Psychologists are divided on whether unnoticed cues can influence behavior. Cognitive psychologist David Shanks of University College London says, “the big idea in social psychology is that social behavior is unconsciously influenced by cues in the environment, but the evidence for that idea needs to be much better.” And Major journals make no secret of [...] Read more – ‘The Hot and Cold of Priming’.
It’s Memorial Day weekend, which means summer is here. If you haven’t already decided on your summer reading list, here is a curated list of multi-disciplinary books that can help fill your brain. Explaining Social Behavior: More Nuts and Bolts for the Social Sciences Nassim Taleb reviews this book, offering the following: “I read this [...] Read more – ‘Summer Reading List — Curated Recommendations For a Curious Mind’.
The circumstances of our lives may matter less than how we see them, says Rory Sutherland. In this video, from TEDxAthens, he makes a compelling case for how reframing is the key to happiness. The power of restating things cannot be over-stated. Still curious? See Rory’s talk on influence. Read more – ‘Rory Sutherland — Perspective Is Everything’.
when individuals are faced with making a choice that could result in short-term reward or longer-term benefit, those provided with complete information about the options tend to opt for the quick result. … You’d think that with more information about your options, a person would make a better decision. Our study suggests the opposite. To [...] Read more – ‘Do Decision-Makers Opt For Quick Results?’.
Is guilty pleasure. This explains why everything tastes better when you’re on a diet. Guilt is so often linked with pleasure that research by Kelly Goldsmith, an assistant professor of marketing at the Kellogg School of Management, shows that making people feel the slightest bit guilty amplifies whatever pleasure they subsequently indulge. And participants who [...] Read more – ‘The Best Type of Pleasure’.
You probably don’t know as much as you think you do. When put to the test, most people find they can’t explain the workings of everyday things they think they understand. Don’t believe me? Find an object you use daily (a zipper, a toilet, a stereo speaker) and try to describe the particulars of how [...] Read more – ‘Do You Know What You Don’t Know?’.
A recent study sheds light on how power can fuel the overconfidence that causes people in leadership positions to make bad decisions. Nathanael Fast, one of the study’s co-authors, commented, “The aim of this research was to help power holders become conscious of one of the pitfalls leaders often fall prey to, The overall sense [...] Read more – ‘Power and Poor Decision-Making’.
It’s possible to love your job and hate it at the same time: On one side of the equation, there are the elements of work that, if not done right, will cause us to be dissatisfied. These are the hygiene factors: status, compensation, job security, work conditions, company policies, and supervisory practices. It matters, for [...] Read more – ‘How To Find Work You Love’.
When a subordinate chimpanzee grooms a dominant one, it often does so for a long time and unsolicited. When it then requests to be groomed in turn, it receives only a brief grooming and usually after having to ask a second time. This gorgeous little juxtaposition of tales comes from a new book by Dario [...] Read more – ‘Why Your Boss Is Such an Ape’.
When you look closely at how we use language, you find that a lot of what we say is metaphorical—we talk about certain things as though they were other things. We describe political campaigns as horse races: “Senator Jones has pulled ahead.” Morality is cleanliness: “That was a dirty trick.” And understanding is seeing: “New [...] Read more – ‘Metaphorical Expressions Are Merely The Visible Tip Of The Iceberg’.
Jonah Lehrer on religious thoughts and self-control: People are better able to resist their desires when thinking about God. In a series of clever experiments, Canadian scientists demonstrated that triggering subconscious thoughts of faith increased self-control. We still don’t know why inklings of religion increase self-control. The scientists describe thoughts of God as providing the [...] Read more – ‘Does Thinking About God Make it Easier to Exert Self-control?’.
Poring through Harvard philosopher Michael Sandel’s new book, “What Money Can’t Buy: The Moral Limits of Markets,” I found myself over and over again turning pages and saying, “I had no idea.” I had no idea that in the year 2000, as Sandel notes, “a Russian rocket emblazoned with a giant Pizza Hut logo carried [...] Read more – ‘I Had No Idea’.
The Ten Commandments that, as a teacher, I should wish to promulgate, might be set forth as follows: 1. Do not feel absolutely certain of anything. 2. Do not think it worth while to proceed by concealing evidence, for the evidence is sure to come to light. 3. Never try to discourage thinking for you [...] Read more – ‘Bertrand Russell’s 10 Commandments of Teaching’.
A new study found that people who avoid regularly looking at email experience less stress and increased productivity. Gloria Mark, informatics professor and co-author, says “We found that when you remove email from workers’ lives, they multitask less and experience less stress.” Does being continually connected provide benefits to information workers? …being continually connected on [...] Read more – ‘Does Email Stress You Out?’.
Allan Hawke makes the argument that performance pay has no place in the public service. The essence of my arguments is that performance pay: (1) Is at odds with public service culture; (2) Ignores the complexity of how the public service actually works; (3) Is bad for morale and teamwork; and (4) Gives senior leaders [...] Read more – ‘The Paradox Of Performance Pay’.
Sherry Turkle with an interesting article in the New York Times on how we think constant connection with others through devices will make us feel less lonely. The opposite is true. We expect more from technology and less from one another and seem increasingly drawn to technologies that provide the illusion of companionship without the [...] Read more – ‘Alone Together’.
The curious thing about curiosity is that we tend to seek out information that tells us what we already believe. Our brains are programmed to construct a robust model of how the world works and then fine-tune it. As we learn, some circuits get hardened and reinforced and some wither away. The hardened circuits are [...] Read more – ‘Why Your Brain Avoids Information It Doesn’t Agree With’.
Pamela Meyer, author of Liespotting: Proven Techniques to Detect Deception, with some tips on how to spot a liar: Baseline your subject: Obtain a reference point for measuring changes later. Have a normal conversation with someone and note how they typically move their hands and feet, what their posture is, the style and duration of [...] Read more – ‘How To Spot A Liar’.
In his new book The Storytelling Animal: How Stories Make Us Human, Jonathan Gottschall puts forth the argument that storytelling’s deceptions emerge from deeply human needs. The Atlantic’s Maura Kelly investigates: When we tell stories about ourselves, they also serve another important (arguably higher) function: They help us to believe our lives are meaningful. “The [...] Read more – ‘How Stories Make Us Human’.
From Tyler Cowen’s book: Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist: Brainstorming sessions are a counterproductive way of spending time. People usually think of more new ideas on their own than they do in a group. Psychologists refer to “the illusion of group productivity.” [...] Read more – ‘Why Brainstorming Sucks’.
Susan Fournier, author of the groundbreaking 1990′s study* Consumers and Their Brands: Developing Relationship Theory in Consumer Research, offers some insight in an interview with the Atlantic. … For whatever reason, many refuse to accept that people might actually have relationships with brands. They say, “Relationship is just a metaphor.” One particularly aggravating form of [...] Read more – ‘Do People Have Relationships With Brands?’.
New research shows that when consumers share “incidental” traits like a birthday, name or hometown with a salesperson, they’re more likely to open their wallets. If your waitress happens to mention her birthday is the same day as yours, or you discover a clothing store clerk grew up your hometown, chances are you’ll order an [...] Read more – ‘You’re More Likely To Spend More If Your Salesman Shares Your Birthday’.
“Man is not a rational animal he is a rationalizing animal.” — Robert A. Heinlein …the process of making or finding a reason for what one already has a mind to do. Franklin’s Gambit was implicated in the two most serious policy disasters of the past decade; the Iraq war and the financial crisis of [...] Read more – ‘Franklin’s Gambit’.
Thanks again for sharing and tweeting. 1. Book Recommendations from Nassim Taleb 2. Awesome Example of Game Theory — Split or Steal? 3. A Primer on Strategy 4. How to Learn Anything Faster and Better 5. Economic Recovery: Perils, Politics and Possibilities 6. How To Quickly Improve Your Skill At Something 7. Rory Sutherland on [...] Read more – ‘The Best of Farnam Street April 2012’.
We easily think associatively, we think metaphorically, we think causally, but statistics requires thinking about many things at once, which is something that System 1 is not designed to do. Appreciating uncertainty is not exactly rewarded either: An unbiased appreciation of uncertainty is a cornerstone of rationality—but it is not what people and organizations want. [...] Read more – ‘Why is it so difficult for us to think statistically?’.
Vaughan Bell, of Mindhacks, with an interesting piece in the Guardian on ‘Lie Detectors.’ Although highly fallible, suspects are more likely to tell the truth when wired up to them. Bell explores why and whether this means we should trust the results. “It turns out,” Bell writes, “that polygraphs have a sort of placebo effect, [...] Read more – ‘The Lie Detector Paradox’.
A recent article in the WSJ, “Hidden Ways Hotels Court Guests Faster”, focused on how hotels are trying to dazzle guests with first impressions. Jeremy McCarthy, a hotel executive, argues this is why “upon arriving to a luxury hotel, you are often greeted in the lobby by a friendly face, an offer to assist with [...] Read more – ‘Why First Impressions Don’t Matter Much For Experiences’.
The more you struggle to master new information, the better you’ll understand and apply it later. The learning paradox is at the heart of “productive failure,” a phenomenon identified by Manu Kapur, a researcher at the Learning Sciences Lab at the National Institute of Education of Singapore. Kapur points out that while the model adopted [...] Read more – ‘The Learning Paradox’.
Susan Cain, author of Quiet: The Power of Introverts in a World That Can’t Stop Talking, with some advice on how to survive in an open office: I am very skeptical of open office plans. Research suggests they make people less productive and more hostile and anxious. If your office provides private spaces that you [...] Read more – ‘How to Survive in an Open Office’.
What they don’t seem to teach you in business school is that “the five forces” and “the seven Cs” and every other generic framework for problem solving are heuristics: they can lead you to solutions, but they cannot make you think. Via The Atlantic Still curious? Read the book: The Management Myth: Debunking Modern Business [...] Read more – ‘What They Don’t Teach You In Business School’.
Adapted from a commencement speech given by David Foster Wallace to the 2005 graduating class at Kenyon College. A huge percentage of the stuff that I tend to be automatically certain of is, it turns out, totally wrong and deluded. Here’s one example of the utter wrongness of something I tend to be automatically sure [...] Read more – ‘David Foster Wallace — The Truth With A Whole Lot Of Rhetorical Bullshit Pared Away’.
In this TED talk, Keith Barry shows us how our brains can fool our bodies — in a trick that works via podcast too. Then he involves the audience in some jaw-dropping (and even a bit dangerous) feats of brain magic. Think of Keith Barry as a hacker of the human brain — writing routines [...] Read more – ‘Keith Barry — Brain Magic’.
Awesome short video on the Feynman Technique — an incredibly simple and effective way to learn new things and identify holes in your knowledge. In How To Read A Book, Mortimer Adler writes: The person who says he knows what he thinks but cannot express it usually does not know what he thinks. Step 1. [...] Read more – ‘Learn Anything Faster With The Feynman Technique’.
Your memory changes every time you tell a story. Police have to be very careful when questioning witnesses. They basically treat a witness’s memory like a crime scene: once you go over it a single time, it’s irreversibly disturbed. For example, asking a biased question, even unintentionally, can make a witness tell their story a [...] Read more – ‘The Fatal Flaw of the Storyteller’.
At TEDxCambridge, Michael Norton shares fascinating research on how money can, indeed buy happiness — when you don’t spend it on yourself. Through clever studies, Norton studies how we feel about what we buy and spend. Read more – ‘Can Money Buy Happiness?’.
Here are the key lessons to learn from the most recent financial crisis: Seth Klarman walks through 20 lessons we haven’t learned. #1 Things that have never happened before are bound to occur with some regularity. Two takeaways from What’s the one question the Federal Reserve Can’t Answer? First, you can never merely do one [...] Read more – ‘Lessons From The Most Recent ‘Financial Crisis’’.
Would you make the same decisions in a foreign language as you would in your native tongue? It may be intuitive that people would make the same choices regardless of the language they are using, or that the difficulty of using a foreign language would make decisions less systematic. We discovered, however, that the opposite [...] Read more – ‘Does Thinking In A Foreign Language Reduce Decision Biases?’.
The paths to power for men and women are quite different. Talking a lot works for guys but doesn’t work for women. Can we learn anything from how much you talk? …how much an individual talks in interpersonal interactions is a key way in which we not only draw inferences about that person but also [...] Read more – ‘Are The Paths To Power Different For Women Than Men?’.
Why do so many great companies fail? Professor Clay Christensen of the Harvard Business School argued they fail because of something called The Innovator’s Dilemma – a term he popularized to describe the way in which smart companies become prisoners of their own innovation. Is it possible to escape the innovator’s dilemma? In this interview [...] Read more – ‘Escape The Innovator’s Dilemma’.
We are counselled to fix our eyes on our goals, looking neither to the right nor to the left, refusing to be distracted. This is supposed to be the sure route to success. But here is a puzzling fact. It turns out that lucky men and women, on the whole are not straight-line strugglers. They [...] Read more – ‘The Route To Success Is Not A Straight Line’.
Shawn Achor, author of The Happiness Advantage, with some tips to increase your well-being: In The Happiness Advantage, I challenge readers to do one brief positive exercise every day for 21 days. Only through behavioral change can information become transformation. - Write down three new things you are grateful for each day; - Write for [...] Read more – ‘Scientifically Proven Tips to Increase Well-Being’.
Some fantastic insight, in this video, from Neil deGrasse Tyson on how persuading others is about more than just putting the facts out there and letting the chips fall as they may. You can’t simply have the impact you want with facts alone. Rather, you have to understand how those facts and arguments are received [...] Read more – ‘Persuading With Facts Is Not Enough’.
The best reason to ask a question is to contribute to the quality of the discussion that has already begun. You can do this if you can draw something more and perhaps unexpected out of the speaker you are addressing. “Mr. Rasputin, I admire your tunic. Do you consider fashion to be a revolutionary statement?” [...] Read more – ‘Recovering A Lost Art — How to Ask A Question’.
Extroverts get better grades than introverts during elementary school, but introverts outperform extroverts in high school and college. At the university level, introversion predicts academic performance better than cognitive ability. One study tested 141 college students’ knowledge of twenty different subjects, from art to astronomy to statistics, and found that introverts knew more than the [...] Read more – ‘What Predicts Academic Performance Better Than Cognitive Ability?’.
Indeed, after all these years of evidence that conventional brainstorming groups don’t work, they remain as popular as ever. Participants in brainstorming sessions usually believe that their group performed much better than it actually did, which points to a valuable reason for their continued popularity—group brainstorming makes people feel attached. A worthy goal, so long [...] Read more – ‘If Brainstorming Doesn’t Work, Why Does It Persist?’.
Doctor and writer Atul Gawande gives a fascinating TED talk. He urges us to take a step back and look at new ways to do medicine — with fewer cowboys and more pit crews. Gawande argues that doctors can dramatically improve their practice using something as simple as a checklist. Making systems work is the [...] Read more – ‘Atul Gawande — How Do We Heal Medicine?’.
Emanuel Derman on the difference between models and law: In physics, Maxwell’s theory and quantum mechanics allow you to predict the way an electron spins about its own axis inside a hydrogen atom to an accuracy of twelve decimal places. Something that accurate isn’t just a model—it’s a law. In economics, by contrast, there are [...] Read more – ‘On The Difference Between Laws and Models’.
Introverts also seem to be better than extroverts at delaying gratification, a crucial life skill associated with everything from higher SAT scores and income to lower body mass index Via Quiet: The Power of Introverts in a World That Can’t Stop Talking. Read more – ‘What Are Introverts Better Than Extroverts At?’.
In this talk Andrew Lo addresses the problem of finding the right level of abstraction with which to think about economic phenomena. He compares economics to physics, with some surprising results. In physics it takes 3 laws to explain 99% of the data. In finance it takes more than 99 laws to explain about 3% [...] Read more – ‘Physics Envy May be Hazardous to Your Wealth’.
Harvard’s Daniel Lieberman, Professor of Human Evolutionary Biology, speaks about the evolutionary origins of today’s obesity epidemic. (Via The Situationist) Read more – ‘The Evolutionary Biology of Obesity’.
There are many good reasons to read Good Strategy Bad Strategy by Richard Rumelt. You may be frustrated by the state of your organizations’ strategy. You may be interested in identifying the characteristics of good strategy. Or you may want to learn how to identify the elements of a bad strategy. A leader’s most important [...] Read more – ‘A Primer on Strategy’.
From Tyler Cowen’s book: Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist: The point is this: most people do not study very effectively. They study to feel they are trying. They study to feel better about themselves. They do not always study to succeed in [...] Read more – ‘Can An Economist Teach You How To Study Better?’.
The vast majority of people in any peaceful society obey the law not so much because they are making a rational calculation about costs and benefits, and fear punishment. They obey because they believe that the law is fundamentally fair, and they are morally habituated to follow it. They are much less inclined to obey [...] Read more – ‘Why Do We Obey Laws?’.
I’m a huge fan of Rory Sutherland. After watching this video, I think you’ll see why. “broadly speaking, something apparently very stupid and silly, which has been around for a million years or so, probably has some function to it.” Rory argues that some things have no rational basis for existing but are nonetheless valuable. [...] Read more – ‘Rory Sutherland on Influence’.
The dominant difference between successful ventures and failed ones, generally, is not the astuteness of their original strategy. Guessing the right strategy at the outset isn’t nearly as important to success as conserving enough resources (or having the relationships with trusting backers or investors) so that new business initiatives get a second or third stab [...] Read more – ‘What Is The Difference Between Successful Ventures And Failed Ones?’.
Book banning efforts were alive and well in 2011. The American Library Association Office for Intellectual Freedom (OIF) received 326 reports regarding attempts to remove or restrict materials from school curricula and library bookshelves. The Top Ten Most Frequently Challenged* Books of 2011 include the following titles; each title is followed by the reasons given [...] Read more – ‘The Top Ten Books People Want Removed from School Curricula and Library Bookshelves’.
Change the way you practice. Mediocre performers practice in the most pleasant way possible. Great achievers practice in the most deliberate and self-critical way. Often they break their craft down to its smallest constituent parts, and then they work on one tiny piece of the activity over and over again. Via The Social Animal: The [...] Read more – ‘How To Quickly Improve Your Skill At Something’.
As McLuhan suggested, media aren’t just channels of information. They supply the stuff of thought, but they also shape the process of thought. And what the Net seems to be doing is chipping away my capacity for concentration and contemplation. Whether I’m online or not, my mind now expects to take in information the way [...] Read more – ‘What is The Internet Doing To Our Brain’.
Quick, how many animals of each kind did Moses take into the ark? The number of people who detect what is wrong with this question is so small that it has been dubbed the “Moses illusion.” Moses took no animals into the ark; Noah did. Like the incident of the wincing soup eater, the Moses [...] Read more – ‘The Moses Illusion’.
In a recent New Yorker article, Jonah Lehrer profiled Roger Thomas, the head of design for Wynn Resorts. Thomas is largely credited with reinventing the modern casino by breaking all the rules. Wynn and Thomas believed (correctly) that people “would be more likely to place big, risky bets when they felt safe and relaxed.” “People,” [...] Read more – ‘“Although they come away with bigger losses, they’re more likely to return.”’.
It’s a paramount consideration for most wine consumers, yet the industry likes to keep us guessing. The relative dryness of a wine is measured in terms of residual sugar, or RS in the wine geek’s argot. This is the level of natural grape sugar left after fermentation. Once grapes are crushed, yeast feeds off grape [...] Read more – ‘What makes some wines dry and others sweet, and how can I tell which is which?’.
Experts who acknowledge the full extent of their ignorance may expect to be replaced by more confident competitors, who are better able to gain the trust of clients. An unbiased appreciation of uncertainty is a cornerstone of rationality—but it is not what people and organizations want. Extreme uncertainty is paralyzing under dangerous circumstances, and the [...] Read more – ‘Why Don’t Experts Admit To Their Ignorance?’.
In his book, Thinking Fast and Slow, Daniel Kahneman writes about the dangers of only hearing one side of an argument: The participants were fully aware of the setup, and those who heard only one side could easily have generated the argument for the other side. Nevertheless, the presentation of one-sided evidence had a very [...] Read more – ‘The Effect Of One-Sided Arguments On Judgment’.
An interesting opinion piece by Thomas Friedman in the New York Times on the new book Why Nations Fail, co-authored by the M.I.T. economist Daron Acemoglu and the Harvard political scientist James A. Robinson. The more you read it, the more you appreciate what a fool’s errand we’re on in Afghanistan and how much we [...] Read more – ‘Why Nations Fail’.
On whether monetary incentives make you dumber when doing something that requires any creative or critical thinking: …When your employees have to do something straightforward, like pressing a button or manning one stage in an assembly line, financial incentives work. It’s a small effect, but they do work. Simple jobs are like the simple candle [...] Read more – ‘How Monetary Rewards Reduce Critical Thinking’.
Some insightful comments by Steve Jobs on the information economy. Jobs argues that television is causing us to think less than we used to. We live in an information economy, but I don’t believe we live in an information society. People are thinking less than they used to. It’s primarily because of television. People are [...] Read more – ‘Are People Thinking Less Than They Used To?’.
Steve Jobs doesn’t think so. I used to think that technology could help education. I’ve probably spearheaded giving away more computer equipment to schools than anybody else on the planet. But I’ve had to come to the inevitable conclusion that the problem is not one that technology can hope to solve. What’s wrong with education [...] Read more – ‘Can Technology Help Education?’.
Biology and economics face similar challenges: both seek to explain survival and innovation in an unpredictable world. … For example, Nassim Taleb, famous for his prescient identification of rare “black swan” events that are correlated with economic catastrophes, recently proposed the notion of “anti-fragility” as a way to conceptualise the reproduction of markets and output [...] Read more – ‘Anti-fragile life of economy’.
Steve Jobs with an interesting perspective on what design means Design is a funny word. Some people think design means how it looks. But of course, if you dig deeper, it’s really how it works. The design of the Mac wasn’t what it looked like, although that was part of it. Primarily, it was how [...] Read more – ‘Steve Jobs on Design’.
An excellent reminder from Nassim Taleb on the use of faulty models: …We’re better off with no model than with a defective model, something people understand intuitively, but they tend to forget when they don’t have “skin in the game.” If you are a passenger on a plane and the pilot tells you he has [...] Read more – ‘Faulty Models — Nassim Taleb’.
Open-plan offices have been found to reduce productivity and impair memory. They’re associated with high staff turnover. They make people sick, hostile, unmotivated, and insecure. Open-plan workers are more likely to suffer from high blood pressure and elevated stress levels and to get the flu; they argue more with their colleagues; they worry about coworkers [...] Read more – ‘What’s The Problem With Open-Plan Offices?’.
Thanks again for sharing and tweeting. 1. 5 Things Cicero Can Teach You About Winning An Election 2. Nassim Taleb — How to Prevent Other Financial Crises 3. Six Ways To Have A Better Conversation 4. The Power of Introverts — Susan Cain’s talk at TED 5. Book Recommendations from Nassim Taleb 6. The Ultimate [...] Read more – ‘The Best of Farnam Street March 2012’.
An insightful piece by Bruce Schneier on the TSA’s security theatre. Not only are all those extra precautions effectively useless they are increasingly moving us towards a Kafkaesque world. …trust that a 400-ml bottle of liquid is dangerous, but transferring it to four 100-ml bottles magically makes it safe. He wants us to trust that [...] Read more – ‘Airline Security After 9/11 — Towards a Kafkaesque World’.
The way you deliver a message to them is a cue to how they should react. If you make an argument, you’re implicitly asking them to evaluate your argument—judge it, debate it, criticize it—and then argue back, at least in their minds. But with a story, Denning argues, you engage the audience—you are involving people [...] Read more – ‘Why Stories Persuade Better Than Arguments’.
Becoming an expert in something means that we become more and more fascinated by nuance and complexity. That’s when the Curse of Knowledge kicks in, and we start to forget what it’s like not to know what we know. … … Once we know something, we find it hard to imagine what it was like [...] Read more – ‘The Curse of Knowledge’.
Consistency. By far the most important facet of punishment – and the most difficult one for parents – is consistency. Ideally, a parent should quickly discipline the child every single time he or she misbehaves, but in a restrained, even mild manner. A stern word or two is often enough as long as it’s done [...] Read more – ‘When It Comes To Kids, What Is The Most Important Facet Of Punishment?’.
From Willpower: Rediscovering the Greatest Human Strength Contrary to popular stereotype, alcohol doesn’t increase your impulse to do stupid or destructive things; instead, it simply removes restraints. It lessens self-control in two ways: by lowering blood glucose and by reducing self-awareness. Therefore, it mainly affects behaviors marked by inner conflict, as when part of you [...] Read more – ‘The Effect Of Alcohol On Willpower’.
Some tidbits from Willpower: Rediscovering the Greatest Human Strength Inner versus external cues: Yes, obese people ignored their inner cues, but that’s not why they became obese. It worked the other way: Their obesity made them likely to go on diets, and their diets caused them to rely on external instead of internal cues. For [...] Read more – ‘Dieting Tips From a Book About Willpower’.
From Willpower: Rediscovering the Greatest Human Strength Clearly it’s not because of the irresistible prison cuisine. No gourmet chef is ever hired to cook when the clientele consists of customers who are literally captive. Yet men consistently come out of prison fatter than when they went in. The reason, according to Cornell’s Brian Wansink, is [...] Read more – ‘Why do prisoners put on weight?’.
In Your Brain at Work: Strategies for Overcoming Distraction, Regaining Focus, and Working Smarter All Day Long, David Rock writes: One of the most effective distraction-management techniques is simple: switch off all communication devices during any thinking work. Your brain prefers to focus on things right in front of you. It takes less effort. If [...] Read more – ‘What Is The Most Effective Distraction-Management Technique?’.
The same advice from two remarkably different people: Become a Learning Machine. Charlie Munger says: I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up and [...] Read more – ‘Are You A Learning Machine?’.
Let us start with our conclusion, which is also a simple policy recommendation, and one that is not just easy to implement but has been part of history until recent days. We believe that “less is more” in complex systems—that simple heuristics and protocols are necessary for complex problems as elaborate rules often lead to [...] Read more – ‘Nassim Taleb — How to Prevent Other Financial Crises’.
From the modern Machiavelli, Power: Why Some People Have It-and Others Don’t Because power is likely to cause people to behave in a more confident fashion, observers will associate confident behavior with actually having power. Coming across as confident and knowledgeable helps you build influence. Still curious? Buy the book. Read more – ‘Can Confidence Make You More Influential?’.
Stop working so hard and work smarter. Jeffrey Pfeffer argues that performance doesn’t matter in Power: Why Some People Have It and Others Don’t. If performance doesn’t matter, what does? job performance matters less for your evaluation than your supervisor’s commitment to and relationship with you. … The lesson from cases of people both keeping [...] Read more – ‘Work Smarter, Not Harder’.
Charles Darwin explains natural selection: As many more individuals of each species are born than can possibly survive; and as, consequently, there is a frequently recurring struggle for existence, it follows that any being, if it vary however slightly in any manner profitable to itself, under the complex and sometimes varying conditions of life, will [...] Read more – ‘Charles Darwin Explains Natural Selection’.
From Hitch-22: A Memoir: In his brilliant book What Is History?, Professor E.H. Carr asked about ultimate causation. Take the case of a man who drinks a bit too much, gets behind the wheel of a car with defective brakes, drives it round a blind corner, and hits another man, who is crossing the road [...] Read more – ‘Christopher Hitchens On The Trouble with Causation’.
Because adherence to standard operating procedures is difficult to second-guess, decision makers who expect to have their decisions scrutinized with hindsight are driven to bureaucratic solutions—and to an extreme reluctance to take risks. As malpractice litigation became more common, physicians changed their procedures in multiple ways: ordered more tests, referred more cases to specialists, applied [...] Read more – ‘Does Bureaucracy Help Us Avoid Hindsight Bias?’.
In Thinking Fast and Slow, Kahneman writes: The situation has provided a cue; this cue has given the expert access to information stored in memory, and the information provides the answer. Intuition is nothing more and nothing less than recognition. This reminds me of what Herbert Simon wrote: We have seen that a major component [...] Read more – ‘Daniel Kahneman on Intuition’.
It’s important to be aware of anything that may be unduly influencing our evaluations. As an example Dr. Robert Cialdini warns of such a situation by pointing to the unethical comparisons that certain realtors will employ when attempting to influence purchasers. By first driving through a largely unattractive area of town, viewing properties that are [...] Read more – ‘Don’t Let Real Estate Agents Drive You Through Unattractive Areas Of Town’.
From The Power of Habit: Why We Do What We Do in Life and Business Chunking — The Root of Habits The process—in which the brain converts a sequence of actions into an automatic routine—is known as ‘chunking,’ and it’s at the root of how habits form. Why do Habits Emerge? Habits, scientists say, emerge [...] Read more – ‘Everything You Need to Know About Habits — The Science Of Habit Formation And Change’.
In a new study, researchers Aner Sela and Jonah Berger ask “Why do people get mired in seemingly trivial decisions? Why do we agonize over what toothbrush to buy, struggle with what sandwich to pick, and labor over which shade of white to paint the kitchen?” They contend that if a decision feels difficult we [...] Read more – ‘Why Do We Get Mired in Trivial Choices?’.
Robyn Dawes, author of Everyday Irrationality: How Pseudo-Scientists, Lunatics, And The Rest Of Us Systematically Fail To Think Rationally, looked into the relationship between experience and accuracy. There is research about the relationship between experience and diagnostic and predictive accuracy, and about the validity of interviewing people to find out what they are like. Garb [...] Read more – ‘Does Experience Make you an Expert?’.
“The reliability that matters is not the simple reliability of one component of a system, but the final reliability of the total control system.” —Garrett Hardin in Filters Against Folly Read more – ‘The Reliability That Matters Is …’.
Putting expensive items with cheap ones seems like an easy way to make money. According to a new study, however, most consumers in this situation are not willing to pay as much for “combinations” as they would for two separate items. “Consumers often encounter product combinations, many of which include both expensive and inexpensive items,” [...] Read more – ‘Do Consumers Pay More for Separate Products Than Combinations?’.
The authors of this interesting paper take a fresh look at the credit card premium and argue that how we look at products depends on how we are paying for them. They find that paying by credit card tends to make us focus more on the benefits we’re receiving than the cost of the product. [...] Read more – ‘Does Using Your Credit Card Change the Way You Perceive Products?’.
Planning ahead is not always good for self control. Although planning tends to aid subsequent self-control for those who are in good standing with respect to their long-term goal, those who perceive themselves to be in poor goal standing are found to exert less self-control after planning than in the absence of planning. This occurs [...] Read more – ‘Is Planning Ahead Good for You?’.
In this short video Adam Savage, of Mythbusters fame, walks through two interesting examples of profound scientific discoveries that came from simple, creative methods anyone could have followed: (1) Eratosthenes’ calculation of the Earth’s circumference around 200 BC and (2) Hippolyte Fizeau’s measurement of the speed of light in 1849. Simple ideas can lead to [...] Read more – ‘How Simple Ideas Lead to Scientific Discoveries’.
Ten examples of how consumers get baffled by branding: (1) Fooled by Fresh Flowers — … This creates an image of “fresh from the farm” delectability that sets the tone for their shopping experience. (2) Crazed by Counterfeit Crates — … This is deliberately done to create the image of workers piling the crates of [...] Read more – ‘Ten Ways Your Local Grocery Store Hacks Your Brain’.
Airline pricing took on its weekly cadence many years ago, when sales were announced in daily newspaper ads and most travelers bought tickets when travel agencies were open for business Monday-Friday. On Monday, pricing executives looked at inventory and booking trends and decided whether to offer a sale, putting together big newspaper ads for Tuesday [...] Read more – ‘When is the Best Time to Buy an Airline Ticket?’.
Someone recently pointed me to David Deutsch’s fascinating new book The Beginning of Infinity: Explanations That Transform the World, which addresses the nature and evolution of human knowledge. Deutsch explores subjects form artificial intelligence to the evolution of culture and creativity. While looking into Deutsch, I discovered one of his old TED talks. For tens [...] Read more – ‘The Nature and Evolution Of Human Knowledge’.
Why is it that we all seem overwhelmed and burned out at work? More than the number of hours we work, we’re trying to do too many things at the same time. The biggest cost of this “multitasking” is a loss of productivity. Here are some interesting tips: If you’re a manager, here are three [...] Read more – ‘Stop Trying To Do So Much Work’.
Nearly the entire wealth of human knowledge can live at our fingertips or even in our pockets. Such an amazing feat, of course, doesn’t happen without impacting our lives, and scientists have begun to note that the Internet has not only served to fulfill our brains’ curiosities, but also rewired them. So what exactly is [...] Read more – ‘15 Ways The Internet Is Changing Our Brain’.
In 64 B.C Marcus Tullius Cicero was running for the post of Roman consul. Cicero, a political outsider, was a brilliant man and gifted speaker with a burning desire to gain the highest office in the ancient republic. As the campaign approached, his brother Quintus wrote to him offering some advice on how to win [...] Read more – ‘5 Things Cicero Can Teach You About Winning An Election’.
Great talk by Philip Tetlock, author of Expert Political Judgment: How Good Is It? How Can We Know?, on the Long Now Foundation’s Seminars About Long-Term Thinking series: In a nutshell, “How you think matters more than what you think.” It’s a matter of judgement style, first expressed by the ancient Greek warrior poet Archilochus: [...] Read more – ‘Philip Tetlock on Expert Prediction’.
It turns out that just “googling it” might not be such a great idea. The Filter Bubble, by Eli Pariser, puts forth an argument that we’re increasingly trapped inside an algorithm that filters our news based on what it thinks is best for us. Computers and the algorithms they run are increasingly aware of the [...] Read more – ‘The Filter Bubble — What the Internet is Hiding From You’.
The point is not to abolish signalling—which is impossible—but rather to use signalling to our advantage. More importantly, if we understand signalling we will have a new patience and the fortitude to accept those social facts that we cannot change. Signalling, by its very nature, is hard to circumvent, outdo, or avoid. Signalling will irritate [...] Read more – ‘Signalling Helps Explain Why Successful People Feel Overloaded’.
From Tyler Cowen’s book: Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist: Here is the bitter truth: in the medium and long run, apparently inefficient meetings bring workplace rewards and penalties to life. Meetings help us invest in our self-images as cooperators rather than scofflaws. [...] Read more – ‘An Economist on Meetings’.
Stop seeing conversations as a means to an end: What makes a good conversationalist has changed little over the years. The basics remain the same as when Cicero became the first scholar to write down some rules, which were summarised in 2006 by The Economist: “Speak clearly; speak easily but not too much, especially when [...] Read more – ‘Six Ways To Have A Better Conversation’.
A paper about heuristic traps and avalanche accidents. In a review of 41 avalanche accidents involving avalanche aware victims, … 83% were due to decision-making errors rather than subtleties of the terrain or snowpack. These and other results have fostered a growing emphasis on decision making skills and human factors in avalanche education. … In [...] Read more – ‘Evidence of Heuristic Traps In Recreational Avalanche Accidents’.
According to Dan Gilbert people make two classes of errors when trying to make decisions: errors in odds and errors in value. Gilbert discussed the psychological phenomena leading to errors in odds, including the imaginability error and the optimism bias. We miscalculate the odds of a particular outcome because the imaginability error causes us to [...] Read more – ‘Dan Gilbert — Common Barriers To Good Decision-making’.
In a culture where being social and outgoing are prized above all else, it can be difficult, even shameful, to be an introvert. But, as Susan Cain argues in this passionate talk, introverts bring extraordinary talents and abilities to the world, and should be encouraged and celebrated. Susan Cain is the author of Quiet: The [...] Read more – ‘The Power of Introverts — Susan Cain’.
…elites excel at hypocrisy. Elites can better distinguish ideals which are mainly given lip service, from ideals that really matter personally. Elites can better see which laws and social norms are actually enforced with strong penalties, and those that can be violated with impunity. This ability comes in part from implicit cultural learning, and also [...] Read more – ‘Why Elites Excel At Hypocrisy’.
Charles Bosk, a sociologist at the University of Pennsylvania, once conducted a set of interviews with young doctors who had either resigned or been fired from neurosurgery-training programs, in an effort to figure out what separated the unsuccessful surgeons from their successful counterparts. More than technical skills or intelligence, he concluded that what was necessary [...] Read more – ‘An Obsession with Failure’.
Indiana University neuroscientist Karin Harman James says if you want to remember something, write it down: … her research, which used brain imaging technology to document how significant changes in the brain occur depending on whether preschool-age children learn letters by printing or typing. The findings point to the formation of a literary system used [...] Read more – ‘Is it Better For Your Memory To Write In Cursive Or Use A Keyboard?’.
Daniel Kahneman on why organizations have trouble implementing systems that would make decisions more rational: Kahneman: … there is actually enormous resistance, I think, within organizations to implementing programs that would improve the rationality of their decisions. Charlie Rose: Why? Kahneman: Well because it creates difficulty for the leadership. The moment you have a system [...] Read more – ‘People Don’t Like To Be Second Guessed’.
In The Swerve: How the World Became Modern, Stephen Greenblatt tells the story of the most important person you’ve probably never heard of: Poggio Bracciolini. Although Bracciolini’s contribution to society can’t be measured directly, we feel the effects of it to this day. He was, perhaps, the greatest book hunter in the world. And one [...] Read more – ‘The Swerve — How the World Became Modern’.
Most of us—including politicians—believe that building more and wider roads reduces congestion. However, research dating as far back as the 1960′s proves these benefits are generally temporary as vehicles soon fill new lanes. In “The Fundamental Law of Road Congestion: Evidence from U.S. Cities,” published in American Economic Review in 2011, researchers explore the relationship [...] Read more – ‘The Fundamental Law of Road Congestion’.
Thanks again for sharing and tweeting. 1. Book Recommendations from Nassim Taleb 2. What are the best books on the psychology behind human decision making and irrationality? 3. The Art of Storytelling Through Presentations 4. How does putting a price on time affect our ability to smell the roses? 5. Master of Influence Robert Cialdini [...] Read more – ‘The Best of Farnam Street February 2012’.
Interesting study addressing a marketing-relevant yet largely under-studied topic of how quantitative specifications influence consumer preferences. In many situations, quantitative specifications provide useful information. If you’re buying a laptop online, it helps to know if the laptop is 3 pounds or 5 pounds. Under this scenario the quantitative information is highly informative and should be [...] Read more – ‘How Product Specifications Influence Consumer Preference’.
… If you have never been tortured, or locked up and verbally threatened, you may find it hard to believe that anyone would confess to something he had not done. Intuition holds that the innocent do not make false confessions. What on earth could be the motive? To stop the abuse? To curry favor with [...] Read more – ‘Why Do Innocent People Confess?’.
I have posed at two different business schools the following problem. I say, “You have studied supply and demand curves. You have learned that when you raise the price, ordinarily the volume you can sell goes down, and when you reduce the price, the volume you can sell goes up. Is that right? That’s what [...] Read more – ‘How Raising Prices Can Increase Sales’.
Magic is about understanding and then manipulating sensory information. 1. Exploit pattern recognition. I magically produce four silver dollars, one at a time, with the back of my hand toward you. Then I allow you to see the palm of my hand empty before a fifth coin appears. As Homo sapiens, you grasp the pattern, [...] Read more – ‘How Magicians Manipulate The Human Mind’.
Consumer.ology I enjoyed the first part of the book, which explores the fallacy of market research and the complex reality about consumers and the psychology of shopping. A summary paragraph: “The unconscious mind is the real driver of consumer behavior. Understanding consumers is largely a matter of understanding how the unconscious mind operates; the first [...] Read more – ‘What I’ve been reading’.
What was the effect of the useless information on negotiation? To find out, Neale and Wiltermuth asked participants to represent two companies in a merger and negotiate several issues, such as which firm’s CEO would head the new company and where that company’s headquarters would locate. People who had read the irrelevant, distracting statements, it [...] Read more – ‘Too Much Information Clouds Judgment’.
Bara Vaida with an interesting article on complexity, human nature, checklists, and improving medical care. “We are humans and are destined to make mistakes,” says Nancy Foster, vice president of quality and patient-safety policy at the 5,000-member American Hospital Association. “The question in health care is: Can we design processes and have them in place [...] Read more – ‘Doctor, Did You Check Your Checklist?’.
Companies don’t need to ask you if you’re pregnant, they know from the change in your purchases. And sometimes they even know you’re pregnant before you do. This fascinating article in the New York Times takes a look at habit formation and the rise of data mining. In order to conserve energy, the brain will [...] Read more – ‘How Companies Learn Your Secrets’.
Many promising executives derail sometime during their careers, often because they weren’t very good at office politics. Not playing the political game is often seen as a good thing, even a badge of honor. Some managers see it as proof of their integrity. They are going to succeed because of job performance alone. They couldn’t [...] Read more – ‘Do you want to be right, or do you want to be effective?’.
Interesting article by Richard Thaler on encouraging good citizenship by making the desired behavior more fun: Lotteries are just one way to provide positive reinforcement. Their power comes from the fact that the chance of winning the prize is overvalued. Of course you can simply pay people for doing the right thing, but if the [...] Read more – ‘Making Good Citizenship Fun — Richard Thaler’.
Idealistic approaches, however well motivated, rely on top down determination of what is right. In the idealistic approach, the leaders of an organization set out an ideal future state that they wish to achieve, identify the gap between the ideal and their perception of the present, and seek to close it. This is common not [...] Read more – ‘Naturalistic v. Idealistic Approaches to Organizational Planning’.
In the reign of Queen Elizabeth, an official named Gresham observed that where different metals were in circulation as coinage and some were better than others of the same nominal value, the coins made of the inferior metal tended to drive the better out of circulation. The better coins were either hoarded or melted down [...] Read more – ‘The Law of Competing Standards’.
William James famously wrote “Ninety-nine hundredths of our activity is purely automatic. All of our life is nothing but a mass of habits.” James, according to Jonah Lehrer writing in the WSJ, “was pointing out that, though we give habits little thought, they define our lives: how much we eat, save or spend, how often [...] Read more – ‘Habits’.
Matt Ridley with an excellent column in the weekend Wall Street Journal on why we feel uncomfortable about using honesty when face to face with other people but seem to have no problem being brutally honest over the net. In many monkeys and apes, face-to-face contact is essentially antagonistic. Staring is a threat. A baboon [...] Read more – ‘The Online Disinhibition Effect: Why We Tell All Over The Internet’.
Skepticism, if by that we mean cautiousness, is the balance wheel of civilization. Most of the present acute troubles of the world arise out of taking on new ideas without first carefully investigating to discover if they are good ideas. — My Life and Work Read more – ‘The Balance Wheel of Civilization’.
…Students might consider taking the questions in the back of the textbook chapter and try to answer them before reading the chapter. (If there are no questions, convert the section headings to questions. If the heading is Pavlovian Conditioning, ask yourself What is Pavlovian conditioning?). Then read the chapter and answer the questions while reading [...] Read more – ‘Scientifically Proven Ways to Study Better’.
The prisoners’ dilemma is the best known strategy game in social science. The game shows why two entities might not cooperate even when it appears in their best (rational) interest to do so. What is rational for the individual in certain circumstances is not rational for the group — that is, pursuing a strategy that [...] Read more – ‘Mental Model: Prisoners’ Dilemma’.
Justin Landis with an an interesting blog post he wrote in response to a Freakonomics podcast “Why Is ‘I Don’t Know’ So Hard to Say?” The highlight: [T]hose of us who live in the business world are certainly incentivized to focus on what we know over what we don’t know. And whether we’re talking about [...] Read more – ‘The Most Dangerous Place’.
Information: The New Language of Science (5 stars) If you want an introduction to information theory, and, in a way, probability theory from the real front door, this is it. A clearly written book, very intuitive, explains things, such as the Monty Hall problem in a few lines. I will make it a prerequisite before [...] Read more – ‘Book Recommendations from Nassim Taleb’.
“To do nothing is within the power of all men.” — Samuel Johnson A fundamental assumption in rational decision making is that only relevant information from the alternatives available will influence an individual’s decision. Thus, the order in which alternatives are presented should not affect an individual’s choice. However, decision problems are rarely presented without [...] Read more – ‘Status Quo Bias in Decision Making’.
There are 563 toasters for sale on Amazon.ca. Most of the listings offer detailed technical specifications and reviews from customers and consumer magazines. In the quest for the best, “it’s so easy to be seduced, so easy to search some more,” says Barry Schwartz, a professor of psychology at Swarthmore College and the author of [...] Read more – ‘Where does willpower come from?’.
Psychologist Robert Cialdini wrote two of the the most important books on influence Yes!: 50 Scientifically Proven Ways to be Persuasive and Influence: The Psychology of Persuasion. Now he recommends five books for you: Enchantment by Guy Kawasaki Enchantment, as defined by bestselling business guru Guy Kawasaki, is not about manipulating people. It transforms situations and relationships. It [...] Read more – ‘Master of Influence Robert Cialdini Recommends Five Books’.
From the “I have a dream” speech to Steve Jobs’ iPhone launch, all great presentations have a common architecture. At TEDxEast, Nancy Duarte draws lessons on how to make a powerful call-to-action. If you want to improve your presentations try Duarte’s books: slide:ology: The Art and Science of Creating Great Presentations and Resonate: Present Visual [...] Read more – ‘The Art of Storytelling Through Presentations’.
Great video of psychologist Robert Cialdini introducing the universal principles of influence: reciprocation, scarcity, authority, commitment, liking, and consensus. Still curious? Read Robert Cialdini’s books Yes!: 50 Scientifically Proven Ways to be Persuasive and Influence: The Psychology of Persuasion. Read more – ‘The Principles of Influence (video)’.
Drawing on attribution theory in psychology, a new research paper investigates how individuals learn from both failure and success. The authors contend that when individuals fail, they ascribe the performance deficit as the result of situational factors beyond their control. As a result, individuals are likely to fail to learn as much from their own [...] Read more – ‘How Individuals Learn From Both Failure And Success’.
A new paper by Dan Ariely found offering customers the choice to downsize portions proved effective (and cost-effective for the company): Policies that mandate calorie labeling in fast-food and chain restaurants have had little or no observable impact on calorie consumption to date. In three field experiments, we tested an alternative approach: activating consumers’ self-control [...] Read more – ‘An Alternative to Calorie Labels’.
Increasing evidence suggests that the mindsets associated with the concepts of time and money can differentially affect the happiness we derive from a given activity. Conclusion: In three separate experiments we have demonstrated that bringing individuals’ effective hourly wage to their attention impairs the ability to derive happiness from pleasurable experiences. This effect was observed [...] Read more – ‘How does putting a price on time affect our ability to smell the roses?’.
How do you remember where you parked your car? How do you know if you’re moving in the right direction? Neuroscientist Neil Burgess studies the neural mechanisms that map the space around us, and how they link to memory and imagination. RSS and Email readers click here. Read more – ‘TED Talk — How Your Brain Tells You Where You Are’.
An eloquent explanation on the difference between mysteries and secrets by Gregory Treverton: There’s a reason millions of people try to solve crossword puzzles each day. Amid the well-ordered combat between a puzzler’s mind and the blank boxes waiting to be filled, there is satisfaction along with frustration. Even when you can’t find the right [...] Read more – ‘What’s The Difference Between a Puzzle and a Mystery?’.
Two Harvard researchers looked at the factors that actually improve student achievement and those that don’t. In a new paper for the National Bureau of Economic Research, Will Dobbie and Roland Freyer analyzed 35 charter schools, which generally have greater flexibility in terms of school structure and strategy. They found that traditionally emphasized factors such [...] Read more – ‘Class size doesn’t matter’.
**reader suggestions are at the bottom*** How We Decide by Jonah Lehrer Predictably Irrational by Dan Ariely Mentioned by many others. Outstanding experimentally-driven analysis of human irrationality. Nudge by Richard Thaler and Cass Sunstein Great book that explains the disproportionate impact that initial conditions (priming, anchoring, etc.) have on our decision making. Stumbling Toward Happiness, [...] Read more – ‘What are the best books on the psychology behind human decision making and irrationality?’.
danah boyd with a fascinating talk on the realities of information consumption and the flow of information through social media: The goal is not to be a passive consumer of information or to simply tune in when the time is right, but rather to live in a world where information is everywhere. To be peripherally [...] Read more – ‘The Flow of Information Through Social Media’.
In three experiments, we tested the prediction that individuals’ experience of power influences their perceptions of their own height. High power, relative to low power, was associated with smaller estimates of a pole’s height relative to the self (Experiment 1), with larger estimates of one’s own height (Experiment 2), and with choice of a taller [...] Read more – ‘Powerful People Overestimate’.
What the model showed was that diverse groups of problem solvers outperformed the groups of the best individuals at solving problems. The reason: the diverse groups got stuck less often than the smart individuals, who tended to think similarly. The other thing we did was to show in mathematical terms how when making predictions, a [...] Read more – ‘Collective Accuracy = Average Accuracy + Diversity’.
Forensic scientists are not immune to cognitive biases: Dr Dror’s and Dr Hampikian’s experiment presented data from a real case to 17 DNA examiners working in an accredited government laboratory in North America. The case involved a gang rape in the state of Georgia, in which one of the rapists testified against three other suspects [...] Read more – ‘Ignorance is bliss’.
Interesting video: Still curious? Check out Clay Johnson’s intelligent manifesto for optimizing our consumption The Information Diet: A Case for Conscious Consumption. Read more – ‘The Truth About Information Overload’.
Thrity Umrigar, a 2000 Nieman Fellow, and the author of the bestselling The Space Between Us, and the forthcoming World We Found explores how the worlds of journalism and fiction writing are not as unimaginably different as one might think. First of all, journalism imposed a certain discipline, a work ethic, a workmanlike attitude toward [...] Read more – ‘The Exploration of How Power Corrupts Human Relationships’.
In a 1904 letter to a friend, Franz Kafka asked a provocative rhetorical—and metaphorical—question: “If the book we are reading does not wake us, as with a fist hammering on our skull, why then do we read it?” And then he answered the question this way: A book should serve as an ice-axe to break [...] Read more – ‘If the book we are reading does not wake us … why then do we read it?’.
To change an organization you must first change minds. A. Regard every belief as a hypothesis. The biggest barriers to strategic renewal are almost always top management’s unexamined beliefs. Music can only be sold on shiny discs? Don’t bet on it. The news has to be delivered on a big piece of flimsy paper? Not [...] Read more – ‘Intellectual Flexibility’.
In this rare clip from 1972, legendary psychiatrist and Holocaust-survivor Viktor Frankl delivers a powerful message about the human search for meaning — and the most important gift we can give others. If we take man as he is, we make him worse, but if we take him as he should be, we make him [...] Read more – ‘Viktor Frankl — Why to believe in others’.
Joseph Schumpeter applied the term “creative destruction” to the dynamic of the market economy. Not only does the new technology displace the old: the new company displaces the old. Innovation mostly comes from entrepreneurs outside established businesses, engaged in an endless succession of experiments. Most fail, but not all. …The established firm more often responds [...] Read more – ‘Creative Destruction’.
When your environment is cluttered, the chaos restricts your ability to focus. The clutter also limits your brain’s ability to process information. Clutter makes you distracted and unable to process information as well as you do in an uncluttered, organized, and serene environment. The clutter competes for your attention in the same way a toddler [...] Read more – ‘Physical Clutter Negatively Affects Your Ability To Focus & Process Information’.
An excerpt from an interesting article highlighting some of the recent findings of brain science on making better decisions: Alex Pouget, associate professor of brain and cognitive sciences at the University of Rochester, has shown that people do indeed make optimal decisions-but only when their unconscious brain makes the choice. …Roy F. Baumeister, a social [...] Read more – ‘How Can We Make Better Decisions? Brain science helps redefine decision-making’.
Knowing what to expect colors so much of our life’s experiences. The key is understanding what you control. There are two sides of expectations — what we expect from others and what we expect from ourselves. And how we manage those expectations is critical to how we view our experiences and pursue our goals. … [...] Read more – ‘Expectations Make A Difference’.
Many of us have constant access to information. We are so used to looking up the answer to any question immediately that it can feel like withdrawal when we have to wait. Of course, storing information outside of our brains is nothing new. I came across this interesting study: “We investigate whether the Internet has [...] Read more – ‘The Cognitive Consequences of Having Information at Our Fingertips’.
Jonah Lehrer with an interesting article in WSJ on our belief that risks can be overcome with technology: Though antilock brakes should make cars safer to drive, studies have demonstrated that drivers with such systems drive faster and brake later. The same goes for cyclists and skiers who wear helmets; they tend to move more [...] Read more – ‘The Risk-Compensation Effect’.
Classical conditioning (also known as Pavlovian Association) is one of the most basic forms of associative learning that was first demonstrated by Ivan Pavlov and his dogs in 1927. This Scientific America piece takes a closer look: Classical Conditioning, Explained The most important thing to remember is that classical conditioning involves automatic or reflexive responses, [...] Read more – ‘Classical Conditioning And Why It Matters’.
Interesting Nudge: Sugary drinks like soda are a big cause of obesity, but public health types haven’t had much luck convincing the public of that. But what if you knew that it would take 50 minutes of jogging to burn off one soda? When researchers taped signs saying just that on the drink coolers in [...] Read more – ‘Exercise Info — Not Calorie Counts’.
Email has influenced the kinds of people we interact with. A new study by Stefan Wuchty and Brian Uzzi at Northwestern University claims that we exchange the highest volume of email with the people we know the least. “These are folks you almost certainly wouldn’t talk to on the phone,” Mr. Uzzi says. “You also [...] Read more – ‘How To Use Email To Determine If Someone Likes You’.
Working alone is out. Organizations, schools, and culture are in the thrall of what Susan Cain calls “the New Groupthink,” which holds that creativity derives from our gregariousness. “Most of us,” she writes, “now work in teams, in offices without walls, for managers who prize people skills above all. Lone geniuses are out. Collaboration is [...] Read more – ‘Open-plan Offices Suck — Privacy Makes Us Productive’.
Surgical care is often linked to adverse events with a wide variation in mortality rates across hospitals. Given that lives are at risk a lot of efforts go into improving care. Most of those efforts focus on technological advancement. Only a few focus on the impact of human factors, such as the surgeon’s performance. “Professional [...] Read more – ‘Are More Experienced Surgeons Better? The Association Between Surgeons’ Experience and Performance’.
An edited excerpt from David Weinberger’s new book, Too Big to Know, explains how the massive amounts of data necessary to deal with complex phenomena exceed any single brain’s ability to grasp, yet networked science rolls on. In 1963, Bernard K. Forscher of the Mayo Clinic complained in a now famous letter printed in the [...] Read more – ‘To Know, but Not Understand: David Weinberger on Science and Big Data’.
An interesting article in the Boston Globe on the future of prediction. Philip Tetlock’s findings, which he collected in a 2005 book called “Expert Political Judgment: How Good Is It? How Can We Know?”, were disturbing because they seemed to imply that prediction was impossible. But Tetlock’s study did not cause him to give up [...] Read more – ‘The Future of Prediction’.
An interesting TED talk by Dr. Angela Lee Duckworth, an Assistant Professor of Psychology at the University of Pennsylvania. Duckworth studies non-IQ competencies that predict success both academically and professionally. Duckworth defines grit as “perseverance and passion for long-term goals.” “Grit,” she continues, “entails working strenuously toward challenges, maintaining effort and interest over years despite [...] Read more – ‘True Grit: Can Perseverance be Taught?’.
