Thursday, February 12, 2009

Lumpers, Splitters, and Decisionmaking

There are two kinds of people; lumpers, and splitters. Lumpers look for commonalities, and lump things into groups. Splitters look for differences between things, and treat each individually.

For example, you, Ernst, and Ralph are looking at a toy poodle, a labrador, a newfoundland, a sharpei, and a mastiff playing in a dog park. You ask them each to break the dogs into groups.

Ernst says there is just one group – they’re all dogs. Ernst is a lumper. You press him, and he comes up with this group:

Color Dogs
White Toy Poodle
Black Labrador
Brown Mastiff

You press him some more, and Ernst identifies this group:

Size Dogs
Large Newfoundland
Medium Labrador
Small Toy Poodle

Now it’s Ralph’s turn. Ralph says there are no groups, all the dogs are different. You press him, and Ralph comes up with this:

Color, Size Dogs
White, Small Toy Poodle
Black, Medium Labrador
Black, Large Newfoundland
Brown, Small Sharpei
Brown, Large Mastiff

Note that, although Ralph has identified categories, each dog has his own.

Neither of these approaches is wrong – you need both approaches to make effective decisions. For example, an extreme lumper will not be effective at working out loans, because he or she will offer the same modification to every borrower, and the same modification will not work for every borrower. An extreme splitter will also be ineffective, because every modification will be customized for each borrower, and the time that takes will result in few modifications being completed.

The error lumpers make is the failure to identify relevant differences. The error splitters make is to identify differences which are not salient, encumbering the decisionmaking process.

Ideally, what you want is to identify the salient differences between borrowers (a splitter skill), and group the borrowers according to their salient differences (a lumper skill) so similar modifications can be offered to the each group.

Obviously, people can put on different hats and function as a splitter some of the time and as a lumper on other occasions. I do believe, however, that people have a preferred mode.

These ideas are drawn from Scott Page’s excellent book, The Difference, which I highly recommend.