusion.

The antidote to frequency illusion is real data. Is tourism to Asheville really increasing? Yes! Is it new? Not really. Tourism to Asheville is indeed soaring, up 2 million people annually from 2009-16. The increase is from 9 million to 11 million however, meaning a few million people have been “in” on the Asheville secret for some time.

Of course, it’s entirely possible that this new thing you’ve heard about really is new. Sometimes, spotting new trends is indeed a game that involves hunches and bets. It’s good to notice when some product or service suddenly seems all the rage. Just don’t assume you are special, that you’re the first person to spot it. Start with the hunch, then do the research and make sure that hot tip isn’t just a mind trick.  

 

 

By Bob Sullivan
Writer

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