In this RSA Keynote (video below), Nassim Taleb, author of The Black Swan, discusses his ideas on fragility and their relevance to the current economic crisis, national policy making and other topics. Listen to an audio copy and see the slides here. Nassim Taleb is the author of The Black Swan, Fooled By Randomness, and most recently, [...] Read more – ‘Nassim Taleb — The Predictability of Unpredictability’.
Odysseus had himself tied to the mast, and that still works against modern sirens. To keep your New Year’s promises to yourself, first recognize that human will is a depleatable physical resource. But, there’s hope: “the way to keep a New Year’s resolution is to anticipate the limits of your willpower.” One of their newest [...] Read more – ‘Willpower & New Year’s Resolutions’.
George Orwell’s anti-totalitarian novella, Animal Farm, almost never saw the light of day. The manuscript barely survived the Nazi bombing of London during World War II, and then T.S. Eliot (an important editor at Faber & Faber) and other publishers rejected the book, partly for political reasons. Eventually Animal Farm came out in print in [...] Read more – ‘George Orwell’s Animal Farm — The Movie’.
An interesting paper by Max Bazerman on the malleability of morality and behavioral ethics. Bazerman defines behavioral ethics as “the study of systematic and predictable ways in which individuals make ethical decisions and judge the ethical decisions of others that are at odds with intuition and the benefits of the broader society.” By focusing on [...] Read more – ‘Behavioral Ethics: Toward a Deeper Understanding of Moral Judgment and Dishonesty’.
How we perceive the world and how we act in it are products of how and what we remember. … No lasting joke, invention, insight, or work of art was ever produced by an external memory. … Our ability to find humor in the world, to make connections between previously unconnected notions, to create new [...] Read more – ‘Joshua Foer — How We Perceive The World’.
“But the problem, you see, when you ask why something happens, how does a person answer why something happens?” Interviewer: If you get hold of two magnets, and you push them, you can feel this pushing between them. Turn them around the other way, and they slam together. Now, what is it, the feeling between [...] Read more – ‘Richard Feynman on Why Questions’.
Mindless Eating: Why We Eat More Than We Think will change the way you think about your next meal. According to eating behavior expert Brian Wansink the mind makes food-related decisions, more than 200 a day, and many of them without pause for actual thought. In Mindless Eating, Wansink argues that we don’t have to [...] Read more – ‘Mindless Eating: Why We Eat More Than We Think’.
An insightful piece by Ivan Eland on the uses and limitations of economic sanctions against nations. Sanctions — an economic means to achieve a political end — don’t work. Frequent practitioners of economic warfare—especially the United States, which is the most aggressive user of such methods in the world—often confuse the economic effects of sanctions [...] Read more – ‘Economic Sanctions Are Overrated’.
In his 1986 book, All I Really Need to Know I Learned in Kindergarten, Robert Fulghum laid out the foundation for life. Some of his advice: - Share everything. - Play fair. - Don’t hit people. - Put things back where you found them. - Clean up your own mess. - Say you’re sorry when [...] Read more – ‘What You Were Supposed to Learn in Kindergarten’.
A lecture by Harvard Professor Nicholas Christakis on face-to-face social networks, what they mean to our lives, and how they effect us. Our social networks have the power to spread obesity — or happiness — like contagion. If you’re friends are obese you have about a 45% higher likelihood of being obese yourself. If your [...] Read more – ‘The Surprising Power of Our Social Networks and How They Shape Our Lives’.
Interesting article in the economist on the science of pedestrian behaviour. “At low densities, behaviour is cognitive and strategic. At high density, it’s about mass movement and physical pressures”. … Another self-organising behaviour comes when opposing flows of people meet at a single intersection: think of parents trying to shepherd their children into school as [...] Read more – ‘The strange but extremely valuable science of how pedestrians behave’.
“We tell ourselves stories in order to live.” – Joan Didion Tyler Cowen with an excellent TEDtalk on the dangers of storytelling: So if I’m thinking about this talk, I’m wondering, of course, what is it you take away from this talk? What story do you take away from Tyler Cowen? One story you might [...] Read more – ‘The danger of storytelling’.
Do people desire creative ideas? If yes, why do we resist them? Similarly, research documents that teachers dislike students who exhibit curiosity and creative thinking even though teachers acknowledge creativity as an important educational goal. Three researchers took a stab at the answer: We offer a new perspective to explain this puzzle. Just as people [...] Read more – ‘The Bias Against Creativity: Why People Desire But Reject Creative Ideas’.
[A] species of crow and a species of woodpecker can continue to diverge evolutionarily, when while sharing the same forest. They do it by responding differently to different aspects of the environment—that is by adapting themselves to different ecological niches. An excerpt from The Song of the Dodo Read more – ‘Evolution and Divergence’.
“I do not believe I have ever written a children’s book.” An awesome 5 minute video of children’s book author and illustrator Maurice Sendak. Sendak is the creative genius behind books such as Where the Wild Things Are and In the Night Kitchen. When asked why he never did a sequel to Where the Wild [...] Read more – ‘Maurice Sendak, Creative Genius’.
An insightful piece by Jonah Lehrer on the challenge of causation. Despite all of our fancy tools and computers, we’re still trying to figure out how X relates to Y. This assumption—that understanding a system’s constituent parts means we also understand the causes within the system—is not limited to the pharmaceutical industry or even to [...] Read more – ‘The Challenge Of Causation’.
How did our species develop a mind that is hardwired for culture-and why? “…at no greater time in history than ever before, copiers are probably doing better than innovators.” In a recent video (below) posted on edge.org Mark Pagel, Professor of Evolutionary Biology, Reading University, offers a hypothesis on the downside of interconnectedness — A [...] Read more – ‘Wired for Culture: Mark Pagel Explains our Social Culture’.
If you read the seven habits of highly ineffective people, you might want to read seven things highly productive people do: 1. Work backwards from goals to milestones to tasks. Writing “launch company website” at the top of your to-do list is a sure way to make sure you never get it done. Break down [...] Read more – ‘7 Things Highly Productive People Do’.
Some widely held holiday- and winter- themed medical beliefs are re-examined by a pair of scientists. “Examining common medical myths reminds us to be aware of when evidence supports our advice, and when we operate based on unexamined beliefs.” Sugar causes hyperactivity in children …Regardless of what parents might believe, however, sugar is not to [...] Read more – ‘Can You Cure a Hangover? A Closer Look At Some Holiday Medical Myths’.
Leading neuropsychiatrist Peter Whybrow is the author of American Mania: When More Is Not Enough, a neurobiological look at the instinctual and social behaviors that balance a market economy. He explains how America’s reward-driven culture is pushing the physiological limits of our evolutionary inheritance. Peter Whybrow – PopTech 2008 from PopTech on Vimeo. Read more – ‘Neuroscience, Happiness, and Balancing Self v. Social Interest’.
How did Christmas, a holiday started back in Pagen Rome, become the centrepiece of the Christian Year? Christmas Unwrapped: The History of Christmas originally appeared on the history channel back in 1997. Narrated by Harry Smith, this documentary traces the roots of Christmas back to its early beginnings as a pagan Roman holiday of feasting [...] Read more – ‘Origins of Christmas’.
We all enjoy stockings but those extra little gifts can diminish the value of other presents you bought. It’s Christmas morning, and you open a box to find a cashmere sweater. The sweater feels plush and expensive, and you feel grateful. But then, underneath the sweater, you find a packet of Hershey’s kisses. Technically, you [...] Read more – ‘Should You Buy Stocking Stuffers?’.
Where did the iconic Santa Claus imagery we have all come to know – red suit, pleasantly plump, flowing white beard, rosy cheeks – come from? Turns out, Coca-Cola’s advertising program was more than a little helper in the modern interpretation of Saint Nick. Eatocracy talked with Phil Mooney, the Coca-Cola Company’s Vice President for [...] Read more – ‘How Coca-Cola helped shape the modern-day Santa’.
While talking with friends, you learn that your former boss has been sentenced for fraud. One of your friends thinks your boss received a jail term of “one year” and another friend reports that it is “366 days”. Who seems more knowledgeable about the details of the case? Similarly, suppose you want to order a [...] Read more – ‘How does one year differ from 365 days?’.
…When we’re threatened we defend ourselves—and our systems. Before 9/11, for instance, President George W. Bush was sinking in the polls. But as soon as the planes hit the World Trade Center, the president’s approval ratings soared. So did support for Congress and the police. During Hurricane Katrina, America witnessed FEMA’s spectacular failure to rescue [...] Read more – ‘Why do people defend unjust, inept, and corrupt systems?’.
As you stand in endless lines this holiday season, here’s a comforting thought: all those security measures accomplish nothing, at enormous cost: “The only useful airport security measures since 9/11,” he says, “were locking and reinforcing the cockpit doors, so terrorists can’t break in, positive baggage matching”—ensuring that people can’t put luggage on planes, and [...] Read more – ‘Smoke Screening’.
The most obvious differences between different animals are differences of size, but for some reason the zoologists have paid singularly little attention to them. In a large textbook of zoology before me I find no indication that the eagle is larger than the sparrow, or the hippopotamus bigger than the hare, though some grudging admissions [...] Read more – ‘On Being the Right Size’.
Our mental machinery is designed to make sense of the world. Our mental machinery is designed to tell us stories, and those are stories we believe, and the stories tend to be simple. They tend to be causal, and yet, internally coherent. And the quality of those stories plays a very significant role in our [...] Read more – ‘Our mental machinery’.
‘Email’s variable interval reinforcement schedule is basically a slot machine for your brain’ 1. Responding Like a Trained Monkey. Every productivity expert in the world will tell you to check email at periodic intervals — say, every 90 minutes — rather than clicking “refresh” like a Pavlovian mutt. Of course, almost no one listens, because [...] Read more – ‘Five Things You Should Stop Doing in 2012’.
Holidays make us nostalgic, which increases our feelings of fellowship. This leads to more giving: Compared with control groups, those encouraged to wax nostalgic planned to donate and volunteer more and scored higher on tests of empathy. In a final experiment, a nostalgic pitch (“Restoring the Past for the Children of Wenchuan”) led to greater [...] Read more – ‘Feeling Nostalgic Leads to Increased Giving’.
Ronald Reagan once remarked that “the trouble with our liberal friends is not that they are ignorant, but that they know so much that isn’t so.” “…our interviews revealed an interesting and creative reasoning style that we call inferred justification: recursively inventing the causal links necessary to justify a favored politician’s action. Inferred justification operates [...] Read more – ‘Inferred Justification’.
As someone who recently purchased a copy of The Story of Art, I found Jonah Lehrer’s wired article on how the brain perceives art fascinating: We want to believe that pleasure is simple, that our delight in a fine painting or bottle of wine is due entirely to the thing itself. But that’s not the [...] Read more – ‘How Does the Brain Perceive Art?’.
Those who solicit tips know why they do it, but can the same be said of those who tip? The obvious answer is, a tip is a small thank you for services rendered. Thank you to the doorman for getting you a cab, to the cabdriver for not killing us, and to the waitress for … [...] Read more – ‘Tyranny of Gratuity’.
“A man with a conviction is a hard man to change. Tell him you disagree and he turns away. Show him facts or figures and he questions your sources. Appeal to logic and he fails to see your point.” —Leon Festinger In that quote, Festinger was describing a famous case study in psychology. Festinger and [...] Read more – ‘The Science of Why We Don’t Believe Science’.
Behavioral economics is more appreciative of gift giving than traditional economics: Behavioral economics better understands why people (rightly, in my view) don’t want to give up the mystery, excitement and joy of gift giving. In this view, gifts aren’t irrational. It’s just that rational economists have failed to account for their genuine social utility. So [...] Read more – ‘Is It Irrational To Give Gifts?’.
The human understanding when it has once adopted an opinion (either as being the received opinion or as being agreeable to itself) draws all things else to support and agree with it. And though there be a greater number and weight of instances to be found on the other side, yet these it either neglects [...] Read more – ‘The Effects of Prior Theories on Subsequently Considered Evidence’.
Even though sales of vitamins have risen steadily, there has been no corresponding improvement in public health. Indeed, the opposite is true, with obesity and diabetes climbing perilously. What’s going on here? A team of psychological scientists in Taiwan, led by Wen-Bin Chiou of National Sun Yat-Sen University, has been exploring this paradox from the [...] Read more – ‘Behavioral Licensing’.
Interesting post on limits of our perception and awareness. Late one January night in 1995, Boston police officer Kenny Conley ran right past the site of a brutal beating without doing a thing about it. The case received extensive media coverage because the victim was an undercover police officer and the aggressors were other cops. [...] Read more – ‘If You Can’t Notice a Gorilla in Plain Sight, How Can You Testify as a Witness?’.
It’s a fact: 80% of people tend to think they are above average. Until now, few people have ever questioned why? What happens is that we evaluate others based on their average performance and ourselves based on our best performance. * * * Abstract We examine whether people call to mind different manifestations of various [...] Read more – ‘Are You Above Average?’.
“We live in a competitive world in which people frequently act on the basis of their own self-interest. This means they will embrace you when you provide value and forget you the minute you don’t. This tough lesson is being played out in work organizations every day. Prepare and act accordingly.” To benefit from the [...] Read more – ‘Why Your Company Won’t Repay Your Favors’.
This explains why humans are naturally hardwired to make bad investment decisions. “When we enjoy a gain of a dollar and the loss of a dollar which are, of course, symmetrical, we tend to suffer two to two and a half times more from the loss then we enjoy the gain,” says Michael Mauboussin, Chief [...] Read more – ‘Why Emotional People Make Bad Investors’.
In one of the more in-depth and wide-ranging Q&A sessions on the freakonomics blog has run, Daniel Kahneman, whose new book is called Thinking, Fast and Slow, answered 22 questions posted by readers. Three of the questions that caught my attention: Q. As you found, humans will take huge, irrational risks to avoid taking a [...] Read more – ‘Daniel Kahneman Answers’.
“When I say that human nature is selfish, I mean that our minds contain a variety of mental mechanisms that make us adept at promoting our own interests, in competition with our peers. When I say that human nature is also groupish, I mean that our minds contain a variety of mental mechanisms that make [...] Read more – ‘Breaking Out of Our Righteous Minds’.
“Sustainability by stealth, if you will. So many strategies for addressing the sustainability challenge hinge on a simple, appealing premise: Explain the facts about our unsustainable lifestyles and assume that if people understand those facts, they’ll alter their behavior accordingly. It’s an approach based on two assumptions: that individuals listen to reason, and that individuals [...] Read more – ‘Four Ways to Make Sustainability More Attractive’.
In honor of the publication of his first book later this month (Situations Matter), Sam Sommers presents his Top 7 List of Lessons about Human Nature offered by Seinfeld: 7. The Ubiquity of Social Norms. Seinfeld was a show about norms, not nothing. At its minutiae-focused best, the series was a 22-minute weekly discourse on [...] Read more – ‘Top 7 List of Lessons about Human Nature offered by Seinfeld’.
Leaders, in other words, are necessary, but not because they are the source of social change. Rather their real function is to occupy the role that allows the rest of us to make sense of what is happening — just as Tolstoy suspected. Typically, the way we think of social change is some variant of [...] Read more – ‘What Are Leaders Really For?’.
I’m a huge Feynman fan. Here is the complete BBC video of “No Ordinary Genius” If you want to learn more, check out these Feynman books: Six Easy Pieces, Surely You’re Joking, Mr. Feynman!, The Feynman Lectures On Physics. Read more – ‘Richard Feynman – No Ordinary Genius’.
Thomas Friedman was responsible for the Iraq invasion of 2003, and not only he paid no penalties for it but he is still continuing to have the Op-Ed page of the New York Times confusing innocent people. He got —and kept —the upside, others get the downside. A journalist with arguments can harm more people [...] Read more – ‘Nassim Taleb: “If you see fraud and don’t say fraud, you are a fraud”’.
The world is a complicated place. Reality is dense with patterns, but these patterns are often subtle and inconsistent. We think we understand how things work – X always causes Y – but then Z happens. It’s very confusing. Needless to say, such complexity poses a big problem for biology. How should animals learn from [...] Read more – ‘Is there such a thing as too much feedback?’.
We sweat the small stuff. “We suggest that metacognitive inference contributes to a process we name “decision quicksand,” whereby people get sucked into spending more time on unimportant decisions. Our central premise is that people use the subjective difficulty experienced while making a decision as a cue to how much further time and effort to [...] Read more – ‘Why do people sometimes get stuck in seemingly minor choices?’.
This study examined the role of gratuity guidelines on tipping behavior in restaurants. When diners were finished with their meals, they were given checks that either did or did not include calculated examples informing them what various percentages of their bill would amount to. Results indicated that parties who received the gratuity examples left significantly [...] Read more – ‘Does Including Gratuity Guidelines on Customers’ Checks Affect Restaurant Tipping Behavior?’.
An excerpt from an Interview with Malcolm Gladwell: It’s an interesting question. I have been reading a lot about the Vietnam War. What’s amazing [about it] is that a set of lessons were painfully learned there, which were completely ignored 30 years later in the Iraq War and Afghanistan. It’s like Vietnam never happened. One [...] Read more – ‘Malcolm Gladwell On The Role of Academics’.
Two years after the Airbus 330 plunged into the Atlantic Ocean, Air France 447′s flight-data recorders finally turned up. The revelations from the pilot transcript paint a surprising picture of chaos in the cockpit, and confusion between the pilots that led to the crash. We now understand that, indeed, AF447 passed into clouds associated with [...] Read more – ‘What Really Happened Aboard Air France 447’.
Social scientists have only begun to seriously examine the act of donating money: …the emerging research on charitable giving has yielded a difficult truth: Thinking harder about how to give makes us less likely to give at all. …Why anyone is ever selfless is a mystery that has fascinated, not to mention frustrated, scientists since [...] Read more – ‘Why we give to charity’.
Frequent multitaskers are worse at multitasking than infrequent multitaskers. Chronic media multitasking is quickly becoming ubiquitous, although processing multiple incoming streams of information is considered a challenge for human cognition. A series of experiments addressed whether there are systematic differences in information processing styles between chronically heavy and light media multitaskers. A trait media multitasking [...] Read more – ‘Do you get better at multitasking with experience?’.
I have come gradually to understand that the liberal arts cliché about teaching you how to think is actually shorthand for a much deeper, more serious idea: learning how to think really means learning how to exercise some control over how and what you think. It means being conscious and aware enough to choose what [...] Read more – ‘Learning How To Think’.
Power—defined as the ability to influence others—makes people think differently. For North Americans, a feeling of power leads to thinking in a focused and analytical way, which may be beneficial when pursuing personal goals. “What’s most interesting about this study is the idea that thinking is flexible, not rigid or innately pre-programmed. We are able [...] Read more – ‘Does Power Goto Our Heads?’.
“Thinking about how disturbingly herdlike people become in so many different contexts—mimetic theory forces you to think about that, which is knowledge that’s generally suppressed and hidden. As an investor—entrepreneur, I’ve always tried to be contrarian, to go against the crowd, to identify opportunities in places where people are not looking.” — Peter Thiel While [...] Read more – ‘Mimetic Theory’.
If you’re still looking for the perfect gift for the book-lover on your list, start here: Five Must-Reads for Tackling Complex Problems Farnam Street’s Behavioral Economics Reading List Foreign Policy’s Favorite Reads of 2011 The 10 Best Books of 2011 from the NYT What books influenced Steve Jobs What is Bill Gates Reading Five Book [...] Read more – ‘The Ultimate Book Lover’s Resource’.
In this podcast, renowned academic and author Nassim Nicholas Taleb discusses his groundbreaking ideas and their relevance to the current economic crisis, national policy making and other topics with Rohan Silva, senior policy advisor to the Prime Minister. Cameron Conservatives quote Taleb in making the case against central state control and planning and in favour [...] Read more – ‘The Predictability of Unpredictability’.
I thoroughly enjoyed Douglas Allen’s new book, The Institutional Revolution: Measurement and the Economic Emergence of the Modern World. Here is a summary excerpt: Having consistent weights and measures, like knowing the precise time, allowed for — almost by definition — more accurate and less costly monitoring. The lowered transaction costs of measurement meant that [...] Read more – ‘The Institutional Revolution’.
Freeman Dyson reviews Thinking, Fast and Slow Cognitive illusions are the main theme of his book. A cognitive illusion is a false belief that we intuitively accept as true. The illusion of validity is a false belief in the reliability of our own judgment. The interviewers sincerely believed that they could predict the performance of [...] Read more – ‘Freeman Dyson on Daniel Kahneman: How to Dispel Your Illusions’.
Just how tech-savvy are young people? A group of researchers led by business professor Bing Pan tried to find out. Specifically, Pan wanted to know how skillful young folks are at online search. His team gathered a group of college students and asked them to look up the answers to a handful of questions. Perhaps [...] Read more – ‘“Google makes broad-based knowledge more important, not less”’.
An observer of policy based on behavioral economics might well conclude that an assumption of irrationality may be valid, but irrational behavior is hard to predict. Why, for example, do people (even experts and managers who should know better) act in their own worst interests or those of their firms? Can such behaviors be predicted [...] Read more – ‘Is Thinking Slow An Argument for Bureaucracy?’.
Hermann Goering, one of Hitler’s top commanders and chief of the German Luftwaffe, speaks on the ease with which people can be induced to enter into war. Interviewed in his cell during the Nuremburg trials by Gustave Gilbert, an intelligence officer and psychologist, Goering was quite candid. Gilbert kept a journal of his observations of [...] Read more – ‘How to persuade a nation to enter a war?’.
Thanks again for sharing and tweeting. 1. But Wait … There’s More: A look at how infomercials persuade. 2. If You’re Busy, You’re Doing Something Wrong: How you spend your time makes a big difference. 3. Google Talks Presents: Daniel Kahneman. 4. Three ways organizations demotivate their employees(Video.) 5. An Interview With Daniel Kahneman. 6. [...] Read more – ‘The Best of Farnam Street November 2011’.
“Things without all remedy. Should be without regard. What’s done is done.” —Lady Macbeth Kathryn Schulz, author of Being Wrong: Adventures in the Margin of Error, delivers an excellent TED talk on embracing our regrets. “The point isn’t to live without any regrets. The point is to not hate ourselves for having them. … Regret [...] Read more – ‘Don’t Regret Regret’.
As we mature we progressively narrow the scope and variety of our lives. Of all the interests we might pursue, we settle on a few. Of all the people with whom we might associate, we select a small number. We become caught in a web of fixed relationships. We develop set ways of doing things. [...] Read more – ‘How We Lose Our Mental Flexibility’.
“Economists essentially have a sophisticated lack of understanding of economics, especially macroeconomics.” There is a beauty to the models in and of themselves. You assume, for example, that people are rational. I don’t think any really good economist thinks that people are perfectly rational, but, on the other hand, if you want to model people [...] Read more – ‘All Of The Models Are Going To Be Flawed’.
The New York Times picks the 10 best books of 2011 (fiction first, nonfiction at the bottom) THE ART OF FIELDING At a small college on the Wisconsin side of Lake Michigan, the baseball team sees its fortunes rise and then rise some more with the arrival of a supremely gifted shortstop. Harbach’s expansive, allusive [...] Read more – ‘The 10 Best Books of 2011 from the NYT’.
Christian Jarrett created a list of the best psychology books in 2011 for the the BPS Research Digest: Moonwalking with Einstein: The Art and Science of Remembering Everything by Joshua Foer. The Sunday Times describes Foer’s story of how he became American Memory Champion as “the most entertaining science book of the year”. The Indy [...] Read more – ‘Best Psychology Books Of The Year – 2011’.
Situations Matter is an excellent book that should give you a leg up in life. One of the lessons of modern psychological research is that ‘the situation’ we find ourselves in influences us. If you’ve ever wondered about why you are not as independent-minded as you think or about the difference between men and women [...] Read more – ‘Situations Matter’.
High performers learn from both success and failure making small adjustments. Conversely, low performers, learned more from success. Learning effectively from experience is a daunting task for any organism. For every good or bad outcome, there are an immense number of potential causes and associations to be considered. For many decisions, it can be nearly [...] Read more – ‘Learning Effectively From Experience: Distinguishing High from Low Performers’.
What’s the best way to beg for money? Psychologist Dan Ariely put a student on the street to find out. …And it turned out that both his position and his eye contact did, in fact, make a difference. He made more money when he was standing and when he looked people in the eyes. It [...] Read more – ‘What’s The Best Way to Beg for Money?’.
Scientists have long cautioned that the brain is not a video recorder-storing perfect memory in a way that can be pulled out, rewound, and replayed over and over while remaining intact. Even the simple act of telling a story can modify memory. This month, the Supreme Court heard its first oral arguments in more than [...] Read more – ‘The Certainty of Memory’.
In standard models with asymmetric information, the parties involved are assumed to have private information about their own characteristics. That means, I should know more about me than you know about me. This plays out in many different ways. “In the health insurance market, for example, customers are typically assumed to know more about their [...] Read more – ‘Asymmetric Information’.
Why is it so hard to get doctors, nurses and others in patient care to adequately disinfect their hands? At least part of the problem is psychological. People in general—but health care professionals in particular—suffer from cognitive biases that skew their judgment about risk. Research has shown, for example, that hospital workers maintain an “illusion [...] Read more – ‘Can altruism be a better motivator than self-interest?’.
An insightful paper by Sendhil Mullainathan on how behaviorial influence like the status quo bias affect the poor and rich alike. The main difference being the narrow margins for error in poverty: …According to this behavioral view, people who live in poverty are susceptible to many of the same impulses and idiosyncrasies as those who [...] Read more – ‘Savings Policy and Decisionmaking in Low-Income Households’.
Bob Sutton commenting on a very old study called “The Effects of Changes in Roles on the Attitudes of Role Occupants”: The study was fascinating in that Lieberman was able to gather data during a “naturally occurring experiment” where people who worked in a manufacturing company switched roles — in some cases moving from a [...] Read more – ‘The Power of Roles’.
“The more corrupt the state, the more numerous the laws.” —Tacitus In Plato’s Revenge, William Ophuls spells out what’s implied by this syllogism: * In a healthy state, laws are few, simple, and general because the people are moral, law-abiding, and public spirited, which makes them easy to govern. * In a sick state, the [...] Read more – ‘Tacitus’ syllogism’.
If you’re planning on cruising Amazon.com today for deals, you can use this link to help support Farnam Street in the process. It won’t cost you any extra and you’ll help support my caffeine addiction. If you live outside the United States and you want to contribute, please consider a modest donation. Read more – ‘Cyber Monday’.
Joel Podolny, currently the vice pesident of HR at Apple, sat down with James March for an interview published in Academy of Management Learning and Eduction. As always, March offers counter-intuitive thinking and fascinating insight. On the importance of leadership: I think, however, that the importance (or unimportance) of leadership for the unfolding of history [...] Read more – ‘An Interview on Leadership with James March’.
For anyone who has been compelled to give a long-term vision or read a marketing forecast for the next decade, Mr. Taleb’s chapter excoriating “The Scandal of Prediction” will ring painfully true.” What is surprising is not the magnitude of our forecast errors,” observes Mr. Taleb, “but our absence of awareness of it.” We tend [...] Read more – ‘The Scandal of Prediction’.
Psychologist Barry Schwartz talks with Lars Mensel about the downside of choice, and the silver lining to the economic downturn. On choice and aspiration When choice was limited, I think people’s aspirations and expectations were limited. And so you could live a decent life and feel good about it. But living a decent life just [...] Read more – ‘The Paradox of Choice’.
In all versions of the game, roughly 60% of players started out co-operating. However, in the first two, this decreased over time as the pernicious influence of the freeloaders spread. The larger the fraction of a subject’s partners who defected in a given round, the less likely that person was to co-operate in the next—classical [...] Read more – ‘The evolution of co-operation: Social networking tames cheats’.
In response to But Wait … There’s More, a kind reader passed along a link to a wonderful interview between Andrew Warner and Tim Hawthorne (a producer of infomercials). On how to orchestrate an immediate response: ..In order to do that, I think there are definitely certain products that fall into a category of generating [...] Read more – ‘How Infomercials Persuade’.
From an excellent career couch column in the New York Times: People often lose their concentration when they are bored, of course, but also when they are engaged in challenging tasks, says Peter Bregman, author of “18 Minutes: Find Your Focus, Master Distraction, and Get the Right Things Done” and chief executive of a management [...] Read more – ‘Why do we lose focus so easily?’.
Meet Colonel Robin Stephens, a master interrogator, who was tasked with breaking down the most hardened of German Spies during WWII. He was so successful, the British “actively ran and controlled the German espionage system.” Stephens didn’t believe in violence, instead, he applied many forms of psychological pressure. “Figuratively, a spy in war should be [...] Read more – ‘The Commandant: A Master Interrogator Reveals His Secrets’.
Since discovering Lapham’s Quarterly earlier this year, I’ve been a reader. In the wake of the two month anniversary of Occupy Wall Street, we asked Lewis Lapham, the founder of Lapham’s Quarterly and the former editor of Harper’s, what books he would recommend in order to better understand the current political climate. Here is his [...] Read more – ‘Lewis Lapham’s revolutionary reading list’.
…marketers also understand that, by using the illusion of scarcity, they can accelerate demand. This false scarcity encourages us to buy sooner and perhaps to buy more than normal. We saw two excellent examples of this effect this summer with the launches of the iPhone and the seventh Harry Potter book. In both cases, the [...] Read more – ‘How to Profit from Scarcity’.
Daniel Balliet, Norman Li, Shane Macfarlan and Mark Van Vugt did a meta-analysis of 272 research findings over the past 50 years exploring men and women in cooperative settings. This paper was published in the November, 2011 issue of Psychological Bulletin. In a meta-analysis, researchers analyze the data from many studies conducted over a long [...] Read more – ‘Do Men And Women Cooperate Differently?’.
“The principles of good management are simple, even trivial. They are not widely practices for the same reason that Christianity is not widely practiced. It is not enough to know what the principles are; you must acquire deeply ingrained habits of carrying them out, in the face of all sorts of strong urges to stray [...] Read more – ‘The Principles Of Good Management’.
In the highly anticipated Thinking, Fast and Slow, Kahneman takes us on a groundbreaking tour of the mind and explains the two systems that drive the way we think. System 1 is fast, intuitive, and emotional; System 2 is slower, more deliberative, and more logical. Kahneman exposes the extraordinary capabilities—and also the faults and biases—of [...] Read more – ‘Google Talks Presents: Daniel Kahneman’.
There’s a lot of psychology at play here. Lauren Rivera, examined hiring processes in three types of elite professional service firms: investment banks, law firms, and management consulting firms. “These types of firms share important similarities, allowing for a robust comparison.” Her results are fascinating. You have 10 seconds to make an impression – most [...] Read more – ‘How Elite Firms Hire’.
You’ll never look at infomercials the same after reading this post. Robert Cialdini calls But Wait…There’s More “A wholly fascinating account of a wholly fascinating industry.” If you’re interested in how late night TV informercials use every psychology trick in the book, you need to read this. Infomercials are powerful. A thirty-second commercial for Tide [...] Read more – ‘An Incredible Offer — But Wait…There’s More’.
…There once was a clever engineer who noticed that the carousels for luggage are spaced at different distances from different gates – some farther and some closer to where the passengers were deplaning. And this engineer redesigned the allocation of carousels such that they minimized the distance to their gate, and therefore minimized the amount [...] Read more – ‘Idleness, Luggage Carousels, and The Inefficiency of Airports’.
Lance Workman interviews Daniel Kahneman, Nobel laureate, co-creator of behavioural economics, and author of Thinking, Fast and Slow: You’ve demonstrated that people are rather poor at making decisions that involve some degree of uncertainty – and yet you don’t see people as irrational? Well, I think the whole issue of whether people are rational or [...] Read more – ‘An Interview With Daniel Kahneman’.
Interesting, this paper suggests that television access is associated with higher debt levels for durable household goods, but not with the total amount of non-mortgage debt. …The empirical results suggest that the greater access to television is associated with a greater tendency to maintain household debt and debt for household products. Results also suggest that [...] Read more – ‘Does access to a television increase debt?’.
…They also reveal a problem at the very heart of Nudge theory: it assumes that our wise leaders will use their powers to nudge us for our own good. But why should we think they are any less self-deceived and irrational than the rest of us? (In his book, The Folly of Fools: The Logic [...] Read more – ‘Who is nudging the nudgers?’.
The size of dinnerware influences how much people serve and consume. When plates and bowls are large enough that capacity is not a constraint, we consistently serve more onto relatively larger than relatively smaller dinnerware. But why? Two researches (Van Ittersum & Wansink) set out to investigate. This is more important than you might think, [...] Read more – ‘Why you eat too much: The Delboeuf Illusion’.
Energy issues can be extremely complex and controversial. Bill Gates offers up 4 books that bring clarity and point to solutions: Energy Myths and Realities: Bringing Science to the Energy Policy Debate I recommend this book to everyone who spends time working on energy issues – not to cheer them up but to help them [...] Read more – ‘Bill Gates Picks 4 Reads That Bring Clarity and Solutions to Energy Issues’.
Penny Sarchet discusses research on the ‘nocebo’ effect in her winning essay for the Wellcome Trust science writing prize Can just telling a man he has cancer kill him? In 1992 the Southern Medical Journal reported the case of a man who in 1973 had been diagnosed with cancer and given just months to live. [...] Read more – ‘The nocebo effect’.
With the adoption of environmental programs by hotels, more and more travelers are finding themselves urged to reuse their towels to help conserve environmental resources by saving energy and reducing the amount of detergent-related pollutants released into the environment. In most cases, the appeal comes in the form of a strategically placed card in the [...] Read more – ‘Using Social Norms to Motivate’.
John Kay with some insight: …When political leaders imagined they derived authority by divine right, they were tempted to believe that they had all the necessary talents – that they added the wisdom of Socrates and the military prowess of Alexander to the rhetorical skills of Cicero. The principal basis for this belief was the [...] Read more – ‘We need a fox to see the snares and a lion to scare the wolves’.
“Leadership is a gift. It’s given by those who follow. You have to be worthy of it.” —General Mark Welsh The video is 50 minutes long, but it might be the finest piece of public speaking you’ll see all year. Do your Christmas shopping at Amazon.com and support Farnam Street. Read more – ‘Leadership Is a Gift Given by Those Who Follow’.
Clayton Christensen asks, “What is it that kills successful companies?” His answer might surprise you. According to Christensen, “It’s the principles of good management that we teach at the harvard business school that sow the seeds of every company’s ultimate failure.” Christensen wrote a book on this called The Innovators Dilemma, who’s central message was [...] Read more – ‘Disruptive Innovation’.
Why are we so optimistic in our estimation of a projects cost and schedule? Why are we so surprised when something inevitably goes wrong? Because of the human tendency to underestimate disjunctive events. According to Daniel Kahneman and his long-time co-author Amos Tversky (1974): “A complex system, such as a nuclear reactor or the human [...] Read more – ‘Mental Model: Conjunctive and Disjunctive-Events Bias’.
Amazon.com’s editors choice for 2011 1. Lost in Shangri-La: A True Story of Survival, Adventure, and the Most Incredible Rescue Mission of World War II “A riveting story of deliverance under the most unlikely circumstances, Lost in Shangri-La deserves its place among the great survival stories of World War II.” …“A truly incredible adventure.” (New [...] Read more – ‘Amazon’s 10 Best Books of 2011’.
“Landing gear malfunctions tend to be splendidly telegenic, but rarely are they going to end in disaster”: Touching down without landing gear isn’t a whole lot different from touching down with landing gear. For this reason — and contrary to what was reported on page one of last Wednesday’s Wall Street Journal – pilots do [...] Read more – ‘How Difficult Was That Landing in Poland Without Landing Gear?’.
From an interesting article in Time magazine: The grand jury investigation that resulted in 40 counts of child abuse against Penn State’s former defensive coordinator, Jerry Sandusky, has raised profoundly unsettling psychological and moral questions about the actions — or lack thereof — of others involved in the case. Head football coach Joe Paterno was [...] Read more – ‘The Bystander Effect at Penn State: Why Some Witnesses to Crime Do Nothing’.
I’d like the people teaching my kids to be good enough that they could get a job at the company I work for, making a hundred thousand dollars a year. Why should they work at a school for thirty-five to forty thousand dollars if they could get a job here at a hundred thousand dollars [...] Read more – ‘“The unions are the worst thing that ever happened to education”’.
Why are elite violinists better than the average players? The obvious guess is that the elite players are more dedicated to their craft. That is, they’re willing to put in the long, Tiger Mom-style hours required to get good, while the average players are off goofing around and enjoying life. The data tells a different [...] Read more – ‘If You’re Busy, You’re Doing Something Wrong’.
Somehow a belief in the power of group brainstorming sessions persists, despite evidence that it doesn’t work. Evidence has long shown that getting a group of people to think individually about solutions, and then combining their ideas, can be more productive than getting them to think as a group. Some people are afraid of introducing [...] Read more – ‘Why brainstorming doesn’t work’.
Crowds, we are often told, are dumb. They obliterate reason, sentience and accountability, turning individuals into helpless copycats. Commentators on the riots offered different explanations but most agreed that crowd psychology was part of the problem. “The dominant trait of the crowd is to reduce its myriad individuals to a single, dysfunctional persona,” wrote the [...] Read more – ‘Crowd Behaviour’.
If you’re not following me on twitter, here is a sample of the great stuff you might have missed: —New Michael Lewis Article in Vanity Fair on Daniel Kahneman: The King of Human Error —Cognitive Biases in Times of Uncertainty —Chart: One Year of Prison Costs More Than One Year at Princeton —Why IQ fluctuates [...] Read more – ‘Not following @farnamstreet on Twitter? See what you missed’.
In his 20 years as a researcher, first at Stanford University, now at the University of Toronto, Dr. Redelmeier, 50, has applied scientific rigor to topics that in lesser hands might have been dismissed as quirky and iconoclastic. In doing so, his work has shattered myths and revealed some deep truths about the predictors of [...] Read more – ‘Think the Answer’s Clear? Look Again’.
When you wander into the work of Kahneman and Tversky far enough, you come to find their fingerprints in places you never imagined even existed. It’s alive in the work of the psychologist Philip Tetlock, who famously studied the predictions of putative political experts and found they were less accurate than predictions made by simple [...] Read more – ‘The King of Human Error’.
Two researchers set out to investigate what drives loss aversion. They found that the usual model of loss aversion does not fully explain how people make decisions—and that, rather than tallying everything up as a gain or a loss right away, people are constantly comparing options and seeking out information that supports their inclinations. That [...] Read more – ‘What drives loss aversion’.
Why do we so often fail to act in our own best interest? Why do we promise to skip the chocolate cake, only to find ourselves drooling our way into temptation when the dessert tray rolls around? What are the forces that influence our behavior? Dan Ariely, James B. Duke Professor of Psychology & Behavioral [...] Read more – ‘Dan Ariely – Money Changes Everything (Video)’.
Nassim Taleb proposes addressing the principle-agent problem in banking by removing banker’s bonuses: Bonuses are particularly dangerous because they invite bankers to game the system by hiding the risks of rare and hard-to-predict but consequential blow-ups, which I have called “black swan” events. The meltdown in the United States subprime mortgage market, which set off [...] Read more – ‘The Best Risk-Management Rule Ever’.
Picture this in your mind: On a cool evening in late October, a man driving a crew-cab pickup with roll bars in the bed pulls into the parking lot of an upscale grocery store in Santa Barbara. The man exits his pickup and locks it, then walks quickly toward the sliding glass doorway of the [...] Read more – ‘Alleged ‘Excessive Force’ Incident a Case Study in Cognitive Bias’.
Here is a wonderful excerpt on the pitfalls of hiring star performers from Think Twice: Harnessing the Power of Counterintuition: What is the quickest way to improve your organization’s results? Many companies, sports teams, and entertainment businesses opt for the same solution: they hire a star. At first glace, signing a star seems like a [...] Read more – ‘Why you should never poach “stars” from competitors’.
Fibs and self-deception are central to our evolutionary strategy. The following excerpt is from an interview with Robert Trivers, author of The Folly of Fools: The Logic of Deceit and Self-Deception in Human Life: You do have some really fascinating information about the power of the placebo effect in medicine. What does the placebo effect [...] Read more – ‘The evolution of deceit’.
…the system was not set up for educated people who thought for themselves, it wasn’t to help customers make informed decisions. The system was designed to catch people off guard, to score a quick sale, to exploit people who were weak or uninformed. And of course, they use a lot of subtle psychological hacks to [...] Read more – ‘Confessions of a Car Salesman’.
Using examples from vacations to colonoscopies, Nobel laureate and founder of behavioral economics Daniel Kahneman reveals how our “experiencing selves” and our “remembering selves” perceive happiness differently. This new insight has profound implications for economics, public policy — and our own self-awareness. You should read Kahneman’s Thinking Fast, Thinking Slow Read more – ‘Video: Daniel Kahneman – The riddle of experience vs. memory’.
On average people are too pessimistic, we actually enjoy our workouts more than we think. According to the researchers below this is “forecasting myopia.” The trick is to focus on the whole, not the beginning. People underestimate how much they enjoy exercise because of a myopic focus on the unpleasant beginning of exercise, but this [...] Read more – ‘Why you suck at starting your workout’.
This is why the ambience of a restaurant matters. In a 2001 experiment, Brochet invited 57 wine experts and asked them to give their impressions of what looked like two glasses of red and white wine. The wines were actually the same white wine, one of which had been tinted red with food coloring. But [...] Read more – ‘Does Music Change The Taste Of Wine?’.
The last two looked pretty interesting. The Master Switch: The Rise and Fall of Information Empires This one really stuck with me–a top level analysis of how changes in media change the culture and change the structure of industry. The Better Angels of Our Nature: Why Violence Has Declined I heard Steve Pinker present on [...] Read more – ‘Seth Godin’s Fall 2011 Reading List’.
Heather Brooke, author of Your Right To Know: A Citizen’s Guide to the Freedom of Information Act, offers five picks on Holding power to account. Animal Farm …it is an allegory about power and its seductive and corruptive influence on people regardless of their initial good intentions. As one moves up the ladder and accrues [...] Read more – ‘Five books on Holding Power to Account’.
Insightful: “If you’ve never at some point stayed up all night talking to your new boyfriend about the meaning of life instead of preparing for the test, then you’re not really an intellectual.” The issue—and this is actually much more a problem in the United States but even in Canada it’s true—is we’re selecting a [...] Read more – ‘What’s wrong with the way we teach’.
People who feel like they’re stuck with a rule or restriction are more likely to be content with it than people who think that the rule isn’t definite. Psychological studies have found two contradictory results about how people respond to rules. Some research has found that, when there are new restrictions, you rationalize them; your [...] Read more – ‘People Rationalize Situations They’re Stuck With, But Rebel When They Think There’s An Out’.
Robert Siegel’s interview with Thinking Fast, Thinking Slow author Daniel Kahneman: “When you’re depleted, you tend to fall back on default actions, and the default action in that case is apparently to deny parole. So yes, people are strongly influenced by the level of glucose in the brain.” The implications of such a study are [...] Read more – ‘Implications of Kahneman’s Findings’.
In 1969, the psychologist Robert Zajonc published an article about a curious study. He’d posted a silly-sounding word—either kardirga, saricik, biwonjni, nansoma, or iktitaf—on the front page of some student newspapers in Michigan every day for several weeks. Then he sent questionnaires to the papers’ readers, asking them to guess whether each word referred to [...] Read more – ‘What is the exposure effect?’.
Hans Rosling explains the growth of 200 countries over 200 years and then explains the world of 7 billion using IKEA props. Via TED: The world’s population will grow to 9 billion over the next 50 years — and only by raising the living standards of the poorest can we check population growth. This is [...] Read more – ‘Video: Hans Rosling explains world population’.
… Greed is a human motivation, but not a dominant one – and the institutions that most exemplified the philosophy of greed were those that imploded in 2007-08. The goods made by workers whose motivation was purely instrumental were driven out of the marketplace by those of people who took pride in their work and [...] Read more – ‘Capitalism need not be about greed and gambling’.
How many of these does your organization do? Jim Collins, the author of the infamous Good to Great and co-author of the new and equally compelling Great by Choice, offers a very insightful 3-minute video describing three ways organizations demotivate their employees. Via Dan Pink Read more – ‘Video: Three ways organizations demotivate their employees’.
The psychologist David Nussbaum has shown that whether we tend to learn from mistakes or brush them aside, the response is rooted in repairing our self-esteem. Failure is never fun, but success requires that we learn to fight through our frustration and find the upside of error. People with a fixed mindset tend to see [...] Read more – ‘The Art of Failing Successfully’.
Selection by Consequences, B.F. Skinner In summary, then, human behaviour is the joint product of (i) the contingencies of survival responsible for the natural selection of the species and (ii) the contingencies of reinforcement responsible for the repertoires acquired by its members, including (iii) the special contingencies maintained by an evolved social environment. Ultimately, of [...] Read more – ‘Selection by Consequences’.
Thanks again for sharing and tweeting. 1. Video: Nassim Taleb on Wall Street Protest, Banking 2. The Science of Irrationality 3. Mental Models 4. What did Steve Jobs Read? 5. What does Bill Gates Read for Fun? 6. The Psychological Bias Against Creativity 7. Video: TEDxEast Guest Curator Dan Ariely on Self-control 8. Video: Michael [...] Read more – ‘The Best of Farnam Street October 2011’.
“Pleasure now is worth more to us than pleasure later,” says economist William Dickens of Northeastern University. “We much prefer current consumption to future consumption. It may even be wired into us.” …In fact, neuroscientists are mapping the brain’s saving and spending circuits so precisely that they have been able to rev up the saving [...] Read more – ‘Moneybrain’.
An excerpt from Think Twice on unintended consequences: When you are dealing with a system that has lots of interconnected parts, tweaking one part can have unforeseen consequences for the whole. Take the example of Yellowstone National Park. In retrospect, it looks like the park’s woes started when explorers in the mid-1800’s couldn’t find enough [...] Read more – ‘Unintended Consequences’.
Feedback loops are created when reactions affect themselves and can be positive or negative. Consider a thermostat regulating room temperature. This is an example of a negative feedback loop. As the temperature rises, the thermostat turns off the furnace allowing the room to rest at a predetermined temperature. When the temperature falls below that predetermined [...] Read more – ‘Mental Model: Feedback Loops’.
According to author and researcher Joshua Foer, it’s the dedication and willpower to doggedly push beyond the “OK Plateau.” When most of us learn a new skill, we work to get just “good enough” and then we go on autopilot. Foer identified four principles that he saw the experts using to remain alert and to [...] Read more – ‘What separates those who accomplish outstanding feats from those who don’t?’.
Bill Gates reviews Vaclav Smil’s Prime Movers of Globalization: The History and Impact of Diesel Engines and Gas Turbines: … Smil says, today’s prime movers have reduced the cost of shipping so much that “distance to the market has been largely eliminated” as a factor in siting manufacturing facilities, sourcing imported materials, or pursing new [...] Read more – ‘Prime Movers of Globalization’.
While Daniel Kahneman’s new book, “Thinking Fast, Thinking Slow” flies off the shelf, he’s quietly written a few articles that might catch your interest. Optimistic Bias: In terms of its consequences for decisions, the optimistic bias may well be the most significant cognitive bias. Because optimistic bias is both a blessing and a risk, you [...] Read more – ‘Thinking about Thinking’.
Bad emotions, bad parents and bad feedback have more impact than good ones, and bad information is processed more thoroughly than good. The self is more motivated to avoid bad self-definitions than to pursue good ones. Bad impressions and bad stereotypes are quicker to form and more resistant to disconfirmation than good ones. Source Read more – ‘Bad Is Stronger Than Good’.
Albert Speer did very bad things. Although you’ve probably never heard of Speer, at one time he was Hitler’s chief architect and second most powerful man in the Reich. But that’s not why he’s interesting. Speer is one of the few Nazi elite not to be hanged after the Nuremberg trials. In fact, Speer was [...] Read more – ‘Ignoring the Obvious’.
It’s impossible to overstate the influence of Kahneman and Tversky. Like Darwin, they helped to dismantle a longstanding myth of human exceptionalism. Although we’d always seen ourselves as rational creatures—this was our Promethean gift—it turns out that human reason is rather feeble, easily overwhelmed by ancient instincts and lazy biases. The mind is a deeply [...] Read more – ‘Is Self-Knowledge Overrated?’.
In this video, master storyteller Malcolm Gladwell tells the tale of the Norden bombsight, a groundbreaking piece of World War II technology with a deeply unexpected result. Malcolm Gladwell is a staff writer at the New Yorker and the author of The Tipping Point: How Little Things Make a Big Difference, Blink, Outliers and most [...] Read more – ‘Malcolm Gladwell: The strange tale of the Norden bombsight’.
Marketing researchers Rajesh Bagchi and Derick Davis conducted a series of three studies looking at the influence that order, size and calculation effects have on decision making. The resulting analysis showed that when an offer was easy to calculate people rated that offer as better value and were more likely to trial it when it [...] Read more – ‘Anchoring And The Influence of Order’.
They can do it because Apple hasn’t optimized its organization to maximize profit. Instead, it has made the creation of value for customers its priority. When you do this, the fear of cannibalization or disruption of one’s self just melts away. In fact, when your mission is based around creating customer value, around creating great [...] Read more – ‘How Steve Jobs Solved the Innovator’s Dilemma’.
From an essay by George Soros: The typical sequence of boom and bust has an asymmetric shape. The boom develops slowly and accelerates gradually. The bust, when it occurs, tends to be short and sharp. The asymmetry is due to the role that credit plays. As prices rise, the same collateral can support a greater [...] Read more – ‘Boom, Bust, and Asymmetric payoffs’.
Walter Isaacson’s biography of Steve Jobs provides an unprecedented look at the texts which influenced Jobs. There is only one business book on the list, The Innovator’s Dilemma, and it “deeply influenced” Jobs. Of his teen years, Jobs recalled “I started to listen to music a whole lot, and I started to read more outside [...] Read more – ‘What did Steve Jobs Read?’.
“A revolution aims at bringing about fundamental changes in institutions by employing illegal tactics. What is legal and what a society will tolerate are distinct. When there is sympathy for ends, illegal means may become acceptable and the laws against them unenforceable.” From the remarkable autobiography of the Nobel Prize winning social scientist and father [...] Read more – ‘Revolutions’.
This may turn some heads. A new study shows that the “hot hand” really does exist. Mind Hacks explains: A famous 1985 study by psychologist Thomas Gilovich and his colleagues looked at the ‘hot hand’ belief in basketball, finding that there was no evidence of any ‘scoring streak’ in thousands of basketball games beyond what [...] Read more – ‘Is the hot hand real?’.
In this video, Michael Mauboussin, Chief Investment Strategist at Legg Mason, shares three mistakes about how your brain leads you astray with cognitive biases. One tip, Mauboussin offers to counter hindsight bias, is to keep a decision-making journal. Michael Mauboussin is the author of More More Than You Know: Finding Financial Wisdom in Unconventional Places [...] Read more – ‘Michael Mauboussin Explains Three Mistakes You Make’.
As a guest curator for TEDxEast, Dan Ariely shares more of his research and thoughts on self-control and irrationality in this video. Dan Ariely is the best-selling author of The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home and Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That [...] Read more – ‘Video: TEDxEast Guest Curator Dan Ariely on Self-control’.
“Fitness is the central concept in modern Darwinian genetics. It is measured simply by the rate at which an organism reproduces itself. If two organisms compete for occupancy of the same ecological niche, relative fitness determines which will survive. Even small differences in fitness can lead to enormous differences in reproductive success over only a [...] Read more – ‘Models of My Life’.
Gary Klein’s book Streetlights and Shadows takes commonly held maxims for decision making and overturns them, revealing cases where these practices break down Klein’s book does an impressive job showing us where these problems occur and he prescribes how we can be more resilient decision makers in these scenarios. He begins by outlining ten of [...] Read more – ‘Streetlights and Shadows’.
From Daniel Kahneman’s Edge master class on the flaws of intuitive thinking: One way a thought can come to mind involves orderly computation, and doing things in stages, and remembering rules, and applying rules. Then there is another way that thoughts come to mind. You see this lady, and she’s angry, and you know that [...] Read more – ‘Understanding Intuition’.
Let’s return to evolution. Are humans the only species with the capacity for self-deception? No, I do not think so. Lying is widespread throughout the animal kingdom, both between species and also within species. One example is mimics, species that are harmless and tasty but gain protection by resembling a poisonous or distasteful one. Psychologists [...] Read more – ‘Is self-deception correlated with intelligence?’.
If you or your organization develop software this is a worthy read: Any organization that designs a system … will produce a design whose structure is a copy of the organization’s communications structure. In other words, if the people writing a program are divided into four teams, the program they create will have four major [...] Read more – ‘Empirical Software Engineering’.
In an essay in the NYT, Daniel Kahneman adapts part of his new book Thinking Fast, Thinking Slow: The dismal truth about the quality of our predictions had no effect whatsoever on how we evaluated new candidates and very little effect on the confidence we had in our judgments and predictions. I thought that what [...] Read more – ‘Don’t Blink! The Hazards of Confidence’.
In a recent New Yorker, Evan Hughes explores how personal friendship, rivalry, and jealousies among a group of writers that included Jeffery Eugenides, Jonathan Franzen, Mary Carr, and David Foster Wallace pushed each of them to become better. Eudenides’ new book, The Marriage Plot, sparked the story. It was another novel-in-manuscript that had propelled Franzen [...] Read more – ‘What fuels great fiction?’.
Is addiction about the reward of dopamine or the anticipation of that reward? Neurologist Robert Sapolsky explains that it’s the uncertainty of the reward that drives behaviour. “Dopamine” Sapolsky argues, “is about the pursuit of happiness not the happiness itself.” Interestingly, we are able to keep our dopamine levels up for decades and decades waiting [...] Read more – ‘Is addiction about the reward or the anticipation of that reward?’.
People have a difficult time comprehending the meaning of small probabilities. Many individuals exhibit behavior that implies they are either unconcerned or extremely risk averse when deciding whether to purchase insurance against events that have a small probability of occurring. Unconcerned individuals are not willing to pay a penny, even if premiums are subsidized, whereas [...] Read more – ‘Insurance and the role of worry’.
From the Economist: Satire and idealism have been the yin and yang of management wisdom for nearly a century. Emerging humor by pioneers such as Randall Munroe of xkcd, High Macleod of Gaping Void and the creative team behind “The Office” reveal many things about the landscape of human potential that earnest and idealistic management [...] Read more – ‘The Gervais Principle’.
From the Boston Globe: Researchers asked people to write about situations when they felt envy and then to read fictitious interviews of other people. An envious mindset increased the time spent reading the interviews and improved subsequent recall for details from the interviews. In another experiment, researchers asked people to read fictitious interviews of wealthy [...] Read more – ‘Can Jealousy Improve Your Memory?’.
If leaders were chosen randomly, would our productivity increase? A paper by S. Alexander Haslam, called “Inspecting the emperor’s clothes: evidence that random selection of leaders can enhance group performance” argues that random leaders are more effective. Interestingly, in some follow up work, the authors also found that groups rated random leaders as less effective [...] Read more – ‘What happens if you select leaders at random?’.
This is the best risk management rule ever: If you have the upside, you have to keep the downside. Taleb posted this on his facebook wall, which is relevant to the video above: Hammurabi’s code, ~3800 years ago, removed the agency problem as a condition for transaction: “If a builder builds a house and the [...] Read more – ‘Video: Nassim Taleb on Wall Street Protest, Banking’.
