Biology of Business

Concept · Cognitive Bias: Forecasting errors

Dilution effect

Origin: Nisbett, Zukier & Lemley, 1981

By Alex Denne

Biological Parallel

Predicting rabbit population growth from current abundance, weather data, and predator counts—high accuracy. Adding irrelevant variables (lunar phase, wind direction, atmospheric pressure) dilutes the model: noise drowns signal. The dilution effect: more data isn't always better. Immune systems face this: T-cells exposed to too many similar antigens simultaneously show reduced response to the primary threat—diluted activation across targets. Predator recognition dilutes with varied alarm calls: vervet monkeys with precise leopard/eagle/snake alarms respond faster than species using generic danger calls. Biological forecasting suffers when adding marginally relevant variables (distant climate indices, tangentially related species) that worsen predictions. The mechanism: finite resources (attention, activation, data) spread across more targets increase noise-to-signal ratio. Parsimony isn't elegance; it's predictive necessity. Companies dilute brand identity when expanding product lines too broadly—the same signal degradation.