Analysis Paralysis

Reviewed by Bhavana | Updated on Nov 11, 2021


Introduction to Analysis Paralysis

Analysis paralysis refers to a condition where, as a result of overanalyzing data or overthinking a problem, an individual or a group is unable to continue with a decision. With several investment decisions, such as selling or buying shares, an analytical paralysis may occur. The inaction that it causes can easily lead to losses in a portfolio or missed opportunities for greater profits.

Impact of Analysis Paralysis

It can lead to missed opportunities for losses or gains when investing.

When Does Analysis Paralysis Occur?

  • It occurs when an individual or group is prevented from making a decision by overanalysis or overthinking.
  • This condition can arise when a person is uncertain of the best way to make a decision.

How Does This Function?

Analysis paralysis can happen in standard as well as complex issues. Generally, it is an outcome resulting from an analysis which involves an undefined count of variables.

A person would expect to use basic logic or routine statistical analysis in a standard set of problems to analyze facts relevant to a possible course of action. The resulting analysis would typically provide more heavily in one direction or another with a well-defined answer or a pros and cons list with weight.

It can occur when an individual is unsure of the best practices for finding an outcome. The situation or problem may also involve an undefined number of variables leading to an arbitrary result with a low degree of trust. Therefore, paralysis analysis may be the result of an unknown outcome in some cases. Analysis paralysis can, however, be overcome in many problem sets by broadening the analytical practices used.

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