Some thoughts from occupywriters.com: People who say money doesn’t matter are like people who say cake doesn’t matter—it’s probably because they’ve already had a few slices. …Historically, a story about people inside impressive buildings ignoring or even taunting people standing outside shouting at them turns out to be a story with an unhappy ending. Continue [...] Read more – ‘Occupy Farnam Street’.
In the latest Wired, Dan Ariely talks about persuasion in the medical field. This is something we’ve covered before. One tactic was to hire doctors to lecture other practitioners about a drug. The reps weren’t interested in what the audience took from the talk, but in the effects on the speaker himself. They found that [...] Read more – ‘Are Dr.’s blind to being influenced?’.
Focused attention can make you oblivious to sights and sounds that would otherwise be glaringly obvious. This has been confirmed, with a great example being the “Invisible Gorilla” experiment, by psychologists Dan Simons of the University of Illinois and Chris Chabris of Union College, New York. Guardian columnist Mocosandi writes: Simons and Chabris investigated inattentional [...] Read more – ‘The illusion of attention’.
“These findings do not mean that people enjoy painful experiences, such as filling out their income-tax forms, or that people enjoy things because they are associated with pain. What they do show is that if a person voluntarily goes through a difficult or a painful experience in order to attain some goal or object, that [...] Read more – ‘How a little pain makes something more attractive’.
There is a ton of psychology at work in Apple’s new virtual assistant Siri and if they succeed, it will be much harder to change phones. This : The Siri group, one of the largest software teams at Apple, fine-tuned Siri’s responses in an attempt to forge an emotional tie with its customers. To that [...] Read more – ‘Brand Attachment Through Emotion’.
On any given day we’re lied to from 10 to 200 times, and the clues to detect those lie can be subtle and counter-intuitive. Pamela Meyer, author of Liespotting, shows the manners and “hotspots” used by those trained to recognize deception — and she argues honesty is a value worth preserving. You can purchase Pamela’s [...] Read more – ‘(Video) How to spot a liar’.
Remember the episode of Seinfeld called “The Caddy?” It’s the one where George ends up getting promoted for locking his car keys in his car. George: Assistant to the General Manager!! You know what that means?!? He’d could be askin’ my advice on trades! Trades, Jerry, I’m a heartbeat away! Jerry: That’s a hell of [...] Read more – ‘The illusion of hard work’.
There are actually few organizations that can support passionate employees—even if they say they want them. That’s because the original industrial revolution was designed to support productivity … Managers want passionate employees, but don’t always know how to manage them. Passionate employees question things, probe and push. Who’s got the time to deal with that? [...] Read more – ‘Passion vs. Productive’.
The Web offers choice and competition that is only one click away. But in practice, the power of defaults often matters most. This article in the NYT flags some interesting points on technological defaults and privacy. THE default values built into product designs can be particularly potent in the infinitely malleable medium of software, and [...] Read more – ‘The Default Choice, So Hard to Resist’.
Jonah Lehrer reviews Daniel Kahneman’s new book Thinking, Fast and Slow in the WSJ: In Mr. Kahneman’s important new book, “Thinking, Fast and Slow,” his first work for a popular audience, he outlines the implications of this new model of cognition. What are the most important mental errors that we all make? And can they [...] Read more – ‘The Science of Irrationality’.
“The first principle is that you must not fool yourself–and you are the easiest person to fool.” —Richard Feynman Cargo cult science follows all the apparent precepts and forms of scientific investigation, but misses something essential. But then I began to think, what else is there that we believe? (And I thought then about the [...] Read more – ‘Cargo Cult Science’.
This isn’t very definitive, but if you’re “old” you’ll appreciate it: It appears that 20-somethings are more efficient at identifying the most rewarding choices, but slower to form hypotheses about the dynamic relationships between past and future choices. The latter form of problem solving, the scientists emphasize, is much closer to the dilemmas faced in [...] Read more – ‘Youth vs Age: Who Makes the Better Decisions?’.
The trap for the helper is to move too rapidly to solutions, to provide advice or guidance on the hypothetical problem and, thereby, cut off the opportunity to learn what the real problem might be. Working the hypothetical problem does little to equilibrate the relationship. Source: Helping: How to Offer, Give, and Receive Help Read more – ‘Are you too quick to help?’.
There is a growing movement to change the way organizations make decisions – from a reliance on a leader’s “gut instinct” to increasing data-based analytics. Interesting things happen in organizations when you argue more over data and less on subjective thoughts. The authors below point out that organizations employing data driven decisions tend to perform [...] Read more – ‘How do firms make a better decision?’.
I finally got around to reading Susanna Braund’s translation of Seneca’s De Clementia, which is well worth the read. Seneca addresses De Clementia to the young roman emperor Nero with the aim of depicting the ideal ruler. Braund goes to great lengths to establish the literary, philosophical, and political traditions that influenced the work but [...] Read more – ‘Why is the power of tyrants short-lived?’.
Ted Cadsby writes “the following five books are a small sample from a longer list of must-reads, but they have two things in common. First, they forced me to confront how superficial and inadequate my thinking was in assessing different kinds of complex problems. Second, they took the important next step of introducing more sophisticated [...] Read more – ‘Five Must-Reads for Tackling Complex Problems’.
If you’re not following me on twitter, here is a sample of what you missed over the last week: Photo Essay on the Construction of the Hover Dam http://goo.gl/SoOVG More money? More problems : materialistic couples have more money and more problems http://goo.gl/hY3it Are Workers Too Productive? http://goo.gl/seVHD David Foster Wallace, Jonathan Franzen, and Jeffrey [...] Read more – ‘Not following @farnamstreet on Twitter? Here is what you’re missing’.
The paper below finds a link between having a sense of power and having a disregard for advice. According to the paper’s authors, power increases confidence, which can lead to an excessive belief in one’s own judgment. In a sense, powerful people think they are right because of their place in the organization, not because [...] Read more – ‘The Decision-Making Flaw in Powerful People’.
Jon Ronson, author of The Psychopath Test, reveals an interesting email he received from a reformed psychopath: Well, lets look at what (bright) psychopaths are naturally quite exceptional at… We are good at identifying, very rapidly, extreme traits of those around us which allows us to discern vulnerabilities, frailties, and mental conditions. It also makes [...] Read more – ‘The Psychopath Test’.
We think narcissists rise to the top because their qualities – confidence, dominance, authority, and self-esteem make them good leaders. But is this true? “Our research shows that the opposite seems to be true,” says Barbora Nevicka, a PhD candidate in organizational psychology, describing a new study. It turns out that the narcissists’ preoccupation with [...] Read more – ‘Reality at Odds With Perceptions: Narcissistic Leaders and Group Performance’.
In a recent column for Foriegn Policy, Vaclav Smil argues Americas real problems are wasteful private energy use and the near-total absence of effective, down-to-earth, long-term policies. The parallels with America’s great public-health epidemic of obesity are inescapable. Even after throwing away some 40 percent of its abundant food supply, the United States still has [...] Read more – ‘Americans use more energy per capita than any other country, and have nothing to show for it.’.
A preview of Malcolm Gladwell’s talk at the New Yorker Conference discussing deterrence. Malcolm Gladwell is a staff writer at the New Yorker and the author of The Tipping Point: How Little Things Make a Big Difference, Blink, Outliers and most recently, What the Dog Saw. Read more – ‘Malcolm Gladwell: The Virtues of Obnoxiousness (video)’.
A wonderful essay by Atul Gawande in the New Yorker on whether we need a personal coach. …I’d paid to have a kid just out of college look at my serve. So why did I find it inconceivable to pay someone to come into my operating room and coach me on my surgical technique? …Élite [...] Read more – ‘Top athletes and singers have coaches. Should you?’.
Jonah Lehrer on Steve Jobs’ emphasis of consilience over convenience. Perhaps the clearest demonstration can be seen in the design of the Pixar campus. In November, 2000, Jobs purchased an abandoned Del Monte canning factory on sixteen acres in Emeryille, just north of Oakland. The original architectural plan called for three buildings, with separate offices [...] Read more – ‘Consilience Over Convenience’.
In The Black Swan: The Impact of the Highly Improbable, Taleb defined a black swan as “an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact…. Third, [...] Read more – ‘What is a black swan?’.
Most of us believe we are rational decision makers. But medical decisions are especially complex, thanks to the numerous unknowns and the uniqueness of each person’s body. Groopman and Hartzband (in Your Medical Mind) explore two sets of biases that affect patient decisions. We can be minimalists, preferring to do as little as possible, or [...] Read more – ‘How Patients Think, and How They Should’.
Jonah Lehrer comments on a new study forthcoming in Psychological Science led by Jason Moser at Michigan State that helps explain why some people are more effective at learning from their mistakes than others. …the scientists applied a dichotomy first proposed by Carol Dweck, a psychologist at Stanford. In her influential research, Dweck distinguishes between [...] Read more – ‘Why are some people so much more effective at learning from their mistakes?’.
“What we’re trying to do is be the modern-day Pavlovs and ring your bell with these images.” “I make my living basically taking food and painting a reality with it,” says Mr. Somoroff, leaning back in a chair in his office as the team preps another set-up. “And if I succeed in a given moment, [...] Read more – ‘Why does food look so good on television?’.
“People align themselves with a brand that reflects what they see when they look in the mirror…” Happiness Tactic No. 1: Make Us Feel Like a Kid Again “Certain companies know that they have something—a classic label, a certain smell or taste or feel—that make people remember their childhoods, a time people relate to being [...] Read more – ‘The Happiest Brands In the World’.
Peter Thiel: The state of true science is the key to knowing whether something is truly rotten in the United States. But any such assessment encounters an immediate and almost insuperable challenge. Who can speak about the true health of the ever-expanding universe of human knowledge, given how complex, esoteric, and specialized the many scientific [...] Read more – ‘The End of the Future’.
“…death is the destination we all share. No one has ever escaped it. And that is as it should be, because death is very likely the single best invention of life. It’s life’s change agent; it clears out the old to make way for the new … Your time is limited, so don’t waste it [...] Read more – ‘Death is the destination we all share.’.
On that note, leading clevers require some non-traditional leadership skills. Please describe a couple of them. We have a full list of ‘do’s and don’ts’ in the book. We say things like: Do explain and persuade rather than tell people what to do; do use your expertise rather than rely on the hierarchy; do encourage [...] Read more – ‘How To Lead Clever People’.
People everywhere differentiate each other by liking (warmth, trustworthiness) and by respecting (competence, efficiency). Essentially they ask themselves: (1) Is this person warm? and (2) Is this person competent? The “warmth dimension captures traits that are related to perceived intent, including friendliness, helpfulness, sincerity, trustworthiness and morality, whereas the competence dimension reflects traits that are [...] Read more – ‘Two Questions Everyone Asks Themselves When They Meet You’.
We discount the pain of people we don’t like. Pain “of disliked patients expressing high intensity pain was estimated as less intense than pain of liked patients expressing high intensity pain.” If a patient is not likeable, will he or she be taken less seriously when exhibiting or complaining about pain? Reporting in the October [...] Read more – ‘We discount the pain of people we don’t like’.
Vaclav Smil pens an excellent article comparing Thomas Edison’s and Steve Job’s accomplishments: Some 130 years after Edison’s remarkable creation of the electricity system, there still remains no doubt about the fundamental and truly epochal nature of his contributions: the world without electricity has become unimaginable. I bet that 130 years from now our successors [...] Read more – ‘Why Jobs Is No Edison’.
Neal Stephenson with some interesting thoughts: The illusion of eliminating uncertainty from corporate decision-making is not merely a question of management style or personal preference. In the legal environment that has developed around publicly traded corporations, managers are strongly discouraged from shouldering any risks that they know about—or, in the opinion of some future jury, [...] Read more – ‘Innovation Starvation’.
Awesome video of Richard Feynman talking about beauty: Read what you’ve been missing. Subscribe to Farnam Street via Email, RSS, or Twitter. (via @matthiasrascher) Read more – ‘Richard Feynman on Beauty’.
Earlier this year, Martin Lindstrom (author of Brandwashed) carried out an fMRI experiment to find out weather iPhones were as addictive as alcohol, cocaine, shopping or video games. As with most additions, the chemical driver of this process is the feel-good neurotransmitter dopamine. Our 16 subjects were exposed separately to audio and to video of [...] Read more – ‘You Love Your iPhone. Literally.’.
Daniel Kahneman answers: When you make your own sandwich, you anticipate its taste as you’re working on it. And when you think of a particular food for a while, you become less hungry for it later. Researchers at Carnegie Mellon University, for example, found that imagining eating M&Ms makes you eat fewer of them. It’s [...] Read more – ‘Why Do Sandwiches Taste Better When Someone Else Makes Them?’.
Not according to this insightful piece by Chad Ford who argues that professional basketball teams are actually getting worse at picking players, despite all of their new data-points, statistical tools and models. The NBA draft is both an art and a science. Over the years, the balance between the two has gotten out of whack. [...] Read more – ‘Are we getting better at evaluating NBA talent?’.
Our resistance to uncertainty makes the “old ways” far sticker than warranted in light of the benefits of new creative ideas. Our preference to avoid uncertainty causes us to eschew the novel in favor of the tried-and-tested. Our results show that regardless of how open minded people are, when they feel motivated to reduce uncertainty [...] Read more – ‘The Psychological Bias Against Creativity’.
NPR reports on Gene Heyman’s book Addiction: A Disorder of Choice Here is a remarkable yet rarely remarked fact about addiction. Only a very small portion of drug users are drug addicts. About 15 percent of people who drink develop alcoholism; about 10 percent of those who experiment with drugs become drug addicts. (See Heyman’s [...] Read more – ‘Do spouses raise the cost of addiction?’.
“Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.” —Warren Buffett Read more – ‘Warren Buffett on Temperament’.
One of the most interesting studies I’ve come across is the case of Dr. Myron L. Fox. Dr. Fox, an authority on the application of mathematics to human behavior, presented a lecture on “Mathematical Game Theory as Applied to Physician Education” to a group of highly trained educators. These educators were then asked to rate [...] Read more – ‘Rating Teachers is Educational Seduction’.
This mental model refers to the pursuit of perfect fairness which causes a lot of terrible problems in system function. Charlie Munger, twice referenced this mental model. First in a UCCB talk: “It is not always recognized that, to function best, morality should sometimes appear unfair, like most worldly outcomes. The craving for perfect fairness [...] Read more – ‘Mental Model: Kantian Fairness Tendency’.
“Moderate levels of embarrassment are signs of virtue” If tripping in public or mistaking an overweight woman for a mother-to-be leaves you red-faced, don’t feel bad. A new study from the University of California, Berkeley, suggests that people who are easily embarrassed are also more trustworthy, and more generous. In short, embarrassment can be a [...] Read more – ‘Easily embarrassed? Study finds people will trust you more’.
“The innate force of matter is a power of resisting, by which every body, as much as in it lies, endeavors to preserve in its present state.” —Newton Interesting. “A policy’s attractiveness increases when it is labeled status quo.” Three types of tendencies confer advantage to status quo: 1. Tendencies to refrain from action altogether. In [...] Read more – ‘Advantage: Status quo’.
David Wilson offers a thumbnail sketch of the current state of scientific knowledge about cultural evolution in an interesting response to Jerry Coyne’s tepid review of his latest book: The Neighborhood Project: Using Evolution to Improve My City, One Block at a Time. 1. Darwin’s theory of evolution originally said nothing about genetics. It was [...] Read more – ‘A thumbnail sketch of scientific knowledge about cultural evolution’.
Retro but still relevant. How to Create Advertising That Sells By David Ogilvy Ogilvy & Mather has created over $1,480,000,000 worth of advertising, and spent $4,900,000 tracking the results. Here, with all the dogmatism of brevity, are 38 of the things we have learned. 1. The most important decision. We have learned that the effect [...] Read more – ‘Create Advertising That Sells’.
An interesting new paper in the Journal of Marketing Research explores the effect of relaxation on consumer behavior. People who feel relaxed spend far more easily than those who feel less at ease. It turns out that relaxation increases the monetary valuation of products “rather than a deflation of value by less-relaxed individuals.” Jonah Lehrer [...] Read more – ‘Feeling relaxed? Don’t shop’.
Scary stuff. …the ethical and legal implications of the new technology already go far beyond the relatively circumscribed issue of targeted killing. Military robots are on their way to developing considerable autonomy. As noted earlier, UAVs can already take off, land, and fly themselves without human intervention. Targeting is still the exclusive preserve of the [...] Read more – ‘Predators and Robots at War’.
Some amazing insights on Steve Jobs (and marketing) from an interview with John Sculley, the former CEO of Apple: We did some research and we discovered that when people were going to serve soft drinks to a friend in their home, if they had Coca Cola in the fridge, they would go out to the [...] Read more – ‘John Sculley On Steve Jobs’.
The cost of spin: …There are so many costs to a culture of spin. It’s kind of a situation of mutually assured destruction, where you have this arms race of good news, and the price you pay for being candid about your missteps or problems on the horizon is that everyone will turn to your [...] Read more – ‘The cost of spin’.
The safest cities in America were all incorporated before 1930, when streets were grids. “What intuitively made sense to us a hundred years ago can be justified and measured in foreclosure rates, vehicle miles traveled, and traffic fatalities.” Cul-de-sacs, it turns out, are inefficient and dangerous. The FHA never put it quite this way, but [...] Read more – ‘Debunking the Cul-de-Sac’.
Advertisers come at you in two ways. There is the just-the-facts type of ad, called “logical persuasion,” or LP (“This car gets 42 miles to the gallon”), and then there is the ad that circumvents conscious awareness, called “non-rational influence,” or NI (a pretty woman, say, draped over a car). Despite research surrounding the notion [...] Read more – ‘Logical Persuasion or Non-rational Influence’.
Fascinating: We like to think that others agree with us. It’s called “social projection,” and it helps us validate our beliefs and ourselves. Psychologists have found that we tend to think people who are similar to us in one explicit way—say, religion or lifestyle—will act and believe as we do, and vote as we do. [...] Read more – ‘Do the silent agree with us?’.
Great thoughts on instilling a challenging mindset in children: We trust experts because there is no way that we can learn everything that we need to know to understand every issue that affects us. We put our trust in those who offer good work. But how do we decide who those experts are? Without the [...] Read more – ‘Kids need fewer facts, more crap detection’.
“We prepare children to learn how to learn, not how to take a test.” Finland has vastly improved in reading, math and science literacy over the past decade while other nations struggle. Why? The article below argues that its teachers are trusted to do whatever it takes to turn young lives around. The transformation of [...] Read more – ‘Why Are Finland’s Schools Successful?’.
Although absolute power is supposed to corrupt absolutely, a recent experiment suggests that power without status is the most corrupting. In the experiment, students were told they would be interacting with a fellow student in a business exercise and were randomly assigned to either a high-status “Idea Producer” role or low-status “Worker” role. They were [...] Read more – ‘When power makes us cruel’.
Sewage water, it seems, is thought of as contaminated even once every last contaminant has been removed. As the psychologist Carol Nemeroff told NPR: “It is quite difficult to get the cognitive sewage out of the water, even after the real sewage is gone.” In his highly readable book On Second Thought: Outsmarting Your Mind’s [...] Read more – ‘The Cooties Heuristic’.
An insightful piece by Martin Lindstrom on priming. As Lindstrom points out in his new book Brandwashed, retailers are becoming masters at the art of seduction. Consider Whole Foods’s store at Columbus Circle in New York City: As you descend the escalator you enter the realm of a freshly cut flowers. These are what advertisers [...] Read more – ‘How Whole Foods “Primes” You To Shop’.
Believing you’re better than you are may help you succeed or fail. The results, published today in the journal Nature, showed that overconfidence pays off only when there is uncertainty about opponents’ real strengths, and when the benefits of the prize at stake is sufficiently larger than the costs. “So let’s say you and I [...] Read more – ‘Evolution of Narcissism: Why We’re Overconfident, and Why It Works’.
The Egyptians have pyramids, the Chinese have a Great Wall, the British have immaculate lawns, the Germans have castles, the Dutch have canals, the Italians have grand churches. And Americans have shopping centers.* An insightful study on why Americans love chain stores and the lure of familiarity: “Our main thesis is that residential mobility, the [...] Read more – ‘Why Americans Love Chain Stores’.
Nassim Taleb at UPenn talking about anti-fragility: There’s something called action bias. People think that doing something is necessary. Like in medicine and a lot of places. Like every time I have an MBA—except those from Wharton, because they know what’s going on!—they tell me, “Give me something actionable.” And when I was telling them, [...] Read more – ‘Taleb: People Kept Telling Me I Was an Idiot’.
Priming represents a powerful idea—that very subtle cues can shape people’s unconscious minds to think and act in certain ways. On Second Thought author Wray Herbert explaines how we can minimize priming effects: New York University psychological scientist Peter Gollwitzer believes that we do have such power, and he set out to demonstrate it in [...] Read more – ‘Are we powerless to priming?’.
Why do teenagers act the way they do? Viewed through the eyes of evolution, their most exasperating traits may be the key to success as adults. …Selection is hell on dysfunctional traits. If adolescence is essentially a collection of them—angst, idiocy, and haste; impulsiveness, selfishness, and reckless bumbling—then how did those traits survive selection? They [...] Read more – ‘Beautiful Minds: Why teenagers act they way they do?’.
NPR on Gene M. Heyman’s 2009 book Addiction: A Disorder of Choice: ..the distinctive hallmark of addiction is the fact that in addiction the normal interplay we’ve just been contemplating between choice, value and preference breaks down. And this is because addictive substances are, in Heyman’s phrase, behaviorially toxic. They neutralize the value of everything [...] Read more – ‘Addiction: A Disorder Of Choice?’.
Shelley Adler, author of Sleep Paralysis: Night-mares, Nocebos, and the Mind-Body Connection, comes to a stunning conclusion: People can be killed for their beliefs in the sprit world. “If you were born under a bad sign, you died five years younger from the same diseases as people born under good signs. But only if you [...] Read more – ‘The Dark Side of the Placebo Effect: When Intense Belief Kills’.
If you were browsing a book in a store and the jacket blurb said, “This is one of the best books of the year!” – amazon.com …would you be inclined to buy it? Before you say no, here’s something to think about. We have a deep-seated sense of duty to authority. If we’re uncertain about [...] Read more – ‘Amazon Reviewer Objectivity’.
George Soros with some shrewd insight: It takes a crisis to make the politically impossible possible. Under the pressure of a financial crisis the authorities take whatever steps are necessary to hold the system together, but they only do the minimum and that is soon perceived by the financial markets as inadequate. That is how [...] Read more – ‘How to make the politically impossible possible’.
We all love a good story. Knowing how the story unfolds doesn’t change that: Stories are a universal element of human culture, the backbone of the billion-dollar entertainment industry, and the medium through which religion and societal values are transmitted. The enjoyment of fiction through books, television, and movies may depend, in part, on the [...] Read more – ‘Story Spoilers Don’t Spoil Stories’.
David Books, author of The Social Animal, with an excellent column on the planning fallacy: In his forthcoming book (now released), “Thinking, Fast and Slow” (I’ll write more about it in a couple of weeks), Kahneman calls this the planning fallacy. Most people overrate their own abilities and exaggerate their capacity to shape the future. [...] Read more – ‘The Planning Fallacy’.
Ray Dalio, the sixty-one-year-old founder of Bridewater Associates, the world’s biggest hedge fund, offers the following management advice. Dalio says “Taken together, these principles are meant to paint a picture of a process for the systematic pursuit of truth and excellence and for the rewards that accompany this pursuit. I put them in writing for [...] Read more – ‘Management Lessons from Ray Dalio’.
Putting people and things into categories is something we all do. It’s a useful shortcut but reveals biases. And it plays a role in everything from ethnic violence to childhood development. The Browser’s excellent five-books interview with Susan Gelman: People have all kinds of cognitive biases, ways that we look at the world that are [...] Read more – ‘Putting people and things into categories’.
A great read in the NYT: “Whether it’s the pioneer in the Conestoga wagon or someone coming here in the 1920s from southern Italy, there was this idea in America that if you worked hard and you showed real grit, that you could be successful,” he said. “Strangely, we’ve now forgotten that. People who have [...] Read more – ‘What if the Secret to Success Is Failure?’.
Steve Martin, co-author of Yes! 50 Secrets from the Science of Persuasion, writes “…asking people what persuades them to make decisions is not that helpful — primarily because they won’t know.” Behavioural scientist Wesley Schultz has some compelling evidence of why asking people what they think influences their decisions is largely ineffective. In one set [...] Read more – ‘The difference between what people say and what they think’.
The admirable goal of increasing diversity in organizations has led, inevitably, to an increase in interactions between members of majority groups and members of historically underrepresented or stigmatized groups. Problematically, interactions between members of such groups are fraught with opportunities for things to go awry: stigmatized individuals must worry that non-stigmatized individuals hold prejudiced attitudes [...] Read more – ‘The persuasive power of stigma?’.
The quantity of students’ homework is a lot less important than its quality. And evidence suggests that as of now, homework isn’t making the grade. Here are some simple and easy to carry out ideas (backed by science) that will help you improve your ability to absorb, retain, and apply knowledge: “Spaced repetition” is one [...] Read more – ‘The Trouble With Homework: Using Science to Learn Better’.
If you’re looking to gain a scientific advantage over that two-year-old that controls your life, this might be the book for you. The books authors, Aamodt and Wang, offer some insights from neuroscience on how you can get your child to sleep (use a routine); improve their vision (lots of time outdoors); and promote the [...] Read more – ‘Parenting tips from neuroscience’.
If you’re reading this at work don’t feel guilty. According to a new study, web surfing may actually help improve your performance. But don’t check email. “Web browsing can actually refresh tired workers and enhance their productivity, compared to other activities such as making personal calls, texts or emails, let alone working straight through with [...] Read more – ‘Web surfing at work increases performance’.
Aristotle claimed that poetry—at the time he meant the epics of Homer and other tragedies, which we now call fiction—was better than history. He argued that fiction tells us what is possible, whereas history tells us only what has happened. Fiction stretches our imaginations and, in doing so, opens a window into ourselves and others. [...] Read more – ‘Is reading fiction good for you?’.
Something to ponder. A sobering excerpt from Vaclav Smil’s Global Catastrophes and Trends: The Next Fifty Years: “The first is that even the most assiduous deployment of the best available preventive measures (smart policing, clever informants, globe-spanning, electronic intelligence, willingness to undertake necessary military action) will not be able to thwart all planned attacks. The [...] Read more – ‘Several uncomfortable realities’.
How will we feed 9 billion or more people by 2050? “Where,” Gareth Cook asks in his op-ed in the Boston Globe, “on this ever more crowded planet, will we grow all of it?” …Where will the food come from? Today, we use about a third of the planet’s land surface for agriculture, according to [...] Read more – ‘The limits of farming’.
The part on Alfred Marshall looks really interesting. Roger Lowenstein gives Sylvia Nasar’s new book, Grand Pursuit: The Story of Economic Genius, five stars in his review column. Grand Pursuit retraces much of the same ground as Robert L. Heilbroner’s 1953 classic The Worldly Philosophers—which is to say, Nasar gives us Karl and Jenny Marx [...] Read more – ‘The Story of Economic Genius’.
The status-update era is changing the annual performance review. But the question reamains: Do performance reviews work? For most companies, employee reviews are still an annual rite of passage. Some 51% of companies conduct formal performance reviews annually, while 41% of firms do semi-annual appraisals, according to a 2011 survey of 500 companies by the [...] Read more – ‘Do performance reviews work?’.
Hans Magnus calls the people who wish to end their life in a grand bloddy finale “radical losers.” Hundreds of years ago, the ability for these people to inflict massive damage was limited to stone throwing. Recently, however, their ability to inflict evil or harm onto others has grown exponentially. Hans Magnus’ excellent essay, The [...] Read more – ‘The radical loser’.
In the Globe and Mail, Michael Ignatieff has an excellent column on the age of sovereign failure: It is always good to be skeptical about what governments tell us. But we are beyond skepticism now, into a deep and enduring cynicism. There will come a day when they are not crying wolf and we will [...] Read more – ‘The age of sovereign failure’.
Why do we like an original painting better than a forgery? In this video, Paul Bloom argues that our beliefs about the history of an object profoundly changes how we experience it. Bloom argues that we value an expensive bottle of wine from a friend of ours more than an identical one from our employer, [...] Read more – ‘How our perceptions change our experiences’.
In this TED talk, chemist Lee Cronin asks what is the minimum unit of matter that can under go Darwinian evolution? The answer is, in fact, a single cell. Before life existed on Earth, there was just matter, inorganic dead “stuff.” How improbable is it that life arose? And — could it use a different [...] Read more – ‘Making matter come alive’.
What trick can you learn from the most successful sales person ever? How many choices are too many? How can you persuade people to keep appointments? How Apple is brilliantly using a 100-year-old persuasion strategy. Storytelling in Psychology and Marketing. The most brilliant marketing in the history of wine. Why Performance Won’t Get You Promoted. [...] Read more – ‘How you can naturally influence others’.
An excerpt from an awesome article by Herbert Simon: We have seen that a major component of expertise is the ability to recognize a very large number of specific relevant cues when they are present in any situation, and then to retrieve from memory information about what to do when those particular cues are noticed. [...] Read more – ‘On expertness and intuition’.
Robert Whitaker’s Anatomy of an Epidemic is a shocking book. This book explores some hard questions. Why has the number of disabled mentally ill in the United States tripled recently? Are the long-term health outcomes of this medication better than no medication? Once we start taking drugs for our mental illnesses, do we end up [...] Read more – ‘Anatomy of an Epidemic’.
The progress of science is commonly perceived of as a continuous, incremental advance, with new discoveries added to the existing body of scientific knowledge. However, Thomas Kuhn argues that the history of science tells a different story, in which discontinuities are crucial. He argues that science proceeds with a serious of revolutions. “A prevailing theory [...] Read more – ‘How Scientific Advancement Happens’.
Johnah Lehrer, author of How We Decide, with a column in the WSJ on our ability to focus. The key is strengthening what psychologists call “executive function,” a collection of cognitive skills that allow us to exert control over our thoughts and impulses. When we resist the allure of a sweet treat, or do homework [...] Read more – ‘Learning How to Focus on Focus’.
A new study explains why people take stupid chances in a group of friends that they would never take by themselves. It seems, the human brain places more value on winning in a social setting than it does on winning when you’re alone. The researchers found that the striatum, a part of the brain associated [...] Read more – ‘Is succumbing to peer pressure hard-wired into our brains?’.
Faced with too many choices (see Do You Make Too Many Decisions?), people find it difficult to stay focused long enough to handle even routine tasks and decisions. We have a limited amount of cognitive energy and using it ensures that subsequent tasks are increasingly difficult. In addition, cognitive depletion makes it easier for others [...] Read more – ‘The role of cognitive depletion in how we believe’.
From London to the Middle East riots have shaken political stability. Why? Is it human nature? “Imagine you’re on a bus,” explains Vaughan Bell, clinical research psychologist at King’s College London. “It’s full of people and you have to jam into an uncomfortable seat at the back.” Very little connects you with any of the [...] Read more – ‘Freedom to Riot: On the Evolution of Collective Violence’.
A column in the Boston Globe asks how we insulate ourselves from conflicts of interest? The most popular solution—disclosing them—turns out not to help. …transparency, the rationale goes, encourages those in authority to behave more ethically, and lets those relying on their guidance take the bias into consideration. But recent research by experimental psychologists is [...] Read more – ‘Deeply conflicted’.
It seems the only thing western society is good at delaying is delayed gratification. The study below points out that the capacity to resist temptation was relatively stable over a 40 year span. Put differently, children who were able to resist temptation grow into adults who are able to resist temptation. Whereas children who had [...] Read more – ‘Is the capacity to resist temptation stable from toddlers to adults?’.
Ryan Avent argues that when it comes to economic growth and the creation of jobs, the denser the city the better. An essay, adapted from Avent’s book The Gated City, appeared in the New York Times: …In 2009, the average Silicon Valley household earned about $85,000. Despite this, over 500,000 residents of the Bay Area [...] Read more – ‘Does increasing the density of cities lead to better jobs?’.
It’s impossible not to. Sam McNerney writes: For example, back in the early 1980s psychologists John Darley and Paget Gross showed a video of a girl, ‘Hannah’ to two different groups, one who saw her in an affluent neighborhood and the other who saw her in a poor neighborhood. Then, Darley and Gross asked both [...] Read more – ‘Do we judge a book by its cover?’.
A follow up to Do You Make Too Many Decisions? Steven Pinker reviews Willpower: Rediscovering the Greatest Human Strength in the Sunday NYT Book review: What is this mysterious thing called self-control? When we fight an urge, it feels like a strenuous effort, as if there were a homunculus in the head that physically impinged [...] Read more – ‘The Sugary Secret of Self-Control’.
In most workplaces a failure to consider sound evidence inflicts unnecessary damage on “employee well-being and group performance.” But Jeffrey Pfeffer and Robert Sutton argue, in the New York Times, that it doesn’t have to be that way: Consider the issue of incentive pay. Many people believe that paying for performance will work in virtually [...] Read more – ‘Trust the Evidence, Not Your Instincts’.
Deborah Blum with an excellent article on the history of food poisoning: … Since that time, really dangerous food—the term food poisoning, even—has tended to refer to bacterial contamination issues rather than toxic-chemical contamination. Still, the public continues to worry about pesticide residues, preservatives, and food dyes—the FDA recently investigated concerns that food dyes might [...] Read more – ‘The history of food poisoning’.
“People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the 100 other good ideas that there are. You have to pick carefully. I’m actually as proud of the many things we haven’t done as the things we [...] Read more – ‘Steve Jobs: The Focus to Say No’.
Is the velocity of making the impossible possible increasing? I’ve had to persuade myself to believe in the impossible more often. In the past several decades I’ve encountered a series of ideas that I was conditioned to think were impossibilities, but which turned out to be good practical ideas. For instance, I had my doubts [...] Read more – ‘Why the Impossible Happens More Often’.
It’s comforting to believe that the world is simple and can easily be guided by simple heuristics and models. Our reality, however, is vastly more complex. Dan Airely argues that we need to spend more time helping people understand and deal with complexity and less time concocting dumbing-down mechanisms. A perfect example of what happens [...] Read more – ‘Asking the right and wrong questions’.
Reinsurers make their living thinking about the things that almost never happen and are devastating when they do. “The psychology piece dominates, even in boardrooms,” says David Bresch. “People measure against the perceived reality around them and not against possible futures.” Bresch is in charge of sustainability and risk management for Swiss Re, founded in [...] Read more – ‘The God Clause’.
Jason Zweig with an excellent column on how the halo effect can lead investors astray: But halos also can lead investors astray. As management professor Phil Rosenzweig points out in his book “The Halo Effect,” a soaring stock price can lead investors to regard the company’s managers as focused, disciplined and passionate—while, in the negative [...] Read more – ‘The Halo Effect: How it leads investors astray’.
David Books, author of The Social Animal: The Hidden Sources of Love, Character, and Achievement, with an excellent column on the diminishing returns of luxury living. Often, as we spend more on something, what we gain in privacy and elegance we lose in spontaneous sociability. I once visited a university that had a large, lavishly [...] Read more – ‘The Diminishing Returns of Luxury Living’.
Sixty-six years ago, we dropped a nuclear bomb on Hiroshima. Now, some historians say that’s not what ended the war. In recent years, however, a new interpretation of events has emerged. Tsuyoshi Hasegawa – a highly respected historian at the University of California, Santa Barbara – has marshaled compelling evidence that it was the Soviet [...] Read more – ‘Why did Japan surrender?’.
‘Nudging’ on its own is unlikely to be successful in changing the population’s behaviour. That is the main conclusion of the House of Lords Science and Technology Sub-Committee’s report, Behaviour Change, published today. The report – the culmination of a year-long investigation into the way the Government tries to influence people’s behaviour using behaviour change [...] Read more – ‘Nudging Alone Not Enough’.
“It would be wrong [to conclude from the new study] that nature doesn’t play a role. [But] nurture plays a substantial role, large enough that we can even see a gender difference wiped out.” Indeed, culture is not limited simply to encouragement of young girls in grade-school math. Studies that have looked at gender gaps [...] Read more – ‘The Math Gender Gap: Nurture Trumps Nature’.
Jonah Lehrer reports: Amid all this punctiliousness, however, the rulebook contains one glaring omission: There are no rules about the surface of the court. While the boundaries of the space are carefully specified — it must be a rectangle, 78 feet by 27 feet, with a one-inch-wide center service line — there are zero references [...] Read more – ‘The Physics of Grass, Clay, and Cement’.
I always like to see what other people are highlighting on the kindle. Here are some recent popular ones. Boundaries: When To Say Yes, How to Say No What we can do is set limits on our own exposure to people who are behaving poorly; we can’t change them or make them behave right. The [...] Read more – ‘What people highlight on their kindle’.
We’ve all heard the theory that some students are visual learners, while others are auditory learners. And others learn best when lessons involve movement. In fact, an entire industry has sprouted up on learning styles. This prompted Doug Rohrer, a psychologist at the University of South Florida, to look more closely at the learning style [...] Read more – ‘Think You’re An Auditory Or Visual Learner? Scientists Say It’s Unlikely’.
Dan Ariely offers: 1) Procrastination. Joys untold attend this particular bad habit. And it’s one people indulge in all the time, exercise, projects at work, calling the family, doing paperwork, and so on. Each time we face a decision between completing a slightly annoying task now and putting it off for later, battle for self-control [...] Read more – ‘The 7 Habits of Highly Ineffective People’.
…After 1850, things changed. American agriculture fell into the grip of scientific farming. Agricultural scientists, followed by farmers, began to conceptualize farming as a strictly quantifiable venture. Beginning with plants, and then moving to animals, they became less concerned with individual idiosyncrasies and more concerned with collective evaluations of productivity. The chain of production expanded, [...] Read more – ‘The Dangerous Psychology of Factory Farming’.
In this short talk, psychologist Dan Ariely tells two personal stories that explore scientific conflict of interest: How the pursuit of knowledge and insight can be affected, consciously or not, by shortsighted personal goals. When we’re thinking about the big questions, he reminds us, let’s be aware of our all-too-human brains. Dan Ariely is the [...] Read more – ‘Video: Beware conflicts of interest’.
A few months ago, Adam Lashinsky wrote a fascinating article in Fortune describing life inside Apple. The article begins with the following scene: In the summer of 2008, when Apple launched the first version of its iPhone that worked on third-generation mobile networks, it also debuted MobileMe, an e-mail system that was supposed to provide [...] Read more – ‘The surprising benefits of negative moods’.
The American Library Association (ALA) released its list of books which were most often challenged by the public to be banned from libraries in America. 1. And Tango Makes Three by Peter Parnell and Justin Richardson Reasons: Homosexuality, religious viewpoint, unsuited to age group 2. The Absolutely True Diary of a Part-Time Indian by Sherman [...] Read more – ‘What are the top 10 books the public wants banned from the library?’.
Are people starting to value ebooks less? Nathan Bransford asked people what they thought an ebook should cost if the hardcover retailed at $25? While the results are likely not up to a scientific standard, they are nonetheless interesting. On June 14, 2010 people responded: And the same survey ran again on February 2, 2011: [...] Read more – ‘What should an e-book cost for a $25 hardcover?’.
Give people a head start. Not only does this improve the odds of loyalty but it also increases the speed of purchases. Why? Two reasons: (1) People are generally more willing to commit to tasks that have already started but that are incomplete than to begin a new task and (2) The closer that an [...] Read more – ‘How to double customer loyalty using the science of persuasion’.
From the Sunday Book Review Toward the end of his penetrating new book, “The Secret Life of Pronouns: What Our Words Say About Us,” Pennebaker crunches the numbers on presidential press conferences since Truman and finds that “Obama has distinguished himself as the lowest I-word user of any of the modern presidents.” If anything, Obama [...] Read more – ‘The Power of Pronouns’.
We’re pathetically obedient. We queue and walk where we’re told to, and all because it’s printed on a sign. There is a massive body of research about the psychological effects of signs, perhaps because they’re an easy way to rope members of the public into an experiment without asking permission: erect a sign, stand somewhere [...] Read more – ‘Signs’.
Can you tell the difference in container size between a Haagen Dazs (14oz) and Ben and Jerry’s (16oz)? Two researchers, Chandon and Ordabayeva, conducted experiments on customer perceptions of package size and changes, concluding “that changes in size appear smaller when products change in all three dimensions (height, width, and length) than when they change [...] Read more – ‘Container Size and Visual Bias’.
An excerpt from The Paradox of Choice by Barry Schwartz. Americans spend more time shopping than the members of any other society. Americans go to shopping centers about once a week, more often than they go to houses of worship, and Americans now have more shopping centers than high schools. In a recent survey, 93 [...] Read more – ‘What Too Much Of A Good Thing Means For Consumers’.
One President. Five Books. 1. Isabel Wilkerson’s National Book Critics Circle Award winner, “The Warmth of Other Suns,” which chronicles the Great Migration of black Americans out of the South. 2. “Cutting For Stone” by Abraham Verghese: an unforgettable story of love and betrayal, medicine and ordinary miracles–and two brothers whose fates are forever intertwined. [...] Read more – ‘Obama’s Summer Reading List’.
The first thing you do in the morning is make a decision. Decisions pile up fast. Should I hit snooze? What clothes should I wear? What should I have for breakfast? What combination of choices from Starbucks will make my morning go smoother? You’ve already made more decisions than most of our ancestors would make [...] Read more – ‘Do you make too many decisions?’.
Maria Popova comments: In a lot of ways, we do that with information. If we somehow stumble upon an incredible archive of, say, digitized “rare” vinyl LP’s or unpublished manuscripts by a famous author, and it tickles our fancy, perhaps we bookmark it, perhaps we save it to Delicious or Instapaper, perhaps we take a [...] Read more – ‘How the rhetoric of rare is changing in the age of information abundance’.
Some interesting NPR reporting by Dave Pell The only time I really experience any self-reflection these days is when my computer sleeps and my screen goes dark. And I’m not alone. According to Pew, 42 percent of cell owners used their phone for entertainment when they were bored. If those 42 percent of people are [...] Read more – ‘Does the Internet Make You More — Or Less — Connected?’.
The case shows we see what we expect to see. That can mean innocent people go to jail while criminals remain free. Last week, the “West Memphis Three” were released from prison, having spent half their lives — 18 years — behind bars for crimes they almost certainly didn’t commit. So what made prosecutors and [...] Read more – ‘The ‘West Memphis Three’ and combating cognitive biases’.
James Gleick, author of The Information: A History, A Theory, A Flood, says: We’re in the habit of associating value with scarcity, but the digital world unlinks them. You can be the sole owner of a Jackson Pollock or a Blue Mauritius but not of a piece of information — not for long, anyway. Nor [...] Read more – ‘We’re in the habit of associating value with scarcity’.
“Big populations don’t go extinct. Small populations do. It’s not a surprising finding but it is a significant one.” But why do small populations go extinct? While the answer is simple to outline the scientific details are complicated. For now, lets stick to the outline version. “Small populations go extinct because (1) all populations fluctuate [...] Read more – ‘Why do big populations survive while small ones go extinct?’.
Daniel Lieberman, author of The Evolution of the Human Head, sat down with the NYT for an interesting conversation. Some years ago, I was doing an experiment where I put pigs on treadmills. The goal was to learn how running stressed the bones in the head. One day, a colleague, Dennis Bramble, walked into the [...] Read more – ‘Born, and Evolved, to Run’.
An interesting study on the prevalence of mistaken intuitions about memory. Do people think that memory works like a video camera? Do they believe that memories are immutable once they are formed? Answers to questions like these have important ramifications for psychologists… People often dismiss behavioral science research as merely recapitulating common sense, but many [...] Read more – ‘What People Believe about How Memory Works’.
Malcolm Gladwell explains why owning a basketball franchise has always been a bad business — and ought to stay that way. The best illustration of psychic benefits is the art market. Art collectors buy paintings for two reasons. They are interested in the painting as an investment — the same way they would view buying [...] Read more – ‘‘Psychic Benefits’ and the NBA Lockout’.
The Song of the Dodo: Island Biogeography in an Age of Extinction: Quammen explores how studying the distribution of species on islands applies to modern ecosystem decay and extinction. (This was mentioned in our post on What is the best book that no one knows about? where a reader offered “If there’s been a better [...] Read more – ‘What I’m Reading’.
“It’s a perverse time. The time when people should enter into investments and make commitments is when times are extremely tough. But human nature is such that most people can’t. They only want to go into something when it’s on a winning streak. That’s just the way it works.” —Bruce Berkowitz. Read more – ‘It’s a perverse time’.
I thought Warren Buffett said a lot of interesting things in his recent interview with Charlie Rose. Here are some of the bits that stood out for me. Fairness: BUFFETT: …I also think fairness is important and I think getting rid of promises that you can’t keep is important. I don’t think we should cut [...] Read more – ‘This is a world of incentives’.
Beliefs come first; reasons second. That’s the insightful message of “The Believing Brain,” by Michael Shermer, the founder of Skeptic magazine. A extract from a WSJ book review makes me think some readers might be interested: In the book, he brilliantly lays out what modern cognitive research has to tell us about his subject—namely, that [...] Read more – ‘Beliefs come first; reasons second’.
Kathryn Schulz, author of Being Wrong: Adventures in the Margin of Error, gave an excellent talk at TED this past year. There is a moment in her talk when she summarizes what we do when someone disagrees with us that is worth pondering. …The first thing we usually do when someone disagrees with us is [...] Read more – ‘What We Do When Someone Disagrees With Us’.
Nassim Taleb, author of many books—The Black Swan, Fooled By Randomness, and The Bed of Procrustes—is in the process of writing a new book. He’s taken the sample chapter down from his website but I thought his thoughts were well worth pondering. We humans have a natural, seemingly innate, bias to think that systems do not improve on [...] Read more – ‘Intervention Bias’.
The confirmation bias is the tendency to seek information that confirms prior conclusions and to ignore evidence to the contrary. The importance of understanding this source of Psychological Misjudgment is enormous. Once you become aware of the confirmation trap you realize that it permeates your decision making process. Several biases emerge from the confirmation heuristic: [...] Read more – ‘Mental Model: Confirmation Bias’.
Habits allow us to do all sorts of things. We can make breakfast while talking on the phone without having to focus (consciously) on every step. The dark side of habits rears its ugly head when you try to change them. It’s a lot harder than it sounds. Here are six things you can do [...] Read more – ‘Changing Bad Habits’.
Al Pittampalli has just published a book, Read This Before Our Next Meeting, about how to make meetings better. In his post, Pittampalli argues that meetings are a tragedy of the commons: Our traditional system of meetings is a true tragedy of the commons. In a culture where anyone can call a meeting for any reason at [...] Read more – ‘Are Meetings a Tragedy of the Commons?’.
What is common to many is taken least care of, for all men have greater regard for what is their own than for what they possess in common with others. —Aristotle The rules pay you to do the wrong thing. —Garrett Hardin The Tragedy of the Commons is a parable that illustrates why commons resources [...] Read more – ‘The Tragedy Of The Commons’.
Dan Gilbert, author of Stumbling on Happiness, wrote in a op-ed for the NYT that “when our bathroom scale delivers bad news, we hop off and then on again, just to make sure we didn’t misread the display or put too much pressure on one foot. When our scale delivers good news, we smile and [...] Read more – ‘Accepting evidence when it pleases us’.
In their 1978 paper Performance Sampling in Social Matches, researchers March and March discussed the implications of performance sampling for understanding careers in organizations. If you hire/fire or promote people you’ll probably want to read this post. Considerable evidence exists documenting that individuals confronted with problems requiring the estimation of proportions act as though sample [...] Read more – ‘Promoting People In Organizations’.
I wonder if the eighth circle of hell is the most crowded. In Dante’s Divine Comedy that’s where fortune-tellers existed. The soothsayers “had their faces twisted toward their haunches and found it necessary to walk backward, because they could not see ahead … and since he wanted so to see ahead, he looks behind and walks [...] Read more – ‘What’s Wrong With Expert Predictions’.
The Cockroach Papers by Richard Schwied is an interesting book if you are looking to learn more about biology or evolution. Cockroaches are built for survival no matter what the world throws at them. Their ability to adapt is just amazing. Here are some of my notes from the book. Food and Water German cockroaches, [...] Read more – ‘Why is it so hard to kill a cockroach with your shoe?’.
Michael Lewis investigates German attitudes toward money, excrement, and the country’s Nazi past, all of which help explain its peculiar new status. …The curious thing about the eruption of cheap and indiscriminate lending of money during the past decade was the different effects it had from country to country. Every developed country was subjected to [...] Read more – ‘It’s the Economy, Dummkopf!’.
Are you good at buying the perfect gift for others? Now what if I asked you to rate the gift giving ability of others? You would probably remember some awful gifts. The fact is we’re just not that good at buying gifts for others. Thankfully, some researchers have discovered a way to improve your ability [...] Read more – ‘Improve Your Ability To Give Gifts People Appreciate’.
Not according to this recent interview with Ed Thorp: I think that one of the big issues today is that the playing field in the financial world is not level. If big institutions behave in a risky way and threaten to bring down the hole financial community and throw the entire country into a depression, [...] Read more – ‘Is The Financial World A Level Playing Field?’.
Would you explain some of the principles of influence you have uncovered? RC: The first is reciprocation. People will be ready and eager to help you when you have first done something for them. This principle suggests that to be successful one must be proactive in their approach instead of reactive. Give first, and then [...] Read more – ‘Learn The Principles Behind The Art Of Persuasion’.
“The attention which we lend to an experience is proportional to its vivid or interesting character; and it is a notorious fact that what interests us most vividly at the time is, other things equal, what we remember best.” —William James There are two biases eliminating from the availability heuristic: Ease of recall and retrievability. [...] Read more – ‘Mental Model: Availability Bias’.
“A person who has not made peace with his losses is likely to accept gambles that would be unacceptable to him otherwise.” –Daniel Kahneman and Amos Tversky We tend to bet more aggressively when the odds aren’t in our favor. The right response, however, is to change direction, as Tim Harford’s writes in Adapt: Why Success [...] Read more – ‘Why Do We Hold Fast To Losing Strategies?’.
Jonah Lehrer, author of How We Decide and Proust Was a Neuroscientist, explores some of the recent scientific literature on what impact our workplace has on the length of our lives in a recent Wired article. A new study led by Arie Shirom at Tel Aviv University reveals the powerful impact of the workplace on [...] Read more – ‘Are your co-workers killing you?’.
In this essay, Vaclav Smil (author of Why America is not a New Rome; see the FS review) takes a closer look at the rapid decline of American manufacturing in comparison to other wealthy nations. Smil challenges the reasons given for why Americans need not worry and argues that the US manufacturing sector needs to [...] Read more – ‘The Manufacturing of Decline’.
Interesting approach to rewards and behaivor at Pret A Manger: How does any company encourage teamwork? At Pret A Manger, executives say, the answer is to hire, pay and promote based on — believe it or not — qualities like cheerfulness. There is a certain “Survivor” element to all of this. New hires are sent [...] Read more – ‘Rewards and behavior’.
I heard about this before but completely forgot. Getting honest answers about behaviour that is illegal or frowned-upon – such as taking drugs or visiting prostitutes – is notoriously difficult. But survey researchers have devised a neat way to get people comfortable with revealing their indiscretions. Each time the researcher asks the respondent a question, [...] Read more – ‘How to get honest answers to illegal behavior’.
You may think that as you juggle emails, my-book, twitter, google, work, life, the phone and casual web surfing that you’re really doing all of that stuff at once, but you’re really doing is quickly switching constantly between tasks. And switching carries a cognitive cost. Steven Yantis, a professor of psychological and brain sciences at [...] Read more – ‘Screen Media and Deep Thinking’.
Most people thought the Internet represented a liberation from conformity where ideas, freedom of information, creativity ruled. But what role does our need to belong play? What role does the simple “like” button play in social approval? The WSJ article below argues that “As a result,” of the like button, “we can now search not [...] Read more – ‘The Insidious Evils of ‘Like’ Culture’.
Daniel Kahneman, noted for his amazing work on the psychology of judgment and decision-making & behavioral economics, has a new book coming out this fall entitled Thinking, Fast and Slow. Steven Levitt—the lucky guy—got to read an advance copy*. Among the hundreds of interesting ideas in the book, there is one that I simply can’t get [...] Read more – ‘Blind to our blindness’.
I heard about this before but completely forgot. Getting honest answers about behaviour that is illegal or frowned-upon – such as taking drugs or visiting prostitutes – is notoriously difficult. But survey researchers have devised a neat way to get people comfortable with revealing their indiscretions. Each time the researcher asks the respondent a question, [...] Read more – ‘How to get Honest Answers on Illegal behaviour?’.
You may think that as you juggle emails, my-book, twitter, google, work, life, the phone and casual web surfing that you’re really doing all of that stuff at once, but you’re really doing is quickly switching constantly between tasks. And switching carries a cognitive cost. Steven Yantis, a professor of psychological and brain sciences at [...] Read more – ‘Multitasking’.
Animal species reside on a scale with “generalist” on one end and “specialist” on the other. Specialists can live only in a narrow range of conditions: diet, climate, camouflage, etc. Generalists are able to survive a wide variety of conditions and changes in the environment: food, climate, predators, etc. Specialists thrive when conditions are just [...] Read more – ‘Generalists vs. Specialists (And the Specialist’s Dilemma)’.
David MacKay—the bloke in the excellent video below—is the author of Sustainable Energy. Bill Gates called MacKay’s book “one of the best books on energy that has been written“*. The book is available for free online or in hard copy via Amazon. Farnam Street: Mastering the best of what other people have figured out. Subscribe via twitter, email, [...] Read more – ‘How Many Light Bulbs?’.
Humans exhibit many psychological biases, but one of the most consistent, powerful, and widespread is overconfidence. Most people show a bias towards: (1) exaggerated personal qualities and capabilities; (2) an illusion of control over events; and (3) invulnerability to risk (three phenomena collectively known as “positive illusions”). Overconfidence amounts to an “error” of judgment or [...] Read more – ‘The Evolution of Overconfidence’.
Bill Gates tells us what he has read on topics such as education, energy, finance, and development. A few of these looked really interesting, so I ordered them (yes, amazon.com, I’m in the top 1% of your customers). Education Work Hard, Be Nice ”Jay did a great job writing this book. The book gives a great [...] Read more – ‘What does Bill Gates Read for Fun?’.
In a new study, researchers report that bumblebees were able to figure out the most efficient routes among several computer-controlled “flowers,” quickly solving a complex problem that even stumps supercomputers. We already know bees are pretty good at facial recognition, and researchers have shown they can also be effective air-quality monitors. Bumblebees can solve the [...] Read more – ‘Evolution 1, Supercomputers 0’.
Why are we so bad at knowing — in this case remembering — what passes through our own minds? An interesting article in the NYT Sunday Book Review: The philosopher Eric Schwitzgebel, in “Perplexities of Consciousness,” contends that our minds, rather than being open-access, are largely hidden territory. Despite what we believe about our powers [...] Read more – ‘Know Thyself: Easier Said Than Done’.
