Round-Trip Fallacy: The reasoning error to avoid

The human brain is wired to interpret similar sounding sentences/scenarios/situations in the same way however the reasoning behind it may not be similar at all leading to the generation of reasoning errors and faulty decisions.

The classic similar sounding situations;

"No evidence of cancer" 

                   &

“Evidence of no cancer”

The above situation looks similar hence our brain interprets it as the same. But the below explanation reveals that these are completely different. 

1). "No evidence of cancer" = The test/expert/instrument was unable to detect evidence of cancer.  

    "No evidence of cancer" ≠ There is no existence of cancer. 

It simply means we are so far unable to detect the cancerous cell in the body however this does not lend itself to the premise that there is no cancerous cell in the body.

2). “Evidence of no cancer” = simply there is no cancer.

 But this is not possible as no amount of tests/experts/instruments can confirm with a hundred percent surety that there is no cancerous cell in the body. 

Technically speaking:

The technical term for the above confusion (absence of evidence of such events-cancer for evidence of absence of such events-cancer) is ‘Round-Trip fallacy’ which was coined and elaborated by NassimTaleb in his book The Black Swan. 

 An analogy from the world of finance:

“There is no evidence of fraud/ wrong-doing/ cooking the books in this company” = The so-called auditors/experts/regulators could not find (didn’t want to find!) so far any evidence of fraud. OR They did not know where to look to find evidence. 

“There is no evidence of fraud/ wrong-doing/ cooking the books in this company” ≠ The company is clean.

“There is no evidence of financial trouble/ crisis in the economy” = So far no evidence found to say that there is trouble or crisis.

“There is no evidence of financial trouble/ crisis in the economy” ≠ The economy is booming & everything is rosy! 

In a nutshell:  

When we try to interpret these kinds of similar sounding situations/events, our brain tricks us into believing that no evidence of any such events means no existence of such events. But understanding the ‘Round-Trip fallacy’ and learning to go a little slow while processing such information may help us avoiding faulty decisions. It is high time that regulators/ fraud detection experts/ auditors etc. start understanding this reasoning error in order to perform their duties in a better way. Being more skeptical than usual while analyzing companies/situations/events/economies for financial or any other decision making may be more advisable especially in the world with tariff wars, grappling with negative interest rates, frauds, defaults….!