…While Mr. Berger initially assumed that people would share articles with practical implications—he imagined lots of pieces on diets and gadgets—he discovered instead that the most popular stories were those that triggered the most arousing emotions, such as awe and anger. We don’t want to share facts—we want to share feelings. Why does this desire [...] Read more – ‘We want to share feelings, not facts’.
The model suggests why competitors always seem to locate so close to each other and compete on real estate. Think about big burger chains, supermarkets, and video stores. You will almost always see them clustered even though it would be nicer if they spread out. The model also has been applied to political candidates. Imagine [...] Read more – ‘Why are rival gas stations always across the street from one another?’.
A decade into his record-breaking education philanthropy, Bill Gates talks teachers, charters—and regrets. “It’s been about a decade of learning,” says the Microsoft co-founder whose Bill and Melinda Gates Foundation is now the nation’s richest charity. Its $34 billion in assets is more than the next three largest foundations (Ford, Getty and Robert Wood Johnson) [...] Read more – ‘Bill Gates and billion dollar lessons’.
Dan Ariely, professor of psychology and behavorial economics, says we can all be more aware of our surroundings and our decision-making process. He suggests the following five books: The Invisible GorillaWe think we see with our eyes, but the reality is that we largely see with our brains. Our brain is a master at giving [...] Read more – ‘Five Book recommendations from Dan Ariely on Behavioural Economics’.
This study shows that conventional wisdom isn’t the best approach. What you eat makes a difference. Dr. Frank B. Hu, a nutrition expert at the Harvard School of Public Health and a co-author of the new analysis, said: “In the past, too much emphasis has been put on single factors in the diet. But looking [...] Read more – ‘Still Counting Calories? Your Weight-Loss Plan May Be Outdated’.
Reading Duncan Watts new book Everything is Obvious: Once You Know The Answer will make you uncomfortable. Common sense is particularly well adapted to handling the complexity of everyday situations. We get intro trouble when we project our common sense to situations outside the realm of everyday life. Applying common sense in these areas, Watts argues, “turns out to suffer from a [...] Read more – ‘Is Everything Obvious Once You Know The Answer?’.
Interesting… the study authors were able to determine—before the snap— if the next would be a short pass, medium pass, long pass, run, or scamble 40% of the time. This study investigated the ability of discriminant analysis to predict the offensive play calling of the 2005 Atlanta Falcons. Data was collected on each of the [...] Read more – ‘Can you predict what play will be run in the NFL before the snap?’.
On television modern histories of Rome lead one to think that Romans were rather well off, enjoyed a lot of free time, and commanded the largest and most powerful Empire in the history of the world. That is, until the Americans came along. America’s post WWII strategic and military dominance combined with affluence inspired comparisons [...] Read more – ‘Is America A New Rome?’.
“We put a lot of effort into thinking through how to organize some of the things that we try to do as groups,” said Gordon. “Ants don’t put in any effort at all. They’re pretty messy about it, and it works really well.” …Of course, ants don’t just create farms; they make assembly lines, highways [...] Read more – ‘What Ants Can Teach Us’.
David Foster Wallace in Consider the Lobster: Here is a theory. Top athletes are compelling because they embody the comparison-based achievement we Americans revere — fastest, strongest — and because they do so in a totally unambiguous way. Questions of the best plumber or best managerial accountant are impossible even to define, whereas the best [...] Read more – ‘Why do top athletes fascinate us?’.
…Norwegians call stormannsgalskap, the madness of great men. Stormannsgalskap is particularly common among media barons, not least because they frequently blur the line between reporting reality and shaping it. William Randolph Hearst is widely suspected of stirring up the Spanish-American war to give his papers something to report. Lord Beaverbrook regarded himself as a kingmaker, [...] Read more – ‘Stormannsgalskap’.
If you’d like to read more about economics issues try these 18 books recommended by Greg Mankiw, author of Principles of Economics. The Cartoon Introduction to Economics Basic economic principles, with humor. Spin-Free Economics A straightforward guide to major economic policy debates. Lives of the Laureates Twenty-three winners of the Nobel Prize in Economics offer autobiographical [...] Read more – ‘Greg Mankiw Recommends Reading These 18 Economics Books’.
This is interesting but not surprising—We tend to find aversive situations less stressful when we believe we have some degree of control. In a reaction time (RT) task 40 subjects were told to react to the onset of a 6-second shock. Following l0 trials, half of the subjects were told that by decreasing their RT [...] Read more – ‘The illusion of control and stress’.
Access to computers fosters lower rates of recall of what we’re trying to recall and enhanced recall about where to find it. The advent of the Internet, with sophisticated algorithmic search engines, has made accessing information as easy as lifting a finger. No longer do we have to make costly efforts to find the things [...] Read more – ‘Is human memory migrating to the cloud?’.
For those who don’t know, today would have been Marshall McLuhan’s 100th birthday. McLuhan rocketed from an unknown academic to rockstar with the publication of Understanding Media: The Extensions of Man in 1964. Understanding Media contained the simple prophecy that electronic media of the twentieth century—at the time consisted of telephone, radio, movies, television but also [...] Read more – ‘Marshall McLuhan — The Man, The Mystery, The Life’.
David Foster Wallace in Consider the Lobster: A SNOOTlet is a little kid who’s wildly, precociously fluent in SWE—Standard Written English—(he is often, recall, the offspring of SNOOTs). Just about every class has a SNOOTlet, so I know you’ve seen them — these are the sorts of six-to-twelve-year-olds who use whom correctly and whose response to [...] Read more – ‘Does being precociously fluent in English but teased on the playground indicate a dialectal problem?’.
Future Babble has come out to mixed reviews. I think the book would interest anyone seeking wisdom. Here are some of my notes: First a little background: Predictions fail because the world is too complicated to be predicted with accuracy and we’re wired to avoid uncertainty. However, we shouldn’t blindly believe experts. The world is [...] Read more – ‘Future Babble: Why expert predictions fail and why we believe them anyway’.
The challenges of climbing the corporate ladder are both fascinating and fluid. Whether you’re looking to improve your ability to influence or avoid some common pitfalls these books are a great place to start: 1. Corporate Confidential: 50 Secrets Your Company Doesn’t Want You to Know—and What to Do About Them “Your number one job is [...] Read more – ‘6 Must-Read Books To Help Navigate the Workplace’.
Dan Ariely, below, on how taking something as broad as education and reducing it to a simple measurement has a lot of consequences. Ariely belives that The mission of teaching, and its evaluation, is incredibly intricate and complex. In addition to being able to read, write, and do some math and science, we want students [...] Read more – ‘Teachers cheating and Incentives’.
Ben Franklin discovered that a person who has done someone a favor is more likely to do that person another favor than they would be had they received a favor. Or, as Franklin put it: “He that has once done you a Kindness will be more ready to do you another, than he whom you [...] Read more – ‘The Ben Franklin Effect’.
A lot of these books explore sex and drugs. Anything by Charles Bukowski Anything by William S. Burroughs On the Road by Jack Kerouac The New York Trilogy by Paul Auste Anything by Martin Amis Honourable mentions: Fear and Loathing in Las Vegas by Hunter S. Thompson, anything by Don DeLillo, The Virgin Suicides by [...] Read more – ‘What are the most stolen books from bookstores?’.
People function through their use of two kinds of knowledge: knowledge of and knowledge how. …Knowledge how [is] what psychologists call procedural knowledge. …Procedural knowledge is difficult or impossible to write down and difficult to teach. It is best taught by demonstration and best learned through practice. Even the best teachers cannot usually describe what [...] Read more – ‘Two kinds of knowledge’.
Reciprocity is a social norm that maintains that people should return favors and other acts of kindness. For example, most of us have no problem picking up the tab for a co-worker or friend who picked did the same last time. However, this bias can also be exploited. Many studies show that manipulating reciprocation can increase [...] Read more – ‘Returning favors even when no one finds out’.
The word narcissism comes from the Greek myth of Narcissus, an attractive young man who set out looking for someone to love. The beautiful nymph Echo falls in love with him and repeats everything Narcissus says, but he rejects her and she fades away. Narcissus keeps looking for the perfect mate until one day he [...] Read more – ‘Where does the word narcissism come from?’.
Judgments based on intuition seem mysterious because intuition doesn’t involve explicit knowledge. It doesn’t involve declarative knowledge about facts. Therefore, we can’t explicitly trace the origins of our intuitive judgments. They come from other parts of our knowing. They come from our tacit knowledge and so they feel magical. Intuitions sometimes feel like we have [...] Read more – ‘Insight & Intuition’.
Some of the most famous—and most discussed—studies ever conducted are Stanley Milgram’s obedience studies. Briefly, under the guise of a learning study, an experimenter instructed participants to administer increasingly powerful electric shocks to a learner when a mistake was made on a memory task. In reality, no shocks were delivered and the learner was really [...] Read more – ‘Explaining Obedience to Authority’.
If you look in the Guinness Book of World Records you’ll discover that a car salesman named Joe Girard is one of the most successful salespeople ever. In fact, he has sold more retail “big ticket” items “one-at-a-time” than any other sales-person in any retail industry. We can learn a lot from studying success. So [...] Read more – ‘What trick can you learn from the most successful sales person ever?’.
Research suggests that flattery will get you everywhere. I’m sure you knew that already — you are, after all, the smartest readers on the planet. Psychologies have long known that the more likeable you are the more likely you are to influence others. A study published recently in the Journal of Basic and Applied Social [...] Read more – ‘The art of flattery’.
The tendency to overvalue hard work and the effort of doing something difficult is so deep-rooted that it even infects our notion of love. Why should it be that the average Christian regards loving one’s enemy as the most exalted form of love? Principally because it offers an example of a natural bent heroically curbed; [...] Read more – ‘Overvaluing hard work’.
This introduction to redundancy includes wisdom from Warren Buffett, Charlie Munger, Confucius, Norman Fuqua and others. “The reliability that matters is not the simple reliability of one component of a system, but the final reliability of the total control system”—Garrett Hardin We learn from Engineering that critical systems often require back up systems to guarantee a [...] Read more – ‘Mental Model: Redundancy’.
A great post from John Kay on what the $10 minibar beer has to do with the financial crisis. …have you struggled to understand your mobile phone bill? Bought a cartridge of ink that costs almost as much as the printer? Do you fill in your personal details on an insurance comparison website every year, [...] Read more – ‘Is Caveat Emptor the Dominant Business Principle Of Our Time?’.
Everyone loves to be associated with success. Imperial messengers in old Persia had a precarious time. Assigned the task of updating their rulers on the progress of battles, they had special cause to hope things were going well. Upon arrival at the palace with news of an imminent victory, a messenger would be showered with [...] Read more – ‘How to make people happy’.
What makes a good liar? The authors of this study found 18 attributes: (1) manipulativeness. “for manipulators, people high in Machiavellianism or social adroitness, lying is a normal and acceptable way of achieving their goals. Manipulators frequently tell lies, tend to persist in lying when challenged to tell the truth, don’t feel uncomfortable when lying, [...] Read more – ‘18 Attributes of Highly Effective Liars’.
Rather than invest the time and effort necessary to ponder the pluses and minuses of most decisions, we tend to rely on quick heuristics to make most decisions. These rules of thumb help us save cognitive processing and navigate a world full of choices. Our tendency to make near-automatic decisions exposes us to exploitation by [...] Read more – ‘Just for you: How Scarcity Factors Into Decisions’.
If you want to influence the decisions of clients or colleagues, the number of choices you offer them is crucial. Too many and you risk overloading the cognitive process. Not enough and people don’t feel like they have a choice. In a series of studies recently published in the Journal of Consumer Research, persuasion researchers [...] Read more – ‘How many choices are too many?’.
Chicago restaurateur Gordon Sinclair found he could reduce the number of no-shows in his restaurants by asking staff to make one small change when taking phone reservations. Rather than saying, “Please call us if you need to change or cancel your booking,” staff are instructed to say, “Would you be willing to call us if [...] Read more – ‘How can you persuade people to keep appointments?’.
New research about to be published in the Journal of Consumer Psychology suggests that even though people claim to be pretty good at predicting the likes and dislikes of others, they are, in fact, anything but that. And, surprisingly, the longer we know someone, the worse our predictions may get. …It turned out that everyone [...] Read more – ‘Does knowing someone longer mean you know them better?’.
An interesting paper for the nerds among you. Regret is a negative experience that most of us would rather avoid. In decision making, regret can stem from comparing actual outcomes to outcomes that might have happened had we made different choices. Interestingly, some research has shown that ‘experienced’ regret affects subsequent decisions. After experiencing regret, [...] Read more – ‘Does our desire to avoid regret affect how we make decisions?’.
Great quote from Edward Tufte that was too long for twitter: Agencies, departments, and organizations don’t do things – people do things. People’s names should be on things to foster both accountability and pride. source Read more – ‘Who does things?’.
Research has shown we typically prefer foods, medicine, and other goods described as natural over their artificial counterparts. Little research, however, has examined whether natural preferences extend towards aversive events or hazards. If, as some contend, risk assessment is predominately based on feelings elicited by potential costs and benefits, independent of probabilities, a preference for [...] Read more – ‘Would you rather be injured by lightning or a downed power line?’.
You simply must read this. I don’t normally post ‘finance’ related stuff on this site—I post that stuff here. This is a worthy exception. Like Herb Simon, the world would benefit from a little more Charlie Munger. Munger provided a copy of the document below yesterday at an event. munger Read more – ‘Required Reading: Munger’s Parody’.
Here are some of the notes I took while reading Tim Harford’s Adapt: Why Success Always Starts With Failure Biologists have a word for the way in which solutions emerge from failure: evolution. … Disconcertingly, given our instinctive belief that complex problems require expertly designed solutions, it is completely unplanned. Astounding complexity emerges in response [...] Read more – ‘Notes from Tim Harford’s book Adapt.’.
Human intuition suggests that being ahead in a competition increases the odds of winning. New research from Jonah Berger challenges that thinking by suggesting that being slightly behind can actually increase success because it increases motivation. Berger analyzed more than 18,000 professional basketball games and found that being slightly behind at halftime lead to a [...] Read more – ‘Can Losing Lead to Winning? (Behaviorial Economics to the rescue!)’.
From Thomas Goetz in Wired: …So feedback loops work. Why? Why does putting our own data in front of us somehow compel us to act? In part, it’s that feedback taps into something core to the human experience, even to our biological origins. Like any organism, humans are self-regulating creatures, with a multitude of systems [...] Read more – ‘Harnessing the Power of Feedback Loops’.
Great Big Think interview with Malcolm Gladwell on seeing the world as others do. Malcolm Gladwell is a staff writer at the New Yorker and the author of The Tipping Point: How Little Things Make a Big Difference, Blink, Outliers and most recently, What the Dog Saw. Read more – ‘Malcolm Gladwell: Seeing the word as others do (video)’.
I didn’t put much effort into choosing books. I was promiscuous like that. As a result, I have a room full of overstuffed bookshelves. In an effort to find a few books to donate to the local public school book drive, I’ve been pulling them off my shelves. At first, I decided to get rid [...] Read more – ‘The Great Books’.
If bubbles are so obvious, why do they keep happening? The real problem, according to Duncan Watts, author of Everything is Obvious: Once You Know the Answer, in his recent Slate article is how we learn from history. By analogy, when you’re reading a mystery novel, you don’t necessarily know what to make of events because you [...] Read more – ‘The real reason it’s so hard to predict bubbles’.
We owe thanks to the publishing industry. Their ability to take a concept and fill an entire category with a shotgun approach is the reason that more people are talking about biases. Unfortunately, talk alone will not eliminate them but it is possible to take steps to counteract them. Reducing biases can make a huge difference [...] Read more – ‘Before You Make That Big Decision…’.
We’re all familiar with the classic adage “power tends to corrupt, and absolute power corrupts absolutely.” Not only does this statement reflect popular sentiment but it is also supported by scientific research. How does corruption affect a person’s power position? Idealists among us would hope that people with power who break the rules quickly and [...] Read more – ‘Breaking the Rules to Rise to Power: How Norm Violators Gain Power in the Eyes of Others’.
An excerpt from Buyology: The Truth and Lies About What We Buy: … the team leader, Dr. Calvert, presented me with the results. I was, to put it mildly, startled. Even Dr. Calvert was taken aback by the findings: warning labels on the sides, fronts, and backs of cigarette packs had no effect on suppressing [...] Read more – ‘Will new tobacco labelling with gross images decrease consumption?’.
A great (and negative) book review of How to Write a Sentence and How to Read One: After thirty years of teaching a university course in something called advanced prose style, my accumulated wisdom on the subject, inspissated into a single thought, is that writing cannot be taught, though it can be learned—and that, friends, [...] Read more – ‘Heavy sentences’.
A new book, Inside Jokes Using Humor to Reverse-Engineer the Mind, lays out a cognitive and evolutionary perspective on the answer. A reviewer from Science Magazine explains: The key to the authors’ success is that they locate humor within recent cognitive science and evolutionary theory. To aid survival, our brains constantly and covertly use heuristics to [...] Read more – ‘Why do we laugh?’.
After reading The Ambiguities of Experience, I set out to read another book by James March: On Leadership. The genius of March takes a while to appreciate. I assure you, however, this thought-provoking book is packed full of wisdom you won’t find in the business best seller section. On Leadership offers a stunning demonstration of [...] Read more – ‘On Leadership’.
In 1637 René Descartes changed the course of science forever with the publication of Discourse on the Method of Rightly Conducting One’s Reason and of Seeking Truth in the Sciences. That work lays the foundation to modern science by putting forth two enduring ideas: reductionism as a way of knowing (“divide each of the difficulties [...] Read more – ‘The Humpty-Dumpty Problem’.
I recommend reading Nassim Taleb’s recent article in Foreign Affairs. If you don’t have time here are my notes: Complex systems that have artificially suppressed volatility tend to become extremely fragile, while at the same time exhibiting not visible risks. Seeking to restrict variability seems to be good policy (who does not prefer stability to [...] Read more – ‘How Suppressing Volatility Makes the World Less Predictable and More Dangerous’.
I must admit that I have Derek Parfit’s long-awaited book On What Matters sitting on my night-stand at the moment. Its daunting length—over 1400 pages in two volumes—helps me procrastinate. Most of us might come to the same conclusion as Parfit on the question of what matters—”we rich people give up some of our luxuries, [...] Read more – ‘Does anything Matter?’.
One thing that has always baffled me is how we get fat. Why We Get Fat by Gary Taubes unearths the biological truth around why we’re getting fat. In the process Taubes dispels many accepted ideas on weight-loss and nutrition. While it’s easy to believe that we remain lean because we’re virtuous and we get [...] Read more – ‘Why We Get Fat: And What to Do About It’.
What would you do if you were stranded at sea in a small inflatable raft with little hope of survival? What differentiates the person who gives up immediatley from the one who fights to the end? In 1957 an experiment was done at Johns Hopkins School of Medicine by renowned psychobiology researcher, Curt Richter in [...] Read more – ‘Would you choose to live or die?’.
One researcher suggests that there are two main forms of regret. The first is a “hot emotion” that carries a blow. For example, it’s what you feel when you suffer a loss because you didn’t follow instructions or seek guidance. It’s the punch to the diaphragm as you think about the things you could have [...] Read more – ‘Does the experience of regret serve a purpose? Is it a necessary element of sociality?’.
There are a number of ways you can automatically get this blog daily for free. Email is easy-peasy. Click here to sign up (you will receive an email asking for you to confirm). Your info is never rented or sold. Twitter makes it easy, just follow @farnamstreet. As an added bonus, I post a lot of [...] Read more – ‘Subscribing’.
At some point it happens to all of us. Someone asks a pointed question that we don't want to answer. Politicians have mastered this but what can the rest of us do? The study below indicates that people are frequently unable to remember an initial question if a speaker answers a similar question. According to [...] Read more – ‘How you can avoid answering uncomfortable questions’.
…Classic examples of cognitive biases are escalating commitments, such as those countries that want to hold the Olympic Games and World Games – the projected losses keep rising but they will keep persisting with it. “Another example is rigidity in the face of crisis, so when something is going wrong we tend to withdraw, to [...] Read more – ‘Cognitive traps’.
The next time somebody tells you about a wisdom-of-crowds effect, make sure you ask them whether they're talking about a real crowd or a statistically enhanced crowd.: Even in its most basic expression, the wisdom-of-crowds effect seems to be exaggerated. In many cases, including the ones covered by the Swiss researchers, it's only by using [...] Read more – ‘The wisdom of statistically manipulated crowds’.
This is a great way to kick off your summer reading:Clinical Professor Robert Bordone ’97 has already started on Jonathan Franzen’s novel “Freedom,” a book that is “wonderful for conflict resolution types.” And he is looking forward to the all-new 3rd edition of Professor Emeritus Roger Fisher ’48 and William Ury’s classic, “Getting to Yes.” [...] Read more – ‘9 Harvard Profs share their summer reading list’.
Reasoning is generally seen as a means to improve knowledge and make better decisions. However, much evidence shows that reasoning often leads to epistemic distortions and poor decisions. This suggests that the function of reasoning should be rethought. Our hypothesis is that the function of reasoning is argumentative. It is to devise and evaluate arguments [...] Read more – ‘Why do we reason?’.
Atul Gawande thinks that the revolution that remade how other fields handle complexity is coming to health care: …We are at a cusp point in medical generations. The doctors of former generations lament what medicine has become. If they could start over, the surveys tell us, they wouldn’t choose the profession today. They recall a [...] Read more – ‘Cowboys And Pit Crews’.
I enjoyed reading Dinosaur Brains: Dealing with All Those Impossible People at Work. Near the end of the book the author illuminates how too many decisions are made: 1) Take an idea from some authority figure, maybe your boss, or an author; 2) Tell everyone this idea is the basis for all the change your going [...] Read more – ‘How to make bad decisions’.
The wisdom of crowds turns out to be an incredibly fragile phenomenon. It doesn’t take much for the smart group to become a dumb herd. A new study by swiss scientists (see the article) suggests that interconnectedness might make it harder to benefit from collective intelligence. We live at a time when seemingly everything is [...] Read more – ‘When We’re Cowed by the Crowd’.
I was already over 9,000 days old when it dawned on me that I didn’t know any good approaches to solving problems. Up until that point, I had relied on sheer luck. So I did what any person who prefers reading to reality TV does and rushed out to buy a lot of books on [...] Read more – ‘Problem Solving 101’.
With games, learning is the drug. There is a ton of psychology behind the design of games – that’s part of what make them so addictive. This article in the Guardian explains why our love of video games has a lot to do with our intrinsic desires and motives. …games are fun because they teach [...] Read more – ‘The seduction secrets of video games’.
Florida native Cindy—real name Cheryl—moved to Israel as a teenager, married a government intelligence analyst at nineteen, and was identified as a suitable spy by Mossad recruiters soon after her wedding. Two years of intensive training followed: she was taught how to lie, steal, kill, and, most importantly, how to use sex, and the especially [...] Read more – ‘Sexpionage’.
Joshua Foer, the 2006 US memory champion and author of the best-selling book “Moonwalking with Einstein” picks five books about the art of remembering: The Art of Memory: Frances A. Yates traces the art of memory from its treatment by Greek orators, through its Gothic transformations in the Middle Ages, to the occult forms it [...] Read more – ‘5 Books To Improve Your Memory’.
From The London Review of Books comes an article on the rise of algorithmic trading: Systems that are both tightly coupled and highly complex, Perrow argues in Normal Accidents, are inherently dangerous. Crudely put, high complexity in a system means that if something goes wrong it takes time to work out what has happened and [...] Read more – ‘Tight Coupling and Complexity’.
The ever-brilliant Malcolm Gladwell, in his latest New Yorker article, offers: The psychologist Dean Simonton argues that this fecundity is often at the heart of what distinguishes the truly gifted. The difference between Bach and his forgotten peers isn’t necessarily that he had a better ratio of hits to misses. The difference is that the [...] Read more – ‘Why is managing the creative process so difficult?’.
We all want to persuade others to see things our way. The way we walk – speed, pitch, and pauses plays a role. This study was based on willingness to participate in a telelphone survey. “Interviewers who spoke moderately fast, at a rate of about 3.5 words per second, were much more successful at getting [...] Read more – ‘It’s not what you say: The way we talk sways our listeners’.
You won’t have to wait long for it to happen. At some point during a meeting someone will, in one way or another, suggest that the solution to this problem is to put a bunch of smart people together and let them figure it out. They want Magic. But do smart people make smart teams? [...] Read more – ‘Do Smart People Make Smart Teams?’.
Writing by hand strengthens the learning process. When typing on a keyboard, this process may be impaired. … When writing by hand, our brain receives feedback from our motor actions, together with the sensation of touching a pencil and paper. These kinds of feedback is significantly different from those we receive when touching and typing [...] Read more – ‘Writing by hand strengthens the learning process’.
This fascinating article highlights some of the realities for Asian-Americans after meritocracy comes to an abrupt end after graduation. …Entrance to Stuyvesant, one of the most competitive public high schools in the country, is determined solely by performance on a test: The top 3.7 percent of all New York City students who take the Specialized [...] Read more – ‘Paper Tigers: What happens to all the Asian-American overachievers when the test-taking ends?’.
People can learn to perform better at detecting deception. UCLA professor of psychology R. Edward Geiselman has been trying to determine when people are lying for years. He also teaches investigative interviewing techniques. Along with three former students, Geiselman undertook a study that analyzed some 60 studies on detecting deception to be released this week. [...] Read more – ‘How to tell when someone’s lying’.
Early this year Yale law professor Amy Chua published a critique of the coddling in Western parenting. After reading her article I was curious enough to purchase and read her book “Battle Hymn of the Tiger Mother.” The book details how she raised her two daughters in the “traditional Chinese” way, with strick discipline and [...] Read more – ‘Is There a ‘Tiger Mother’ Effect?’.
Although Americans are mostly in agreement that the demise of Osama bin Laden is a good thing, many are disturbed by the revelry. There is a lot of psychology behind this. When it comes to judging what’s right and wrong, intent matters a whole lot. But when it comes to punishment, consequences matter. Here are three [...] Read more – ‘Why we celebrate murdering Bin Laden’.
I’m half-way through reading Tim Harford’s new book Adapt: Why Success Always Starts with Failure. So far, the book is brilliant. Anyone who’s wondered how successful our instinctive look for leaders with some grand vision to provide us with solutions todays problems should read this book. We badly need to believe in the potency of leaders. [...] Read more – ‘Adapt: Why Success Always Starts with Failure’.
Interesting. Many studies suggest that males tend to be more physically and verbally agressive than females. According to a new study woman may be just as competitive as men-they may just be using a different strategy to come out ahead. Women, it seems, rely more on indirect forms of agression, such as social exclusion. Preemptive [...] Read more – ‘Mean Girls’.
“People instinctively prefer high to low power positions,” says M. Ena Inesi of London Business School. “Similarly, it feels good when you have choice, and it doesn’t feel good when choice is taken away.” Inesi and her coauthors suspected that the need for personal control might be the factor these two seemingly independent processes have [...] Read more – ‘It’s All About Control’.
The psychology of pricing explains why we do many of the silly things we do with our money. Retailers work hard to manipulate us, tweaking price tags and offering special promotions to get us to spend more than we normally would. 1. ‘Free’ Stuff 2. Bye, Bye, Dollar Signs 3. ‘10 for $10′ 4. Per-Customer [...] Read more – ‘Pricing Psychology: 7 Sneaky Retail Tricks’.
1. The risk of playing down change is that you miss the next big thing. But since there’s an equal risk of over-reaction, does anyone know of a business bestseller with the mantra: “Calm down?“ 2. A study finds that the sexes interpret the world differently, with men more likely to judge it in black-and-white [...] Read more – ‘Interesting Reads’.
Kids who score highly on IQ tests will, on average, do better in conventional measures of success. Is that because they are more intelligent? Is it an example of what Malcolm Gladwell so eloquently points out in Outliers — where people showing even a trace advantage over others are constantly reinforced as being smart, given [...] Read more – ‘What Does IQ Really Measure?’.
No. In a blind taste test, volunteers were unable to distinguish between expensive and cheap wine. So the next time you have company and pull a cork, tell the guests you’re serving an expensive and rare bottle. They’ll never know it’s really a cheap bottle. Ultimately anything we experience is not not driven by price [...] Read more – ‘Should We Buy Expensive Wine?’.
“The huge social resources spent on publicly provided education and health have seemingly created no gains in the rate of social mobility,” prof Clark said. “The modern meritocracy is no better at achieving social mobility than the medieval oligarchy. Instead that rate seems to be a constant of social physics, beyond the control of social [...] Read more – ‘Class mobility ‘beyond social engineering’’.
Why is it so hard to change? The short answer is because doing so often involves overwriting one of the most fundamental neurological systems in the brain that evolved over millions of years. Dopamine – a pleasure chemical released by the brain – rewards us for many things crucial for survival such as eating and [...] Read more – ‘Why Is It So Damn Hard to Change?’.
One natural human bias is that we tend to draw strong conclusions based on few observations. This bias unearth’s itself in many ways including the gambler and hot hand fallacies. Such biases may induce public opinion and the media to call for dramatic swings in policies or regulation in response to highly improbable events. These [...] Read more – ‘Predicting the Improbable’.
…A recent neuroscience study shows that fear is a far bigger driver than we would ever care to admit. Fear of losing our job, fear of not being able to make the kids’ school payments, fear of ending up in the proverbial gutter. These thoughts are scary enough to bring on an instant anxiety attack. [...] Read more – ‘Why Condom Sales Soar In A Recession’.
Our political system does not take evidence seriously. Below Tim Harford argues this is because of our love of certitude and our avoidence of uncertainty. The curse of uncertainty is that it makes everything feel unappealing. It is not clear why we enjoy certitude so much – certitude being the subjective experience of feeling certain. [...] Read more – ‘Why we’re all far too sure of ourselves’.
Richard Feynman famously asked: “If, in some cataclysm, all of scientific knowledge were to be destroyed, and only one sentence passed on to the next generations of creatures, what statement would contain the most information in the fewest words?” Fascinated by Feynman’s question, Seed put a similar one to a number of leading thinkers: “Imagine—much [...] Read more – ‘Massively Distilled Wisdom’.
Apple is perhaps the best company in the world at selling. An earlier post, How Apple Plays the Pricing Game reveals some of their tricks. This article further explores some of Apples techniques. Specifically, how they take a 100-year-old persuasion technique and embed that into their DNA. Basically—and this is pretty simple—Apple opens up the [...] Read more – ‘How Apple Brilliantly Uses a 100-year-old Persuasion Strategy’.
On Three Cups of Tea Rajeev paused for a moment. “It seemed to be mostly about the author, about everything he accomplished,” he said slowly. “And that story is about quantity, about the number of schools built.” Rajeev said his own work had convinced him that construction projects are overvalued, and sometimes they can even [...] Read more – ‘WHAT MORTENSON GOT WRONG’.
Kathryn Schulz, author of Being Wrong: Adventures in the Margin of Error, talks at this year’s TED conference on errors and being wrong. Read more – ‘Being Wrong’.
Vaclav Smil paints a sobering picture of the energy cross roads before us. In a sense, the search for new energy is part of a much broader change whose outcome will determine the fortunes of the world’s leading economies and of the entire global civilization for generations to come. From American Scientist: …This all brings [...] Read more – ‘Global Energy: The Latest Infatuations’.
The prize for fiction went to Jennifer Egan for “A Visit From the Goon Squad.” (I’m reading this now.) Bruce Norris won the award for drama for his play “Clybourne Park.” The history prize went to Eric Foner for “The Fiery Trial: Abraham Lincoln and American Slavery.” Ron Chernow won in the biography category for “Washington: [...] Read more – ‘2011 Pulitzer Prize Winners (Books)’.
Only 144 prisoners are know to have escaped the horrors of Auschwitz. One of them, Kazimierz Piechowski tells his story in the Guardian. On 20 June 1942, the SS guard stationed at the exit to Auschwitz was frightened. In front of him was the car of Rudolph Höss, the commandant of the infamous concentration camp. [...] Read more – ‘I escaped from Auschwitz’.
We're spending more than ever on our gourmet kitchens and high-end appliances, yet we're spending less and less time in the kitchen. Megan McArdle explains that we spend more than ever on our kitchen because cooking has moved from a job to a leisure activity. That transition has not only changed the way we see [...] Read more – ‘The Joy of Not Cooking’.
Behavioral economists employ “nudges” that push us in a “more responsible” direction. To do this, they tweak the decision-making environment, altering the way we interpret options. One example would be changing the default for drivers to donate organs (opt-out versus opt-in). Another nudge is to place fruit at eye level in school cafeteria – an [...] Read more – ‘Is ‘Nudging’ Really Enough? With things like burgers and electricity, we often need a shove’.
This Taleb interview with Richard Herring is worth a watch if only for the talk on anti-fragility. People talk about black swans but they don’t talk about robustness to black swans. An edited excerpt: Herring: Yes, that is very much in line with your contribution to our recent book, The Known, the Unknown, and the [...] Read more – ‘Nassim Taleb on Living with Black Swans’.
The bursting of the housing bubble challenges established views of the world but this seems more like a recommendation to others, rather than a personal statement. The lesson most people claim to have have learnt, according to John Kay, is that they were right all along. Funny, isn’t it, how one’s errors are twisted to [...] Read more – ‘Why Economists Don’t Learn From Mistakes’.
How do the insides of buildings influence the inside of our minds? Jonah Lehrer has some answers: The psychologists, at the University of British Columbia, were interested in looking at how the color of interior walls influence the imagination. … When people took tests in the red condition – they were surrounded by walls the [...] Read more – ‘The Psychology of Architecture’.
A little geeky but incredibly interesting. How do high-types (that is, high in productivity, wealth, fecundity, or some other valued attribute) send signals to others to differentiate themselves from average based on status? Average types, presumably less comfortable with their status, work hard to send the “right” signals. Since the average types signal to differentiate [...] Read more – ‘Too cool for school? Signalling and countersignalling’.
In Robert Lustig’s view, sugar should be thought of, like cigarettes and alcohol, as something that’s killing us. But can sugar possibly be as bad as Lustig says? Lustig’s argument is that sugar has unique characteristics, specifically in the way the human body metabolizes the fructose in it, that may make it singularly harmful, at [...] Read more – ‘Is Sugar Toxic?’.
No. Diverting attention away from forbidden fruit undermines, rather than bolsters, the strength of that person’s romantic relationship. While thinking about forbidden fruit can harm your relationship trying not to think about it can, rather iconically, increase the temptation of alternatives and undermine your realtionship. Being inattentive to attractive relationship alternatives can enhance relationship well-being. [...] Read more – ‘Should you avoid thinking about forbidden fruit?’.
The educated readers of Ezra Klein recommend the best book they know of in a subject area other than American politics. The recommendations were pretty interesting – I ordered a couple. A Pattern Language by Christopher Alexander, a bread-and-butter book which documents the results of research by Alexander and his team at UC Berkeley on [...] Read more – ‘What is the best book that most people don’t know about?’.
Want to avoid the feds? Go for a walk-talk. That’s the advice offered by Ex-mafia boss and now federal witness Joseph Massino. “You never talk in a club, you never talk in a car, you never talk on a cellphone, you never talk on a phone, you never talk in your house,” he testified, saying [...] Read more – ‘How to avoid the feds’.
Three Yale scholars discuss research — their own and others’ — that sheds light into questions on making choices. Some excerpts that caught my eye: …what we’ve seen, if anything, is that the short run feedback may actually push people to make the wrong decision, like when they pay too much attention to short-run fluctuations [...] Read more – ‘Are we good at making choices?’.
What’s going on behind the mysterious force of self-control. Are some people born with some innate ability while the rest of us are doomed for failure. Can we learn how to improve our self-control? Dan Ariely, below, offers some insights. Specifically, he mentions that coming up with distraction strategies might be a good way to [...] Read more – ‘How Self-Control Works’.
We spend a large part of our life trying to persuade others to do something. Improving your ability to persuade can yield huge benefits over a lifetime. It also doesn’t hurt to be able to realize when others are using psychology to try and persuate you. Persuading someone using consistency is about them not you. [...] Read more – ‘Persuading with Consistency’.
Writers, like all humans, lack objectivity. That’s the point of writing. Yet many are obsessed with the myth of “objectivity.” So whence the delusional obsession with “objectivity” in the journalism schools and the pages of the Gray Lady et al.? The pretense and veneer of objectivity is the goal. This renders idiot mistakes and outright [...] Read more – ‘Intellectual Prostitution and the Myth of Objectivity’.
How can anyone make rational decisions in a world where knowledge is limited, time is pressing, and deep thought is often unattainable. Some decisions are more difficult than others and yet we make these decisions in the same way easy decisions are made. We have difficulty contemplating and taking protective actions towards low probability, high [...] Read more – ‘The Art and Science of High-Stakes Decisions’.
In life, storytelling is pervasive. One reason stories are popular is that learning through them is more memorable and retrievable than pure lecture-based learning—We naturally store, index, and retrieve information in the form of stories. Most of us would rather listen to someone tell a compelling story than listen to some boring lecture about the [...] Read more – ‘Storytelling in Psychology and Marketing’.
Venice is a beautiful city and I’ve always wondered how it managed to survive the constant threat of humidity, erosion, and unyielding terrain. To live in an ever-changing environment Venetians have become masters of adapting and responding to the inevitable with constant maintenance and appropriate use of the city. The fantastic video below explains everything [...] Read more – ‘How Does Venice Work?’.
We all want to know when someone is lying. The problem is that cues to deception are typically faint and unreliable. One way to try to ascertain whether someone is lying is to actively elicit and amplify verbal and nonverbal cues to deceit. How can we do this? The short answer is by increasing the [...] Read more – ‘Two Strategies to Outsmart Liars’.
Tyler Cowen, at Marginal Revolution, responds to being asked the best book each decade since the 1920′s: 1930s: The Grapes of Wrath, John Steinbeck. 1940s: Farewell, My Lovely, by Raymond Chandler. 1950s: Invisible Man, by Ralph Ellison, with Kerouac’s On the Road as a runner-up. 1960s: Catch-22, by Joseph Heller, with The Bell Jar and [...] Read more – ‘Seminal Books For Each Decade’.
The most sophisticated place in the world for convincing us to part with our money is Wall Street. Vegas, however, is not far behind. Vegas has convinced us that not only is throwing away money “fun” but flying somewhere to do so makes it more fun. Here are some of the psychological tactics that Vegas [...] Read more – ‘How Vegas Turns Our Brain Into Mush’.
PBS put together a fantastic documentary on Albert Einstein that explores his life from many angles. Einstein was notorious for his personal quirks: socks were unnecessary, leather jackets didn’t need replacing, and eggs can be boiled in soup water to save time and energy. He was a scientist who believed in god. Einstein questioned our [...] Read more – ‘Einstein’s Dreams’.
In a plutocracy those with the money make the rules. This recent quote from Warren Buffett caught my eye : “Every line in the tax code is there because someone was fighting for it. The people who care about that line are concentrated and focused on it, and people who are affected by that line [...] Read more – ‘Tax Code and Incentives’.
Tests are often spectacularly bad at predicting performance in the real world. So why do we still cling to them? Because they give us a strong number—something precise. This creates what Malcolm Gladwell calls “mismatch problems“—when the criteria for evaluating job candidates is out of step with the reality of the job demands. Jonah Lehrer [...] Read more – ‘Measurements That Mislead’.
The problem, if you can call it that, with using cell phones and Visa cards to pay is that they remove the friction of payment. While convenient that also nudges us spend more irresponsibly than if we paid with laborious—and insula secreting—cash. Here’s the problem with credit cards: the insula doesn’t seem to understand how [...] Read more – ‘The High Cost Of Easy Payments’.
Awesome Video. Con-men, marketers, and magician’s take their marks on an elaborate pyschologal tour—They have to get inside the subjects head, manipulate their thinking, and their emotions. [vimeo 9198586 w=400 h=300] Jamy Ian Swiss at Gel 2009 from Gel Conference on Vimeo. H/T Nick Follow Farnam Street on Twitter. Shop at Amazon.com and support Farnam [...] Read more – ‘(video) Honest Lying’.
Other things being equal when the price of a good rises, the quantity demanded should fall. Economics refer to this as the law of demand. Because there are many counter-examples to this law it’s more of a quick rule of thumb. Giffen goods are ones which people consume more of as the price rises, thus [...] Read more – ‘Mental Model: Raising prices and increasing consumption’.
“Investing is where you find a few great companies and then sit on your ass” – Charlie Munger Most of us are taught from a young age that effort leads to results. But if you take effort to mean activity, the lesson doesn’t apply for long-term investors. The message here is simple: investors often make changes to [...] Read more – ‘Does Investor Activity Translate Into Results?’.
Attribution errors, overconfidence, incentives, and a lack of curiosity hamper out ability to learn from success. …The first is the inclination to make what psychologists call fundamental attribution errors. When we succeed, we’re likely to conclude that our talents and our current model or strategy are the reasons. We also give short shrift to the [...] Read more – ‘Why Leaders Don’t Learn from Success’.
To deceive or not to deceive? That is the fundamental dilemma for negotiators. In a perfect world everyone would all have the same information and deception would not be as easily possible. But we don't live in a perfect world and negotiators often end up with private information. Deception can be active, as when individuals [...] Read more – ‘Too Guilty to Deceive: How Feeling Burdened Can Reduce Deception in Negotiation’.
When Charlie Munger recommended reading Max Bazerman’s Judgment in Managerial Decision Making I had never hear of the HBS professor. A lot of reading later and I’m a huge fan. In the HBR article below Bazerman covers some of the ground from his new book Blind Spots (see my notes). These days, many of us are instructed to make [...] Read more – ‘Ethical Breakdowns: Why Good People often Let Bad Things Happen’.
As soon as Jay-Z caught wind that an executive at the company that produces Cristal Champagne would prefer people like him didn’t consume his products, Jay-Z replaced Cristal with Krug and Dom Pérignon in his clubs. But it didn’t stop there. As someone that hangs around with the great American capitalist Warren Buffett, Jay-Z smelled an [...] Read more – ‘The most brilliant marketing in the history of wine’.
The war on drugs is corrupting America’s cops. Anyone familier with the Stanford Prison Experiment–which demonstrated that even liberal—minded undergrads can be turned into sadistic prison guards—knows the influencing power of a situation. Add a shot of stress, some emotional arrousal, our willingness to goto extreme lengths to appease authority, social proof, and uncertainty and [...] Read more – ‘When Good Cops Go Bad’.
That’s the title of a fascinating story in Rolling Stone Magazine. The role of Psy-Ops is to play with people’s heads and get them to behave in a desired, and predetermined, manner. In order to get more money and resources for Afganistan, the US Army might have crossed the line from power point presentation to full [...] Read more – ‘Army Deploys Psychological Operations on U.S. Senators’.
Looking under the hood it is the rare entrepreneur who resolves the ethical conflicts of wartime in a way that we today find satisfactory. Malcolm Gladwell reviews Ugly Beauty The details of just how Schueller managed to wriggle out of legal trouble are sordid. Bénouville turns out to have barely known Schueller. He was, it [...] Read more – ‘Sometimes it’s just business’.
A reader sent in an email asking if blocking twitter access at work really increases employee productivity. I’m not aware of any studies that test this specific hypothesis. However, this recent FT article however suggests, citing this study, that forbidding employees from surfing the internet could be counter-productive. Participants in this experiment who had been asked to [...] Read more – ‘Does blocking twitter at work increase productivity?’.
The standard theory says ego depletion — a tired brain has fewer resources left to exert self-control or make good decisions. This helps explain why google goes out of their way to make sure their employees make fewer decisions — so they can put more energy and effort into the more important ones. “A bad [...] Read more – ‘Where Do Bad Moods Come From?’.
Bolthouse and Grimmway Farms control over 80% of the carrot market in the US. The CEO of Blothouse, a former Coke executive, is used to selling sugar water and fairy dust. So when sales of the more profitable baby carrots started declining in the recession, he pulled out a few tricks from his Coke days. [...] Read more – ‘The Carrot Duopoly’.
Here are some of the books I’ve recently read as well as what’s on my nightstand now. If you have any suggestions on good books, let me know. The Ambiguities of Experience (see here) The Best Laid Plans and the sequel The High Road (Won some Canadian Book Award, fun read) Better by Mistake (Myth vs. Fact) Battle [...] Read more – ‘What I’m Reading’.
This quote was too long for the Farnam Street twitter feed: Economists are often asked to predict what the economy is going to do. But economic predictions require predicting what politicians are going to do — and nothing is more unpredictable. Source Join others and follow Farnam Street on twitter if you don’t want to [...] Read more – ‘The Uselessness of Economic Predictions’.
Let’s stop blaming people for failing to predict the unpredictable: Events like the fall of Egypt’s Mubarak regime simply cannot be predicted. But still, whenever they happen, intelligence agencies are blamed. They were blamed after the Iranian revolution and the collapse of the Soviet bloc. They’re being blamed now. “We are not clairvoyant,” a defensive [...] Read more – ‘Predictable Intelligence’.
What lessons will we learn from the nuclear accident at Fukushima? Some astute observations: We have now had four grave nuclear reactor accidents: Windscale in Britain in 1957 (the one that is never mentioned), Three Mile Island in the United States in 1979, Chernobyl in the Soviet Union in 1986, and now Fukushima. Each accident [...] Read more – ‘The lessons of Fukushima’.
Projections based solely on history lead to ruin. Projections seduce us into a false sense of security. We don’t know what’s behind them, what assumptions they make, and yet we take great comfort in the precision of the numbers they proffer. The recent earthquake exceeded the engineering assumptions by a long shot. What was supposed to [...] Read more – ‘Risk, Trust, and the Arrogance of Numbers’.
Spending time alone, if done right, can be good for you. Certain tasks and thought processes are best carried out without anyone else around. One ongoing Harvard study indicates that people form more lasting and accurate memories if they believe they’re experiencing something alone. We also happen to think more critically when we’re alone. “People [...] Read more – ‘The power of lonely: What we do better without other people around’.
Companies routinely lay off workers during a downturn in the economy. At first glance it seems more rational to try and renegotiate labor contracts with existing workers and push down wages rather than lay people off. That is until loss aversion takes hold and employees retaliate for being paid less. A series of studies in [...] Read more – ‘Is it better to lay off some workers or pay all workers less?’.
I finished reading Better By Mistake: The Unexpected Benefits of Being Wrong. The book had a few interesting passages, like this one: “Blaming individuals is emotionally more satisfying than targeting institutions. People are viewed as free agents capable of choosing between safe and unsafe modes of behavior. If something goes wrong, it seems obvious that [...] Read more – ‘Better By Mistake’.
“The earthquake and tsunami we had last week both exceeded our engineering assumptions by a long shot….The nuclear industry around the world probably will have to review how we set those assumptions in designing a nuclear power plant.” Thoughts from Nicolas Taleb: The Japanese Nuclear Commission had the following goals set in 2003: “The mean [...] Read more – ‘A few facts about small probabilities’.
In his book, The Ambiguities of Experience, James March explores the role of experience in creating intelligence. Folk wisdom both trumpets the significance of experience and warns of its inadequacies. On one hand, experience is thought to be the best teacher. On the other hand, experience is described as the teacher of fools, of those [...] Read more – ‘The Ambiguities of Experience’.
In an article published recently in the Annals of Internal Medicine, Ashwini Sehgal analyzed U.S. News’s “Best Hospitals” rankings. The Algorithm U.S. News uses to create this ranking, relies heavily on repetitional ratings generated by professional peers. Sehgal wanted to know how well that “Best Hospitals” ranking correlated to actual medical outcomes based on objective [...] Read more – ‘Do the best Hospitals Have The Best Reputations?’.
Ethical infractions are rooted in the intricacies of human psychology rather than integrity. Max Bazerman’s new book: Blind Spots will certainly make you think about your own actions more objectively. Briefly, here are some of my takeaways. We engage in behavioral forecasting errors. We believe we will behave a certain way in a certain situation. [...] Read more – ‘Max Bazerman: You Are Not As Ethical As You Think’.
Malcolm Gladwell explores at the College ranking game. Unfortunately too many students rely on artificially precise number when making decisions and weighing options. As Gladwell so eloquently demonstrates, who comes out on top, in any ranking system, is really about who is doing the ranking. There’s no direct way to measure the quality of an [...] Read more – ‘The Order Of Things’.
The HR department’s long run on gut instincts may be coming to a close. Recently, Google applied their engineering (data-driven) mindset to building better bosses and the counter-intuitive findings suggest that promoting the best technical person is a bad idea. Not content to just learn what makes a good boss, Google is using this information [...] Read more – ‘Google’s Quest to Build a Better Boss’.
This situation is designed turn the brain into mush …There are so many psychological influences at play here including: uncertainty, social proof, authority, incentives, stress influence, possible drug influence, Gresham's law (where bad behavior corrupts the good), etc. “Keep in mind that many of the models are 14 or 15 when they start out in the business, often come [...] Read more – ‘The Creepy Back-Room Incentives in the Fashion Industry’.
Reciprocation is so powerful that some people will risk everything and willingly break the law to repay a favor: Mr. Kumar said he initially rejected Mr. Rajaratnam’s offer, explaining that McKinsey would not allow the separate arrangement. But Mr. Rajaratnam persisted. “People are making fortunes,” he recalled Mr. Rajaratnam saying. “So just keep track of [...] Read more – ‘The old give and take on Wall Street’.
Marketers want to believe that a few influential people among us can shape the opinions and more specifically, purchasing habits, of the rest of us. According to the theory, if you can find the people with influence, you can, in effect, make something become a success. That idea is easy to like because it feels [...] Read more – ‘Can a few influential people really start a trend?’.
While we like to think we're make rational decisions on who to trust, that is not always the case. Heuristics–when our mind unconsciously applies rules of thumb–can take over leaving our more time consuming and rational brain in the dust. According to a new study, one of the factors which influence trust before you meet someone is [...] Read more – ‘Building Trust through Subliminal Cues’.
Understanding what makes people consume some bits of information and not others is important because information importantly determines attitudes. Although large gaps in citizen knowledge are well known, small amounts of the right kind of information can change preferences over issues or the considerations people rely on to evaluate candidates. So how can you make [...] Read more – ‘How can political actors use emotions to their advantage?’.
In his book Collapse, economist Jared Diamond lists five factors that can lead to social decay including: a failure to understand and prevent cases of environmental damage; climate change; depredations by hostile neighbours; inability of friendly neighbors to continue to trade; and finally, how the society itself deals with the problems raised by the first four. [...] Read more – ‘Jared Diamond — How Do Great Societies Collapse?’.
Sleep deprivation can lead to plenty of unwise decisions, which researchers have long tied to flagging attention and short-term memory. But a new study shows how just one night of missed sleep can make people more likely to chase big gains while risking even larger losses—independent of their tapering attention spans. The findings suggest that [...] Read more – ‘Short on sleep, brain optimistically favors long odds’.
Great article from Tyler Cowen in the NYT on why the short-term incentives of our system almost ensure that we constantly run a deficit, even in good times: James M. Buchanan, a Nobel laureate in economics — and my former colleague and now professor emeritus at George Mason University — argued that deficit spending would [...] Read more – ‘The Fiscal Illusion’.
We briefly touched on this research before Would you pay more for John Voight’s Car?. This NYT article asks an interesting follow-up. Why would you pay more for a replica of an Eric Clapton Guitar? One of their conclusions is that the seemingly illogical yearning for a Clapton relic, even a pseudorelic, stems from an instinct [...] Read more – ‘Urge to Own That Clapton Guitar Is Contagious, Scientists Find’.
An interview with best-selling author Guy Kawasaki on his new book Enchantment: The Art of Changing Hearts, Minds, and Actions. Guy’s book is full of tips and tricks for how to convince people to join your cause, whether it’s a rock band or a software startup. Plus, any book where Robert Cialdini is quoted on [...] Read more – ‘Enchantment: The Art of Changing Hearts, Minds, and Actions’.
Clay Shirky in McKinsey Quarterly on managing Gen Y A famous observation about the net generation, the millennials, is, “They’re doing Facebook at their desks on a Tuesday morning,” which is certainly true. One of the reasons for that is that they’re also being asked to use PowerPoint in their homes on a Saturday afternoon. [...] Read more – ‘Managing net generation workers’.
Could the simple act of signing our name on a piece of paper influence the decisions we make afterwards – even if those decisions are unrelated to the document we have signed? the act of signing our name has a priming effect that serves to unconsciously remind us of our identity and as such can [...] Read more – ‘What is the Hidden Influence of Signing Your Name? The “Signature Effect”’.
Nicolas Carr with some interesting thoughts: Situational overload is not the problem. When we complain about information overload, what we're usually complaining about is ambient overload. This is an altogether different beast. Ambient overload doesn't involve needles in haystacks. It involves haystack-sized piles of needles. We experience ambient overload when we're surrounded by so much [...] Read more – ‘Information Overload: Too Much Noise or Too Much Signal?’.
I wonder if this is because we’re removed from the process and thus emotionally detached with omission: People are more comfortable committing sins of omission than commission—letting bad things happen rather than actively causing something bad. A new study published in Psychological Science, a journal of the Association for Psychological Science, suggests that this is because [...] Read more – ‘People Would Rather Let Bad Things Happen Than Cause Them, Especially if Someone Is Watching’.
Intelligence is, for the purposes of this post, the capacity to learn new information, retain it, then use that new knowledge as a foundation to solve the next problem, or learn the next new skill, and so on. Working memory capacity correlates with intelligence. Thus, to improve your intelligence it seems reasonable to improve your working [...] Read more – ‘5 ways to maximize your cognitive potential’.
“One of the signs of a dying civilization,” John Ralston Saul points out in Voltaire’s Bastards, “is that its language breaks down into exclusive dialects which prevent communication. A growing healthy civilization uses language as a daily tool to keep the machinery of society moving.” Chris Hedges points out in Empire of Illusion that we’ve [...] Read more – ‘A sign of a dying civilization?’.
A Q&A with Jon Wertheim, co-author of Scorecasting: The Hidden Influences Behind How Sports Are Played and Games Are Won: BI: The average fan that still loves the traditional stats may be your most important target, but they may also be too stubborn to purchase a book like this. How do you sell your book [...] Read more – ‘A Numbers Game’.
I’ve altered the title of the original article to reflect reality. Things are rarely as simple as they appear from professors or consultants. (But complexity doesn’t sell books does it?) A little background… I’ve coined two terms that describe how people view failure: the type 1 mindset, and the type 2 mindset. The type 1 [...] Read more – ‘Why Failure (Can Sometimes) Drive (Good and Bad) Innovation’.
I don’t know if you have read The Happiness Hypothesis but if you haven’t, then I recommend it. It is an extraordinary book on the human condition and writing about such you cannot miss out on the work of Robert Cialdini, PhD. Dr. Cialdini is the most cited living social psychologist in the world today [...] Read more – ‘The Mafia and Reciprocation’.
Jonah Lehrer on the difficulties of entitlement reform: Politicians seem to know this. As many analysts have pointed out, the current frenzy of budget cutting in Congress—House Republicans have proposed more than $60 billion in discretionary spending cuts, while President Obama has declared a five-year freeze on parts of the federal budget—is a mere blip [...] Read more – ‘The Budget Vs The Brain: The difficulties of entitlement reform’.
Too many decisions in fields from education to business to philanthropy are made without any scientific basis. In order to gather some evidence you have to try some pretty wild ideas, like this one: With $10 million from hedge-fund billionaire Kenneth Griffin, List will track the results of more than 600 students– including 150 at [...] Read more – ‘Using incentives to motivate both students and parents’.
The Theory: (A baby) Growing in a woman who is malnourished – either from eating too little or receiving too few nutrients – primes the fetal DNA to hoard every calorie available, only to be vulnerable to obesity and diabetes in a postnatal world of caloric overload. At the end of the Second World War, [...] Read more – ‘A new prime suspect behind the global upsurge in obesity and diabetes: the womb’.
Lately we’ve been focussing on the little things that differentiate amateurs and experts and offered evidence that experts are made and not born. Next on the list is sleep. Great performers are an exception. Typically, they sleep significantly more than the rest of us. In Anders Ericcson’s famous study of violinists, the top performers slept [...] Read more – ‘Sleep is More Important than Food’.
Consuming sugar makes one less impulsive. Aspertaine, on the other hand, makes people more impulsive. So, if you run a casino, you should serve only diet soda. However, before you make a personal decision you should have a Coke. In a recent paper published in Psychological Science, the relationship between the consumption of sugar (via [...] Read more – ‘How sugar helps you make better decisions’.
You’re about to start a civil uprising to overtake a corrupt government. Everything is ready to go but you have no idea what concessions would maximize the likelihood of permanent and lasting change. Luckily, Farnam Street has the answer! According to the economists Daron Acemoglu and James A. Robinson, who have built a detailed series of [...] Read more – ‘What type of concessions should protesters demand?’.
Fascinating story on power, incentives, and the epedemic of rape in prisons: Back in 1998, Jan Lastocy was serving time for attempted embezzlement in a Michigan prison. Her job was working at a warehouse for a nearby men’s prison. She got along well with two of the corrections officers who supervised her, but she thought [...] Read more – ‘Prison Rape and the Government’.
The Twitterization of our culture has revolutionized our lives, but with an unintended consequence—our overloaded brains freeze when we have to make decisions. The brain is wired to notice change over stasis. An arriving email that pops to the top of your BlackBerry qualifies as a change; so does a new Facebook post. We are [...] Read more – ‘I Can’t Think!’.
Experience of power leads to an illusion of personal control and hubristic overconfidence. By producing an illusion of personal control, power may cause people to lose touch with reality in ways that lead to overconfident decision-making. Having a sense of control over the future has long been considered a fundamental motive and a highly adaptive trait for humans. [...] Read more – ‘Does Power Cause People to Lose Touch With Reality?’.
There is no such thing as bad publicity, or so goes the adage. Tell that to McDonald’s. When a rumor circulated that McDonald’s used worm meat in its hamburgers, sales decreased by more than 25%. However, recent research suggests that negative publicity can sometimes increase sales under some circumstances. An analysis of New York Times [...] Read more – ‘How and when does negative publicity increase sales?’.
“You seem to make better decisions when you have a full bladder,” Tuk says. What should you do when you really, REALLY have to “go”? Make important life decisions, maybe. Controlling your bladder makes you better at controlling yourself when making decisions about your future, too, according to a study to be published in Psychological [...] Read more – ‘Controlling Impulsive Choices’.
In essence, my basic decision-making flaw is that I tend to treat easy consumer decisions (toothpaste, floss, shampoo, laundry detergent, etc.) as if they were really difficult. Although I know that every floss will work well enough, I still can’t help but contemplate the pros and cons of waxed versus unwaxed, spearmint versus wintermint. It’s [...] Read more – ‘Why Are Easy Decisions So Hard?’.
Interesting article on the multi-generational appeal of Dr. Seuss: Kerry Mallan of Australia’s Queensland University of Technology points to the poetic meter Dr. Seuss usually utilized, the name of which — anapaestic tetrameter — sounds like one of his imaginary creatures. This meter, also used by Lord Byron, “has the accented syllable following two unaccented [...] Read more – ‘Did Sam-I-Am grow up to become a CEO?’.
The Marxist ethic “from each according to his ability, to each according to his needs” sounds simple enough, but it evades the question: Who decides what a person needs and what he can do? If the state decides that’s socialism. If each individual decides for himself, that’s anarchism or commonism. When dreams set up idealistic [...] Read more – ‘The influence of shame’.
In our culture oral persuasion counts for a lot, but it seems like we’ve been going downhill. Despite the beliefs of many, public speaking and persuasion are skills that can be acquired. The comic playwright Aristophanes in the 5th century BC pointed the finger at those clever rhetoricians whose weasel, winning words made what was [...] Read more – ‘Public speaking from Demosthenes to Obama’.
This book explains why expert predictions fail and why we believe them anyway. Not only are experts wrong, the vast majority preform worse than random chance. And these failures don’t seem to matter. In our fast media twitter cutlure, we rely on experts more than ever to shap our thoughts. Ultimatley, our world view is [...] Read more – ‘Why expert predictions fail and why we believe them anyway’.
Looks like mom was right, again: We analyse the impact of the friends’ educational attainment on an individual’s educational attainment where they are identified as friends during school and in to adulthood. We find that peer effects in education are not only strong but also persistent over time. We find that the most relevant peers [...] Read more – ‘Are friends important in educational outcomes?’.
At the recommendation of Warren Buffett’s Biographer Alice Schroeder, I’ve been reading The Craft of Interviewing. Schroeder, seems pretty crafty at knowing when to ask, what do ask, and how to ask. Rest assured, I have no intention to interview anyone. Yet I do want to ask better questions. I’ve never been taught how to [...] Read more – ‘The Art and Science of Asking Better Questions’.
Here is what Scott Lilienfeld, the author of 50 Great Myths of Popular Psychology, has to say about where psychology myths come from: The primary source is the huge, burgeoning pop psychology industry: self-help books, the internet, films, TV shows, magazines, and the like. But many of these myths also spring from the allure of [...] Read more – ‘The Origins of Psychology Myths’.
When you must convey your complex ideas simply, pick your metaphor’s carefully. Good metaphors can make a complex and obtuse world seem exciting and accessible. …But bad metaphors can do a great disservice to the public understanding of science. The idea of the “evolutionary ladder” perpetuates the myth that evolution is about a steady linear [...] Read more – ‘How Metaphors Shape Our Thoughts And Decisions’.
Overall, the handlers beliefs had a greater influence over what was found than the dogs. If you’re a smuggler, get a haircut and buy a suit. Continue Reading Shop at Amazon.com and support Farnam Street Read more – ‘Drug Sniffing Theatre?’.
Interesting, publishers are mad that the default wasn’t to opt-in and now users must make a conscious choice. Naturally, publishers also aren’t jazzed about Apple’s insistence that users have to opt in to have their information shared with publishers. “Anything that requires the consumer to take yet another step is always going to reduce the [...] Read more – ‘Why Publishers Don’t Like Apple’s New Subscription Plan’.
Adaptation has to do with how we learn to interpret signals. Behavioral economist Dan Ariely has based his career working through these types of issues as they relate to adaptation to pain and social adaptation. In his talk, he explores how we’re drawn to partners with a similar level of attractiveness and how exposure to [...] Read more – ‘(Video) Dan Ariely: Adaptive Responses’.
If you’re going to play the game you should at least educate yourself on the unwritten rules. In an NPR interview (audio below), Stanford business professor Jeffrey Pfeffer highlights why performance won’t get your promoted and why power is corrupting. Here are my notes on the audio interview: 1. performance is elusive and thus can [...] Read more – ‘Why Performance Won’t Get You Promoted’.
It is difficult to get a man to understand something when his salary depends upon his not understanding it. …IT job security is often dependent on making things hard, slow, and complex. If the Exchange Server didn’t require two people to babysit it at all times, that would mean two friends out of work. Of [...] Read more – ‘The end of the IT department’.
Turns out that brand loyalty in toothpaste is so high that retailers are reluctant to eliminate small brands after trying out a product because shoppers will actually go somewhere else. Over time this has lead to retailers carrying quite a few brands and now consumers are getting annoyed at the quantity of selection. From the WSJ: It should [...] Read more – ‘Too Many Toothpaste Choices’.
Here is an interesting study demonstrating that we can maintain a belief even while acting contrary to it (Moral Hypocrisy): Across 3 small studies, 80 female undergraduates were confronted with the dilemma of deciding whom-themselves or another research participant-to assign to a positive consequences task, leaving the other to do a dull, boring task. In [...] Read more – ‘Moral Hypocrisy’.
Even average memories are remarkably powerful if used properly: top achievers typically follow the same general pattern. They develop strategies for keeping out of the autonomous stage by doing three things: focusing on their technique, staying goal-oriented and getting immediate feedback on their performance. Amateur musicians, for example, tend to spend their practice time playing [...] Read more – ‘US Memory Champ Joshua Foer: What Differentiates Amateurs and Top Achievers’.
Mckinsey asked Dan Ariely on what distinguishes a situation when an executive should trust his intuition or his gut feeling, versus one where he should really pause and think? Dan Ariely: One way to think about it is the following: imagine you stand on a field and you have a soccer ball and you kick [...] Read more – ‘Dan Ariely on irrationality in the workplace’.
Are your friends more popular than you are? There doesn’t seem to be any obvious reason to suppose this is true, but it probably is. We are all more likely to become friends with someone who has a lot of friends than we are to befriend someone with few friends. It’s not that we avoid [...] Read more – ‘Why You’re Probably Less Popular Than Your Friends’.
… “For 20 years, governors have come into this room and lied to you, promised you benefits that they had no way of paying for, making promises they knew they couldn’t keep, and just hoping that they wouldn’t be the man or women left holding the bag. I understand why you feel angry and betrayed [...] Read more – ‘Where the leaders are: lie, deceive, and obfuscate’.
We all want to believe that humankind is getting smarter and we won’t repeat past blunders. This theory rests on the blief that we can learn the right lessons from our past and cast discredited ideas into the historical garbage bin where they never see the light of day again. This article in Foreign Policy [...] Read more – ‘Where Do Bad Ideas Come From?’.
An investment manager writes about the one question the Federal Reserve can’t answer: “and then what?” Analyzing Analysis One of our favorite authors is the ecologist/economist Garrett Hardin, author of works such as Living Within Limits and Filters Against Folly, as well as the famous essay on the “Tragedy of the Commons.” In Filters Against [...] Read more – ‘What’s the one question the Federal Reserve Can’t Answer?’.
Personally I think this is bunk, but it’s worth sharing: Stanley Milgram’s seminal experiments in the 1960s may not have been a demonstration of obedience to authority after all, a new study claims. Milgram appalled the world when he showed the willingness of ordinary people to administer a lethal electric shock to an innocent person, [...] Read more – ‘Milgram’s obedience studies – not about obedience after all?’.
You can bet that book publishers won’t like this idea one bit. However, for those who love reading as much as I do, this is AWESOME: You can now borrow and lend kindle books to other kindle readers. You may search for the book you’re looking for, or use our Available Now and Recommendations pages [...] Read more – ‘Welcome Lendle: A Kindle Book-sharing Service’.
People may (irrationally) value an object more if they believe it was once owned by a celebrity because of an inherent belief that it still carries an essence of physical trace of the famous person. Why would anyone spend money, often a lot of money, on a common object just because somebody famous once owned it? A [...] Read more – ‘Would You Pay More For Jon Voight’s Car?’.
Jonah Lehrer explains the concept of mental accounting: I’m writing this blog post because I just paid $16.95 for hotel internet access. Normally, I get around the hotel internet conundrum by walking to the nearest Starbucks and drinking a cup of coffee while sending my email. Alas, I seem to be in the last zipcode [...] Read more – ‘Why can hotels get away with such exorbitant fees?’.
Flirtation is a game we play, a dance for which everyone knows the moves. “People can flirt outrageously without intending anything,” says independent sex researcher Timothy Perper, who has been researching flirting for 30 years. “Flirting captures the interest of the other person and says ‘Would you like to play?’” And one of the most [...] Read more – ‘The Science of Romance: Why We Flirt’.
Need to woo a partner in time for Valentine’s? Follow these simple, evidence-based instructions for boosting your irresistibility. When asking a lady for a dance or for her number, your chances will be improved by lightly touching her on the arm. Try not to do it in a creepy way. Use mimicry, bodily and verbal. [...] Read more – ‘Evidence-based tips for Valentine’s’.
Interesting article in the NYT on the economics of the Huffington Post: Next question: how much are those page views worth? The Huffington Post had revenues of about $30 million last year, they’ve reported, almost all of which was from display advertising. This revenue was generated on roughly 4.8 billion page views over the course [...] Read more – ‘The Economics of Blogging and The Huffington Post’.
Something fun for a Saturday night? How about a cookbook reccommendation from Bill Gates. The book, compiled after nearly four years of obsessive research, clocks in at 2,400 pages (that’s 47-pounds), is really a six-volume collection that costs $460 and requires four pounds of ink to print. The result is a large-scale investigation into the math, [...] Read more – ‘Microsoft in your Kitchen? A cookbook Recommendation from Bill Gates’.
Like most of us, politicians cherry pick data that agrees with our ideas and disregard evidence that might challenege those ideas. So the Minister has cherry picked only the good findings, from only one report, while ignoring the peer-reviewed literature. Most crucially, he cherry-picks findings he likes whilst explicitly claiming that he is fairly [...] Read more – ‘Why is evidence so hard for politicians?’.
Groupon is a psychological lollapalooza. The author below forgets to point a few other clever tricks, like the social proof nature of Groupon, which allows you to see how many other people have already “bought” the deal. The answer: clever psychology. First of all, Groupon’s sales staff tries to cultivate deals that suit the audience [...] Read more – ‘Why is Groupon such a superstar when so many competitors labor in obscurity?’.
A few days after sending the resignation letter to Tommy Davis, Haggis came home from work to find nine or ten of his Scientology friends standing in his front yard. He invited them in to talk. Anne Archer was there with Terry Jastrow, her husband, an actor turned producer and director. “Paul had been such [...] Read more – ‘The Apostate’.
It seem to me that monetary policy should be informed by the effect it has on incentives and the potential for greater procyclicality of the system. In this paper, former IMF economist Raghuram G. Rajan, offers his thoughts on how financial development has made the world a risker place. If you’re interested in this type of [...] Read more – ‘Has Financial Development Made the World Riskier?’.
Much of America today is as addicted to bureaucratic, rule based thinking as ancient China. The uncertainties of life in a thermonuclear world haunt us. There must, we feel, be infallible techniques for making the economy grow, keeping inflation at bay, understanding international events and managing American foreign policy. When there is a problem — [...] Read more – ‘The Paradox of Leadership and the Art of War’.
Besides making cities more affordable and architecturally interesting, tall buildings are greener than sprawl, and they foster social capital and creativity. Yet some urban planners and preservationists seem to have a misplaced fear of heights that yields damaging restrictions on how tall a building can be. From New York to Paris to Mumbai, there’s a [...] Read more – ‘My skyscraper is bigger: A case for building up, not out.’.
The controversies that followed the publication of Rachel Carson’s Silent Spring in 1962 more often than not sprang from a misunderstanding of the true nature of her concerns. Most felt she was anti technology or innovation. However, those people missed the nuance in her remarks. Her criticisms were not so much directed at technology itself [...] Read more – ‘On the reliability of humans’.
Studies by Steven Maier at the University of Boulder show that the degree of control available to an animal confronted by stressful situations determines whether or not that stressor undermines the ability to function. Similarly, in an organization, as long as people feel they can execute their own decisions without much oversight, stress remains under [...] Read more – ‘The Autonomy Factor’.
Big Brands are eager to reconnect with consumers after losing ground to private labels over the last few years. Increasingly, they are turning to in-person social networks to sell their wares. While companies such as Kraft, P&G, and Kimberly-Clark (KMB) continue to pour money into TV and Web advertising, they’re mindful that consumers are programmed [...] Read more – ‘Tupperware parties are back…’.
If you look at the history of philosophy, you see that all the great and influential stuff has been technically full of holes but utterly memorable and vivid. They are what I call “intuition pumps” — lovely thought experiments. Like Plato’s cave, and Descartes’s evil demon, and Hobbes’ vision of the state of nature and [...] Read more – ‘Intuition pumps’.
“If incompetence is the disease of the novice, overconfidence is the disease of the expert.” —Malcolm Gladwell Malcolm Gladwell is a staff writer at the New Yorker and the author of The Tipping Point: How Little Things Make a Big Difference, Blink, Outliers and most recently, What the Dog Saw. Read more – ‘Video: Wide-ranging Interview with Malcolm Gladwell’.
This article reinforces the view that social network structure can facilitate more influence than the quantity of followers/friends and that people need to hear new ideas multiple times before they catch on. A recommendation from a smaller, more-connected, network can be more valuable than one from Ashton Kutcher. One key finding is that members of middling status – having [...] Read more – ‘Why Some Twitter Posts Catch On, and Some Don’t’.
Carnegie Mellon Professor Jesse Schell, of the university’s Entertainment Technology Center, dives into a world of game development emerging from the popular “Facebook Games” era. People used to think that people played games to avoid reality, however, in the facebook era, there is a realism to the games. Jesse mentions a book he read recently, [...] Read more – ‘The Psychology Behind Computer Games’.
Faced with both a public health crisis and a public relations disaster, Portugal’s elected officials took a bold step. They decided to decriminalize the possession of all illicit drugs — from marijuana to heroin — but continue to impose criminal sanctions on distribution and trafficking. The goal: easing the burden on the nation’s criminal justice [...] Read more – ‘What happens when an entire country legalizes drug use?’.
Far from being the most able, arrogant workers were judged weaker in almost every way by one rating group or other. Some of the findings are less surprising: people who think their managers are arrogant grade them as poorer across the board, which may be influenced by a reverse halo effect (overgeneralising a negative feature) [...] Read more – ‘How good are arrogant individuals at their jobs?’.
I’ve been reading The Big Short, his account of the men who bet against the subprime bubble, and express my baffled admiration at his ability to get inside the heads of his characters. One, the hedge fund owner-manager Michael Burry, gave him access to every e-mail he had ever sent. “God’s gift to the narrative [...] Read more – ‘Tim Harford Interviews Michael Lewis’.
The CEO may have thought of these people as rats working in a maze, and therefore seen no reason to motivate or help them make the most out of their canceled project. But if he had understood the importance of meaning in the workplace he might have taken some of these steps, spent some money [...] Read more – ‘(de)motivating employees’.
A banking system is an act of faith: it survives only for as long as people believe it will. Two weeks earlier the collapse of Lehman Brothers had cast doubt on banks everywhere. Ireland’s banks had not been managed to withstand doubt; they had been managed to exploit blind faith. Now the Irish people finally [...] Read more – ‘When Irish Eyes Are Crying’.
We just updated what we believe to be the best behavioral economics reading list on the web. If you’re serious about getting smarter and applying that knowledge on everything from daily decisions to investing, you simply must read some of these books. Shop at Amazon.com and support Farnam Street Read more – ‘What Are The Best Books On Psychology And Investing?’.
The Monitor spoke with Robert Cialdini about his work and its influence. Have your findings from the towel study made their way into policy yet? I think it’s a little too early. There’s only one place where we saw the implications actually taken into account. I was in the Netherlands at The Hague giving a [...] Read more – ‘How can job-seekers harness persuasion to help them land a job?’.
There are alternative approaches to resolving marital spats other than therapy. One couple used principles from economics and psychology to improve their marriage: 50/50 isn’t the best way to divide housework. We want an egalitarian marriage (and anything else would betray the feminist principles my mother taught me). But Adam Smith famously noted that efficiency is [...] Read more – ‘Economics Saved My Marriage: How a Nobel laureate got me to stop nagging my husband.’.
So what happens when shoppers buy under pressure? Consumers are more likely to do what the retailer wants. And they want you to spend more money, says retail psychologist Tim Denison. “If you are under time pressure, you are basically looking for cues and shortcuts in the process,” he says. “You’ll be more likely to [...] Read more – ‘Why do people buy under pressure?’.
As a trained statistician with degrees from MIT and Stanford University, Srivastava was intrigued by the technical problem posed by the lottery ticket. In fact, it reminded him a lot of his day job, which involves consulting for mining and oil companies. A typical assignment for Srivastava goes like this: A mining company has multiple [...] Read more – ‘Cracking the Lottery Code’.
I thought the merchant’s use of a calculator was ingenious. Negotiation@Grand Bazaar from serendipity on Vimeo. Dan Ariely is the best-selling author of The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home and Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions. Read more – ‘Video: Dan Ariely, Negotiation @ the Grand Bazaar’.
Android had taken the lead in the smartphone market share. But does market share ensure victory? No according to these thoughts. Historically, in the case of PC operating systems, large market share attracted developers who built software exclusively for the dominant platform. That software, in turn, created further lock-in as users grew accustomed to the [...] Read more – ‘Does market share matter?’.
What principles could have guided MySpace and News Corp. management and designers, even as they fought over control? Much of the answer lies in the work of David Reed and what is known as “Reed’s Law.” Developed in the late 1990s, Reed’s Law offers the fundamental insight that the value of social networks depend on [...] Read more – ‘Why Facebook Beat MySpace’.
The concept of Gresham’s Law can be broadly stated as “the bad drives out the good.” Industries that require never-ending subsidies simply cannot increase overall economic welfare. To conclude otherwise is to believe in ‘free-lunch’ economics of the worst kind. Yet, free-lunch economics are driving the push for renewable energy. Jonathan A. Lesser, of Continental [...] Read more – ‘Gresham’s Law of Green Energy’.
For those who want to read up on the roots of the turmoil, The Economist Cairo bureau chief, Max Rodenbeck, recommends several clearly written accounts. The first is “Egypt on the Brink: From Nasser to Mubarak” by Tarek Osman, a Western-educated Egyptian banker and occasional newspaper columnist. The second is a series of books by Galal [...] Read more – ‘From Pharaohs to Facebook’.
Hypothesis: a decent knowledge of mathematics reveals that correlation is not causation, that most coincidences actually are the result of chance Shop at Amazon.com and support Farnam Street Read more – ‘(video) It *could* just be coincidence’.
The lecture below was delivered by William Deresiewicz to the plebe class at the United States Military Academy at West Point in October of last year. Deresiewicz convincingly argues that we don’t teach leadership; excellence doesn’t get you up the greasy pole of bureaucracy; we lack solitude; and we constantly bombard ourselves with the opinions of others. It [...] Read more – ‘How do you learn to lead?’.
Do the tools of social media make it possible for protesters to challenge their governments? Malcolm Gladwell argues that there is no evidence that they do; Clay Shirky disagrees. Gladwell: The lesson here is that just because innovations in communications technology happen does not mean that they matter; or, to put it another way, in [...] Read more – ‘The Debate: Do Social Media Make Protests Possible?’.
Defense doesn’t win championships. Teamwork isn’t what it’s cracked up to be. Momentum is a myth. Punting in football is a waste. Officials are biased. And the Chicago Cubs aren’t cursed; they just stink. From the Sunday New York Times Book Review of Scorecasting: The Hidden Influences Behind How Sports Are Played and Games Are [...] Read more – ‘Conventional wisdom takes a beating’.
Neoclassical economics suggests that we act as if we’ve rationally considered all possible outcomes factoring in probability and utility to come up with expected utility. Behavioural economics, in contrast, proposes prospect theory instead, which gives more weight to losses than gains and provides a better fit for the choices observed in the laboratory. But, say [...] Read more – ‘Why we do what we do’.
In some cases it appears that experts who are less certain about their opinions more persuasive and compelling. Why? This is counterintuitive. Basically, what they think is going on is an expert that expresses uncertainty are surprising. We expect experts to know but when they surprise us we feel something is amiss and we pay more attention. If the message [...] Read more – ‘Are Experts who are less certain more persuasive?’.
Always-on, multitasking work environments are killing productivity, dampening creativity, and making us unhappy. We tend to believe that by doing several things at the same time we can better handle the information rushing toward us and get more done. Unfortunately, current research indicates the opposite: multitasking unequivocally damages productivity. Email is both a positive and [...] Read more – ‘Information overload’.
Yale economist Robert Shiller argues that rising inequality in the US was a major cause of the recent crisis, and little is being done to address it. He recommends reading Adam Smith’s Theory of Moral Sentiments, The Passions and The Interests: Political Arguments for Capitalism Before its Triumph, Nudge, Fault Lines: How Hidden Fractures Still [...] Read more – ‘Human Traits Essential to Capitalism’.
I found this interesting. Motivational fees are not new to this blog. In a past post, we documented how NBA All-Stars hated paying fines for being late. Parents, on the other hand, didn’t mind paying extra to pick up their little ones late from daycare. Gym-Pact offers what Zhang calls motivational fees — customers agree [...] Read more – ‘Would you pay more to miss a workout?’.
Excellent article. To understand your culture, you need to pay close attention to its quiet, sometimes hidden, manifestations, such as the side conversations in the hallways, the informal consultations behind closed doors, and the incisive guidance that people get when they ask one another for advice. It is also evident in the formal lines of [...] Read more – ‘Stop Blaming Your Culture’.
What was the impetus behind the Farnam Street blog? I ended up with an undergrad and a master’s degree being largely ignorant to how the world works. I think the education system failed me. I did a two-year MBA and actually felt stupider at the end. Professors wanted rote regurgitation of textbooks without any critical [...] Read more – ‘Curiosity Advertising Interviews Farnam Street’.
As this NPR video explains, we are unable to walk straight when there is no fixed point. This remains a mystery to this day. [vimeo 17083789 w=400 h=225] A Mystery: Why Can’t We Walk Straight? from NPR on Vimeo. Shop at Amazon.com and support Farnam Street H/T Enoch Read more – ‘A Mystery: Why Can’t We Walk Straight?’.
Christian Jarrett examines the relevance of the idea of sin to modern life. As Charlie Munger said “Envy is a really stupid sin because it’s the only one you could never possibly have any fun at. There’s a lot of pain and no fun. Why would you want to get on that trolley.” It seems [...] Read more – ‘The deadly sins’.
Nearly six hundred undergrads answered open-ended questions about why they’d purchased, downloaded or copied their most recently acquired album (the vast majority had acquired one within the last two weeks), and then they provided the same information again six months to a year later. The participants’ answers fell into five main categories: because they liked [...] Read more – ‘How reliable is our memory for our own previous intentions?’.
The problem with Strunk & White, in Fish’s view, is that “they assume a level of knowledge and understanding only some of their readers will have attained,” that is, the Cornell kids whose secondary education did at least a halfway decent job of teaching them the basics. …Fish’s aim is to offer a guide to [...] Read more – ‘How to Write a Sentence’.
Some excerpts from the excellent essay, Education After Auschwitz, by Theodor Adorno: One must fight against the type of folkways [Volkssitten], initiation rites of all shapes, that inflict physical pain—often unbearable pain—upon a person as the price that must be paid in order to consider oneself a member, one of the collective. The evil of [...] Read more – ‘Education After Auschwitz and The Veil of Technology’.
Tipping is a $40 billion dollar industry in the United States. Yet from the traditional economic perspective, which sees us as rational agents operating in our own interest, tipping waiters, barbers, taxi drivers and other service workers is crazy. Many food servers depend on tips to make their living. Understanding the variables that affect tipping [...] Read more – ‘Scientifically Proven Ways to Increase Tips in the Service Industry’.
Today, most people have debit cards, and many of those people also have credit cards. There is a paradox, though, which has stimulated a lot of research. Consumers are almost always better off paying with their credit cards than their debit cards. With a credit card, they can get rewards and the free use of [...] Read more – ‘Why Do We Use Debit Cards when Credit Cards Make More Sense?’.
Research published online Thursday in the journal Science, found that students who read a passage, then took a test asking them to recall what they had read, retained about 50 percent more of the information a week later than students who used two other methods repeatedly studying the material and drawing diagrams). One interesting paradox [...] Read more – ‘Does taking a test help you learn or measure your learning?’.
Newly published research from Australia suggests why a pain-inducing practice has survived through the centuries: It provides psychological benefits to the self-flagellating faithful. Who knew there was a Dobby Effect? “Experiencing pain as a penalty can cause people to feel that their guilt is resolved and their soul cleansed,” a research team led by psychologist [...] Read more – ‘Does physical suffering reduce feelings of guilt?’.
Empathy is a cornerstone of human behavior and has long been considered innate. A forthcoming study, however, challenges this assumption by demonstrating that empathy levels have been declining over the past 30 years. Previously, people thought empathy was something you were born with, however this new study challenges that notion. I suspect there is no [...] Read more – ‘What, Me Care? Young Are Less Empathetic’.
Regular readers of this blog know that I’m a huge fan of Atul Gawande. No, I wasn’t the guy who liked him so much he wrote him a check for $20,000. (I cash all checks from readers!) Always keen to see what he has to say, I really enjoyed this interview and his book recommendations. What [...] Read more – ‘What are you reading Dr. Atul Gawande?’.
I.O.U.S.A. boldly examines the rapidly growing national debt and its consequences for the United States and its citizens. Burdened with an ever-expanding government and military, increased international competition, overextended entitlement programs, and debts to foreign countries that are becoming impossible to honor, America must mend its spendthrift ways or face an economic disaster of epic [...] Read more – ‘(Video) I.O.U.S.A.’.
According to Dan Ariely, we don’t think that natural is more effective. We do, however, think synthetic has more side effects, particularly long-term side effects. ..And this kind of made me wonder about what – what is it, why do people think that running with shoes without soles is more logical. I actually met one [...] Read more – ‘Irrational Thinking: The Word ‘Natural’ Sells’.
In the latest edition of the New Yorker, Dr. Atul Gawande attempts to answer this question. Brenner wasn’t all that interested in costs; he was more interested in helping people who received bad health care. But in his experience the people with the highest medical costs—the people cycling in and out of the hospital—were usually [...] Read more – ‘The Hot Spotters: Can we lower medical costs by giving the neediest patients better care?’.
The advent of digital media and the growing collection of digital documents have had a profound impact on how we read. Findings – With an increasing amount of time spent reading electronic documents, a screen-based reading behavior is emerging. The screen-based reading behavior is characterized by more time spent on browsing and scanning, keyword spotting, one-time reading, [...] Read more – ‘How has reading behavior changed over the past ten years?’.
Our mix of jobs has changed from algorithmic tasks into heuristic based ones but our approach to incentives is still lost in the algorithmic past. Many popular management techniques—budgets, goal-setting, and financial reward systems—actually undermine the conditions that encourage intrinsic motivation. …Economists love to talk about incentives and how they shape behavior. They often assume that poor [...] Read more – ‘Are we undermining intrinsic motivation with antiquated incentives?’.
That’s the Edge Question of the Year for 2011. Let’s take a look at some of the responses: Matt Ridley, author of The Rational Optimist, concludes: That’s why, as Friedrich Hayek observed, central planning never worked: the cleverest person is no match for the collective brain at working out how to distribute consumer goods. The idea of [...] Read more – ‘What scientific concept would improve everybody’s cognitive toolkit?’.
I highly recommend reading this article by Tim Harford (The Undercover Economist) on the similarities between finance and nuclear reactors: they are both complex and tightly coupled. The connection between banks and nuclear reactors is not obvious to most bankers, nor banking regulators. But to the men and women who study industrial accidents such as Three Mile [...] Read more – ‘What Finance Can Learn From A Nuclear Reactor’.
How can someone so smart be so stupid? We’ve all asked this question after watching a perfectly intelligent friend or relative pull a boneheaded move. “There is a narrow set of cognitive skills that we track and that we call intelligence. But that’s not the same as intelligent behaviour in the real world,” Stanovich says. [...] Read more – ‘Are intelligence and rationality different?’.
One of the neat features of e-books is that you can see what others are highlighting (see our post from October). I find it fascinating to read and learn from the insights others are gaining from books. Here are some selections from some heavily highlighted books: Cutting for Stone “The key to your happiness is to [...] Read more – ‘What are kindle readers highlighting?’.
Jason Fried, co-founder of 37Signals and co-author of the amazingly popular cult hit Rework, says its because we can’t say no. …The only way to stop this perpetual growth of an object without physical borders is for you to create your own borders. Those borders are discipline, self-control, an editor’s eye for “enough.” The ultimate border is [...] Read more – ‘Why does software end up sucking?’.
Leave it to Warren Buffet to offer a thoughtful perspective. In a memorable, hour-long PBS interview with Charlie Rose during the 2008 crisis, Buffet gave a master class in how the world got into its economic mess and what we can learn from it. At one point, Rose asked the question that scholars, pundits, and [...] Read more – ‘The natural progression of how good ideas go wrong’.
I enjoyed this article so much I bought a copy of Amy Chua’s new book: Battle Hymn of the Tiger Mother. Can a regimen of no playdates, no TV, no computer games and hours of music practice create happy kids? And what happens when they fight back? A lot of people wonder how Chinese parents [...] Read more – ‘Why Chinese Mothers Are Superior’.
The second of a two-part essay on the role trains play in society: If we lose the railways we shall not just have lost a valuable practical asset whose replacement or recovery would be intolerably expensive. We shall have acknowledged that we have forgotten how to live collectively. If we throw away the railway stations [...] Read more – ‘Bring Back the Rails!’.
Practice activities are worthless without useful feedback about the results. Here is a wonderful excerpt from Talent Is Overrated: What Really Separates World-Class Performers from Everybody Else: The best performers observe themselves closely. They are in effect able to step outside themselves, monitor what is happening in their own minds, and ask how it’s going. [...] Read more – ‘How Do Excellent Performers Differ from the Average?’.
A new paper highlights how hard it is to determine signal through noise in visual processing: Loud bangs, bright flashes, and intense shocks capture attention, but other changes—even those of similar magnitude—can go unnoticed. Demonstrations of change blindness have shown that observers fail to detect substantial alterations to a scene when distracted by an irrelevant [...] Read more – ‘Signal vs. Noise in Visual Processing’.
Without education or contacts, Andrew Carnegie rose from poverty to become the richest person in the world, mostly while working three hours a day in comfortable surroundings far from his factories. What would Andrew Carnegie give to new graduates? …I beseech you avoid liquor, speculation and indorsement. Do not fail in either, for liquor and [...] Read more – ‘The Road to Business Success: A Talk to Young Men’.
The authors find that appeals for charity that evoke personal nostalgia will have an effect on the charitable-donation intentions of consumers. In study 1 with 103 respondents, nostalgic charity appeals evoke higher levels of emotions and donation intentions than non-nostalgic appeals. Study 2 457 respondents indicates that this effect is moderated by the consumer’s propensity [...] Read more – ‘How do you get people to donate money?’.
The smell changed from stale to sweet. That’s when he knew they’d made it. For weeks he’d sucked in musty, dead air. Now he smelled life, walking home from school after a heavy rain, watching half-drowned worms squirm on the sidewalk, the smell of the world growing. He wriggled and shifted and rolled onto his [...] Read more – ‘The Escape from Kinross Prison’.
Renowned surgeon,writer, and medial thinker Dr. Atul Gawande interviews with WPUR’s On Point. In this wide ranging interview, Dr. Gawande covers healthcare reform, measuring the quality of healthcare, the value of checklists, lowering the cost of healthcare, what healthcare can learn from agriculture. Dr. Atul Gawande, is the New York Times bestselling author of Better: [...] Read more – ‘Dr. Atul Gawande on Health Care & the Age of Reform’.
There is an old saying that power corrupts, and absolute power corrupts absolutely. It’s a catchy phrase that might be true. In the unpublished manuscript “Power and the consumption of resources,” Ward and Keltner provide a vivid experiment of how increased power can lead to reduced inhibitions. They placed college students in same-sex groups [...] Read more – ‘The Poison of Power’.
In an intimate talk on his new book Practical Wisdom, Barry Schwartz dives into the question “How do we do the right thing?” With help from collaborator Kenneth Sharpe, he shares stories that illustrate the difference between following the rules and truly choosing wisely. Schwartz argues we need virtue and character to go along with [...] Read more – ‘(Video) Barry Schwartz: Using our practical wisdom’.
Kathryn Schulz, author of Being Wrong: Adventures in the Margin of Error, talks at PopTech about the gap between understanding that we get things wrong and our ineptitude in dealing with our mistakes. Kathryn Schulz: Being Wrong from PopTech on Vimeo. Read more – ‘Video: Being Wrong’.
The public will have "social norms" heavily emphasised to them in an attempt to increase healthy eating, voluntary work and tax gathering. Appeals will be made to "egotism" in a bid to foster individual support for the Big Society, while much greater use will be made of default options to select benevolent outcomes for passive [...] Read more – ‘Nudge, nudge, wink wink… How the Government wants to change the way we think’.
If you’re a shareholder, large or small, you should read this article: The implicit message from directors to shareholders runs something like this: “Give us your money and we will represent your interests in an organization managed by people who have an incentive to steal from you and who we’ve known for years and with [...] Read more – ‘All too often boards let their friendship with management win out’.
Scientists are not sure how the brain tracks time. One theory holds that it has a cluster of cells specialized to count off intervals of time; another that a wide array of neural processes act as an internal clock. On an obvious level, these kinds of findings offer an explanation for why other people’s children [...] Read more – ‘Where Did the Time Go? Do Not Ask the Brain’.
A reader pointed us to this this radiolab podcast, which address a question that haunted Charles Darwin: if natural selection boils down to survival of the fittest, how do you explain why one creature might stick its neck out for another? The standard view of evolution is that living things are shaped by cold-hearted competition. [...] Read more – ‘(Audio) How do you explain why one creature might stick its neck out for another?’.
Just because an idea is true doesn’t mean it can be proved. And just because an idea can be proved doesn’t mean it’s true. Much of what medical researchers conclude in their studies is misleading, exaggerated, or flat-out wrong. The findings are noise. Why? Because we’re human. Human nature ensures there are many forces nudging [...] Read more – ‘The Truth Wears Off: Is there something wrong with the scientific method?’.
Groupthink is one of the most troublesome downfalls of organized society. Today, it manifests itself on a sliding scale of severity, ranging from genocide to bullying to superstition to fashion fads to the “Digg mentality” of news reporting. Still, most of us refuse to believe that our opinions, perception and worldview are being in any [...] Read more – ‘Video: Psychology of Conformity, Groupthink, & Wikileaks’.
Hans Rosling says there’s nothing boring about stats, and then goes on to prove it. Only with statistics can we make sense of the world and harness the data deluge to serve us rather than drown in its confusion. Read more – ‘Video: The Joy of Stats’.
Nissan employs a little bit of psychology: Nissan Leaf owners with a competitive streak will be happy to learn that the electric car has a wirelessly connected ranking system for driving efficiency. Nissan’s Carwings system connects all Nissan Leafs to a network, wirelessly feeding their energy economy statistics to a central server. The “Regional Rankings” [...] Read more – ‘Ranking Driving Efficiency’.
Mix incentives, greed, denial, Gresham’s law, commitment and consistency bias, and you get: Two years before the financial crisis hit, Merrill Lynch confronted a serious problem. No one, not even the bank’s own traders, wanted to buy the supposedly safe portions of the mortgage-backed securities Merrill was creating. Bank executives came up with a fix [...] Read more – ‘The ‘Subsidy’: How a Handful of Merrill Lynch Bankers Helped Blow Up Their Own Firm’.
Perhaps the best marketing campaign ever wasn’t about selling a product directly — it was about associating a product with an emotion; thus making it a psychological necessity. Here is the story of how De Beers, through a well-orchestrated marketing campaign, associated diamonds with romance and forever changed the social attitudes of Americans. The message had been so successfully [...] Read more – ‘The most successful marketing campaign ever’.
Awesome story in the Sunday NYT (no matter how good the system is, it seems humans and our irrationalities are the weakest link) : …this was a disaster with two distinct parts — first a blowout, then the destruction of the Horizon. The second part, which killed 11 people and injured dozens, has escaped intense [...] Read more – ‘Deepwater Horizon’s Final Hours’.
Because it works to maximize profits. Why? Market demand does not react to difference in the cent digits of a price. Why does our brain ignore the .99 The basic idea is the assumption that consumers use a heuristic to calculate, compare and memorize prizes, due to their limited brain-capacity to process prices exactly: they [...] Read more – ‘Why do prices end in .99?’.
How Apple Plays the Pricing Game How To Tell When a CEO is Lying? Jamie Dimon’s Summer Reading List Sin Tax Yes! 50 Scientifically Proven Ways to Be More Persuasive What is The Most Recognizable Scent in the World? Why the Office is the Worst Place to Work. The Forgotten Lessons of 2008 The Razor and Blades [...] Read more – ‘The Ten Most Popular Posts of 2010’.
Dan Ariely tells Matthew Taylor why it’s only by understanding our weaknesses that we can learn to anticipate and avoid mistakes Matthew Taylor: The UK government has just set up a behavioural insight team, and behavioural economics has been subject to a surge of policy interest in recent years. What do you think has driven [...] Read more – ‘It’s only by understanding our weaknesses that we can learn to anticipate and avoid mistakes’.
I think she fell victim to a different form of blindness, a blindness that we all live with all of the time. We are convinced that we see a world full of well-defined, well-understood objects. Here is my computer mouse, there is the paper, the coffee mug, and my lava lamp (really) – all visible [...] Read more – ‘Why do we fail to see what’s right in front of us?’.
Sed quis custodiet ipsos cutodes Fascinating Read: Should you be able to record police officers? Police across the country are using decades-old wiretapping statutes that did not anticipate iPhones or Droids, combined with broadly written laws against obstructing or interfering with law enforcement, to arrest people who point microphones or video cameras at them. Even in [...] Read more – ‘The War on Cameras: It has never been easier—or more dangerous—to record the police’.
Need batteries at the checkout line? If a stranger is standing nearby, shoppers are more likely to pick the expensive brand, Dr. Argo’s research has shown. Another study from the University of Vienna followed parents shopping with their kids, and found that mom and dad underestimated – by about half – the number of items [...] Read more – ‘People Power’.
Though intriguing this is at its infancy. A striking study led by an MIT Sloan School of Management professor shows that teams of people display a collective intelligence that has surprisingly little to do with the intelligence of the team’s individual members. Group intelligence, the researchers discovered, is not strongly tied to either the average [...] Read more – ‘What makes one team of people smarter than another?’.
The issue here is the perception of value: it’s not what we’re getting, it’s how much effort the other person puts in. Would you pay for incompetence? Before you answer watch this video. As I mention in the video, what’s really interesting is that this locksmith was penalized for getting better at his profession. He [...] Read more – ‘Do you reward incompetence?’.
An interesting read on man’s quest for precision: West wanted to begin with a blank page, to study cities as if they had never been studied before. He was tired of urban theory — he wanted to invent urban science. For West, this first meant trying to gather as much urban data as possible. Along [...] Read more – ‘A Physicist Solves the City’.
IN 492BC, at the end of the “Spring and Autumn” period in Chinese history, Goujian, the king of Yue in modern Zhejiang, was taken prisoner after a disastrous campaign against King Fuchai, his neighbour to the north. Goujian was put to work in the royal stables where he bore his captivity with such dignity that [...] Read more – ‘Brushwood and Gall’.
The United States holds tens of thousands of inmates in long-term solitary confinement. Is this torture? Atul Gawande answers: The problem of isolation goes beyond ordinary loneliness, however. Consider what we’ve learned from hostages who have been held in solitary confinement—from the journalist Terry Anderson, for example, whose extraordinary memoir, “Den of Lions,” recounts his [...] Read more – ‘Is Long-Term Solitary Confinement Torture?’.
Is it possible we want to believe heroes are born so we can absolve ourselves from trying? Heroism, after all, isn’t supposed to be a teachable trait. We assume that people like Gandhi or Rosa Parks or the 9/11 hero Todd Beamer have some intangible quality that the rest of us lack. When we get [...] Read more – ‘Are Heroes Born, or Can They Be Made?’.
Repeat yourself. New research reveals even if only one member of a group repeats their opinion, it is more likely to be seen by others as representative of the whole group. A study published recently in the Journal of Personality and Social Psychology examined exactly this situation to test how people judge the distribution of [...] Read more – ‘Want to be more persuasive in meetings?’.
Repeating something doesn’t make it true, does it? What appears to be true might as well actually be true, because we tend to process the illusion as though it were the truth. Repetition is effective almost across the board when people are paying little attention, but when they are concentrating and the argument is weak, [...] Read more – ‘The Illusion of Truth’.
…The reason it pays to put off even those errands is that real work needs two things errands don’t: big chunks of time, and the right mood. If you get inspired by some project, it can be a net win to blow off everything you were supposed to do for the next few days to [...] Read more – ‘Why are startups more successful at the beginning?’.
The fear of uncertainty can have profound consequences on human decision-making. Why is uncertainty so dangerous? Why does it keep us from spending money and investing in factories and hiring new workers? I think part of the answer is revealed in an interesting Science paper led by Colin Camerer, a neuroeconomist at Caltech. …Because every [...] Read more – ‘The Uncertainty Effect’.
A cross-cultural survey taken by Satosh Ishii showed that average person in the US converses twice as long (six hours and forty three minutes) than the Japanese (three hours and thirty-one minutes). Westerners speak first, listen second, and observe third. Eastern Cultures prefer a different order: observe, listen, speak. The Zen of Listening Read more – ‘What do you do more: Speak, Listen, or Observe?’.
The factors that most persuade Citibank employees to voluntarily comply with a request for help from a colleague across cultures: The study found that in westernized cultures that included the US, Canada and the United Kingdom, Citibank employees tended to take an individual market-based approach when deciding whether to help out a colleague. In essence [...] Read more – ‘Being Persuasive Across Cultural Divides’.
…The research I’ve described to this point demonstrated that when people observe that their peers have violated one social norm, they are more likely to violate a related but different social norm. But could observing a seemingly small violation in the environment actually cause a person to steal when they otherwise wouldn’t have? To address [...] Read more – ‘Broken Windows and the Spreading of Disorder’.
The modern office has become an interruption factory. You can’t get work done at work anymore. When people walk into the office, they trade their work day in for a series of work moments. It’s like the front door is a “time Cuisinart” — shredding it all into little bits. When you’re in the office [...] Read more – ‘(Video) Jason Fried: Why the office is the worst place to work’.
If I were a con artist, I’d get in the habit of buying people warm drinks. If that didn’t work, I’d start conducting my con in warm rooms, or maybe move to a tropical region. Why? Because fleeting feelings of heat increase our willingness to trust strangers. That, at least, is the conclusion of a [...] Read more – ‘Trust and Temperature’.
This is just the latest in a whole raft of research showing how we can be manipulated into believing that we have control over chance outcomes, simply by presenting information differently, or giving cues which imply that skill had a role to play. One series of studies has shown that if you manipulate someone to [...] Read more – ‘Why do clever people believe stupid things?’.
Jeffrey Pfeffer does a good job decomposing what it takes to attain power in the corporate world. If you think it takes intelligence or even high performance, you’re working too hard. According to his book, Power: Why Some People Have It And Others Don’t, Pfeffer came up with seven personal qualities that help to build [...] Read more – ‘Power: Why some people have it and others don’t’.
Nicolas Carr, author of The Shallows: What the Internet Is Doing to Our Brains, penned a thought provoking post on his blog about the move of journalism to the cloud and the (legal) implications. When the printing press moves from a physical one to a virtual one, Amazon wants to ensure that it isn’t going to be [...] Read more – ‘What happens when hosting companies filter journalism?’.
How a persuasive message can kick in long after you’ve been exposed. What seems to be going on is this: people are convinced by the arguments until they see that the source of the message can’t be trusted. But people don’t tend to process the discounting cue very thoroughly. So, over time, people forget they [...] Read more – ‘The Sleeper Effect’.
A new study suggests that social factors can get you to try something—but not necessarily to buy it. They found that social cues did increase the probability that someone would give a song a chance. However, the main factor in whether someone downloaded a song was whether the person had listened to it. A social [...] Read more – ‘Who cares what everyone else thinks?’.
First, though, you need to outfit yourself with the basic knowledge, and Mr. Dutton’s research suggests there are five key elements, which he wraps up in the acronym SPICE. (His use of quippy anecdotes to begin each chapter, and his instinct for neologisms – the book was published in the U.K. as Flipnosis – illustrate [...] Read more – ‘A master of persuasion reveals his secret’.
We don’t really know why loss-framed appeals turn out to be no more effective, and in some cases worse, than gain-framed appeals. Maybe we don’t like to be bullied? …Throw away the carrots and start wielding the big stick. The theory being that people pay more attention to frightening messages, so they are more likely [...] Read more – ‘The Influence of Positive Framing’.
Many people see the decline of embarrassment as a good thing. “Why shouldn’t I be able to do X?” people often say after having done something outrageous or transgressive. But this misunderstands the distinction between embarrassment – a mild but necessary correction of inappropriate behavior – and shame, which is a stronger emotional response usually [...] Read more – ‘The death of embarrassment’.
…The most basic problem that I identify is an example of what is known as the Halo Effect. When a company is doing well—when its revenues and profits are up, and its share price is strong—it’s natural to infer that the company has a good strategy, an effective leader, excellent customer focus, and a vibrant [...] Read more – ‘Why Success Formulas Will Never Work’.
Bruce Schneier offers: A short history of airport security: We screen for guns and bombs, so the terrorists use box cutters. We confiscate box cutters and corkscrews, so they put explosives in their sneakers. We screen footwear, so they try to use liquids. We confiscate liquids, so they put PETN bombs in their underwear. We [...] Read more – ‘This is a stupid game, and we should stop playing it.’.
A study by Vladas Griskevicius points to the importance of assessing the emotional state of an audience before deciding how to frame a message. For example, if you must lead a team of people through change, and those people are already uncertain or fearful of the future, this study suggests that touting the unique opportunities [...] Read more – ‘The importance of assessing the emotional state of an audience’.
Jonah Lehrer: Expertise might also come with a dark side, as all those learned patterns make it harder for us to integrate wholly new knowledge. Consider a recent paper that investigated the mnemonic performance of London taxi drivers. In the world of neuroscience, London cabbies are bestknown for their demonstration of structural plasticity in the hippocampus, [...] Read more – ‘The Cognitive Cost Of Expertise’.
From Psychology Today: We’ll start with the “that’s not all” technique. Discount coupons are offered that seem to reduce prices to such a ridiculous degree that the price of an item seems too good to pass up. Consider the hypothetical case of a “keepsake” holiday ornament that cost the retailer $10.00. The retailer’s desired profit [...] Read more – ‘How to avoid retail tactics that manipulate you to overspend’.
One of my favorite sayings is: your system is perfectly designed to yield the outcome you are currently getting. Nowhere is this more true than in healthcare. We have set up a system that encourages consumption. We pay doctors more to do more. We pay doctors less to spend time with patients. We want our [...] Read more – ‘Your system is perfectly designed to yield the outcome you are currently getting’.
A new study by Daniel Gilbert—author of Stumbling on Happiness—and Matthew Killingsworth, confirms something we’ve all suspected: most of us are ‘mentally checked out’ a good portion of the time. We developed a smartphone technology to sample people’s ongoing thoughts, feelings, and actions and found (i) that people are thinking about what is not happening [...] Read more – ‘Are you mentally checked out?’.
From McKinsey Our research suggests, for instance, that ice cream shoppers in grocery stores look at the brand first, flavor second, and price last. Organizing supermarket aisles according to way consumers prefer to buy specific products makes customers both happier and less likely to base their purchase decisions on price—allowing retailers to sell higher-priced, higher-margin [...] Read more – ‘Ice Cream Choice Architecture’.
Stereotypes sometimes arise from faulty human memory. If there were a social cognition hall of fame, Hamilton and Gifford’s (1976) article on illusory correlations and stereotypes would surly be a featured exhibit. Offering an insightful analysis and a telling pair of experiments, they argued that stereotypes sometimes arise not from base human motivations or intergroup [...] Read more – ‘Are Minority Group Members Responsible For More Than Their Fair Share Of Undesirable Behavior?’.
From Dan Ariely: We can’t entirely avoid outcome-based decisions. Still, we can reduce our reliance on stochastic outcomes. Here are four ways companies can create more-sound reward systems. 1. Change the mind-set. Publicly recognize that rewarding outcomes is a bad idea, particularly for companies that deal in complex and unpredictable environments. 2. Document crucial assumptions. Analyze a [...] Read more – ‘Good Decisions. Bad Outcomes’.
How everything you learned in kindergarten affects your salary, your chances of going to college and owning a home, and even your retirement savings “We found that everything comes back,” he said. “Our paper shows that investments in early childhood education have potentially very large payoffs. In the U.S., kids from disadvantaged families attend lower [...] Read more – ‘The Kindergarten Advantage’.
Steve Rattner’s Overhaul (I’d pass on this; See Malcolm Gladwell’s review). Snakes in Suits (see mask of sanity). The Zen of Listening Some of the books on the way to my house : A History of Knowledge: Past, Present, and Future All the Devils are Here: The Hidden History of the Financial Crisis History of [...] Read more – ‘What I’m Reading’.
Praise their effort, not their intelligence. I am smart, the kids’ reasoning goes; I don’t need to put out effort. Expending effort becomes stigmatized—it’s public proof that you can’t cut it on your natural gifts. Dweck had suspected that praise could backfire, but even she was surprised by the magnitude of the effect. “Emphasizing effort [...] Read more – ‘Praise Junkie: How do you talk to your kids?’.
This is not to say that charismatic CEO’s are better… We argue that charismatic leadership can influence external support for the organization, particularly in making the company more attractive to outside investors. Two studies were conducted to test this general hypothesis. First, an archival study demonstrated that the stock of companies headed by charismatic leaders [...] Read more – ‘Lend me your wallets: the effect of charismatic leadership on external support for an organization’.
I love reading and couldn’t turn down reposting Paul Kedrosky’s recent book list: Super Sad True Love Story, by Shteyngart Godel, Escher, Bach • Incompleteness, by Goldstein The Drunkard’s Walk Shadow of the Wind Kapitoil Strength in What Remains, by Kidder The Art of Racing in the Rain You Never Give Me Your Money Crisis Economics The [...] Read more – ‘Book Recommendations du Jour’.
Bruce Schneier gives an awesome talk at TEXxPSU on Reconceptualizing Security. If you watch the video, you’ll see how large of a role psychology plays. There are several biases in risk perception …. Read more – ‘Reconceptualizing Security’.
Fascinating. You’ve never heard of me, but there’s a good chance that you’ve read some of my work. I’m a hired gun, a doctor of everything, an academic mercenary. My customers are your students. I promise you that. Somebody in your classroom uses a service that you can’t detect, that you can’t defend against, that [...] Read more – ‘The Shadow Scholar’.
The consistently amazing Jonah Lehrer offers another example of the Ikea Effect: Why do the microwave and frozen dinner inexorably lead to obesity? According to the economists, the cheapness of calories (both in terms of price and time) has led us to dramatically boost consumption. Food stops being something we make and create — it [...] Read more – ‘Why Making Dinner Is a Good Idea’.
Dr. Atul Gawande, The New York Times bestselling author of Better, Complications, and The Checklist Manifesto has preached adoption of a simple set of questions that should be asked before any surgical team starts an operation. When tested in a pilot program at eight hospitals around the world, from Seattle to Tanzania, it worked, cutting deaths and other serious [...] Read more – ‘No matter how hard we work and how smart people are, we will have failures’.
Question: Are leaders more likely to be sociopaths? Paul Lawrence: Well the question becomes you know, do these people without conscience, let’s call them PWOC’s is a rather shorthand way for that. Talking about them getting into leadership positions and they probably get into them out of all proportion to a percentage often population, we [...] Read more – ‘Are leaders more likely to be sociopaths?’.
If you work for a large institution that provides very large incentives for tasks requiring creativity, problem solving, and memory I suggest you stop reading now. The study below challenges the assumption that increases in motivation would necessarily lead to improvements in performance. Payment-based performance is commonplace across many jobs in the marketplace. Many, if [...] Read more – ‘Large Stakes and Big Mistakes’.
Here is a fascinating study conducted in a familiar setting. When forced to split the bill at a restaurant, people minimize their individual losses by taking advantage of others. Experimental studies, with few exceptions, find evidence against theories based purely on selfish motives. The studies find that people free ride but not to the extent economic theory predicts (Dawes [...] Read more – ‘Do you split the bill at restaurants?’.
Last week I picked up a copy of Snakes In Suits: When Psychopaths Goto Work and found myself quickly immersed. On the surface psychopaths appear normal, sane, and in control; in fact, many are quite likable. However, as The Mask of Sanity puts it, “[the psychopath presents a technical appearance of sanity, often one of high intellectual capacities and not infrequently [...] Read more – ‘The Mask of Sanity’.
A clever reader writes in about Million Dollar Money Drop, which turns “the typical game show around. Loss aversion / prospect theory at its best.” The setup: Two contestants are given $1 million in cash and work as a team to answer seven quiz questions. During each round, they must risk all their money — [...] Read more – ‘Million Dollar Money Drop’.
Our Best of the Year lists are always the culmination of a year of eager book scouting, and then a few contentious weeks of nominating, discussing, rehashing, rereading, and sorting, and this year is no different, although our #1 pick made itself pretty plain, and left us extra time to debate the other 9 spots [...] Read more – ‘Amazon’s 10 Best Books of 2010’.
Much of what medical researchers conclude in their studies is misleading, exaggerated, or flat-out wrong. Simply put, if you’re attracted to ideas that have a good chance of being wrong, and if you’re motivated to prove them right, and if you have a little wiggle room in how you assemble the evidence you’ll probably succeed [...] Read more – ‘Lies, Damned Lies, and Medical Science’.
This research paper shows that people’s compliance with a request can be substantially increased if the requester first gets them to agree with a series of statements unrelated to the request, but selected to induce agreement (mere agreement effect). …Across five studies, we show that induced mere agreement subtly causes respondents to view the presenter [...] Read more – ‘Better Think before Agreeing Twice’.
People aren’t very accurate at predicting how good or bad they’ll feel after an event — such as watching their team lose the big game or getting a flat-screen TV. But afterwards, they “misremember” what they predicted, revising their prognostications after the fact to match how they actually feel, according to new research…. Across the [...] Read more – ‘After Good or Bad Events, People Forget How They Thought They’d Feel’.
A Speech by Mr Andrew Haldane, Executive Director, Financial Stability, Bank of England, at the Oxford China Business Forum, Beijing, 9 September 2010. … Immediate gratification (drugs, alcohol, sex, food) is sought irrespective of the long-term consequences. There is a neurological explanation for such behaviour. Drugs and some foodstuffs flood the brain with dopamine, which [...] Read more – ‘While few squirrels are dieters, even fewer are glue-sniffers.’.
Why are bubbles such a persistent feature of financial history? Economists argue that these speculative frenzies are caused in part by market failures like too much liquidity or lax regulation. Cognitive psychologists, meanwhile, see bubbles as a case of pattern recognition gone awry, as people extrapolate the past into the future. In recent years, neuroscientists [...] Read more – ‘There’s a signal in our head that’s so much smarter than we are. Really.’.
Not if you ask the experts…However, they’re often wrong. Think about this the next time you turn on your TV. When it came to predicting the likelihood of an outcome, the vast majority performed worse than random chance. In other words, they would have done better picking their answers blindly out of a hat. Liberals, [...] Read more – ‘Is The Future Impossible To Predict?’.
I came across this in reference to sexual predators and Halloween — For those convicted of sex offenses, it can be the most dreaded night of the year. Group roundups, dusk-to-dawn curfews with the lights out, mandatory “no candy” signs on their doors and spot checks for compliance are among the various techniques of control [...] Read more – ‘Security Theater’.
A reader pointed me to this book a few weeks ago and I finally had a chance to read it! Obsolete: An encyclopedia of once-common things passing us by is an attempt to take stock of things in our lives that are hanging on by threads: ideas, habits, and objects that are either obsolete or well on their way. [...] Read more – ‘Obsolete’.
Friedrich Nietzsche was right—sort of. Under the right conditions, experiencing some adversity may foster resilience. Adversity, according to the author of the study, can help people develop a “psychological immune system” to help them cope with the slings and arrows that life throws, while those with no experience of adversity may have a hard time [...] Read more – ‘What does not destroy me, makes me stronger’.
What are the most popular books requested by inmates? Popular requests are The Diary of Anne Fran, Robert Greene’s Machiavellian self-help manual The 48 Laws of Power, and anything by Sylvia Plath. Get your geek on and subscribe to Farnam Street via Email, RSS, or Twitter. Shop at Amazon.com and support Farnam Street. Read more – ‘What The Bad Boys Read?’.
Great, short, podcast on risk: The public deals with risk using emotions more than mathematics. David Spiegelhalter argues there is good risk, and that we’re assessing and taking risks all the time in our daily lives. The bigger risks are often longer term risks and these are not as easy to see. Obesity, lack of [...] Read more – ‘Risks — the long term is more difficult to see’.
We were slapped with a nice little note from a law firm from two days ago about our unauthorized use of the “Farnam Street” trademark. If anyone knows a good IP lawyer willing to work for free, please let me know. I’m pondering my next steps but I’m all ears if you have any advice. (email [...] Read more – ‘Popular enough to get noticed’.
A reader sent in another element to the Rob Ford campaign for mayor that highlights commitment and consistency. “Identify your voters, raise money and lock them in. Get five bucks from everybody and they’re all committed to you instead of trying to get 2,500 bucks from a few people,” Kouvalis said. “People switch their votes but once [...] Read more – ‘People switch their votes…unless’.
HUMANS are a gregarious lot. We appreciate company. And we appreciate our company appreciating us. One way to preserve this mutual appreciation is to emulate others. This gives rise to trends or, in a less charitable turn of phrase, herd mentality. We appear to be wired to find all manner of fads psychologically irresistible. Advertisers [...] Read more – ‘Herd Instinct’.
If you ever thought politics stinks, you’ll love this article on how Carl Paladino mailed out thousands of campaign ads custom scented with the smell of rotting garbage. Paladino realizes that voters who are disgusted are more likely to judge people harsher. As a result voters are likely to be more judgmental of New York’s “career politicians” and more [...] Read more – ‘The smell of politics’.
This is riveting for a guy like me The practice of trying to influence doctors with money didn’t disappear — it shifted. Today when a rep like Webb wants to get a doctor to write prescriptions for his drug, there’s still one almost foolproof way to get that task accomplished. To get a doctor to [...] Read more – ‘How To Win Doctors And Influence Prescriptions With a Simple Phrase’.
It should have been a routine foreclosure, with Mrs. Bradbury joining the anonymous millions quietly dispossessed since the recession began. But she was savvy enough to contact a nonprofit group, Pine Tree Legal Assistance, where for once in her 38 years, she caught a break. Her file was pulled, more or less at random, by [...] Read more – ‘How A Retired Lawyer Deposed A GMAC Employee And Discovered The Robo-signers’.
One of the neat features of the kindle is that you can see what others are highlighting –here are some selections from some heavily highlighted books: Why Does He Do That?: Inside the Minds of Angry and Controlling Men Abuse and respect are diametric opposites: You do not respect someone whom you abuse, and you [...] Read more – ‘What Are Kindle Readers Highlighting?’.
Thought this article on political candidate Rob Ford, who is running for mayor in Toronto, Canada, was pretty interesting. One psychological element to his campaign is commitment and consistency (near the end of the article). This guy also returns your phone call, no really, he does. Here is a brief excerpt: However improbable it may seem [...] Read more – ‘The political genius of Rob Ford’.
Societies come together slowly, but can fall apart quickly, say researchers who applied the tools of evolutionary biologists to an anthropological debate. … The study, published October 13 in Nature, was intended to illuminate an issue of contention among archaeologists, anthropologists and historians: whether societies become more complex in incremental steps or sudden bursts, and [...] Read more – ‘Culture Evolves Slowly, Falls Apart Quickly’.
It’s the 21st century. Knowing how to read a novel, craft an essay, and derive the slope of a tangent isn’t enough anymore. You need to know how to swing through the data deluge, optimize your prose for Twitter, and expose statistics that lie. Statistical Literacy :How to parse polls, play the odds, and embrace [...] Read more – ‘Essential Skills You Didn’t Learn In College’.
In short, yes, they do. In this video clip of Ariely giving a fascinating description of a study he did on fakes — fake designer accessories, bags, clothes, and more. Specifically, he sought to discover what buying and wearing fakes will do to our thought processes — and whether or not, even though no one [...] Read more – ‘Can Fake Glasses Make you More Dishonest?’.
Excellent Interview with Robert Cialdini author of Yes!: 50 Scientifically Proven Ways to be Persuasive and Influence: The Psychology of Persuasion. (click here to play the video.) Read more – ‘Is Persuasion Science or Art?’.
Fascinating story on the diaper wars and efficiency: …Amazon.com executives would not comment for this story, but the company is clearly aware of Quidsi. It started selling diapers in the summer of 2006, just a year after Diapers.com debuted. When Quidsi launched Soap.com in July, adding an additional 25,000 products to their lineup, the site was [...] Read more – ‘The diaper wars’.
At TEDxChange, Melinda Gates makes a provocative case for nonprofits taking a cue from corporations such as Coca-Cola, whose plugged-in, global network of marketers and distributors ensures that every remote village wants — and can get — a Coke. Why shouldn’t this work for condoms, sanitation, vaccinations too? In this talk Gates highlights three things [...] Read more – ‘Melinda French Gates: What nonprofits can learn from Coca-Cola’.
How do you establish yourself as an authority to get people to view you as an expert? Aside from being an expert, here are some things you can do to increase the odds people see you as an expert: Dress for success is more than just a slogan. Believe it or not something simple like [...] Read more – ‘Increase your ability to Influence others.’.
The process of persuasion, according to Aristotle, needed three elements in order for the movement of abstraction to happen. When these three elements are blended together, this then represents a potent mix of persuasive behavior. And what are the three elements? Pathos – Emotional appeal Ethos – Ethical, character and reputation Logos – Logical Pathos [...] Read more – ‘People forget what you say, but they remember how you made them feel’.
Nice article in the New Yorker on procrastination. Here are some excerpts: …hyperbolic discounters are able to make the rational choice when they’re thinking about the future, but, as the present gets closer, short-term considerations overwhelm their long-term goals. A similar phenomenon is at work in an experiment run by a group including the economist [...] Read more – ‘What does procrastination tell us about ourselves?’.
Author Zack Miller Interviewed Farnam Street — here is an excerpt: How should an investor participate in the markets knowing with full awareness that he’s totally flawed? In my book, Tradestream, I write a lot about piggyback strategies, hitching one’s horse to specific strategies mimicking investors with long-term proven track records (Buffett, Greenblatt, etc.). Does this [...] Read more – ‘Farnam Street Interviewed’.
Mob, Messiahs, and Markets: Surviving The Public Spectacle in Finance and Politics (Recommended by Nicholas Taleb) The Rule of Empires: Those Who Built Them, Those Who Endured Them, and Why They Fail Wrong: Why Experts Keep Failing Us and How to Know When Not to Trust Them Read more – ‘What I’m Reading’.
In a wide-ranging interview that spanned human nature, the future of machines, and how Google could have helped the stimulus, Schmidt said technology could “completely change the way government works.” “Washington is an incumbent protection machine,” Schmidt said. “Technology is fundamentally disruptive.” Mobile phones and personal technology, for example, could be used to record the [...] Read more – ‘Interview with Google CEO Eric Schmidt’.
A beautiful excerpt from Herbert Simon’s Strategy and Organizational Evolution: Anticipating the future means detecting, preferably prospectively,novel features in the environment that may affect the firm significantly in the future, and determining at what point in time attention should be focused on them and energy devoted to dealing with them. The available management time and attention [...] Read more – ‘The Inevitable Failure of Organizational Planning’.
I hope you enjoy this brief excerpt from “How Managers Express Their Creativity” by Herbert Simon: In this respect, successful scientific research has much in common with successful stock-market investment. Information is only valuable if others do not have it or do not believe it strongly enough to act on it. The investor pits his knowledge, beliefs [...] Read more – ‘Successful scientific research has much in common with successful stock-market investment’.
The Washington Post on how to outsmart your biases: Emily Pronin, a professor of psychology at Princeton University, says we fall victim to BSB even when we’re shown incontrovertible evidence that it exists. “I spend a whole lecture describing blind-spot bias, and I give my students lots of examples of biases,” says Pronin – say, believing [...] Read more – ‘How to outsmart your biases’.
Interesting article in the WSJ Health Section, I wonder how the type of decision factors into this (structured versus ill-structured problems, logical decision making—where goals and alternatives are made explicit—versus judgmental …) Seeing the world as black and white, in which choices seem clear, or shades of gray can affect people's path in life, from [...] Read more – ‘Why So Many People Can’t Make Decisions’.
When consumers are overwhelmed with options, marketers should give them what they really want: ways of shopping that lower the cognitive demands of choosing. From Strategy + Business People like the idea of choice. It’s exciting to hear a list of exotic flavors and to see a wide wall of colorful jars, any of which [...] Read more – ‘A Better Choosing Experience’.
Sebastian Seung is mapping a massively ambitious new model of the brain that focuses on the connections between each neuron. He calls it our “connectome,” and it’s as individual as our genome — and understanding it could open a new way to understand our brains and our minds. http://video.ted.com/assets/player/swf/EmbedPlayer.swf Read more – ‘I am my connectome’.
Robin Hanson makes a list of “Signs that your opinions function more to signal loyalty and ability than to estimate truth:” You find it hard to be enthusiastic for something until you know that others oppose it. You have little interest in getting clear on what exactly is the position being argued. Realizing that a topic is [...] Read more – ‘Opinion Warning Signs’.
Two weeks ago, Ben Zimmer published an article in the NY Times on how children learn language not so much on a word-by-word basis but in larger “lexical chunks” or meaningful strings of words that are committed to memory. From the Zimmer article: Ritualized moments of everyday communication — greeting someone, answering a telephone call, wishing someone a [...] Read more – ‘How We Learn Language’.
Jonah Lehrer, author of How We Decide and Proust Was a Neuroscientist, offers a fascinating follow up to a Malcolm Gladwell article in the New Yorker. In the New Yorker article, Gladwell argues that online social networks are based on weak ties— a weak tie is a friend of a friend, or casual acquaintance— and thus are ill suited [...] Read more – ‘The Ties that Bind’.
Malcolm Gladwell’s latest… because activism that challenges the status quo—that attacks deeply rooted problems—is not for the faint of heart strong relationships matter more than weak ones. However, the kind of activism associated with social media isn’t like this at all. Most of your 1,000 Facebook friends are weak relationships. Gladwell also points out that because social networks [...] Read more – ‘Why the revolution will not be tweeted’.
Say you want to persuade someone to purchase a product or service. One of your main questions will be how to frame the "pitch" to have the biggest impact. You could tell people what they stand to gain, or you could tell them what they stand to avoid. Which is more effective? It depends. Auto [...] Read more – ‘It’s not what you say, it’s how you say it’.
An analysis of 3,000 Re-tweeted twitter titles concluded that the words increase, socialize, automate and manage appear most in posts that prove popular. Terms including write, talk and trust appear to have a negative weight on the likelihood of a post being retweeted. Also, the best time to post is between 1pm and 3pm PST [...] Read more – ‘Increase your personal online persuasion’.
Some of the general heuristics—rules of thumb—that people use in making judgments that produce biases towards classifying situations according to their representativeness, or toward judging frequencies according to the availability of examples in memory, or toward interpretations warped by the way in which a problem has been framed. These heuristics have important implications for individuals and society. [...] Read more – ‘Choice Under Uncertainty’.
People who (voluntarily) undergo a great deal of pain, discomfort, or effort to get something will be happier with that something than if it came to them easily. Ikea uses this to their advantage. Not only does “assemble yourself” furniture save them money and increase their business efficiency, it also has a psychological effect on [...] Read more – ‘The Ikea Effect’.
One of the most universal and powerful of human traits is the urge to form strong attachments to groups, ranging from the family, through gangs, tribes, organizations, ethnic, religious and linguistic groups, to nations. Almost certainly, identification with groups has its roots in our genes; it has been, is and will continue to be of [...] Read more – ‘We and they: the human urge to identify with groups’.
Herbert Simon, a man of many talents, penned the following passage on the value of mental models. One can train a man so that he has at his disposal a list or repertoire of the possible actions that could be taken under the circumstances…A person who is new at the game does not have immediately [...] Read more – ‘Solution By Recognition’.
A rather complicated and long winded answer from a keynote delivered by Clay Shirky, author of Cognitive Surplus: Creativity and Generosity in a Connected Age. Here is an excerpt: The best explanation I have found for the ways in which this pattern establishes itself, the group is its own worst enemy, comes from a book [...] Read more – ‘How is a group its own worst enemy?’.
The waiter hands you a wine list as you sit down. Now if you don’t know a lot about Wine, like most people, you’re probably wanting some help picking out some wine and you’d rather avoid the whole uncertainly of the process. Normally you’d turn to the wait staff, however, they’re a little too used [...] Read more – ‘Choosing Wines at the Touch of a Screen’.
A reader sent in this old Scientific America article detailing how our indulgences can ultimately cause us much harm. Perhaps the most ironic aspect of the struggle for survival is how easily organisms can be harmed by that which they desire. The trout is caught by the fisherman’s lure, the mouse by cheese. But at least those [...] Read more – ‘How Indulgences Can Harm’.
Not really, however it seems like they are better at persuasion. New experiments show, narcissists are great at convincing others that their ideas are creative even though they’re just average. If you’re thinking this is justification to rid yourself of that narcissistic co-worker, think again. The researchers also discovered that groups with a handful of [...] Read more – ‘Do Narcissists Have Better Ideas?’.
Great article in Slate on the lone Genius Myth. From our first days relationships shape our experience, our character, even our biology. So why are we so fascinated with the lone hero? The other reason the lone genius myth persists is that “collaboration” gets defined so narrowly, as though the only relationships that matter are [...] Read more – ‘The Lone Genius Myth’.
NPR recently interviewed Christopher Chabris and Daniel Simons, authors of The Invisible Gorilla. Chabris and Simons had some fascinating things to say about how we pay attention. The famous gorilla video goes something like this — even for those of you who’ve seen it, I think you should watch this one. Here is an excerpt from the [...] Read more – ‘How We Pay Attention’.
Don’t touch that ‘justified’ post-workout pastry or venti Starbucks — apparently it undoes the good work of the exercise: In what has become a defining experiment at the University of Louisiana, led by Dr Timothy Church, hundreds of overweight women were put on exercise regimes for a six-month period. Some worked out for 72 minutes each week, [...] Read more – ‘Why exercise won’t make you thin’.
The miners, having regained some of their weight and strength, are starting to push back against the mandatory daily sessions with a psychologist. In order to increase compliance, the psychologies are offering rewards for good behavior and punishments for bad. In recent days, the miners have been asked to conduct interviews using a video camera. The videos [...] Read more – ‘Prizes and Punishments for the Trapped Miners’.
I’ve always wondered about this. In a 1927 article on razor-blade counterfeiters, Time magazine stated the obvious: “as everyone knows, safety razor manufacturers derive the bulk of their profit, not from razors, but from the replaceable blades.” And this is just as clear today. In his 2009 business best seller, Free, Chris Anderson turns early [...] Read more – ‘The Razors‐and‐Blades Myth’.
Sports teams don’t sell the game, they sell an experience. Mark Cuban provides some insight We in the sports business don’t sell the game, we sell unique, emotional experiences.We are not in the business of selling basketball. We are in the business of selling fun and unique experiences. I say it to our people at [...] Read more – ‘What does the sports business sell?’.
There can be no cast-iron guarantee that the cutting-edge science of today will not represent the discredited alchemy of tomorrow. More Intelligent Life asks whether we should be skeptical of science itself and finds many reasons why we should: Journal articles are rarely checked for accuracy, discredited research is regularly cited in support of other research [...] Read more – ‘The Limits of Science’.
A police officer charges you with a crime. They bring you into the interrogation room and start to pepper you with questions. They start to rough you up a bit, to keep you awake and deprive you of sleep. They continue a relentless assault of detailed questions, unknowingly disclosing details throughout the entire interrogation process. After a 36 hours [...] Read more – ‘What would you do?’.
In a hilarious talk from the 2006 Gel conference, Seth Godin gives a tour of things poorly designed, the 7 reasons why they are that way, and how to fix them. Seth Godin at Gel 2006 from Gel Conference on Vimeo. Seth is the author of Linchpin, Tribes, and Purple Cow. Read more – ‘Why are so many things broken?’.
The very best behavioral economic “parlor tricks” aren’t all used for good. In fact, it’s often the marketing departments of consumer goods companies that implement new research the fastest. Behavioural economists study the psychology of economic decision-making, and if they are any good at their task they will discover something the unscrupulous salesman could use to [...] Read more – ‘How companies use behavioral economics to squeeze your wallet’.
In an interview with Foreign Policy, Eric Smit (then CEO of Google) had an interesting answer when asked if there is a downside to hyper-information access? I am worried about the decline of what I call deep reading. In other words, the sort of "here I am on the airplane, there's no Internet connection, I [...] Read more – ‘What worries Google CEO Eric Schmidt?’.
The reliability that matters is not the simple reliability of one component of a system, but the final reliability of the total control system. – Garrett Hardin Awesome find by Joe: In the world fond of simple associations, Garrett Hardin will be remembered above all as the man who made millions familiar with a concept known [...] Read more – ‘Living Within Limits’.
Meetings are a fact of life. No matter how hard we try sometimes, we just can’t seem to shake them. But most of us feel that meetings are generally a waste of time. One problem is that people trying to make decisions in groups spend most of their time telling each other things that everyone already [...] Read more – ‘Why do people in meetings tell you what you already know?’.
Wired editor and accomplished author Jonah Lehrer on the future of reading: Let me explain. Stanislas Dehaene, a neuroscientist at the College de France in Paris, has helped illuminate the neural anatomy of reading. It turns out that the literate brain contains two distinct pathways for making sense of words, which are activated in different [...] Read more – ‘The Future of Reading’.
Interesting article in Foreign Policy on Bob Gates. He’s challenging the status quo and changing the incentives. Gates also noticed that the Army’s most innovative colonels — brigade commanders who not only understood counterinsurgency theory but practiced it in Iraqi cities and villages — were getting stalled in their careers by generals with much less battlefield experience [...] Read more – ‘The Transformer’.
Junk foods switch on biological mechanisms that are just as hard to fight as recreational drugs Before you dismiss my agitation as mere weakness, consider this: to my brain, sugar is akin to cocaine. There is now compelling evidence that foods high in sugar, fat and salt – as most junk foods are – can [...] Read more – ‘Tastes your brain can’t resist’.
Awesome article from Bloomberg Business Week on how Apple uses decoys, anchoring, and obscurity to make you think those shiny aluminum toys are a great deal. (Airlines, are also using obscurity in pricing.) So let’s count the ways Apple defends itself with pricing: Decoys Decoys, in marketing, are products, services, or price points that a business doesn’t [...] Read more – ‘How Apple Plays the Pricing Game’.
Micheal Lewis is perhaps one of the best storytellers of our generation. This recent article in Vanity Fair is no exception: The credit wasn’t just money, it was temptation. It offered entire societies the chance to reveal aspects of their characters they could not normally afford to indulge. Entire countries were told, “The lights are [...] Read more – ‘Beware of Greeks Bearing Bonds’.
Daniel Pink, author of Drive: The Surprising Truth About What Motivates Us, talks with EconTalk host Russ Roberts about drive, motivation, compensation, and incentives. Pink discusses the implications of using monetary rewards as compensation in business and in education. Much of the conversation focuses on the research underlying the book, research from behavioral psychology that [...] Read more – ‘Daniel Pink on Drive, Motivation, and Incentives’.
From retailing to counterterrorism, the ability to analyse social connections is proving increasingly useful. The economist has an awesome article on the ways in which your social network information is being used — think everything from advertising to counterterrorism. Of course, companies have long mined their data to improve sales and productivity. But broadening data mining to [...] Read more – ‘Mining You Data — From Advertising To Counterterrorism’.
Stephen Hawking and Leonard Mlodinow’s kicked off their new book: The Grand Design, with an book excerpt in the WSJ today: Newton believed that our strangely habitable solar system did not “arise out of chaos by the mere laws of nature.” Instead, he maintained that the order in the universe was “created by God at first [...] Read more – ‘The Grand Design’.
I’m a fan of Seth Godin — I’ve read Linchpin, Tribes, and Purple Cow. I find the posts at his blog are often thoughtful and engaging, yet they are not the typical posts you’d come across at Farnam Street. His blog entry today, struck me as something I wanted to share: Your attitude is now what’s [...] Read more – ‘What are you selling at work?’.
Scientists have long thought that social networks, which features many distant connections, or “long ties,” produces large-scale changes most quickly. But in a new study, Damon Centola, an assistant professor at the MIT Sloan School of Management, has reached a different conclusion: Individuals are more likely to acquire new health practices while living in networks [...] Read more – ‘Do social networks affect the spread of behavior?’.
What causes some people to buckle under pressure when others thrive? I came across this NYT article that posted an excerpt from a new book, Clutch, detailing the five traits of people who are great under pressure: focus, discipline, adaptability, being present, and a mix of entrepreneurial desire and fear. More interestingly, from my perspective, the article [...] Read more – ‘The Five Traits of People Who Are Great Under Pressure’.
In response to this post on joining a cult, a reader sent us this awesome video on how to start a cult. Another reader sent us a link to this book which seems somewhat interesting. I’d love to read the first part, where he talks about being recruited by the Moonies. Read more – ‘How to Start a Cult’.
Psychologists have known for some time that we possess blind spots in our decision-making. When faced with uncertainty, we fall back on mental shortcuts that can get us into trouble. Among our many bad habits, we ignore information if it contradicts our beliefs. We cling to facts that have been disproved. We’re overconfident in our [...] Read more – ‘The ants go marching one by one…’.
It’s interesting to see just how many mental models are used to recruit people into cults. This great find by Simoleon Sense shows just how powerful of a force cults can be. In order to get an inside look at how cults go about recruiting, Thomas Morton joined three cults. You know a cult is effective when a [...] Read more – ‘I Joined Three Cults Simultaneously’.
The main ingredient for laughter is not actual comedy but the social setting. People tend to laugh about 30 times more when they are in a social situation versus just by themselves (Provine & Fischer, 1989). When alone, people are more likely to talk to themselves and even smile than laugh. There are also gender [...] Read more – ‘Go ahead, laugh’.
We spend a lot of time trying to understand the characteristics of good leaders. Research now suggests that leading in an extraverted manner is a key to success. Extraversion is best understood as a tendency to engage in behaviors that place oneself at the center of attention, such as seeking status and acting dominant, assertive, outgoing, and talkative. In fact, [...] Read more – ‘Do Extroverts Make Better Leaders?’.
Cool insights below from Decision Science News. Prior to this study, advertisers have been unable to demonstrate (with statistical support) that a link can be made from a social network and product service adoption. The main findings, if you’re pressed for time and would like to avoid the text below, are (1) consumers linked to [...] Read more – ‘The Extent to Which Your Friends’ Behavior Predicts Your Own’.
Humans are fascinated by randomness and yet we fundamentally misunderstand it. One misunderstanding is our belief in the hot hand–the intuition that a short run of consistent, but statistically independent, events is likely to continue. Another is our belief in the gamblers fallacy – the intuition that a short run of consistent events is likely to reverse. Although these two tendencies [...] Read more – ‘Our Fundamental Misunderstanding of Randomness’.
I have a huge soft spot for intersting stories about bank robbers. Of the seven thousand one hundred and twenty-seven bank robberies in the United States in 2000,the average take was just twelve hundred dollars, and most of the thieves were eventually captured. Bank robberies tend to be committed by inexperienced and desperate people, but [...] Read more – ‘The Largest Take in US History’.
Dave Logan, author of Tribal Leadership, offers three good reasons why business books are bad for you. In place of reading airport best-sellers on the latest repackaged business idea, he recommends three suggestions with a little more substance. First, most business books use stories to cover over their complete lack of insight. Second, the stories [...] Read more – ‘3 Reasons Why Business Books Are Bad for You’.
Bob Sutton, author of Good Boss, Bad Boss and The No Asshole Rule details an interesting study on the power of Thank You. These researchers found, in each study (all are randomized experiments with control and treatment conditions), that a simple expression of thanks by someone in authority led people to be more likely to [...] Read more – ‘How to get employees to volunteer for extra work’.
In this episode, Paul talks with journalist and author Kathryn Schulz. They discussed Shulz’s recently released book, “Being Wrong: Adventures in the Margin of Error.” They talked about Schulz’s premise that we’re all wrong, all the time, and how the inability of politicians and business leaders to admit to mistakes can be devastating. On the [...] Read more – ‘Paul Kedrosky: On Being Wrong(er)’.
This is a fascinating article from Wired about a guy from Holland who’s rethinking traffic flow. Hans Monderman is a traffic engineer who hates traffic signs. Oh, he can put up with the well-placed speed limit placard or a dangerous curve warning on a major highway, but Monderman considers most signs to be not only annoying but [...] Read more – ‘Turning eight decades of traditional traffic thinking on its head’.
When faced with a complex decision, people tend to accept the status quo, as reflected in the old adage, “When in doubt, do nothing.” Indeed, across a range of everyday decisions, such as whether to move house or trade in a car, or even whether to flip the TV channel, there is a considerable tendency [...] Read more – ‘When are we most likely to accept the status quo?’.
Today’s NYT with a feature on how language shapes our perception of the world. When your language routinely obliges you to specify certain types of information, it forces you to be attentive to certain details in the world and to certain aspects of experience that speakers of other languages may not be required to think about all [...] Read more – ‘Does Your Language Shape How You Think?’.
A recent study tested whether people felt like they understood political candidates’ positions on a variety of issues like immigration, health care, and taxes. Most people rated themselves as being fairly knowledgeable about the candidates. However, when asked to actually descrive a candidate’s position on an issue they felt they understood, people faired much worse than they [...] Read more – ‘Do you really know why you hate the incumbent?’.
Trader Joe’s does a lot of things right. They tell stories about their products — they don’t sell olives they sell rare Greek olives. They don’t sell virgin olive oil they sell Hand picked, organic, Tuscan virgin olive oil. But they do more than just tell stories about products, they intentionally limit selection: Swapping selection for value [...] Read more – ‘Inside the Secret World of Trader Joe’s’.
Part of the reason habits are so difficult to change is they are triggered unconsciously, often by situations we’ve encountered time and time again. Before going into the bathroom: turn on the light. After getting new email: waste 10 minutes aimlessly surfing the web. New research published in the journal Personality and Social Psychology Bulletin [...] Read more – ‘How to Banish Bad Habits and Control Temptations’.
Why we (sometimes) learn more from failure than success—I wonder where the boundaries of this are? It doesn’t seem to apply to sports teams but it does seem to apply to organizations like NASA. While success is surely sweeter than failure, it seems failure is a far better teacher, and organizations that fail spectacularly often [...] Read more – ‘Is Failure A Better Teacher Than Success?’.
As someone interested in how the weak win wars, I found this article, by William Lynn, in the recent Foreign Affairs fascinating. Here’s an excerpt: …cyberwarfare is asymmetric. The low cost of computing devices means that U.S. adversaries do not have to build expensive weapons, such as stealth fighters or aircraft carriers, to pose a [...] Read more – ‘Defending a New Domain: The Pentagon’s Cyberstrategy’.
There is common ground in analysing financial systems and ecosystems, especially in the need to identify conditions that dispose a system to be knocked from seeming stability into another, less happy state. Tipping points‘, ‘thresholds and breakpoints’, ‘regime shifts’ — all are terms that describe the flip of a complex dynamical system from one state [...] Read more – ‘Complex Systems and Ecology’.
Can know anything about humanity in general if we only study an unusual subset? Not according to a new paper by Joseph Henrich of the University of British Columbia finding that the Western mind differs in fundamental ways from other people. “If you’re a Westerner, your intuitions about human psychology are probably wrong or at [...] Read more – ‘Are Western Minds Different?’.
Nassim Taleb writes in a new essay: The interplay of the following five forces, all linked to the misperception, misunderstanding, and hiding of the risks of consequential low probability events (Black Swans). … Increase in hidden risks of low probability events (tail risks) across all aspects of economic life, not just banking; while tail risks [...] Read more – ‘Why did the 2008 Financial Crisis Happen?’.
Assessing whether reported financial statements are intentionally misstated (or manipulated) is of considerable interest to researchers, creditors, equity investors, and governmental regulators. While there is a lot of information out there on deception detection, there is not a lot of useful information. This recent study, where the authors analyze linguistic features present in answers of [...] Read more – ‘How to Tell When A CEO is Lying’.
Interesting. It seems no one likes a goody two-shoes. An initial study investigating tolerance of group members who abuse a public good surprisingly showed that unselfish members (those who gave much toward the provision of the good but then used little of the good) were also targets for expulsion from the group. Two follow-up studies [...] Read more – ‘The desire to expel unselfish members from the group.’.
Richard Thaler on why anyone in business didn’t consider the possiblity that an economic downturn of this magnitude could happen: What was wrong with their thinking? These decision-makers may have been betrayed by a flaw that has been documented in hundreds of studies: overconfidence. Most of us think that we are “better than average” in [...] Read more – ‘The Overconfidence Problem in Forecasting’.
There is a dark side to psychology: “You inched towards the dark side,” joked one behavioural economist after he read a recent column in which I hinted that his field has some merits. It was a quip that got me thinking, because behavioural economics does indeed have a dark side. Behavioural economists study the psychology [...] Read more – ‘The Dark Art of ‘Drip Pricing’’.
The problem with our sensory world – this “blooming, buzzing confusion” of sights, sounds and smells – is that we put so much faith in it. We believe that the world we experience the world as it is, and that our sensations are an accurate summary of reality. But that’s a convenient illusion. In fact, [...] Read more – ‘Choice Blindness’.
Ryan Fehr and Michele Gelfand at the University of Maryland have drawn on research in other disciplines, including sociology and law, to explore the idea that apologies come in three forms and that their impact varies according to the character of the victim. The three apology types or components are: compensation (e.g. I’m sorry I [...] Read more – ‘What’s the most effective way to apologize?’.
Surprised that executives with the most authority are also the ones with the vast majority of rude and inappropriate behavior? Jonah Lehrer (author of Proust was a Neuroscientist and How We Decide argues that you shouldn’t be in this weekends WSJ. Psychologists refer to this as the paradox of power. The very traits that helped [...] Read more – ‘The Power Trip’.
Absurdly priced menu items are more than a publicity gimmick. They’re an application of “anchoring,” a cognitive phenomenon discovered by psychologists Amos Tversky and Daniel Kahneman in the 1970s. Whenever we try to estimate a numerical value, we are unconsciously influenced by related numbers just considered. In this case, the diner in a touristy Manhattan [...] Read more – ‘The $69 hot dog is on the menu to sell the $20 cheeseburger’.
A new paper argues that human reason has nothing to do with finding the truth, or locating the best alternative. Instead, it’s all about argumentation. Wilson and Schooler argue that “thinking too much” about strawberry jam causes us to focus on all sorts of variables that don’t actually matter. Instead of just listening to our [...] Read more – ‘Human reason has nothing to do with finding the truth’.
“If you’re making the right decision, even if you get a bad result, you’re not really wrong.” Kathryn Schulz, author of Being Wrong, interviews Peter Norvig, the director of research at Google. Some excerpts: As an engineer, you’re just used to the idea that there are errors. No matter how good you think you are, [...] Read more – ‘Failure is always an option at Google.’.
There is a lot of psychology at work in Neil Strauss’s book on the subject The Game: Penetrating the Secret Society of Pickup Artists. While there are many aspects to picking up, the key to the method is, unquestionably, that the pickup artist ignore, tease, or even insult the targeted female, accustomed as she is [...] Read more – ‘Love in the Age of the Pickup Artist’.
1. Goal of affiliationIn the most part humans are social so they want to be liked. Rejection is no fun and we’ll do almost anything to avoid it. We reciprocate because it sends a message about our sociability. We try to elicit liking from other people by behaving in ways we guess will be attractive, [...] Read more – ‘Do you want to influence people? Try appealing to these 3 universal goals’.
Taleb has published a new version of his 2007 best seller The Black Swan. The second edition includes a new 73-page essay, “On Robustness and Fragility.” Businessweek.com interviewed Taleb in early July about his views on investing and the dangerous Black Swans—i.e. unpredictable events with big consequences—that could lie in wait for financial markets. What [...] Read more – ‘Taleb: Government Deficits Could Be the Next ‘Black Swan’’.
What hard liquor, cigarettes, heroin, and crack have in common is that they’re all more concentrated forms of less addictive predecessors. Most if not all the things we describe as addictive are. And the scary thing is, the process that created them is accelerating… The world is more addictive than it was 40 years ago. [...] Read more – ‘The Acceleration of Addictiveness’.
What do we want Sara and her doctors to do now? Or, to put it another way, if you were the one who had metastatic cancer—or, for that matter, a similarly advanced case of emphysema or congestive heart failure—what would you want your doctors to do? The issue has become pressing, in recent years, for [...] Read more – ‘Letting Go: What should medicine do when it can’t save your life?’.
Are you an investor that uses stock message boards? This is for you and the results are not friendly to sites like seekingalpha. Turns out the uncertain and noisy environment provided by (most) message boards actually works against investors. JaeHong Park, Prabhudev Konana, Bin Gu, Alok Kumar and Rajagopal Raghunathan conclude that investors use stock [...] Read more – ‘How do investors use information from message boards to formulate their investment decisions?’.
Vaclav Smil offers some thoughts on the accuracy of long-range energy forecasting. Smil is truly a goldmine of thought. The excerpts below are taken from The Perils of Long-Range Energy Forecasting: Reflections on Looking Far Ahead. On Complexity Greater complexity that was required to make the forecasts more realistic also necessitated the introduction of longer [...] Read more – ‘The (In)Accuracy of Long-Range Forecasting’.
Interesting article from Advertising Age on Behavioral Economics. While reading this, it crossed my mind that companies pouring millions into untangling how people make gut decisions on what to buy while in the store, might be looking for increasing certainty and precision in places where, at best, we can only provide probabilistic estimates. “Behavioral economics [...] Read more – ‘Behavioral Economics Helping Marketers Better Understand Consumers’.
In Eating meat: evolution, patterns, and consequences, Vaclav Smil offers some thoughts on the risk of massive antibiotic use in animals. Carnivores might want to think twice before reading. A health impact of an entirely different kind arises from the massive use of antibiotics in all forms of animal husbandry. The Union of Concerned Scientists [...] Read more – ‘Vaclav Smil: Eating Meat: evolution, patterns, and consequences’.
Many complex systems display a surprising degree of tolerance against errors. For example, relatively simple organisms grow, persist and reproduce despite drastic pharmaceutical or environmental interventions, an error tolerance attributed to the robustness of the underlying metabolic network. Complex communication networks display a surprising degree of robustness: although key components regularly malfunction, local failures rarely [...] Read more – ‘Error and attack tolerance of complex networks’.
The Halo Effect (which is really Availability Bias) in action. When you vote in an election, your choice is surely not influenced by anything as superficial as a candidate’s looks, right? New research from MIT political scientists shows that the appearances of politicians do indeed strongly influence voters — and that people around the world [...] Read more – ‘Do we elect politicians based on appearance?’.
The bookshelf talks with Vaclav Smil about what he’s reading. Charlie Munger would love this guy. Could you tell us a bit about yourself? I am an incorrigible interdisciplinarian. I was trained in a broad range of basic natural sciences (biology, chemistry, geography, geology), and then branched into energy engineering, population and economic studies and [...] Read more – ‘The Bookshelf talks with Vaclav Smil’.
I’ve been reading a lot about Vaclav Smil recently. For those of you who don’t remember, Vaclav is the man who’s tutoring Bill Gates on Energy and Food production. Similar to Charlie Munger, Smil takes a very multidisciplinary approach to looking at problems. Over the next few days and weeks, look forward to some posts [...] Read more – ‘Bad Bets: There is no will, at any governing level, to behave rationally.’.
Scott Adams, of Dilbert Fame, explains how jobs changed the entire iPhone4 argument with 19 simple worlds. In a press conference on the subject, Steve Jobs said, “We’re not perfect. Phones are not perfect. We all know that. But we want to make our users happy.” Jobs got a lot of heat about his response. Where was [...] Read more – ‘High Ground Maneuver of Persuasion’.
This is a slightly more technical Version of the 2010 BT Lecture, Oxford University, July 14, 2010. This can also be used as a second technical companion to the essay On Robustness and Fragility in the second edition of The Black Swan (the first one being the Fourth Quadrant). I also introduce a simple practical method [...] Read more – ‘Excerpts from Taleb’s lecture at Oxford’.
Where have all the $5 footlongs gone? A key factor that often drives consumer compromise is price. In the case of a new $9 sub, I suspect this more expensive product will make the original products seem like a wiser and more economical choice. Subway doesn’t actually need to sell any $9 offerings to increase [...] Read more – ‘$9 footlong. How subway is raising prices’.
Kathryn Schulz, author of Being Wrong: Adventures in the Margin of Error, interviewed Alan Dershowitz in Slate. I want to ask you about the function of error within the law. I think mistakes are the essence of science and law. It’s impossible to conceive of either scientific progress or legal progress without understanding the important [...] Read more – ‘Alan Dershowitz on Being Wrong’.
When Bill Gates recommended Vaclav Smil’s book Global Catastrophes and Trends: The next Fifty Years, I purchased a copy off amazon. Smil is a great multi-disciplinary thinker and I think some of our readers will really enjoy the book. I must warn you, if you’re looking for a feel good book about the future this [...] Read more – ‘Global Catastrophes and Trends’.
An excellent paper by Michael Mauboussin, author of Think Twice, on the role of skill and luck. Mauboussin talks about reversion to the mean, insensitivity to sample size, and transitivity. There’s a simple and elegant test of whether there is skill in an activity: ask whether you can lose on purpose. If you can’t lose [...] Read more – ‘Can you lose on purpose? The role of Skill and Luck’.
Kathryn Schulz, author of Being Wrong, interviews Mountaineer Ed Viesturs on Making Mistake You’ve written that the worst mistake of your climbing career occurred on K2–which is a bad place for a mistake, given its reputation as the deadliest mountain in the world. Can you describe what happened? I was with two other climbers trying [...] Read more – ‘Into Thin Error: Mountaineer Ed Viesturs on Making Mistakes’.
IT seems that every week a new book or major newspaper article appears showing that irrational decision-making helped cause the housing bubble or the rise in health care costs. Such insights draw on behavioral economics, an increasingly popular field that incorporates elements from psychology to explain why people make seemingly irrational decisions, at least according [...] Read more – ‘Economics Behaving Badly’.
“Inflation is like a drug in more ways than one. It is fatal in the end, but it gets its votaries over many difficult moments.” When Money Dies is pretty hard to find cheaply. Luckily, a very awesome reader sent us a synopsis of the book in an article he found. I’ll let Charlie Munger [...] Read more – ‘When Money Dies: The Inflation Drug’.
A must read interview with James Bagian (h/t Joe ). James is, among other things, an engineer, an anesthesiologist, a NASA astronaut (he was originally scheduled to be on the fatal Challenger mission), a private pilot, an Air Force-qualified freefall parachutist, and a mountain rescue instructor. And then there’s his current job: director of the [...] Read more – ‘Risky Business: James Bagian—NASA astronaut turned patient safety expert—on Being Wrong’.
Clayton M. Christensen, author of The Innovator’s Dilemma, teaches Strategy at HBS. On the last day of class, he asks his students to turn theoretical lenses on themselves, to find cogent answers to three questions: First, how can I be sure that I’ll be happy in my career? Second, how can I be sure that [...] Read more – ‘How Will You Measure Your Life?’.
If you’ve ever wondered why underdogs win, why we’re losing the war in the middle east, or how to improve your odds of winning when you’re the underdog, this post is for you. There is a rich tradition of celebrating wins by the weak–while forgetting those who lost–including the biblical Story of David vs. Goliath. [...] Read more – ‘How Underdogs Can Win and Why We’re losing the War in the Middle East’.
Right after Jamie Dimon unveiled his summer reading list for interns, Fortune polled a number of executives to find out what’s on their summer reading list. Brad Alford, Chairman and CEO, Nestlé USA1776, by David McCulloughDrive, by Daniel Pink Mary Erdoes, CEO, JP Morgan Asset Management The Facebook Effect: The Inside Story of the Company [...] Read more – ‘Fortune’s Summer CEO Reading List’.
There are many ways companies compete with one another. Unfortunately, a lot of those ways seem like nothing more than an expensive route to commoditization. Companies are relentless in their pursuit of finding their weaknesses. They hire consultants, create branding maps, and solicit customer feedback. In our hyper-competitive world, this feedback tells us what we’re [...] Read more – ‘On Business Competition’.
I’ve tried to summarize this long article on how our memories are formed and recalled below. Basically, memories are re-formed each time they are recalled. People tend to have accurate memories for the basic facts of a momentous event—for example, that a total of four planes were hijacked in the September 11 attacks—but often misremember [...] Read more – ‘How Our Brains Make Memories’.
According to Greek mythology, Cassandra, a princess of Troy, had mislead Apollo into thinking that she’d give more than worship at his temple. So Apollo punished her by simultaneously granting her the gift of prophesy and the curse of never being believed. But it doesn’t matter why we ignore bad news, the fact is that [...] Read more – ‘Why negative thinking is good for you’.
I think you’ll really enjoy this article from the New Yorker. It has all the hallmarks of a great read: Art, large sums of money, science, pseudo-science, Sherlock Holmes, imitators and forgers, a Canadian con man, social norms, science vs. brains, and so much more. … in January, 2009, Kemp turned to a Canadian forensic [...] Read more – ‘The Mark of a Masterpiece’.
Why is it that the U.S. federal government allows local communities to give tax dollars to wealthy sports team owners rather than to create better benefits for citizens? Why are organ-donor programs constrained to the point where thousands of Americans die needlessly each year? Why did the South African government take a stand against an [...] Read more – ‘Looking Behind Bad Decisions’.
The book is perhaps one of the last of human inventions to succumb to the onslaught of technology. When Amazon’s CEO, Jeff Bezos, introduced the Kindle, he realized the device might alter the way people read forever: “It’s so ambitious to take something as highly evolved as a book and improve on it. And maybe [...] Read more – ‘The Velocity of Thought’.
We’re really good at interpreting new information through the lens of our prior (or desired) beliefs. The last thing we want to do is change our mind. Even in the face of new evidence our brains will work overtime to discredit, forget, or otherwise ignore evidence that goes against our prior beliefs. (We even discount expert [...] Read more – ‘What do you do when the evidence says you’re wrong?’.
To read the factoids David Freedman rattles off in his book Wrong is terrifying. He begins by writing that about two-thirds of the findings published in the top medical journals are refuted within a few years. It gets worse. As much as 90% of physicians’ medical knowledge has been found to be substantially or completely [...] Read more – ‘Are experts Wrong?’.
The always awesome Jason Zweig unearths a new study that tells us why investor sentiment seems to change on a dime. Sometimes the most interesting answers to financial questions come from scientific labs. A study published last week in the journal Current Biology found that the value you place on something is likely to go [...] Read more – ‘Why Can’t Investors Think For Themselves?’.
Brendan Koerner explores Alcoholics Ananymous in a fantastic Wired article. AA has been around since 1935. Created amid the doom and gloom of the Great Depression by a failed stockbroker and reformed lush named Bill Wilson. Lacking any formal training, Wilson created a 12 step process by cribbing ideas from religion and philosophy with a [...] Read more – ‘How effective is Alcoholics Anonymous?’.
Why do we believe in conspiracy theories? Do they influence others more than ourselves? We’ve written briefly about conspiracy theories before. In our previous post, Cass Sustien, co-author of Nudge, wrote: “A distinctive feature of conspiracy theories is their self-sealing quality. Conspiracy theorists are not likely to be persuaded by an attempt to dispel their [...] Read more – ‘The truth is out there’.
JPMorgan had a town hall for summer interns yesterday. Apparently quite a few people asked Dimon for a reading list. He e-mailed them back the following list of his favorite books “which includes a variety of business and history books.” BusinessThe World is FlatCompetitive Strategy: Techniques for Analyzing Industries and CompetitorsSecurity Analysis – Classic 1940 [...] Read more – ‘Jamie Dimon’s Summer Reading List’.
Would you prefer a doctor who exercises caution before prescribing potentially dangerous drugs, or has a “What the hell, you have nothing to lose?” attitude? The results of this study might surprise you: confidence trumped caution and, quite likely, competence. This research is described in The Invisible Gorilla. Confidence beats Competence. The authors note: You [...] Read more – ‘Would You Rather A Confident or Competent Dr.?’.
What signs and markers to elite night clubs look for in deciding whom to allow past the velvet rope?Just how complicated and nuanced is social status? Sociologit Lauren Rivera knows what it takes to get behind the velvet rope. Rivera, a sociologist at Northwestern University’s Kellogg School of Management (and a Harvard Ph.D.), took a [...] Read more – ‘Just how complicated and nuanced is social status? Getting into an elite nightclub’.
Why does subliminal advertising work? How did a cigarette company manage to increase sales after advertisements were banned? The answer, can be found in buyology: …since the subliminal advertising didn’t show any logos the smokers weren’t aware they were viewing an advertising message, and, as a result, they let their guard down. Pretend that it’s [...] Read more – ‘A Stimuli Powerful Enough To Replace Traditional Advertising’.
The Pepsi Challenge, a brilliant piece of marketing, pitted Coke versus Pepsi in two unmarked cups to everyone who dared try a sample. Consumers were asked simply, which one do you prefer? When the final results of this effort were tallied it was clear that people preferred Pepsi. So, by all accounts, Pepsi should be [...] Read more – ‘Mind Hack: Why do we prefer Coke over Pepsi?’.
On problem American car manufacturers are struggling with these days is how to provide health care and pension benefits to retired workers. The cost burdens are high and the willingness to accept cuts is low. Big Auto is like a big family—literally. Many factory workers are third or forth generation workers and that has an [...] Read more – ‘The Generational Incentive Structure @ Big Auto’.
Teachers Cheating? What happened to leading by example? In fairness, examples of exemplary behavior are in short supply these days. Banks are making loans to people that can’t afford them. People who can afford to pay are walking away. And teachers, the foundation of our educational system, are now cheating. If behavior is a bus, [...] Read more – ‘Cheating Teachers? Incentives Drive the Bus’.
Our visual sense is far from our most powerful in seducing our interest and convincing us to buy something. Working alone, our eyes are far less potent than we once thought when it comes to grabbing our attention. There is little doubt that we are more visually overstimulated today than ever before. Studies show that [...] Read more – ‘What’s the most recognizable scent in the world?’.
We know that first impressions are valuable. When our brain immediately likes someone we subconsciously tend to filter all subsequent information in a favorable light (aka, the halo effect). In The Elements of Persuasion, authors Richard Maxwell and Robert Dickman suggest we: …share something personal, and show the audience that you are talking to them, [...] Read more – ‘What you can do in the first 60 seconds of a presentation to aid your ability to persuade?’.
An excellent article in Wired on how google co-founder Sergy Brin is influencing Parkinson’s research and possibly bypassing centuries of scientific epistemology in favor of a more google like approach: Buried deep within each cell in Brin’s body—in a gene called LRRK2, which sits on the 12th chromosome—is a genetic mutation that has been associated [...] Read more – ‘How Sergy Brin is changing Parkinson’s Research’.
From Buyology: Truth and Lies About Why We Buy: In 1997, in preparation for the ban on tobacco advertising that was about to come into place in the United Kingdom, Silk Cut, a popular British tobacco brand, began to position its logo against a background of purple silk in every ad that it ran. It [...] Read more – ‘Advertising and Association’.
I wanted to say thanks to our wonderful readers for giving us one of their most valuable assets: attention. If you like us, tell your friends. After all, it’s in your best interest to pass the word. Since we get a lot of suggestions for content from readers like yourself, more readers will lead to [...] Read more – ‘Thank You (1,000+ readers and growing)’.
…when bacteria encounter antibiotics, the drugs initiate a DNA repair system in bacteria known as SOS response, which is supposed to stop the infection. But the Spanish researchers found that when SOS response kicks in, levels of another protein known as RecA begin to increase. RecA interferes with CheW, causing the colony to stop moving [...] Read more – ‘Bacteria’s battle plan’.
Bill Gates believes Prof. Smil is one of the smartest guys around today. He plugs several of Prof. Smil’s recent books on his website ( Gates recommends: Energy at the Crossroads: Global Perspectives and Uncertainties, Global Catastrophes and Trends: The Next 50 Years, Enriching the Earth: Fritz Habery, Carol Bosch and the Transformation of World [...] Read more – ‘The man who’s tutoring Bill Gates …’.
An excellent article in business week on the rise of ambient scenting and its influence on our mood. The fragrance industry thinks it has the answer. Jovanovic and Gaurin, who are responsible for luxury colognes and perfumes such as Tom Ford Black Violet and Giorgio Armani Onde Extase, are leading the latest fragrance business craze, [...] Read more – ‘Scent Branding’.
Dr. Atul Gawande, author of the checklist, gave the commencement speech at Stanford’s School of Medicine last week. Here is what he told the graduating class. Many of you have worked for four solid years—or five, or six, or nine—and we are here to declare that, as of today, you officially know enough stuff to [...] Read more – ‘The Velluvial Matrix’.
Jonah Lehrer explains why it was in BP’s best interest to come out with incredibly low estimates of flow and going as far as suggesting it wasn’t a very bad leak—and then failing to update that in light of new evidence. This is a form of anchoring…What does this have to do with the ash [...] Read more – ‘BP, the Ash Cloud, and Anchoring’.
Even when they are exposed to conflicting information about products, consumers are greatly affected by images attached to brands, according to a new study in the Journal of Consumer Research. Few doubt that branding messages can be powerful, but new research shows that even when consumers don’t recall the specific message, their preferences can be [...] Read more – ‘I Like It, but I Don’t Know Why: How Does Conditioning Affect Consumer Choice?’.
Interesting The typical car contains about 2,000 functional components, 30,000 parts, and 10 million lines of software code. Making them safe and reducing their environmental impact are important concerns mandated by regulation. At the same time, their high cost raises consumer expectations for styling, power, handling, reliability, and amenities. Satisfying both these masters results in [...] Read more – ‘Complexity’.
Parents across the country and busy paying out the little bribes they promised for good report cards. Companies are paying employees to be healthier. Will these things actually work? Eric Felton makes some interesting points in a recent op-ed in the WSJ: The incentive schemes may be touted as sophisticated means to produce desirable social [...] Read more – ‘Age of Incentives: Paying Big Bucks For Puny Results’.
Bill Gates, Melinda Gates, and Warren Buffett are asking the nation’s billionaires to pledge to give at least half their net worth to charity, in their lifetimes or at death. If their campaign succeeds, it could change the face of philanthropy.…So as 2010 arrived, a pledge became the strategy. The idea of aiming for a [...] Read more – ‘Billionaire peer pressure: Behind the Buffett-Gates challenge’.
An excellent reminder from Jamie Dimon on what it means to hold someone accountable. Thank you, Chancellor Cantor… Syracuse faculty, proud parents and family members and, above all, graduates. It is a privilege to be with you here today celebrating this important step in your lives. One that I am sure is also a moment [...] Read more – ‘Jamie Dimon: What does it mean to hold someone accountable?’.
Two videos. Steven Levitt and Stephen Dubner, authors of Superfreakonomics, challenge you to think differently about a range of controversial subjects. Read more – ‘Superfreakonomics (Video)’.
Barbara Ehrenreich, acclaimed journalist and author of Bright Sided: How the Relentless Promotion of Positive Thinking, explores the darker side of positive thinking. H/T Nick Read more – ‘(Video) Smile or Die’.
Michael Shermer says the human tendency to believe strange things — from alien abductions to dowsing rods — boils down to two of the brain’s most basic, hard-wired survival skills. He explains what they are, and how they get us into trouble. Belief is the status quo; Patternicity; etc. http://video.ted.com/assets/player/swf/EmbedPlayer.swf Shermer is the author of [...] Read more – ‘(Video) Michael Shermer: The pattern behind self-deception’.
Psychologists have discovered that self-control is an exhaustible resource — what looks like laziness is often exhaustion: So picture this: Students come into a lab. It smells amazing—someone has just baked chocolate-chip cookies. On a table in front of them, there are two bowls. One has the fresh-baked cookies. The other has a bunch of [...] Read more – ‘Why Change Is So Hard: Self-Control Is Exhaustible’.
A little off topic but interesting: During a year-long gambling binge at the Caesars Palace and Rio casinos in 2007, Terrance Watanabe managed to lose nearly $127 million. The run is believed to be one of the biggest losing streaks by an individual in Las Vegas history. It devoured much of Mr. Watanabe’s personal fortune, [...] Read more – ‘The Gambler Who Blew $127 Million’.
There are a number of factors that influence how well we do in school, including the amount of time we study and our interest in a subject. Now, according to findings in Psychological Science, how quickly we expect to receive our grades may also influence how we perform: Students who were told they would receive [...] Read more – ‘Expecting Rapid Feedback Enhances Performance’.
Ezra Klien on paying the full price of oil (including externalities): When I started researching this column, my working assumption was that a world in which gasoline’s total costs were represented at the pump would be a world in which our consumption of gasoline was radically different. But almost all of the experts I spoke [...] Read more – ‘Think gas is too pricey? Think again.’.
We know that one way improve your ability to convince someone of something is to pile on the information. Surprising, short, simple copy, can sometimes work better on specific things (e.g., guarantees). A test of guarantee text at the end of an online order form compared the performance of these two guarantees: “You may cancel [...] Read more – ‘Short vs. Long Copy on Guarantees’.
Steven Pinker, author of The Stuff of Thought, weighs in with his thoughts on what the internet is doing to our brains: Yes, the constant arrival of information packets can be distracting or addictive, especially to people with attention deficit disorder. But distraction is not a new phenomenon. The solution is not to bemoan technology [...] Read more – ‘Mind Over Mass Media’.
The New York Times reviews “The Upside of Irrationality,” Dan Ariely’s follow-up to his 2008 best seller “Predictably Irrational. “The Upside of Irrationality” is also about getting to know our courtly narrator, who draws from his own daily experience to generate hypotheses about human behavior (like “the Ikea effect,” which makes us overvalue things we [...] Read more – ‘What We Misunderstand’.
Guy Kawasaki, best-selling author of the persuasion book Enchantment: The Art of Changing Hearts, Minds, and Actions, offers five ways to be more persuasive: 1.Be the first to give. Studies show that we are persuaded more by people who have done something for us first. We give bigger tips to servers who give us a [...] Read more – ‘5 Ways to be Persuasive’.
Sometimes the best way to raise prices is to bribe the middleman. He later learned that Wright paid tens of thousands of dollars to a foundation Keggi helps run and gave him a trip to a conference in the Bahamas. Keggi recommended the ceramic device over the kinds of implants used in 97 percent of [...] Read more – ‘U.S. Kickbacks in Doctors’ Conflicts’.
Richard Thaler comments: AS the oil spill in the Gulf of Mexico follows on the heels of the financial crisis, we can discern a toxic recipe for catastrophe. The ingredients include risks that are erroneously thought to be vanishingly small, complex technology that isn’t fully grasped by either top management or regulators, and tricky relationships [...] Read more – ‘Recipes for Ruin, in the Gulf or on Wall Street’.
Many things in life, although designed with the best intentions bybright people, come with unintended consequences. Consider, for instance, childbirth. A woman who gives birth haschoices to make: do I accept medical interventions (drugs, surgery,etc. ) or let nature take its course? Many of these interventions canbe life-saving procedures for both mother and child. However [...] Read more – ‘Financial Reform Will Never Work: Cascading Intervention’.
Reading this reminded me that the FAA puts a value on human life and that is how they make decisions on what safety measures should be implemented. Mohnish Pabrai explains: What the FAA has done — and it’s been very, very effective — is to put a price on a human life. According to the [...] Read more – ‘The Cost Of Preventing Mistakes: The Value Of A Human Life’.
…In all these cases, observers recognized the existence of catastrophic risk but deemed it to be small. Many other risks like this are lying in wait, whether a lethal flu epidemic, widespread extinctions, nuclear accidents, abrupt global warming that causes a sudden and catastrophic rise in sea levels, or a collision with an asteroid. Why [...] Read more – ‘From the oil spill to the financial crisis, why we don’t plan for the worst’.
Wired contributing editor Jonah Lehrer reviews The Shallows on his blog (and in the NYT), Nick Carr’s new book on what the internet is doing to our brains. Socrates started what may have been the first technology scare. In the “Phaedrus,” he lamented the invention of books, which “create forgetfulness” in the soul. Instead of [...] Read more – ‘The Shallows: What The Internet Is Doing To Our Brain’.
This is your brain on computers. Scientists say juggling e-mail, phone calls and other incoming information can change how people think and behave. They say our ability to focus is being undermined by bursts of information. These play to a primitive impulse to respond to immediate opportunities and threats. The stimulation provokes excitement — a [...] Read more – ‘Hooked on Gadgets, and Paying a Mental Price’.
Frequency and magnitude. The people running BP did a dreadful job of estimating the true chances of events that seemed unlikely — and may even have been unlikely — but that would bring enormous costs.…For all the criticism BP executives may deserve, they are far from the only people to struggle with such low-probability, high-cost [...] Read more – ‘Spillonomics: Underestimating Risk’.
Does the Internet make you smarter or dumber? Clay Shirky, author Cognitive Surplus, argues the Internet is making us smarter. Fighting for the other camp is Nick Carr, author of The Shallows: What the Internet Is Doing to Our Brains. What do you think? The Smart Argument (Clay) Every increase in freedom to create or [...] Read more – ‘Does the Internet Make You Smarter or Dumber?’.
We should never risk something that we have and need for something that we don’t have and don’t need. But some people pull the trigger anyway. This is what Warren Buffett said about the Long Term Capital Management affair: Here are 16 extremely bright – and I do mean extremely bright – people at the [...] Read more – ‘You only have to get rich once’.
…Let me step aside and talk about the difference between theory and model. I was brought up reading the Torah and going to Hebrew school, and there is the story of Moses and the burning bush. God tells Moses to go to Pharaoh to Let My People Go. Moses doesn’t like being sent to do [...] Read more – ‘the difference between theory and model’.
We have recently seen a number of big corporate frauds and stock market scandals. The question arises: is it just the case of a few bad apples or is it a deeper systemic problem? The answer, we’ve found, lies in conflicts of interest. What happens when you put good people in situations that create conflict? [...] Read more – ‘Dan Ariely: What happens when you put good people in situations that create conflict?’.
William Spaniel, an enterprising graduate student at the University of Rochester, has created a useful set of twenty-six short YouTube clips on game theory. I particularly like this explanation of forward induction and burning money: William also uses game-theoretic thinking to solve practical problems like how to catch a baseball during MLB batting practice. Or [...] Read more – ‘Game Theory TV’.
Ken is an awesome presenter and I loved his 06 talk. This reminds me somewhat of a book that a reader sent me a few weeks ago (after it was recommend by Seth Godin) called DIY U In this poignant, funny follow-up to his fabled 2006 talk, Sir Ken Robinson makes the case for a [...] Read more – ‘Video: Sir Ken Robinson: Bring on the learning revolution!’.
Awesome video. Today’s math curriculum is teaching students to expect — and excel at — paint-by-numbers classwork, robbing kids of a skill more important than solving problems: formulating them. At TEDxNYED, Dan Meyer shows classroom-tested math exercises that prompt students to stop and think. http://video.ted.com/assets/player/swf/EmbedPlayer.swf H/T simoleon sense Read more – ‘TED Video: Math Class Needs a Makeover’.
Thanks Joe!Two lessons from mother nature: it doesn’t like debt and there is no such thing as too big to fail. This goes against “efficiency” but helps evolution. “How can you have evolution when you have those who did the right thing finance those who did the wrong thing?” Read more – ‘David Cameron in conversation with Nassim Taleb’.
Tim Harford with a thoughtful article in the FT: They found something fascinating: the biases of newspapers closely reflected those of their potential readership, neither pushing to the extremes nor pulling to the centre. The identity of a newspaper’s owner, in contrast, explained very little of the paper’s content. This is exactly what one would [...] Read more – ‘Media Bias’.
Several months ago Wal-Mart Canada Corp. decided to overhaul one of the staples of its grocery business – the peanut butter aisle. It dropped two of its five lines of peanut butter to free up scarce shelf space for cinnamon spreads. But the decision didn’t cost the retailer a single jar in sales. With fewer [...] Read more – ‘Less is more’.
In the realm of public policy, we live in an age of numbers. To hold teachers accountable, we examine their students’ test scores. To improve medical care, we quantify the effectiveness of different treatments. There is much to be said for such efforts, which are often backed by cutting-edge reformers. But do wehold an outsize [...] Read more – ‘Metric Mania’.
The office’s administrators require that federal agencies express the costs and benefits of their proposed rules (lives saved, swampland preserved) in dollars. Moral principles, filtered through this cost-benefit analysis, find their way into confounding little boxes. A human life, the E.P.A. figured in a 2001 rule about arsenic and drinking water, was worth $6.1 million. [...] Read more – ‘Cass Sunstein Wants to Nudge Us’.
What if bureaucrats could benefit financially from finding cost savings? Why are profit-seeking corporations so much more efficient and innovative than bureaucracies? A significant part of the answer to that question lies in the fact that bureaucracies are often hamstrung by legislation, and amending legislation is always a cumbersome and politics-ridden process. But another significant [...] Read more – ‘Incentives vs. Government Waste’.
Research has shown that financial incentives don’t work for work that requires thought. Why not? What does motivate people? Excellent explanation, using examples from research – now remixed with cool art. Daniel Pink is the author of Drive: The Surprising Truth About What Motivates Us Read more – ‘Great Video! What Motivates People to Work Better?’.
Unlikely as it seems, gambling might help people save. Peter Tufano of Harvard Business School and Tim Flacke of the Doorways to Dreams Fund have piloted a program with eight Michigan credit unions that turns savings accounts into a game. The more people squirrel away, the better their chances of winning small cash prizes each [...] Read more – ‘To Increase Savings, Link Them to Gambling’.
Hindsight bias, the irrational belief that past outcomes were predictable—is a well-understood psychological phenomenon. Our research suggests that this bias is becoming stronger, thanks largely to an abundance of visual information, including re-creations and simulations. But in measuring it, we’ve also discovered its near opposite, what we call the propensity effect: Visualization may also, in [...] Read more – ‘The Visualization Trap’.
From that initial problem, a cascade of failures followed. Workers on the rig somehow missed the buildup of pressure inside the well, even though keeping a close eye on that is the most important safety requirement of their jobs. …Once the well began leaking, the pressure buildup should have been evident to workers monitoring the [...] Read more – ‘From that initial problem, a cascade of failures followed.’.
Though suburban cul-de-sacs have long been attractive as quiet, safe places for families, their disadvantages are becoming clear. One of the biggest problems is interference with motor- and foot-traffic flow. Research by Lawrence Frank, Bombardier Chair in Sustainable Transportation at the University of British Columbia, looks at neighborhoods in King County, Washington: Residents in areas [...] Read more – ‘The Unintended Consequences of Cul-de-sacs’.
The term ‘tipping point’ is in widespread use in English, but what does it mean? Imagine a child’s seesaw with an empty bucket on each end. The seesaw is initially at rest with one end touching the ground. If left alone, nothing would happen – there would be no motion. The whole mechanical contraption would [...] Read more – ‘What Is A Tipping Point ?’.
When people initially become aware of a risk, they overreact. They have a temporary short-term overreaction. People pause what they’re doing, become hyper-vigilant, check out the environment more carefully than they normally would and—this is perhaps the most important characteristic of the adjustment reaction—they take precautions that may be excessive, may be inappropriate, and are [...] Read more – ‘Reactions and overreactions: What’s worse: denial or panic?’.
Using evidence from a systematic study of major disasters in the past 50 years, epidemiologist Sandro Galea has developed a framework that identifies five stages of reaction to a disaster: Five stages of reaction to a disaster Self-Preservation: The first reaction to a disaster is fear and initial anxiety. People are afraid. They seek information. [...] Read more – ‘Five stages of reaction to a disaster’.
Just as the heavy use of antibiotics contributed to the rise of drug-resistant supergerms, American farmers’ near-ubiquitous use of the weedkiller Roundup has led to the rapid growth of tenacious new superweeds. To fight them, Mr. Anderson and farmers throughout the East, Midwest and South are being forced to spray fields with more toxic herbicides, [...] Read more – ‘Farmers Cope With Roundup-Resistant Weeds’.
Studies have shown that people who play games of chance, such as slot machines or the lottery, often mistakenly believe some level of skill is required to win. This illusion of control often pushes players to continue. The findings below indicate that near-miss outcomes may elicit a dopamine response in the most severe gamblers, despite [...] Read more – ‘“Near Misses” Encourage Problem Gambling’.
1698 times: three things—autonomy, complexity, and a connection between effort and reward—are, most people agree, the three qualities that work has to have if it is to be satisfying. Outliers 1420 times: Paradigms power perception and perceptions power emotions. Most emotions are responses to perception—what you think is true about a given situation. If your [...] Read more – ‘Amazon Kindle: The Most Highlighted Passages of All Time’.
An inability to deal with more than two things at a time may be “hard-wired” into our brain, research suggests. “Our result is likely to provide an explanation for why people are good in binary choice but not multiple choice.” When we try to do two things at once, each half of the brain focuses [...] Read more – ‘The Myth of Multi-Tasking’.
Nassim Taleb, author of The Black Swan and Fooled by Randomness, talks with EconTalk host Russ Roberts about his latest thoughts on robustness, fragility, debt, insurance, uncertainty, exercise, moral hazard, knowledge, and the challenges of fame and fortune. Listen Nassim Taleb, author of many books—The Black Swan, Fooled By Randomness, and The Bed of Procrustes—is in the [...] Read more – ‘Audio: Taleb on Black Swans, Fragility, and Mistakes’.
How you see isn’t just about how good your eyes are – it’s also about your mindset, according to a study published in Psychological Science. For example, in one experiment, if someone was told that exercise would improve their vision, they saw better after doing an athletic activity – jumping jacks – than an unathletic [...] Read more – ‘Believing is Seeing: How Mindset Can Improve Vision’.
Interesting article in the New York Times today on how technology affects kids’ friendships. …The question on researchers’ minds is whether all that texting, instant messaging and online social networking allows children to become more connected and supportive of their friends — or whether the quality of their interactions is being diminished without the intimacy [...] Read more – ‘Antisocial Networking?’.
This document is a study guide It’s for anyone who is trying to memorize all of the cognitive biases so they can better understand human thought and behavior. It’s especially recommended for account planners, marketers, and students of psychology / cognitive science. Within, you will find each bias presented with a short description and an [...] Read more – ‘Cognitive biases – a visual study guide by the royal society of account planning’.
So many people underestimate the odds that something bad will happen to them—even though they have received accurate information about average risks—that a law professor is calling for a reassessment of the reasonable person standard in tort law, particularly in the area of negligence. Optimism Bias is nothing more than a combination of mental models. [...] Read more – ‘Optimism Bias in tort law’.
Is this just like a big placebo? Can luck really influence the outcome of events? That question has captivated otherwise rational people for centuries—and challenged scientists to somehow prove whether lucky charms, special shirts or ritualistic behaviors hold special powers. They do. (Sometimes.) New research coming out in June suggests that a belief in good [...] Read more – ‘The Power of Lucky Charms: New Research Suggests How They Really Make Us Perform Better’.
A new paper by Russ Roberts available online. Below find the executive summary and an overview, courtesy of Tyler Cowen, of the main arguments. Executive Summary Beginning in the mid-1990s, home prices in many American cities began a decade-long climb that proved to be an irresistible opportunity for investors. Along the way, a lot of [...] Read more – ‘Gambling with Other People’s Money: How Perverted Incentives Caused the Financial Crisis’.
“Everything can be taken from man but one thing: the last of the human freedoms—to choose one’s attitude in any given set of circumstance, to choose one’s own way.” —Viktor Frankl From Frank’s book:Man’s Search For Meaning, is an amazing tale of his struggle to survive Auschwitz. Read more – ‘What’s the one thing that can never be taken from you?’.
Not always. Is this why politicians are always speaking in such vague terms? There is increasing evidence that individuals interpret the same election message in different ways, according to their personal political views, say experts in the British Medical Journal. Martin McKee, from the London School of Hygiene and Tropical Medicine, and David Stuckler from [...] Read more – ‘Do you hear what I hear?’.
Interesting article on how powerpoint helps facilitate illusions of control and understanding. The article highlights something I hadn’t really considered before: power powerpoint relieves the briefer of the need to polish writing in order to convey an idea (and, also, reduces the need to think critically). “PowerPoint makes us stupid,” Gen. James N. Mattis of [...] Read more – ‘We Have Met the Enemy and He Is PowerPoint’.
Television dramas that rely on forensic science to solve crimes are affecting the administration of justice. In 2008 Monica Robbers, an American criminologist, defined the CSI effect as “the phenomenon in which jurors hold unrealistic expectations of forensic evidence and investigation techniques, and have an increased interest in the discipline of forensic science.” Now another [...] Read more – ‘Are crime dramas warping the legal system? The CSI effect’.
We can’t work properly amid a barrage of emails, texts and tweets. Here is how to clear your mind and focus on what matters. In a new book, The Art of Concentration, the health writer Harriet Griffey argues that we are experiencing an attention crisis. Office workers are interrupted every three minutes, so at best [...] Read more – ‘Have we forgotten how to concentrate?’.
You can lead an investor to disclosure, but you can’t make him think. Jason Zweig highlights some interesting psychology based financial research in this WSJ column. We still chase returns even when told to focus on low fees (bias from the most recent evidence) and we tend to think the larger a prospectus is the [...] Read more – ‘Full Disclosure: Most Risks Hide in Plain Sight’.
False convictions are rarely intentional. Even in the worst cases, when police or laboratory technicians deliberately tamper with evidence or commit perjury, they do not intend to frame an innocent person; they believe that they have the right person and that they are aiding the pursuit of justice. Motivation to catch the culprit can also [...] Read more – ‘Confirmation Bias in Criminal Investigations’.
Easy — slant their reports toward the prior beliefs of readers. Of course this works in the workplace as well — If you want to be seen as a high quality individual you need only agree with those in power. A Bayesian consumer who is uncertain about the quality of an information source will infer [...] Read more – ‘How does a newspaper build a reputation for quality?’.
Only for analysts who desire a long career. Whose bread I eat his song I sing. The research below highlights that career concerns contribute to a systematic pattern of forecasting that aligns with managerial preferences. The likelihood that earnings announcements meet or beat analyst expectations differs substantially and systematically across firms. Prior research explores managers [...] Read more – ‘Do analysts forecasts align with managerial preference?’.
Both: Apparently it exaggerates the incentive to spin stories while eliminating the effect of ideological bias. There are two different types of media bias. One bias, which we refer to as ideology, reflects a news outlet’s desire to affect reader opinions in a particular direction. The second bias, which we refer to as spin, reflects [...] Read more – ‘Does competition in media increase or reduce bias?’.
Psychologists and behavioral economists hope that our tendency to benchmark our own achievements using the performance of others might provide a way to encourage Americans to become better citizens. Can the fear of being below average persuade us to reduce our electricity consumption, increase our charitable contributions, and otherwise compete to be better citizens? One [...] Read more – ‘Nudges Gone Wrong’.
People are perceived as more honest and likeable if they subtly mimic the body language of the person they’re speaking with. It appears this same phenomenon works both in the real and virtual worlds. The results of the study below indicate that subjects liked the mimicking agent more than the recorded agent, rating the former [...] Read more – ‘How an avatar can easily persuade you’.
Must read for anyone interested in banking and incentives. The trouble with Wall Street isn’t that too many bankers get rich in the booms. The trouble, rather, is that too few get poor — really, suitably poor — in the busts. To the titans of finance go the upside. To we, the people, nowadays, goes [...] Read more – ‘The best financial reform? Let the bankers fail’.
The camera focuses on an official of the Service Employees International Union (SEIU), California’s largest public-employee union, sitting in a legislative chamber and speaking into a microphone. “We helped to get you into office, and we got a good memory,” she says matter-of-factly to the elected officials outside the shot. “Come November, if you don’t [...] Read more – ‘How public-sector unions broke California’.
In this paper, HBS professor Ian Larkin and Ross School of Business professor Stephen Leider explore the role that the behavioral bias of overconfidence may play in explaining the prevalence of non-linear incentive schemes. They conclude that the linearity or non-linearity of an incentive system could play an important role in sorting employees according to [...] Read more – ‘What role does overconfidence play in non-linear incentive schemes?’.
Politicians and marketers take note: when it comes to persuading people who have ambivalent attitudes, more is more. People with ambivalent attitudes are more open to influence: specifically when they receive a glut of information. In this case quantity trumps quality. “If a candidate can provide a lot of information, some of it is bound [...] Read more – ‘Want to Influence Someone? Pile on the Information’.
facinating…. This study investigated changes in both the liar’s and the conversational partner’s linguistic style across truthful and deceptive dyadic communication in a synchronous text-based setting. An analysis of 242 transcripts revealed that liars produced more words, more sense-based words (e.g., seeing, touching), and used fewer self-oriented but more other-oriented pronouns when lying than when [...] Read more – ‘How to detect lying over email’.
(Last Updated Nov 13. 2011* New additions at the end.) Judgement in Managerial Decision Making (awesome) When faced with a decision, we all believe we’re weighing the facts objectively and making rational, thoughtful decisions. In fact, science tells us that in situations requiring careful judgment, every individual is influenced by his or her own biases [...] Read more – ‘Behavioral Economics Reading List’.
Persuasion made easy, Seth Godin tells us: Steve Cohen makes more than a million dollars a year doing magic tricks. I will now tell you the secrets of this magic: He sells to a very specific group of people, people who are both willing to hear what he has to say and able to pay [...] Read more – ‘Giving away a magician’s secrets’.
The authors of the study below discovered that opportunism makes both types of incentives profitable, but they have different effects. In our model, rewards are very effective in increasing cooperation but, ironically, increased cooperation makes rewards expensive. At some point punishment might be more efficient. Social incentives can either be positive (rewards) or negative (punishments), [...] Read more – ‘To build a cooperative society, is it better to punish or reward?’.
This article discusses—and gives examples of—some of the most common ways in which business decisions are affected by cognitive biases. The lack of awareness of the widespread operation of cognitive biases reduces the possibilities for good decision making. Since executives make hundreds of decisions daily, the time consuming demands of rational decision making are often [...] Read more – ‘The Impact of Psychology on Corporate Decision Making’.
In principle, kids should learn for the love of learning, but they’re not. So what shall we do? To find out, a Harvard economist named Roland Fryer Jr. did something education researchers almost never do: he ran a randomized experiment in hundreds of classrooms in multiple cities. He used mostly private money to pay 18,000 [...] Read more – ‘Should Kids Be Bribed to Do Well in School?’.
…Study after study has shown that our voting decisions are based not on rational deliberation, but on instinctive biases over which we have little control, such as whether or not we like a politician’s face. And the traditional theory about political leaders—that the best ones are defined by personality traits like confidence and decisiveness—is largely [...] Read more – ‘How to pick a leader?’.
A must read essay by Glen Whitman on the slippery slope of the governments recent interest in using behavioral economics to nudge us: New paternalism has gone by many names, including “soft paternalism,” “libertarian paternalism,” and “asymmetric paternalism.” Whatever the name, it arose from the burgeoning field of behavioral economics, which studies the myriad ways [...] Read more – ‘The Rise of the New Paternalism’.
Asked whether viewers want TV shows manipulating behavior, executives responded that if they are doing a good job it won’t even seem like they are trying to manipulate you. NBC Universal planted eco-friendly elements into scripted television shows to influence viewers and help sell ads. The tactic—General Electric Co.’s NBC Universal calls it “behavior placement”—is [...] Read more – ‘The new nudge: behavior placement’.
Seems that way. This MIT grad gives you an inside look at the Boston Consulting Group. Analytical skills were overrated, for the simple reason that clients usually didn’t know why they had hired us. They sent us vague requests for proposal, we returned vague case proposals, and by the time we were hired, no one [...] Read more – ‘Is the consulting industry a sham?’.
When it comes to spending disposable income, experiential purchases tend to make people happier than material purchases. But why are experiences more satisfying? Cater and Gilovich propose that the evaluation of experiences tends to be less comparative than that of material possessions, such that potentially invidious comparisons have less impact on satisfaction with experiences than [...] Read more – ‘Why experiences are more satisfying than material purchases…’.
Thaler and Sunstein discuss the tools available to choice architects for encouraging certain outcomes. The paper discusses defaults (status quo bias – powerful and unavoidable), Error expectations (well designed systems expect and forgive error), feedback, structuring complex choices, and incentives. A must read for anyone who indirectly (or directly) influences the choices of others. Decision [...] Read more – ‘Choice Architecture’.
(my thoughts below) In op-ed in today’s Washington Post, Geithner says: A clear lesson of this crisis is that any strategy that relies on market discipline to compensate for weak regulation and then leaves it to the government to clean up the mess is a strategy for disaster. This is a defining moment for financial [...] Read more – ‘Timothy Geithner: How to prevent America’s next financial crisis’.
Yes. There are two ways to navigate society: Being liked or being wealthy. Which is exactly why Kathleen Vohs and her colleagues developed the hypothesis that reminders of money might be able to alter the impact of how people perceive social events of acceptance or rejection. In particular, they reasoned, that even the mere thought [...] Read more – ‘Does Money Make Rejection Less Painful’.
Vaccine-autism claims, “Frankenfood” bans, the herbal cure craze: All point to the public’s growing fear (and, often, outright denial) of science and reason, says Michael Specter. He warns the trend spells disaster for human progress.http://video.ted.com/assets/player/swf/EmbedPlayer.swf Read more – ‘Michael Specter: The danger of science denial’.
To make good decisions, people need to be able to understand the risks that exist and how they accumulate over time. Most people cannot accurately answer the (simple) questions below because cumulative risk judgments are hard. A small difference in short-term risk can become significant in the long term. Suppose you are trying to decide [...] Read more – ‘Understanding cumulative risk’.
Management leads to compliance, but only self-direction leads to engagement. There are many reasons for the things we do. We have biological urges (eating, drinking, sex). Another ‘drive’ is our ability to respond to rewards and punishment (incentives). And, Dan Pink, former chief speechwriter for former US vice-president Al Gore and author of Drive: The [...] Read more – ‘Rethinking our outdated assumptions about motivation and performance’.
Books and video games that claim to stimulate grey matter are little more than useless, according to the experts. So what can we do to sharpen our minds? Don’t run out and buy a Nintendo DS — the best option to keep your brain in shape is physical, not mental. Dan Roberts reports: So is [...] Read more – ‘Can you really train your brain? What can we do to sharpen our minds?’.
Yes, especially if you are multitasking. Information must be maintained until it can be applied. Working Memory actively stores and manipulates information over short periods of time. So we need to hold information in WM to function, however, keeping information in working memory is costly (energy and cognitive process). Maintaining information in WM can also [...] Read more – ‘Can your memory bias attention?’.
Perhaps, if this study is to be believed. Commonly it is understood that forgiveness means sacrificing justice. However, the present study shows that the act of forgiving can increase a sense of justice, which in turn facilitates benevolent sentiments towards the offender. University students (N = 88) imagined themselves as victims and, after the offender [...] Read more – ‘Can forgiveness lead to an increased sense of justice?’.
Creativity: Society values it, companies need it, and employers want it. What society claims to want and what is actually rewarded in practice are two different things. We claim to want innovation, but are innovation and creativity actually encouraged, or even allowed in most environments? …Too often, we are given mixed messages from society about [...] Read more – ‘Creativity: A Crime Of Passion’.
What the human being is best at doing is interpreting all new information so that their prior conclusions remain intact. Yes, of course, journalists are biased (and not always for conflict of interest reasons!). The story below is interesting because it basically renames confirmation bias to journalism bias. (Few people ever talk about the laziness and [...] Read more – ‘Are journalists biased?’.
According to the study below “examining an item for longer periods of time resulted in greater attachment to the item and thus higher valuations.” Since we spend a lot of time with our clutter we become attached to it and place high valuations on it (endowment effect). Simply touching an item increases the odds of [...] Read more – ‘Why do we hold on to clutter?’.
We tend to value answers over questions because answers allow us to take action, while questions mean that we need to keep thinking. …This is a typical case, I’ve found. I’ve often tried to help companies do experiments, and usually I fail spectacularly. I remember one company that was having trouble getting its bonuses right. [...] Read more – ‘Why Businesses Don’t Experiment’.
Gresham’s Law in action. Former Citigroup CEO Chuck Prince made what could be considered the most infamous statement of this credit crisis when he said: “as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” From Today’s WSJ: Bill Thomas, a Republican former congressman from California who is [...] Read more – ‘Citigroup’s Chuck Prince confirms that risky behavior drives out prudent’.
Yes. The icing on this psychological cake is that people have no idea about this effect. Francesca Gino from the University of North Carolina has shown that counterfeit products actually make people behave more dishonestly. They cheat more in tests and they judge others as unethical with greater abandon. Even worse, they’re completely unaware of [...] Read more – ‘Are people who purchase counterfeit products more unethical?’.
Yes. Findings indicate that, when e-mail is compared with pen and paper communication media, people are more willing to lie when communicating via e-mail than via pen and paper and feel more justified in doing so. (If you are a marginal employee at work, ask for your review in pen.) Emails feel so transient, so [...] Read more – ‘Are we more willing to lie when communicating via e-mail than via pen and paper?’.
Yes, according to Steve Martin, co-author of Yes! 50 Secrets from the Science of Persuasion: In one study, businesspeople were asked to negotiate on a specific and complex contract via email. Half the group were paired up and simply asked to get down to business. The other half were paired up and one side was [...] Read more – ‘Can sending a funny cartoon improve persuasiveness in negotiations?’.
Yes, according to Steve Martin, co-author of Yes! 50 Secrets from the Science of Persuasion. Sit in the middle. As an aside, if you are ever a contestant on the weakest link, starting off in one of the two central positions in the semi-circle will improve your odds of winning. The study went on to [...] Read more – ‘Can where you sit make you more persuasive?’.
A lot. Ever hear of a kid ask for a pony. After rejection she follows up immediately and asks for a cat. Turns out she’s not just a cute 6 year old — she’s learning persuasion techniques. This rejection and then retreat strategy works more than you might think. Study after study has found we [...] Read more – ‘What can you learn from children about persuasion?’.
Paying attention to what your customers and clients see first can be a very effective way to increase your influence and, subsequently, your business. Steve Martin, co-author of Yes! 50 Secrets from the Science of Persuasion, tells the story: A few years ago a well- known US kitchen retailer released its latest bread-making machine. Like [...] Read more – ‘How Williams Sonoma Inadvertently Sold More Bread Machines’.
Yes. More interesting perhaps is that if you are walking around with smaller denominations you are more likely to be persuaded to make purchases and spend more. A recent study by a team of persuasion researchers suggested that people place more value on their money if they possess it in higher denominations of notes than [...] Read more – ‘Do higher denomination banknotes make you value money more?’.
Promoting the majority view (social proof) can have tremendous results in getting the response you want. Most of us are familiar with the cards placed in bathrooms asking guests to reuse the towels and pointing out the environmental benefits of doing so. These cards are a pretty good example of persuasion in action. Research shows [...] Read more – ‘What hotel towels can tell you about business’.
Bernie Madoff was a fan of Robert Cialdini’s book Influence: The Psychology of Persuasion. Only he used Cialdini’s principles for his $50 billion Ponzi scheme. Madoff used several of Cialdini’s principles, but for evil instead of good. He used the authority principle because he established himself as an expert in the area of investing. Madoff [...] Read more – ‘How Madoff Used Psychology to Swindle Investors’.
The power of ‘but …’According to Robert Cialdini, author of Yes!: 50 Scientifically Proven Ways to be Persuasive and Influence: The Psychology of Persuasion, the word “but” says to recipients in all human languages to take the information they just received, put it away and focus your attention on the next thing I’m about to [...] Read more – ‘The power of the word but’.
Yep, it does. In the context of a real business situation the experimenters claim that mentioning time versus money in marketing materials and promotional campaigns can make a product not only more attractive but also more valued too Campaigns that promote certain brands of beers have long used references to time and money in their [...] Read more – ‘Does mentioning time or money influence peoples’ evaluation of the product or service?’.
Commitment and Reciprocation team together for a great outcome. COIN by coin, the students in the small French village of Villers-Bretonneux have raised more than $20,000 to help rebuild a Victorian school razed in the Black Saturday bushfires. The French students of Ecole Victoria, and three other local schools, knew little about the children they [...] Read more – ‘The long memory’.
With everyone trying to get more for less these days, I thought this study was relevant. If you want to increase job performance remind people of the significance and meaningfulness of their jobs. Does task significance increase job performance? Correlational designs and confounded manipulations have prevented researchers from assessing the causal impact of task significance [...] Read more – ‘Does task significance increase job performance?’.
This is interesting: I always thought thinkers were less likely to be swayed by persuasion techniques than others. However, it appears ‘thinkers’ are just persuaded differently: they like adverts that make intelligent arguments. Another thing that came out of the research, and this has been consistently found, is that people believe others will be swayed [...] Read more – ‘Persuading Intellectuals’.
Yes, if you have kids nudge them towards music. The idea that music makes you smarter has received considerable attention from scholars and the media. The present report is the first to test this hypothesis directly with random assignment of a large sample of children (N = 144) to two different types of music lessons [...] Read more – ‘Can Music Lessons Enhance IQ?’.
All you investor types might be interested in this. Earnings season is upon us and pretty soon stocks will be gapping up or down based upon whether an extra penny was found or lost. That is, whether it was found or lost versus expectations. How those expectations get formed is the subject of today’s observations, [...] Read more – ‘The behavioral economics of earnings estimates’.
The always interesting Malcolm Gladwell in the Globe and Mail. On balance, are the social media a positive or negative thing? I’d like to think that on balance any innovation, at the end of the day, is usually a net good. But that doesn’t mean there aren’t significant and sometimes adverse consequences that we need [...] Read more – ‘Malcolm Gladwell: The quiet Canadian’.
Not entrepreneurs. While failure can teach you what not to do, it rarely teaches you what to do. IF at first you don’t succeed, it doesn’t matter that you tried. That seems to be the message of a working paper prepared recently by a team at Harvard Business School. The study found that when it [...] Read more – ‘Do we learn from prior failure the second time around?’.
Surprisingly, yea. Mark Schaller from the University of British Columbia found that people who see images of sneezes and other signs of disease mount a stronger immune response to later infections than people who see unrelated images. It seems that looking at someone sneezing primes our immune system to prepare for battle. This is the [...] Read more – ‘Can looking at someone sneezing boost your immune system?’.
There is a lot of wisdom in this brief excerpt from Jason Fried and David Hansson’s book Rework. Jason and David are the founders of 37signals. Watch chef Gordon Ramsay’s Kitchen Nightmares and you’ll see a pattern. The menus at failing restaurants offer too many dishes. The owners think making every dish under the sun [...] Read more – ‘Throw Less At The Problem’.
The outlines of this problem are familiar: People were able to get music for free, did so, and many are stubbornly resistant to the idea they should pay for it again– even if they agree in theory that it’s a good thing for musicians to get paid. In Britain we’re seeing a fascinating cocktail of [...] Read more – ‘How do you get people to pay for music?’.
Thanks to Miguel for finding this. Nassim Taleb summarizes his ideas about how Mother Nature deals with the Black Swan, both positive and negative—it knows much better than humans how to take advantage of positive Black Swans. First, Mother Nature likes redundancies, three different types of redundancies. The first, the simplest to understand, is defensive [...] Read more – ‘Redundancy as Insurance’.
If you believe Descartes it’s a dogmatic adherence to falsehood. For Descartes, the illogical adherence to uttered falsehoods is a human constant which the scientific mind must struggle to overcome. “Since the pressure of things to be done does not always allow us to stop and make such a meticulous check, it must be admitted [...] Read more – ‘What Is The Greatest Challenge To The Human Species?’.
The long chains of reasonings, simple and easy, by which geometricians are wont to achieve their most complex proofs, had led me to suppose that all things, the knowledge of which man may achieve, are strung together in the same way, and that there is nothing so distant as ultimately to be beyond our mental [...] Read more – ‘The long chains of reasonings…’.
The NFL draft is a great example of what Malcolm Gladwell calls the mismatch problem (when the criteria for evaluating job candidates is out of step with the reality of the job demands.) Mismatch problems exist because we desire certainty (bias from over-influence from precision and models). A question of increasing interest to researchers in [...] Read more – ‘The Loser’s Curse: Overconfidence vs. Market Efficiency in the NFL Draft’.
As it turns out, however, the draft does not play the Robin Hood role particularly well. Indeed, I have written a paper, recently revised, on this subject with Cade Massey, a professor at the Yale School of Management. We found that the teams choosing early in the draft generally don’t, in fact, get the players [...] Read more – ‘When a First Pick Isn’t the Best Pick’.
Interesting… There are basically two kinds of regulations of human behaviour, namely formal institutions (e.g., law using legal sanctions) and informal institutions through, e.g., conventions, internalized rules, customs or good manners. However, what happens if national legal laws/enforcements and social norms are no longer able to directly regulate individual behaviour? What happens if national legal [...] Read more – ‘When the Cat’s Away, the Mice Will Play: Gambling Behaviour of Visitors in Australia’.
I’ve had numerous readers asking about self control and discipline over the past 6 months and it seems to work. It’s with all this in mind that I’ve been testing the Pomodoro Technique, a productivity method that has recently achieved quasi-cult status online. Its originator, Francisco Cirillo, has been teaching it for 10 years, but [...] Read more – ‘This column will change your life: Is self-discipline the key to success?’.
Thinking about core values puts our minds into an abstract, high-level mode. This has been found to increase self-control. So, the next time you feel your self-control ebbing away at work, with your personal projects or with your partner, think about what you most pride yourself on; think about those things you hold dear, whatever [...] Read more – ‘Improving self-control’.
This is part of the larger issue of why societies collapse. We’ll be posting more on this subject soon. An article by Clay Shirky (thanks Max). In 1988, Joseph Tainter wrote a chilling book called The Collapse of Complex Societies. Tainter looked at several societies that gradually arrived at a level of remarkable sophistication then [...] Read more – ‘The Collapse of Complex Business Models’.
Soon… Adam Harvey, a designer and technologist with NYU’s Interactive Telecommunications Program, has begun reverse-engineering algorithms behind face detection. He generated a series of blocky images that could become the “building blocks of anti-surveillance makeup,” and focused on the simplest yet most important patterns for foiling the face-recognition tech. Some patterns that successfully hid faces [...] Read more – ‘Can You Camouflage Your Face From Face Recgonition Software?’.
You betcha. All sweeteners are not equal when it comes to weight gain. Rats with access to high-fructose corn syrup gained significantly more weight than those with access to table sugar, even when their overall caloric intake was the same. In addition to causing significant weight gain in lab animals, long-term consumption of high-fructose corn [...] Read more – ‘Does high-fructose corn syrup pack on the pounds faster than plain sugar?’.
Actually, yea, with some things (like movie success) social media (twitter, facebook, etc.) seems to be able to predict real-world outcomes. In recent years, social media has become ubiquitous and important for social networking and content sharing. And yet, the content that is generated from these websites remains largely untapped. In this paper, we demonstrate [...] Read more – ‘Can Twitter Predict The Future?’.
We want to cling to these incredibly outdated and simplistic measures of ability. —Malcolm Gladwell Hiring is difficult and we tend to fall back on antiquated tools that give us a number (something, anything) to help us evaluate potential employees. This creates what Malcolm Gladwell calls “mismatch problems” — when the criteria for evaluating job [...] Read more – ‘Hiring and the Mismatch Problem’.
Jonah Lehrer provides a fascinating answer. I think there’s been some really interesting work on what’s happening inside our head when we shop. Consider a recent study led by Brian Knutson of Stanford, Drazen Prelec of MIT and George Loewenstein at Carnegie Mellon. Not surprisingly, the fMRI experiment revealed that when subjects were shown pictures [...] Read more – ‘Why is Costco so successful?’.
A pilot project that paid poor kids for regular attendance at school, and paid their parents for things like going to the dentist, showed middling results. The program did seem to help in some ways. It reduced “some housing and hunger hardships,” according to a report that came out yesterday. But it did not improve [...] Read more – ‘Sorry, Kids: No More Cash For Going To School.’.
Yea. The more suspicious you were the more you likely would have avoided an adjustable-rate-mortgage. (While the entire world isn’t out to screw you there are a lot of people with incentives to do just that). We find evidence that households selecting adjustable-rate mortgages (ARMs) during the recent decade were disproportionately those who were less [...] Read more – ‘Can Suspicion Give You An Advantage?’.
Actually, yes. Studies of human reaction to low probability (rare) events reveal an interesting difference between judgment and decision-making in repeated settings. Judgments (probability estimations) appear to reflect over-sensitivity to rare events. Immediately following an aversive rare-event people believe (or say they believe) the risk decreases yet at the same time they exhibit more cautious [...] Read more – ‘Can Overestimation and Underweighting of Rare Events Coexist at the Same Time?’.
A reader tip’d us to this interesting read… In a book titled Human Universals, professor of anthropology Donald Brown listed hundreds of human universals in an effort to emphasize the fundamental cognitive commonality between members of the human species. Some of these human universals include incest avoidance, child care, pretend play, and many more. A [...] Read more – ‘Why Envy Dominates Greed’.
In a nutshell, yea, they do. Scientists have finally confirmed what the rest of us have suspected for years: Bacon, cheesecake, and other delicious yet fattening foods may be addictive. A new study in rats suggests that high-fat, high-calorie foods affect the brain in much the same way as cocaine and heroin. When rats consume [...] Read more – ‘Do Fatty Foods Cause Cocaine-Like Addiction?’.
A great paper that provides and introduction to the following mental models we should all know, understand and apply: Availability Bias, Hindsight Bias, Black Swans, Conjunctive and Disjunctive-Events Bias, Confirmation bias, Anchoring, Affect Heuristic, Over-confidence Bias, … Here is the part on Availability. Availability A general principle underlying the heuristics-and-biases program is that human beings [...] Read more – ‘Cognitive biases and the judgment of global risks’.
An interview with João Fabiano (translated from Portuguese) The biases that affect our assessment of very high risks are the most important ones to be observed. There is a special type of risk, the catastrophic risk – with the potential to destroy more than 10 million human beings – and the existential risks – with [...] Read more – ‘Fixing Cognitive Biases to Shape the Next Generation of Humans’.
Anyone interested in investing/business should check out our other blog MIN. We post most ‘finance stuff’ at that site but this post was just too good not to post here as well. The story of Reliable Engineers explains quite clearly how a combination of subtle psychological misjudgments (mental models) can lead to extraordinary outcomes. …Raju [...] Read more – ‘The Alchemy of Finance at Reliable Engineers’.
In this brief article Nassim Taleb (of Black Swan fame) touches on information, complexity, the randomness effect, over-confidence, and signal and noise. THE DEGRADATION OF PREDICTABILITY — AND KNOWLEDGE I used to think that the problem of information is that it turns homo sapiens into fools — we gain disproportionately in confidence, particularly in domains [...] Read more – ‘Taleb: The Fooled by Randomness Effect and the Internet Diet?’.
There’s been a lot of academic research suggesting that men think they know what they’re doing, even when they really don’t know what they’re doing… MEN and women invest differently, a growing body of research has found. And in at least one important respect, women may be better at it. The latest data comes from [...] Read more – ‘How Men’s Overconfidence Hurts Them as Investors’.
The New Yorker’s James Surowiecki talks with Michael Mauboussin (author of Think Twice: Harnessing the Power of Counterintuition). The video below is ~20 minutes. What lessons should investors take away: the psychological stuff. This video talks about subjects our readers are likely familiar with (Loss aversion, Over-confidence Bias, Illusion of Control, Endowment Effect, Mean Reversion, [...] Read more – ‘Video: Michael Mauboussin talks with the New Yorker’.
A lot of readers email to ask what is the best book on decision making… my response is always the same: Judgment in Managerial Decision-Making by Max Bazerman. (Bazerman is the Jesse Isidor Straus Professor of Business Administration at HBS.) My copy of this book (7th ed.) has a highlight on almost every page. Everyone [...] Read more – ‘The *Best* Book on Decision Making…’.
Insights about the role of memory and attention in decision making may help us make wiser choices — putting future considerations ahead of immediate gratifications. A large excerpt: Not only do people have a tendency to think about the present at the expense of the future, but when asked to put off consumption, they demand [...] Read more – ‘Remembering the Future’.
Apparently less willing. (Perhaps they’ve never been to a casino.) Do people behave the same in a laboratory experiment as they do in real life?The researchers found that people are less willing to take risks when their wealth declines. They approximated investors’ wealth by looking at housing prices in the investor’s zip code between October [...] Read more – ‘Are you more or less willing to take risks when your wealth declines?’.
William Poundstone, author of the great book, Priceless: The Myth of Fair Value, points out how Amazon and the Kindle use psychology to nudge us… Charm prices. These are prices ending in 9, which often have an uncanny motivating effect on consumers debating whether to buy. Amazon’s eBook price is a super-charming $9.99. Advertised reference [...] Read more – ‘How Amazon.com and the Kindle Employ Psychology To Nudge Us’.
Nassim Taleb and Daniel Kahneman discuss Government Sponsored Enterprises, which according to Taleb are “sitting on a barrel of dynamite” (and everyone agrees), cognitive biases, patterns (and their lack), and risk and denial perceptions. Daniel Kahneman has a new book coming out: Thinking, Fast and Slow. Nassim Taleb, author of many books—The Black Swan, Fooled By [...] Read more – ‘Kahneman And Taleb On Biases, The Illusion Of Patterns And The Perception Of Risk And Denial’.
Conformance tends to be higher when: the more important the group is to the individual the closer time and space proximity of the group to the decision the larger number of people in the group (although this last reduces conformance when the number gets sufficiently large). Read more – ‘The Psychology of Social Impact’.
Conformity is the process and result of our modifying our beliefs and behavior to match others’ expectations. We all conform. Some of us conform more than others. Conformity can cause many problems. One problem is groupthink. Groupthink is “a mode of thinking that people engage in when they are deeply involved in a cohesive in-group, [...] Read more – ‘On Conformity: The Difference Between Peer Pressure and Groupthink’.
In theory, yes. In practice, no. When we make decisions in groups we tend to discuss and debate shared information rather than offer private information (information that select members of a group hold). Why do we prefer shared information? Information usage is a disjunctive task: the group can use a piece of information as long [...] Read more – ‘Are two heads better than one?’.
This is an interesting study on how kids can be primed with exposure to the letter A before a task could improve performance and if exposure to the letter F could impair performance. Interestingly this also suggests that we can all ‘prime’ ourselves. Before you do something today, take 10 seconds and visualize yourself doing [...] Read more – ‘A versus F: The effects of implicit letter priming on cognitive performance’.
Apparently Not. We’re actually more likely to steal and cheat after buying a ‘green product.’ This implies that seemingly virtuous acts can license subsequent asocial and unethical behaviors. Consumer choices reflect not only price and quality preferences but also social and moral values, as witnessed in the remarkable growth of the global market for organic [...] Read more – ‘Do Green Products Make Us Better People?’.
This suggests that ideas trump reality. But in predicting your likings, even someone else’s direct experience trumps mental hypotheses—which is why surrogation works. Your parents recommend taking a Caribbean cruise and tell you about a discount deal. You’ve never taken a cruise and aren’t so sure you’d enjoy it, so you dig up some information [...] Read more – ‘Ideas Trump Reality’.
…what makes a good teacher? There have been many quests for the one essential trait, and they have all come up empty-handed. Among the factors that do not predict whether a teacher will succeed: a graduate-school degree, a high score on the SAT, an extroverted personality, politeness, confidence, warmth, enthusiasm and having passed the teacher-certification [...] Read more – ‘Building A Better Teacher’.
Is it just me or is there something wrong with paying people to be healthy? A new weapon is being deployed in the battle to persuade people to change their unhealthy behaviour – by targeting them in the pocket. If people cannot be persuaded to stop smoking/lose weight/get more exercise for their own good – [...] Read more – ‘Money can can work where willpower fails…’.
Seems like a case of Persian messenger syndrome. (The Persians really did kill the messenger who brought the bad news.) Employees with managers at the top who only hear what they want to hear know it is bad to bring up things they don’t want to hear. This encourages a cocoon of unreality at the [...] Read more – ‘Did Lehman Brothers Shoot the Messenger?’.
Over-influence from ‘authority’ is such a powerful force… …The documentary — due to be broadcast in France on Wednesday — used the ruse of a TV show to explore how even a game show host had the authority to persuade participants to inflict horrendous pain on other people. “It’s more about the notion of power [...] Read more – ‘French TV Reproduces Milgram’s Shocking Authority Experiment’.
An excerpt from an Interview with Dan Ariely (Author of Predictably Irrational and The Upside of Irrationality): Explain the pitfalls of “anchoring” on a particular data point or experience, to the exclusion of other inputs that might lead to better decisions. The market encourages all kinds of anchoring. The price at which you bought a [...] Read more – ‘An Interview with Dan Ariely’.
It seems so — actually, a lot more. Banks around the world should immediately hire attractive female loan officers. The real question is why? I’m not the first person to ponder this. A group including Sendhil Mullainathan and Eldar Shafir conducted an experiment in the fall of 2003. Basically, they received permission from a South [...] Read more – ‘Will Men Pay Higher Interest Rates If A Woman Offers?’.
Consumers view the extra fees airlines are charging as a ridiculous money grab. Airlines, however, recognize that most consumers are price sensitive to airfare and if they can make it difficult to comparison shop, consumers will be confused into paying higher overall prices. Airlines are unbundling fares. ‘Airfares’ are lower but there are now fees [...] Read more – ‘Manufactured Uncertainty: What the Airlines Learned From Mobile Phone Companies’.
Michael Lewis, author of The Big Short, on 60 minutes in two parts (both below). http://cnettv.cnet.com/av/video/cbsnews/atlantis2/player-dest.swfWatch CBS News Videos Online http://cnettv.cnet.com/av/video/cbsnews/atlantis2/player-dest.swfWatch CBS News Videos Online Micheal Lewis is the author of The Big Short, Moneyball, and the The Blindside. Of course it was Liar’s Poker that made him famous. Shop at Amazon.com and support Farnam Street Read more – ‘Michael Lewis on 60 minutes: The Big Short’.
Most financial planners reinforce our bad investment behavior. One reason why: two-thirds of people interested in meeting with a financial planner were likely to implement advice only if it conformed to their own ideas — otherwise, I assume, the consultant never sees them again. The problem: Financial planners are yes-men and -women, asserts a report [...] Read more – ‘Financial advice: The yes-man problem’.
This reminds me of the Kahneman and Tversky quote “a person who has not made peace with his losses is likely to accept gambles that would be unacceptable otherwise.” States and companies have started investing very differently when it comes to the billions of dollars they are safeguarding for workers’ retirement. Companies are quietly and [...] Read more – ‘Public Pension Funds Are Adding Risk to Raise Returns’.
Ed Thorp on some of the things he learned about building successful quantitative models in finance and risk. Here are some of the things we learned about building successful quantitative models in finance. Unlike blackjack and gambling games, you only have one history from which to use data (call this the Heraclitus principle: you can [...] Read more – ‘On Building Successful Quantitative Models In Finance And Risk’.
Incentives. Of course, there are surely other reasons why burgers are cheaper than salads. These might include production costs, since harvesting apples is probably more naturally seasonal than slaughtering cows (even though both are in demand year-round). Transportation and storage costs might also play a role, as it’s probably easier to keep ground beef fresh [...] Read more – ‘Why does a Big Mac Costs Less than a Salad?’.
Robert Shiller is the Arthur M. Okun Professor of Economics at Yale University and co-author, with George Akerlof, of last year’s Animal Spirits. He recently recommended two economics books: Identity Economics: How Our Identities Shape Our Work, Wages and Well-Being, by George A. Akerlof and Rachel E. Kranton Psychology research has shown that our personal [...] Read more – ‘Shiller: The Best Econ Books I’ve Read Recently’.
Some interesting excerpt from this interview with Wilbur Ross on incentives, regulation, and noise in decision making. How can we fix the securitization market? No one had skin in the game. That’s where things went wrong. My proposal then is that everyone has skin in the game. Ratings agencies’ fees and compensation should be paid [...] Read more – ‘Wilbur Ross: Incentives, Regulation, and Noise in Decision Making’.
Dr. Atul Gawande, The New York Times bestselling author of Better and Complications reveals the surprising power of the ordinary checklist (see The Checklist Manifesto). First introduced decades ago by the U.S. Air Force, checklists have enabled pilots to fly aircraft of mind-boggling sophistication. Now innovative checklists are being adopted in hospitals around the world, [...] Read more – ‘Video: An Evening with Dr. Atul Gawande’.
This is a great example of the prisoners’ dilemma from Presh at Mind Your Decisions: I played a poker tournament at Caesar’s Palace last night with thefollowing setup: The buy-in is $65, which gets you 2500 chips. Thereis also the option to buy an additional 500 chips for $5 more, givingyou a total of 3000 [...] Read more – ‘Las Vegas and game theory’.
Yes (unsurprisingly). Again from the MIT Sloan Sports Analytics Conference from a presentation entitled “Whistle Swallowing: Officiating & the Omission Bias.” I highlighted the most interesting stuff – so just read the bold if you are short on time. Officiating has always been a strong point of contention in NBA circles. The flow of an [...] Read more – ‘Officiating Bias In the NBA’.
Zach Lowe of Celtics Hub attended the panel on Saturday at the MIT Sloan Sports Analytics Conference on coaching analytics. Mavs owner Mark Cuban said there would be “nothing worse” than having a coach who ignores the front office’s advanced statistical analysis about which line-up combinations work or which type of shot is most efficient [...] Read more – ‘Will coaches listen to stat heads?’.
Michael Lewis moderated a panel at the 2010 MIT Sloan Sports Analytics Conference called What Geeks Don’t Get: The Limits of Moneyball. … Michael Lewis asked Morey if he believed in clutch stats, long a controversial difference between common fans – who worship the art of the clutch – and statheads – who tend to [...] Read more – ‘What Geeks Don’t Get: The Limits of Moneyball’.
A recent survey of medical literature found that 95 percent of the results of observational studies on human health have failed replication when tested using a rigorous, double blind trial. It’s possible to get the mental equivalent of whiplash from the latest medical findings, as risk factors are identified one year and exonerated the next. [...] Read more – ‘We’re so good at medical studies that most of them are wrong’.
Diversity training has swept corporate America. Just one problem: It doesn’t seem to work.There’s little evidence that diversity training works…. And research by a team of sociologists on more than 800 companies over three decades has found that the best diversity training programs make little difference in who gets hired and promoted, and many programs [...] Read more – ‘Diversity Training: Who’s still biased?’.
Hunt Allcott, a behavioral economist with a two-year appointment as the Energy and Society Fellow in MIT’s Department of Economics and the MIT Energy Initiative, wants to apply his field’s insights to the realm of energy use. Q. Why should we invest in behavioral research pertaining to energy efficiency, and what are the specific kinds [...] Read more – ‘Can understanding human irrationality help solve our energy problems?’.
Tim Harford discusses his book “The Logic of Life. Life sometimes seems illogical. Individuals do strange things: take drugs, have unprotected sex, mug each other. Love seems irrational, and so does divorce. On a larger scale, life seems no fairer or easier to fathom: Why do some neighborhoods thrive and others become ghettos? Why is [...] Read more – ‘Authors@Google: Tim Harford’.
I highly recommend reading this. In this excerpt from his annual letter, investing great Seth Klarman describes 20 lessons from the financial crisis which, he says, “were either never learned or else were immediately forgotten by most market participants.” * * * One might have expected that the near-death experience of most investors in 2008 [...] Read more – ‘The forgotten lessons of 2008’.
William Poundstone, author of the exceptionally illuminating book Priceless: the myth of fair value, posted this brief article on pricing: We’ve heard a lot about one health insurer raising its rates by up to 39 percent. Yet in the past year, the price of another widely used commodity has gone up 50 percent industry-wide. Not [...] Read more – ‘Unpopular Pricing and the Megapixel Bias’.
Using examples from vacations to colonoscopies, Nobel laureate and founder of behavioral economics Daniel Kahneman reveals how our “experiencing selves” and our “remembering selves” perceive happiness differently. This new insight has profound implications for economics, public policy — and our own self-awareness. http://video.ted.com/assets/player/swf/EmbedPlayer.swf Read more – ‘(Video) Daniel Kahneman: The riddle of experience vs. memory’.
Great article. …”First, you’ll be exhilarated by some of this new information, and by having it all — so much! incredible! — suddenly available to you. But second, almost as fast, you will feel like a fool for having studied, written, talked about these subjects, …”Over a longer period of time — not too long, [...] Read more – ‘The cognitive effects of secret information’.
Yes, of course. This fascinating study found that in the year after executives and directors had engaged in hedging, their company’s stock often dropped markedly and there was an increase in financial restatements and shareholder lawsuits. Over the last decade there has been an increased emphasis on tying executive’s wealth to firm performance through the [...] Read more – ‘Does CEO hedging alter the incentive system?’.
Economist and University of Chicago Professor Richard Thaler kicked off the Yahoo! Labs 2010 Big Thinkers Speaker Series with a talk about his New York Times bestselling book, “Nudge: Improving Decisions about Health, Wealth, and Happiness.” In short, people have to make decisions every day that affect every aspect of their lives, personally and professionally. [...] Read more – ‘Big Thinkers Speaker Series with Richard Thaler’.
The Blu Dot group conducted an adorable social experiment to see what will happen if they left designer chairs unattended on the streets of NY (with a GPS attached). They tracked down the people who picked them up and asked: Why did you take the chair? http://vimeo.com/moogaloop.swf?clip_id=8201309&server=vimeo.com&show_title=1&show_byline=1&show_portrait=0&color=&fullscreen=1 Blu Dot Real Good Experiment from Real Good [...] Read more – ‘Interesting Social Experiment Involving Chairs’.
The high crime rates of the 1980s coupled with the belief that prison served as a “revolving door” for criminal activity, prompted new sentencing laws aimed at increasing sentences for repeat offenders. One of the most publicized new policies was habitual offender law, commonly called “Three-Strikes You’re Out”. Are there any unintended consequences? Yes according [...] Read more – ‘The Unintended Consequences of ‘Three-Strikes’ Laws’.
What about the Canadian banking system allowed it to survive the recent worldwide slowdown without a single bank failure? What can the United States learn from Canada about sound banking? Mark Perry speculates: Full Recourse Mortgages in Canada Shorter-Term Fixed Rates in Canada. Mortgage Insurance Is More Common in Canada than in the United States. [...] Read more – ‘Why don’t Canadian Banks Fail, Eh?’.
Yes, according to this HBR column by Dan Ariely: My friend Eduardo Andrade and I wondered if emotions could influence how people make decisions even after the heat or anxiety or exhilaration wears off. We suspected they could. As research going back to Festinger’s cognitive dissonance theory suggests, the problem with emotional decisions is that [...] Read more – ‘Can short-term emotions effect long-term judgment?’.
Decades of behavioral economics research argues that consumers are not always so rational and the two strategies have never been tested head to head, to see which one most effectively alters calorie consumption. So, psychological scientist Leonard Epstein at University of Buffalo, decided to explore the persuasiveness of sin taxes and subsides in the laboratory. [...] Read more – ‘Sin Tax’.
Apparently not: honest people showed no additional neural activity when telling the truth. This is early days in a futuristic brain-based lie detector… A new study of the cognitive processes involved with honesty suggests that truthfulness depends more on absence of temptation than active resistance to temptation. Using neuroimaging, psychologists looked at the brain activity [...] Read more – ‘Is honesty harder on the brain than lying?’.
Jonah Lehrer, a contributing editor at Wired, offers this conclusion… Reality, in other words, is so richly complex that the brain has to process it in two different ways at the same time. We need to see the trees, but we also have to remember the forest. Of course, these implicit and connotative connections – [...] Read more – ‘The neuroscience of sarcasm’.
People in sad moods tend to value familiarity whereas those in a happy mood are more open and welcoming of novelty. Why? “Bad mood signals a problem, tuning individuals toward safety concerns, whereas good mood signals that an environment is benign… After all, familiarity is only a heuristic cue to safety.” People often prefer familiar [...] Read more – ‘What type of mood are you in today?’.
Another example of bribing the purchasing agent. From the NYT The scheme, as laid out by federal prosecutors, has two parts. Officials say that Mr. Salyer and others at SK Foods greased the palms of a handful of corporate buyers in exchange for lucrative contracts and confidential information on bids submitted by competitors. This most [...] Read more – ‘Greasing palms’.
NBA coach Phil Jackson has a system of player fines for minor infractions. Apparently millionaire athletes hate forking over cash out of their wallet for arriving late. Jackson has found that players are more grudging about having to pull cash out of their own pocket on the spot, than having a larger fine deducted from [...] Read more – ‘NBA All-Stars hate paying $20; Mom and Dad Don’t Mind’.
One problem that always grabs our attention is merit pay for teachers. How do you differentiate teachers? What makes a good teacher? How do you create the right incentives through the entire academic ego-system? These are tough, tough, problems. An article in The Atlantic tackles the difficult question:What makes a good teacher?: What did predict [...] Read more – ‘What Makes a Great Teacher?’.
Knowing something isn’t always enough to change (or even influence) behavior. A study by Dinkelman makes the difference between knowledge and behavior all too clear. In many parts of the world, the spread of the HIV epidemic is still fueled by ignorance. Yet, in other parts of the world, HIV is still spreading despite knowledge. [...] Read more – ‘When knowledge does not equal behavior (the spread of HIV)’.
One thoughtful reader pointed us towards a book by Alan Krueger (What Makes a Terrorist: Economics and the Roots of Terrorism. Krueger challenges the myth that terrorism is caused by financial circumstances: It turns out there is no correlation between financial condition and terrorism. Surprisingly, however, there is a positive correlation between education level and [...] Read more – ‘The Educated Terrorist?’.
Chances are you’re unaware of the limits to your abilities, unappreciative of the challenges that lie ahead, and uninformed of all that can go wrong. Don’t worry—you’re not alone. Michael Mauboussin, chief investment strategist at Legg Mason Capital Management and author of Think Twice: Harnessing the Power of Counterintuition, wrote this article (which touches on [...] Read more – ‘Smart People Dumb Decisions’.
People overestimate their ability to control their impulses. The study below found increased neural activity in areas of the brain known to control food intake when patients who lost weight were exposed to food (because leptin -a hormone that helps control appetite-dropped). When leptin was injected into the volunteers (to reach a normal level) the [...] Read more – ‘Rational Or Emotional? Your Brain On Food’.
Yes – at least that is what your mind thinks (and the same goes for wine too). In Many cases the price equals value heuristic works pretty well, but not always. (This study clearly shows a placebo effect because the pills given were nothing more than sugar. The study also demonstrates that the placebo effect [...] Read more – ‘Does the price of medication affect how well it works?’.
This Thomas Sowell article came across my radar this morning: During bad times, the blame game is the biggest game in Washington. Wall Street “greed” or “predatory” lenders seem to be favorite targets to blame for our current economic woes. When government policy is mentioned at all in handing out blame, it is usually blamed [...] Read more – ‘Economic Whodunit’.
Sobering thoughts from the Chairman of Sears Holdings: I just finished Thomas Sowell’s most recent book, Intellectuals and Society. For those not familiar with his writings, Thomas Sowell is one of the clearest and most insightful writers of our era. I look forward to every book and column he publishes. In this book, he discusses [...] Read more – ‘Making Sense of Business and Policy’.
Restraint bias: a tendency for people to overestimate their capacity for impulse control. “Restraint bias offers insight into how our erroneous beliefs about self-restraint promote impulsive behavior,” says lead author Loran F. Nordgren of Northwestern’s Kellogg School of Management. “It helps us to understand puzzles in addiction research such as why recovered addicts often relapse [...] Read more – ‘Why Do We Return to Bad Habits’.
According psychologist and Nobel Laureate Daniel Kahneman $60K a year can make you happy. …millions of dollars won’t buy you happiness, but a job that pays $60,000 a year might help. Happiness levels increase up to the $60K mark, but “above that it’s a flat line,” he said. “Money does not buy you experiential happiness [...] Read more – ‘How much money will make you happy?’.
This interesting talk, given at Standford, details how game and web designers use psychology to encourage participation. In case you don’t have an hour to watch the video, here is a brief summary of the game/web design part (you can find the slides here: How to drive participation using a meta-game Meta-games are all about statistics. [...] Read more – ‘How web designers use psychology to encourage participation’.
Canada’s Globe and Mail has the answer: “On average, bronze medalists are happier than silver medalists,” said Victoria Medvec, a psychologist and professor at Northwestern University’s Kellogg School of Management in Illinois. The phenomenon is a case of counterfactual thinking – thoughts about “what might have been,” she explained. Third-place winners have upward thoughts (“at [...] Read more – ‘Why are bronze medalists happier than silver medalists?’.
By the time you get down to price, the salesperson can easily manipulate the negotiation because he knows exactly how much the car is worth – it’s his job – and has a fair idea how much you’re prepared to pay. An interesting Irish Times article: So, what should you be doing? Well, he recommends [...] Read more – ‘How to buy a car for the cheapest price’.
Selling a used video game? Don’t let the endowment effect hamper your efforts. Let’s go back to my rapidly diminishing game collection. After realizing that I had to overcome the endowment effect, I started pricing things to move. There were, however, some games that I simply could not bring myself to reduce my prices on. [...] Read more – ‘The Endowment Effect and Used Game Sales’.
Emmanuel Sivian says “..engineering as a field of study and a profession tends to attract people who seek certainty, and their approach to the world is largely mechanistic. So they are characterized by a greater intolerance of uncertainty - a quality that is evident among extremists, both religious and secular. “ And in the Arab [...] Read more – ‘Why Are So Many Terrorists Engineers?’.
Yes. People are often distracted by interesting, yet, unimportant noise. In the study below the ability to recall the important information was significantly influenced by whether the reading contained seductive details. How large was the influence? Those who read without seductive details could recall 93% of the important generalizations. However, of those who read with [...] Read more – ‘Do seductive details interfere with your comprehension?’.
The paper below documents a pervasive cognitive bias in how consumers interpret loan terms. The authors call this payment/interest bias: consumers’ systematic tendency to underestimate the annual percentage rate associated with a loan principal and stream of repayments. Importantly the authors also discover that biased households’ loan rates are 200-400 basis points (2-4%) higher than [...] Read more – ‘How do cognitive biases influence economic behavior?’.
In general people often believe explanations because they find them intuitively satisfying (not because they are accurate). With this in mind, the authors of the study below tested whether the presence of neuroscience information would be seen as a strong maker of a good explanation regardless of the actual status of that information within the [...] Read more – ‘The Seductive Allure of Neuroscience Explanations’.
Atul Gawande in the New Yorker responding to the NYT. Atul is the author of three books: the checklist, complications, and better. …As readers may recall, my article investigated why Medicare spent markedly more for its enrollees in McAllen, Texas, than in most of the country—in 2006, the region had higher medical spending per beneficiary [...] Read more – ‘Atul Gawande: The Cost Conundrum Persists’.
Consumers who buy a product intending to use an accompanying mail-in rebate often do not redeem the rebate. To explain this behavior, we argue that consumers use an anchoring and adjustment approach to predicting the likelihood of redeeming a rebate. In keeping with previous research on anchoring and adjustment, for instance, we show that when [...] Read more – ‘The Consumer Psychology of Mail-in Rebates’.
Yes. Sleep is needed to clear the brain’s short-term memory storage and make room for new information. Conversely, the more hours we spend awake, the more sluggish our minds become, according to the findings. The results support previous data from the same research team that pulling an all-nighter – a common practice at college during [...] Read more – ‘Can napping make you smarter?’.
An article that appeared in the huffington post. …Skeptical? Check the research. A major research study into the values and attitudes of this generation was recently conducted. Born between 1978 and 2000, the Millennials include 95 million young people up to 30 years of age — the biggest, most diverse, and best educated age group [...] Read more – ‘Selflessness is profitable’.
Interesting and thought provoking article on best practices in the medial field (through the lens of behavioral economics). Best practices are much more complicated than they appear… Health Care: Who Knows ‘Best’?…That of the President’s statement that doctors will want to engage in federally approved “best practices”? The American College of Physicians, composed of internists, [...] Read more – ‘The challenges of best practices’.
An excellent parable by Charlie Munger on how one nation came to financial ruin. In the early 1700s, Europeans discovered in the Pacific Ocean a large, unpopulated island with a temperate climate, rich in all nature’s bounty except coal, oil, and natural gas. Reflecting its lack of civilization, they named this island “Basicland.” The Europeans [...] Read more – ‘Basically, It’s Over: A Parable About How One Nation Came To Financial Ruin’.
In this wide-ranging, thought-provoking talk from TEDxAmsterdam, Kevin Kelly muses on what technology means in our lives — from its impact at the personal level to its place in the cosmos. http://video.ted.com/assets/player/swf/EmbedPlayer.swf Read more – ‘Kevin Kelly tells technology’s epic story’.
I found an old (1980) paper by Tony Greenwald, Professor of Psychology at the University of Washington, talking about the role of ego in our lives. The parts about egocentricity and self-justification were the most fascinating. Here are some excerpts with the full paper linked below. Ego, as an organization of knowledge (a conclusion to [...] Read more – ‘The Ego Historian: How your ego filters information’.
Last night something amazing happened. While the Swiss hockey team ultimately lost in a shootout to the powerhouse Canadians, they earned a point for tying the game. How did this happen? On paper the two teams don’t even compare. The Canadian roster is full of superstars while the Swiss have largely a ho-hum roster. In [...] Read more – ‘How Underdogs Can Win: A Lesson From The Swiss’.
Cognitive dissonance is a state of tension that occurs whenever a person holds two cognitions (ideas, beliefs, attitudes, or opinions) that are psychologically inconsistent. Dissonance produces an uncomfortable mental state the the mind needs to resolve. In resolving dissonance our minds trend towards self-justification which makes it hard to admit mistakes. Most people, when confronted [...] Read more – ‘The Engine of Self-Delusion: Cognitive Dissonance’.
At TED2010, Bill Gates unveils his vision for the world’s energy future, describing the need for “miracles” to avoid planetary catastrophe and explaining why he’s backing a dramatically different type of nuclear reactor. The necessary goal? Zero carbon emissions globally by 2050. http://video.ted.com/assets/player/swf/EmbedPlayer.swf Read more – ‘Bill Gates on energy: Innovating to zero! (TED)’.
Campbell’s learned that you feel more emotionally engaged with your soup when it looks warm and that you don’t care about spoons. From The WSJ: …It’s not easy to know what prompts people to buy soup, except for something warm to eat on a frosty day. When asked why they eat more soup or not, [...] Read more – ‘Campbell’s NeuroMarketing’.
In a word:Yes. Flattery—the art of offering pleasing compliments—is one of the oldest and most commonly used of persuasion tactics. Instances of flattery also abound in the marketing context because making consumers feel good about themselves can often lead them to evaluate the flatterer positively. However, when prospective consumers are fully aware of a clear [...] Read more – ‘Does Insincere Flattery Work?’.
There is a reason drug companies increased spending on marketing to physicians: reciprocation. Research indicates that a positive correlation has been found between the cost of physicians’ treatment choices and their amount of contact with pharmaceutical company representatives. Interestingly enough, pharmaceutical companies know that gifts influence physicians, which is why many restrict their own employees [...] Read more – ‘Reciprocation in Big Pharma’.
I suspect many of you, like me, were not aware that Richard Thaler, Daniel Kahneman, and Sendhil Mullainathan gave a short course in behavioral economics for Edge. The entire text is available online (see links below) along with video highlights of the talks. …There’s new technology emerging from behavioral economics and we are just starting [...] Read more – ‘Thaler, Mullainathan, Kahneman on Behavioral Economics – An Edge Master Class’.
Financial services decisions can have enormous consequences for household well-being. Households need a range of financial services—to conduct basic transactions, such as receiving their income, storing it, and paying bills; to save for emergency needs and long-term goals; to access credit; and to insure against life’s key risks. But the financial services system is exceedingly [...] Read more – ‘Behaviorally Informed Financial Services Regulation’.
David Cameron, the leader of Britain’s Conservative Party, says we’re entering a new era — where governments themselves have less power (and less money) and people empowered by technology have more. Tapping into new ideas on behavioral economics, he explores how these trends could be turned into smarter policy. http://video.ted.com/assets/player/swf/EmbedPlayer.swf Read more – ‘David Cameron: The next age of government’.
The government announced in December it would fine airlines $27,500 per passenger for long tarmac delays – or $2.75 million for a 100-passenger flight. The fines haven’t started yet and airlines are already deciding on how this will change their flight cancellation policies. What you can expect: More cancellations and less time waiting on the [...] Read more – ‘What happens when you change the incentive?’.
The best part of this 60 minute segment on Ponzi Schemes is when Ricky Jay–America’s foremost card shark–says “as someone who does slight-of-hand for a living to me the idea audience would be scientists or Nobel Prize winners who are incredibly smart in their one discipline and often have an ego with them which says [...] Read more – ‘No one is easier to fool’.
Not necessarily… A new study provides further evidence suggesting many companies tweak quarterly earnings to meet investor expectations, and the companies that adjust most often are more likely to restate earnings or be charged with accounting violations. The study, which examined nearly half a million earnings reports over a 27-year period, reached its conclusion by [...] Read more – ‘Should you believe that earnings announcement?’.
Availability Bias is an enormously powerful force that often leads us astray. On the bottom floors, there were cars, and in the empty spaces, plenty of oil stains to indicate past users. On the upper floors, he noted, it looked as if the spaces had never been graced by a single car. And yet the [...] Read more – ‘Parking Availability Bias’.
PBS puts together some really interesting stuff. This segment, titled “Your Mind and Your Money-Herd Mentality,” is worth reading or watching for those interested in how psychological misjudgments impact investors. I’m a huge fan of Michael Mauboussin Here are some excerpts PETERSON: Herding is a response to having not enough information and thinking that others [...] Read more – ‘There is one bias that all of us share…’.
If democracy is based on an informed public how does pessimism bias play out? And add a dash of availability bias as well — The news media, eagerly meeting a consumer demand for gore and tragedy, while spending nowhere near as much energy explaining the reassuring but dry facts in the background help foster availability [...] Read more – ‘Crime in America keeps going down. Why does the public refuse to believe it?’.
Our brains are constantly processing information. Unfortunately, to cope with such large volumes, it often takes shortcuts without informing us. All brains process information in a biased way. For example, we are hardwired to discount information that does not conform to our beliefs. What you might not know is that reading information that goes against [...] Read more – ‘How Our Brains Filter Information’.
Actually, Yes. People who (voluntarily) undergo a great deal of pain, discomfort, or effort to get something will be happier with that something than if it came to them easily. In this case, the cognitive dissonance results from the underlying belief that I am a sensible, competent, person clashing with the fact you underwent a [...] Read more – ‘Can Pain And Discomfort Make You Like A Group?’.
Great article in the WSJ on why some numbers matter: because we think they do which makes their importance self-fulfilling. Round numbers catch people’s attention and also influence trading decisions. Arbitrary milestones pervade economics, finance and everyday matters. Some carry more meaning than others: Foreign-exchange markets can rattle national confidence when one country’s paper money [...] Read more – ‘Milestone Figures Grab Attention, but Their Impact Is Hazy’.
Most people believe that venting or other aggressive behavior gets rid of anger. However, decades of experiments have shown that venting your anger leads people to get even angrier. Additionally, now you need to create reasons for your anger and rationalize your behavior. Does distraction or rumination work better to diffuse anger? Catharsis theory predicts [...] Read more – ‘Is it good to vent your anger?’.
I will remember that I didn’t make the world, and it doesn’t satisfy my equations According to this economist article companies are now looking at how their models were wrong and what to do. Society’s desire to model the future is not going away. As these models are updated and stress-tested companies will once again [...] Read more – ‘The uses and abuses of mathematical models’.
If so, you’re likely to tip more. John Seiter and Harry Weger tested the effects of ingratiation on food servers’ tips. They had two waiters and two waitresses go about their usual duties but with a twist: for half the parties they served they were instructed to compliment the customers, telling them that they’d made [...] Read more – ‘Is your waiter complementing your meal choice?’.
We’re all for an evidence based approach to almost anything. So, why not, getting a date for Valentines Day. Check out these helpful hints: When asking a lady for a dance or for her number, your chances will be improved by lightly touching her on the arm. Try not to do it in a creepy [...] Read more – ‘Evidence-based approach to getting a Date for Valentine’s’.
Apparently. The gap between what is taught about markets are what actually takes place is quite large… This is the second in a series of articles that examines the practical applications of economic thought. Its focus is on the most fundamental aspects of finance theory, namely asset pricing. We discuss the major pricing models developed [...] Read more – ‘Are economics teachers full of crap?’.
Don’t look to academics for help. This paper is the first in a series of articles that look at the practical benefits of economics/finance literature to the world of business and policymakers and critically examines whether there is any relationship between academic thought and business or policy application. In this article I review some key [...] Read more – ‘Contemplating a Merger?’.
Very interesting. In this, the third paper in the Economists’ Hubris series, we highlight the shortcomings of academic thought in developing models that can be used by financial institutions to institute effective enterprise-wide risk management systems and policies. We find that pretty much all of the models fail when put under intense scientific examinations and [...] Read more – ‘Economists’ Hubris – The Case of Risk Management’.
The recognition heuristic is useful when there is a strong correlation—in either direction— between recognition and criterion. Models of Ecological Rationality: The Recognition HeuristicOne view of heuristics is that they are imperfect versions of optimal statistical procedures considered too complicated for ordinary minds to carry out. In contrast, the authors consider heuristics to be adaptive [...] Read more – ‘The recognition heuristic’.
This was posted on NPR. One of the factors that can help explain this is a manifestation of social proof. We look to others to determine what is acceptable and in this case, with no clearly assigned responsibility, it becomes acceptable do nothing — No one feels responsible for this task. You’ve done a number [...] Read more – ‘Shovelling And The Tragedy Of The Commons’.
Fred McChesney offers fascinating look at the economics of parking (property rights) in Chicago. …Before snowfalls, a parking space belongs to the one who occupies it: you leave it, you lose it. In wintertime Chicago, however, excavating one’s car changes the system of property rights. Once car owners dig themselves out of their snow cocoon [...] Read more – ‘Snow Job’.
Change the anchor. We can’t figure out how much pleasure the NYT gives us so we revert back to what we have paid before $0. The main problem of this approach is that over the years of free access, the New York Times has trained its readers for years that the right price (or the [...] Read more – ‘Dan Ariely: On the NYT pay wall’.
The e-book battle will be an interesting one. This NYT article hit on something interesting — consumer expectations. Pricing expectations might be different for the vast majority of people that haven’t associated e-books with low prices. Predicting the behavior of consumers is always tricky. In the case of e-books, publishers are hoping that a vast [...] Read more – ‘How should you price something new to most people?’.
A range can act as a reference price, inducing buyers to pay more than they otherwise would have. There may be a smart psychological tactic for anxious home sellers: List a house with two prices. In Australia, it’s been the custom for sellers to do that, giving a minimum and a maximum asking price. One [...] Read more – ‘Trying to sell a house? Try two prices.’.
Not so, at least on simple tasks, says a recent study. Members of a group or team will work harder when they’re competing against a group with lower status than when pitted against a more highly ranked group, according to a new study. The results run contrary to the common belief that underdogs have more [...] Read more – ‘Do underdogs have more motivation?’.
Seems that it might. I analyze the longer-run effects of a program that pays both 11th and 12th grade students and teachers for passing scores on Advanced Placement exams. Using a difference-in-differences strategy, I find that affected students attend college in greater numbers, have improved college GPAs, and are more likely to remain in college [...] Read more – ‘Does paying kids for performance work?’.
Apparently. (Omission Bias is the favor of inaction over action (our tendency to do nothing in some decision environments). Perhaps a better example of omission bias are parents who fail to vaccinate their kids even when this risk pales in comparison to the incidents of death caused by the primary disease.) This paper uses proprietary [...] Read more – ‘Are you too conservative at the blackjack table?’.
Because numbers are abstract and fail to spark emotion or feeling and thus fail to motivate action. This is a powerful and deeply unsettling glimpse into human nature that transcends political orientation. Most people are caring and will exert great effort to rescue individual victims whose needy plight comes to their attention. These same good [...] Read more – ‘Why, over the past century, have good people repeatedly ignored mass murder and genocide?’.
I’m all for (what i thought was) individual taste but this is fascinating. We deviate from social pressure (norms) when we perceive things to offer something that signals identity. Perhaps someone should have tried to convince Citigroup that selling sham mortgages was signaling its identity and hope they bucked the trend. We propose that consumers [...] Read more – ‘Are you tricked into thinking music identifies you as a unique individual?’.
Possibly. Consumers often face emotion‐laden choices involving conflicting goals of personal importance (e.g., safety). Research suggests that consumers cope with the negative emotion associated with these choices by avoiding certain behaviors, in particular attribute trade‐off making. This research investigates a factor that moderates these coping effects. Four experiments show that simple cognitive load can make [...] Read more – ‘Does being busy help you make more rational decisions?’.
How much do you spend on “data” – you might be surprised. This article demonstrates that people tend to over-weight the present and fail to consider the long term economic considerations. (Additionally, once you sign up for a service you are more likely to keep paying long after you stop receiving benefit.) From the NYT [...] Read more – ‘How much is too much?’.
This was a very thought provoking paper on the rational vs. experiential system thinking (system 1 and system 2 thinking) — the affect heuristic is the centerpiece of the experiential mode of thinking . The authors challenge the notion that some of our thinking errors in probability and frequency judgment might have less to do [...] Read more – ‘The Affect Heuristic’.
Interesting article in the Boston Globe on standing in line (Thanks Tim for sending this in) Queuing is what separates us from the beasts (assuming, that is, that we want to be separated from the beasts). Man is not just “the only animal that blushes,” as Mark Twain had it, he is the only animal [...] Read more – ‘Standing in line’.
Where’s the price? When it comes to prices, online retailers have a higher burden than their more traditional counterparts as companies, thanks to a 2004 Supreme Court ruling have gained considerable leeway in dictating how prices are communicated to consumers. From Today’s NYT: Wary of the Internet’s tendency to relentlessly drive down prices, major brands [...] Read more – ‘How prices are Communicated to Consumers: The Fight over Prices on the Internet’.
Asking someone to explain why they made a decision often evokes a rational, reasoned reply. The person may completely believe their answer – but they might be completely wrong. Dan Ariely, professor of Behavioral Economics at Duke University (and author of Predictably Irrational), says otherwise: “People often think that they’re making decisions, but in reality [...] Read more – ‘Don’t Let Smart People Manipulate You With Behavioral Economics Kung Foo’.
Pretty simple (note this is correlation, not causation) but still: A new national study suggests that preschool-aged children are likely to have a lower risk for obesity if they regularly engage in one or more of three specific household routines: eating dinner as a family, getting adequate sleep and limiting their weekday television viewing time. [...] Read more – ‘Lowering Childhood Obesity’.
I thought the climate change part of this interview with Stephen Dubner,co-author of Super Freakonomics, was pretty interesting. On climate change If the world gets a lot hotter in a hurry and the primary aim is to cool it down, then the current plan of carbon mitigation will almost certainly not be effective. It’ll be [...] Read more – ‘Incentives Matter: An Interview with Stephen J. Dubner’.
Fundamentally there’s a questionable assumption at the heart of it, and that is that teachers will respond to sums of money, which often are relatively small, and that they will work both harder and more effectively. According to this Canadian Teacher, Merit pay is insulting and a bad idea: In fact, like many teachers, he [...] Read more – ‘Merit Pay for Teachers’.
With a blizzard coming, Bryan Caplan was surprised by what he found at the grocery store: …By the time I got to the grocery store last night around 11 PM, many of the shelves were unsurprisingly empty. Many, but not all. They were out of milk and bread, but there was still plenty of cheese [...] Read more – ‘Brand Power?’.
Wealth inheritance plays a key role in sustaining economic inequality over the long-run. One thing that might capture your interest is that the authors note that wealth in the knowledge-based economy of today resembles that of the hunter-gatherers in that it is less readily passed from parent to child than, say, a factory or plantation. [...] Read more – ‘What role does wealth inheritence play on inequality?’.
Did the bans on short selling achieve their stated purpose of restoring order to the stock market and limiting unwarranted drops in prices? This column presents new evidence from 30 countries arguing that the effect on stock prices was at best neutral, the impact on market liquidity was clearly detrimental – especially for small-cap and [...] Read more – ‘Did short-selling bans help or hinder the market?’.
Darwin first suggested this idea in his 1873 book The Decent of Man but it seems to be getting more attention now. Because so many of the 200,000 years of human history were spent during our hunter-gatherer phase, before the invention of agriculture, less than 10,000 years ago, this long period in our evolutionary history [...] Read more – ‘Did War Make Us Less Selfish?’.
Interesting and yet unsettling. BUSINESSES don’t let 13-year-olds pay for purchases with a promise. At least they didn’t before last week. A new payment option for anyone without a credit card or a debit card, no matter how young, has just become available. It’s initially offered by FooPets and Puzzle Pirates, online game companies that [...] Read more – ‘Paying with a promise’.
The tendency to relate contemporary events to earlier events as a guide to understanding is a powerful one. The difficulty, of course, is in being certain that two situations are truly comparable. Because they are similar in some respects does not assure us that they are similar in all respects. We all know the way [...] Read more – ‘Lessons of the Past’.
It might depend on your income: There has been considerable speculation about the adaptive significance of the human female orgasm, with one hypothesis being that it promotes differential affiliation or conception with high-quality males. We investigated the relationship between women’s self-reported orgasm frequency and the characteristics of their partners in a large representative sample from [...] Read more – ‘How well do you please your partner in bed?’.
I hope not — Craving nicotine might impact your cognitive functioning: Cigarette craving has powerful effects on cognitive functioning, which may promote smoking behavior and relapse. One area of cognition that has had little impact on craving research is human consciousness. Developments in consciousness research using a mindless-reading paradigm permit examination of the effects of [...] Read more – ‘Do you smoke?’.
Financial Times columnist Stefan Stern has lunch with Lynda Gratton (professor of management practice at the London Business School). They touched on some interesting points. Gratton’s take on the financial crisis, and the bankers’ response to criticism of their behavior and how they are compensated: “Well, there is a sort of ‘in-group’ and ‘out-group’ phenomenon [...] Read more – ‘How many people are in your posse?’.
I was skimming the WSJ and came across an article titled “Top ’09 Forecasters Saw Bad Times” Apparently, two economists were able to approximate how bad the economy would get: The two Morgan Stanley economists who beat 50 other forecasters in guessing how bad 2009 would be did it by predicting soaring unemployment—though even they [...] Read more – ‘Hindsight, Foresight, and Pure Luck.’.
The search for mathematical precision in everything (physics envy) continues. There is no way for people to learn everything about a complex process and some information always remains hidden and difficult to extract. In their recent work, the researchers adopt a thorough-going informational view: All of Nature is a communication channel that transmits the past [...] Read more – ‘How to Measure What We Don’t Know’.
The availability bias is incredibly powerful. In this study people who encountered someone sneezing shifted policy preferences to vaccine development over jobs. The public’s perception of a given health risk increases with coverage of the risk in the news media. …To instantiate the threat of contagion, we arranged for participants in two field experiments to [...] Read more – ‘How Sneezing Changes Federal Spending’.
Possibly. Anyone that swats away bees should read this NYT article about a paper in the Journal of Experimental Biology that claims bees can, and do, remember human faces. A honeybee brain has a million neurons, compared with the 100 billion in a human brain. But, researchers report, bees can recognize faces, and they even [...] Read more – ‘Did that Bee Sting me on Purpose?’.
I wouldn’t recommend it, however more and more people are trying. This is interesting on multiple levels. One problem with this is that once we find something that fits we stop looking for information that will disprove our initial thoughts. Another aspect of patients diagnosing themselves is the accuracy of the information they use. No [...] Read more – ‘Can you diagnose yourself before going to the Doctor?’.
On Tuesday, the medical journal Lancet formally and fully retracted the study that started the controversy. However, as exhibited below, some will continue to believe that vaccines cause autism for emotional reasons. One not mentioned is our need to assign blame …. It’s not just irrationality, he insists…. “Blaming vaccines,” he points out, “can promise [...] Read more – ‘The Vaccine-Autism Debate’.
Bankers, like most people in finance, get paid for action, not creating value. More than anything, argue the bankers, pay should motivate: huge bonus cheques are to ensure superior performance from superior talent. On this point, the bankers are wrong. We’ve recently gathered evidence suggesting that dangling exorbitant sums of money in front of workers [...] Read more – ‘Dan Ariely: Bonuses boost activity, not quality’.
Time flies when you’re having fun, but minutes can feel like hours in a dentist’s waiting room. Our ideas of “time” are highly subjective and can depend on a stimulus — or the lack of one — in our environment. Tel Aviv University researchers find time can be manipulated to increase profits and keep customers [...] Read more – ‘Are you being manipulated while waiting in line?’.
Atul Gawande’s book The Checklist has been a runaway best seller and for good reason. Checklists, even a simple ones, have shown amazing results in hospitals saving lives and money. Doctors were initially reluctant to use a checklist however they could not argue with the initial results. Now, 3 years later, the results are still strong. The [...] Read more – ‘3 Years later: The state of Michigan’s infectious line checklist revisited’.
Possibly… Seeing someone perform a virtuous deed (especially if they are helping another person), makes us feel good, often eliciting a warm, fuzzy feeling in our chest. This positive, uplifting emotion, known as “elevation,” might make us feel great, but is it enough to get us to go out and perform good acts ourselves? According [...] Read more – ‘Does watching someone perform a good deed encourage us do the same?’.
A sensational article on how Microsoft, a company that employs thousands of the smartest, most capable engineers and business people in the world, is failing. Most of its profits come from legacy products like Windows and Office rather than innovative ones. What happened? Unlike other companies, Microsoft never developed a true system for innovation and [...] Read more – ‘Microsoft’s Creative Destruction’.
Daniel Pink, author of Drive: The Surprising Truth About What Motivates Us talks about motivating people in this interview. What’s a solution? How do you make all companies (of all different sizes) change their methods? I don’t know if all companies will — or even can — make the change. But I think the key [...] Read more – ‘Interview with Daniel Pink’.
Three in 10 Americans on average (29%) said they did not feel well-rested “yesterday,” according to Gallup-Healthways data from 2008 and 2009. The remaining 70% reported feeling well-rested the day before the survey. Income, Age, Gender, and Presence of Children Make a Difference The lowest income Americans, those aged 49 and younger, women, and those [...] Read more – ‘Richer People Feel More Well-Rested’.
Absolutely: Good behaviors — like quitting smoking or staying slender or being happy — pass from friend to friend almost as if they were contagious viruses. The Framingham participants, the data suggested, influenced one another’s health just by socializing. And the same was true of bad behaviors — clusters of friends appeared to “infect” each [...] Read more – ‘Are your friends making you fat?’.
Most people become stressed when lying, but new research shows that people with power feel just fine when lying — and are better at getting away with it. Lying is costly, extracting physiological and cognitive tolls from most people. The body of research on lying consistently shows that people become stressed when they do not [...] Read more – ‘Powerful Lies’.
Our friends at Simoleon Sense pointed us to this article. The findings are not so much surprising as illuminating. We expected a relationship between luxury and self-interests. However, self-interested behaviors are often conflated with those that do harm to others (e.g., selling low-quality products that might be harmful to consumers). Our second study to some [...] Read more – ‘The ‘Luxury Prime’: How Luxury Changes People’.
“Manipulating people to maintain an ongoing state of mind is hard to do successfully, but manipulating them into a temporal mindset is easier. Using this approach, companies can be very successful in manipulating you to buy their products, especially in cases where the purchase decision is made spontaneously, like grabbing a snack at the store. [...] Read more – ‘How Marketing Manipulates Our Preferences’.
A radio interview with blackjack guru and original quant Ed Thorp.I found his discussion on the prediction of one time events interesting. In 1962, Ed Thorp became every gambler’s favorite mathematician when he published the first mathematically proven method for beating the dealer at blackjack.Thorp’s work revolutionized the game. But he went further: In 1967, [...] Read more – ‘‘The Quants’: It Pays To Know Your Wall Street Math’.
This seems like a manifestation of the Availability Bias. Investors take note! One of the hottest topics in psychology today is something called “cognitive fluency.” Cognitive fluency is simply a measure of how easy it is to think about something, and it turns out that people prefer things that are easy to think about to [...] Read more – ‘Easy = True?’.
Interesting paper on loss aversion. This paper challenges the nature of loss aversion as we understand it. Abstract The principle of loss aversion is thought to explain a wide range of anomalous phenomena involving tradeoffs between losses and gains. In this article, I show that the anomalies loss aversion was introduced to explain — the [...] Read more – ‘Is loss aversion’s existence moot?’.
Mathematician Steven Strogatz is writing for the NYT in a multi-part series on math. Crazy as it sounds, over the next several weeks… I’ll be writing about the elements of mathematics, from pre-school to grad school, for anyone out there who’d like to have a second chance at the subject — but this time from [...] Read more – ‘From Fish to Infinity’.
For every design decision, a host of factors guide the outcome and subsequent user behavior. Often the factors are not rational or reasonable, but rather based on emotion. The field of behavioral economics arose out of the need to understand that choice-making behavior. David Fetherstonhaugh speaks about the relevance of behavioral economics to designers, user [...] Read more – ‘Design Implications of Behavioral Economics’.
In the midst of two wars and the fight against Al Qaeda, the CIA is offering operatives a chance to peddle their expertise to private companies on the side — a policy that gives financial firms and hedge funds access to the nation’s top-level intelligence talent, POLITICO has learned. … TBA focuses on the verbal [...] Read more – ‘Deception Detection’.
According to this three minute TED talk by Arthur Benjamin, yes it should. The reason? Few people use calculus daily. However, if students knew about probability and statistics we wouldn’t be in the mess we’re in today. http://video.ted.com/assets/player/swf/EmbedPlayer.swf Read more – ‘Should statistics trump calculus?’.
People with genes that predispose them to certain troublesome and self-destructive behavior can actually outperformthose without such “bad genes.” In 2004, Marian Bakermans-Kranenburg, a professor of child and family studies at Leiden University, started carrying a video camera into homes of families whose 1-to-3-year-olds indulged heavily in the oppositional, aggressive, uncooperative, and aggravating behavior that [...] Read more – ‘The Science of Success’.
For some interesting listening, here is an excellent BBC podcast on the Hawthorne Effect. Claudia Hammond presents a series looking at the development of the science of psychology during the 20th century. See the Video here. From the situationist: In the 1920s, at the enormous Western Electric Hawthorne Factory in Cicero outside Chicago, management began [...] Read more – ‘Mindchangers: Hawthorne Effect’.
Haggling is back! “I’ve always wondered why more people don’t do this,” said Popick, who lives with his wife in Alexandria. “This is your money. It would be wasteful not to do this, right?”…“This is the latest spin on the old tactic of saying, ‘I know I can get this for a better price down [...] Read more – ‘In tough economic times, shoppers take haggling to new heights’.
I would argue that the confirmation bias is of utmost importance to everyone (especially investors). Confirmation bias invades our lives (e.g., brand loyalty, stereotyping, halo effect, availability bias, …) and, unfortunately, many people exploit this bias tilting the odds in their favor. * * * * * If one were to attempt to identify a [...] Read more – ‘Confirmation Bias: A Ubiquitous Phenomenon in Many Guises’.
The human understanding when it has once adopted an opinion (either as being the received opinion or as being agreeable to itself) draws all things else to support and agree with it. And though there be a greater number and weight of instances to be found on the other side, yet these it either neglects [...] Read more – ‘Francis Bacon: On the confirmation bias’.
Then you’re probably feeling better about the stock market according to this study highlighted in the NYT. This paper shows that people’s optimism towards financial markets and the overall economy is dynamically influenced by their political affiliation and the existing political climate. * * * * * YOU’RE likely to feel more confident about the [...] Read more – ‘Did you vote democrat?’.
Precis of Samuel Bowles lecture series entitled “Machiavelli’s Mistake” I. Moral Sentiments and Material Interests (Tuesday 19th January) The classical thinkers from Aristotle to Aquinas, Rousseau, and Burke recognized the cultivation of civic virtue not only as the test of good governance, but also as its essential foundation. Machiavelli and Hobbes broke with this Aristotelian [...] Read more – ‘MACHIAVELLI’S MISTAKE: WHY GOOD LAWS ARE NO SUBSTITUTE FOR GOOD CITIZENS’.
The fears themselves are an integral part of the problem. Economists have a tendency to assume that everyone’s behavior is rational. But post-boom pessimism is a factor driving the economy, and it is likely to be associated with attitudes that may be enduring. In reality, business recessions are caused by a curious mix of rational [...] Read more – ‘Stuck in Neutral? Reset the Mood’.
So here we are again in late 2009 with rising asset prices, providing investors with confirmation that everything is fine and the pundits that reassure that doomsday scenarists are always early. At Tiburon, our take is “who cares”? I don’t mean to be flip on this point. Yes, we do care and work vigorously to [...] Read more – ‘Confirmation Bias and the Onset of Blindness as We Develop “Clarity”’.
“I’ve seen more people fail because of liquor and leverage – leverage being borrowed money. You really don’t need leverage in this world much.” —Warren Buffett Jamie Dimon’s testimony at the Financial Crisis Inquiry Commission (on what caused the financial crisis): I believe the key underlying causes of the crisis include: the creation and ultimately [...] Read more – ‘Jamie Dimon — What Caused The Financial Crisis’.
Behavioral economics is motivated by a range of empirical facts that are at apparent odds with assumptions of standard economic theory. But while behavioral approaches are becoming common in academia, it is unclear how behavioral models should inform economic policymaking in general, and central banking in particular. This conference, entitled “Implications of Behavioral Economics for [...] Read more – ‘Policymaking Insights from Behavioral Economics’.
The “unprecedented” economic disaster resulting from secularization is far from new according to Floyd Norris in the NYT. As Mark Twain would say “History doesn’t repeat itself, but it does rhyme.” The original wave of securitizations took place in the 1920s, when the United States went on the greatest building boom ever. Many investors saw [...] Read more – ‘Misplaced Incentives’.
People are able to recognise negative sounds, like expressions of disgust, across cultures, say scientists. A study published in the Proceedings of the National Academy of Sciences tested understanding between two groups. Westerners were compared to semi-nomadic people from a remote area of Namibia in southern Africa.The researchers found sounds indicating negative emotions were widely [...] Read more – ‘Emotional signals cross cultures’.
Perhaps this explains much of what is wrong with our society… It is common for people to be more critical of others‘ ethical choices than of their own.This chapter explores those remarkable circumstances in which people see no evil in others‘ unethical behavior. Specifically, we explore 1) the motivated tendency to overlook the unethical behavior [...] Read more – ‘See No Evil: When We Overlook Other People‘s Unethical Behavior’.
When ordering online, we’re less impulsive towards “want” items. How do decisions made for tomorrow or two days in the future differ from decisions made for several days in the future? We use data from an online grocer to address this question. In general, we find that as the delay between order completion and delivery [...] Read more – ‘Hidden Impluse: How Large is Your Grocery Bill?’.
Humans struggle deeply with the divide between results and process. We present six studies demonstrating that outcome information biases ethical judgments ofothers’ ethically-questionable behaviors. In particular, we show that the same behaviors produce more ethical condemnation when they happen to produce bad rather than good outcomes, even if the outcomes are determined by chance. Our [...] Read more – ‘No harm, no foul: The outcome bias in ethical judgments’.
This is an interesting idea (yet one with several other effects…) Policies that would create net benefits for society but would also involve costs frequently lack the necessary support to be enacted because losses loom larger than gains psychologically. To reduce the harmful consequence of loss aversion, we propose a new type of policy bundling [...] Read more – ‘Policy Bundling to Overcome Loss Aversion: A Method for Improving Legislative Outcomes’.
This article begins with an account of logic, and of how logicians formulate formal rules of inference for the sentential calculus, which hinges on analogs of negation and the connectives if, or, and and. It considers the various ways in which computer scientists have written programs to prove the validity of inferences in this and [...] Read more – ‘Deductive Reasoning’.
Think of waiting hours to buy concert tickets or to enter a popular nightclub or store on Black Friday, only to face a sellout or denial of entry when you finally reach the head of the line. How do such experiences shape one’s desire for, and appraisal of, the unobtained outcome? We show how being [...] Read more – ‘Lusting While Loathing’.
Only if you live in the city according to this study. Previous studies document that attractiveness predicts life outcomes, including well-being and social connectedness. This study investigates whether the attractiveness–outcomes link is especially strong in settings, such as many urban areas, that promote relationship constructions as a product of personal choice. This link may weaken [...] Read more – ‘Does attractiveness buy happiness?’.
David Rock, author of Your Brain at Work: Strategies for Overcoming Distraction, Regaining Focus, and Working Smarter All Day Long, gave an excellent talk at Google. Rock noted that Google’s leadership understands human nature. He also pointed out that Google was organized around that idea that decisions take a lot of mental effort. Making choices, [...] Read more – ‘Decisions take effort, too many of them can make you feel tired’.
A loyal reader sent us this nugget. Keep in mind, we may want to believe this, but correlation is not causation. It turns out that increasing educational level is almost perfectly inversely correlated with daily TV consumption. Of the 22% of Hunchers who completed no more than a high school education, only about 12% of [...] Read more – ‘The Link Between TV and Education’.
Our objective here is not to explain the causes of the current crisis. Instead we study the consequences. To do that, we examine the evolution of the real costs of financial crises to get some sense of when things are likely to improve. (H/T Shai) Abstract This paper studies the length, depth and output costs [...] Read more – ‘Financial Crises and Economic Activity’.
Robert J. Shiller, the Nobel-prize winning Yale economist, suggested Wednesday — a bit whimsically — that bubbles could be diagnosed using the same methodology psychologists use to diagnose mental illness. After all, a bubble is a form of psychological malfunction. And like mental illness there’s a tricky gray area between being really sick and just [...] Read more – ‘Schiller’s List: How to Diagnose the Next Bubble’.
Daniel Boorman has spent two decades developing checklists for Boeing. Boorman knows the difference between a good checklist and a bad one. Boeing’s checklists are easy to use, precise, and efficient. Bad checklists, in contrast, are vague and imprecise. Atul Gawande, in his book, The Checklist, refers to Boeing (and Boorman) as the checklist factory. [...] Read more – ‘The Checklist Factory’.
Charging a nickel for every bag at the grocery store has created ‘a behavioral economist’s dream.’ The problem is the bags have always been free and consumers get an instance reminder with each transaction (two articles). …Because plastic bags have always been free, Ariely said, shoppers have come to see them as a kind of [...] Read more – ‘How Far Would You Go for 5 Cents?’.
More businesses are using behavioral economics to appeal to customers, seeking to capitalize on the notion that people don’t always act in their economic self-interest. Behavioral economics is popular among academics, particularly since two of its early theorists won the 2002 Nobel Prize in economics. Now businesses are applying the concepts in new ways. Since [...] Read more – ‘Peer Pressure and Other Pitches’.
Seems like we associate “resort” with luxury. Resorts, of course, have caught on and dropped the R-word (h/t Jon) To attract business conferences in these tough times, some luxury resort hotels have resorted to a sort of strategy of last resort: They’re dropping the very word “resort” from their names. The Ballantyne Resort in Charlotte, [...] Read more – ‘Don’t Use the R-Word: Hotels Find Trick to Business Bookings’.
Michael Mauboussin, author of Think Twice, says people tend to ignore mean reversion, misunderstand it, or miss-specify it. http://quicktake.morningstar.com/widget/VideoPlayer.aspx?vid=322252http://widgets.clearspring.com/o/4aa60b98a79a306f/4b5ef0b8da009703/4aa60b98a79a306f/9b6ca9d7/-cpid/e28477fe299819e Read more – ‘Three Common Mistakes on Mean Reversion’.
Cass Sustein, co-author of the excellent book Nudge, with some interesting research: Many millions of people hold conspiracy theories; they believe that powerful people have worked together in order to withhold the truth about some important practice or some terrible event. A recent example is the belief, widespread in some parts of the world, that [...] Read more – ‘Conspiracy Theories’.
Dan Ariely in the New York Times: What do we really know about the relationships between very large bonuses and job-performance? To look at this question, my colleagues Uri Gneezy of the University of California at San Diego, George Lowenstein of Carnegie Mellon, Nina Mazar of the University of Toronto and I conducted a few [...] Read more – ‘Massive bonuses might actually cause poor performance’.
Perhaps the world is catching on to Berkshire’s philosophy of not having a strategic plan. During the recession, as business forecasts based on seemingly plausible swings in sales smacked up against reality, executives discovered that strategic planning doesn’t always work. Some business leaders came away convinced that the new priority was to be able to [...] Read more – ‘Strategic Plans Lose Favor’.
Speech by Bill and Melinda Gates: Why We Are Impatient Optimists “LIVING PROOF: Why we are Impatient Optimists” is a story about success. Millions of lives have been saved, improved and empowered because of the investments in global health made by the United States and its partners around the world. We have seen the remarkable [...] Read more – ‘Living Proof Project: Why We Are Impatient Optimists’.
A new study finds that TV viewers watch the news more for affirmation than for information. When you turn on the evening news, are you actually hoping to learn something?A new study suggests that viewers worldwide turn to particular broadcasters to affirm — rather than inform — their opinions. It’s a notion familiar to those [...] Read more – ‘The Age of Affirmation’.
The street-savvy but idealistic Officer Serpico was appalled at the cliquishness and the payoffs — free meals as well as big, blatant bribes — from criminals, gamblers, numbers men and ordinary merchants whom he saw as a beat cop in Brooklyn’s 81st Precinct and later while working vice and racketeering. He refused to accept such [...] Read more – ‘Serpico on Serpico’.
ManualOfIdeas posted this earlier today. Fascinating! In case you don’t want to watch the video the answer is to have small families. http://vimeo.com/moogaloop.swf?clip_id=2905893&server=vimeo.com&show_title=1&show_byline=1&show_portrait=0&color=00adef&fullscreen=1 Read more – ‘What stops population growth?’.
Over the past millennium, mass delusions and hysterical outbreaks have taken many forms. Sociologists Robert Bartholomew and Erich Goode survey some of the more colorful cases. …Many factors contribute to the formation and spread of collective delusions and hysterical illness: the mass media; rumors; extraordinary anxiety or excitement; cultural beliefs and stereotypes; the social and [...] Read more – ‘Mass Delusions and Hysterias: Highlights from the Past Millennium’.
Power corrupts, but it corrupts only those who think they deserve it REPORTS of politicians who have extramarital affairs while complaining about the death of family values, or who use public funding for private gain despite condemning government waste, have become so common in recent years that they hardly seem surprising anymore. Anecdotally, at least, [...] Read more – ‘Power Corrupts’.
here have been many unintended consequences, both positive and negative, of the rapid proliferation of powerful chess software. Kids love computers and take to them naturally, so it’s no surprise that the same is true of the combination of chess and computers. With the introduction of super-powerful software it became possible for a youngster to [...] Read more – ‘The Chess Master and the Computer’.
Dr. Atul Gawande, is the New York Times bestselling author of Better: A Surgeon’s Notes on Performance , Complications: A Surgeon’s Notes on an Imperfect Science, and The Checklist Manifesto: How to Get Things Right . CHARLIE ROSE: Atul Gawande is here. He’s a surgeon at Brigham and Women’s hospital in Boston. He’s an associate [...] Read more – ‘Atul Gawande Interview by Charlie Rose’.
William Poundstone, author of Priceless, explains the psychological trick of anchoring and how it works on eBay. Anyone interested in how companies use their knowledge of psychology to influence you should read Priceless. Read more – ‘The power of anchoring’.
This short blip appeared on the Freakonomics blog and left me dumbfounded: The price offered to coffee growers who turn in their “cherries” — ripe coffee beans — at Greenwell Farms in Kona, Hawaii, is $.90 per pound if they are paid weekly and $1.05 if paid monthly. The weekly price is lower because it [...] Read more – ‘The Price of Impatience’.
Abstract: Entrepreneurial innovation encourages economic progress, and an institutional climate that encourages risk taking, rewards success, and weeds out failure is essential to a well-functioning economic system. This essay explores a cluster of path-breaking entrepreneurial innovations with common roots in Memphis, Tennessee: Piggly Wiggly’s popularization of self-serve grocery shopping, Holiday Inn’s innovations in standards and [...] Read more – ‘Economic Progress and Entrepreneurial Innovation: Case Studies from Memphis’.
Buffett is really a master at creating no lose situations. What really jumps out at me is that Buffett arranged something like one of his classic “no-lose deals.” These are deals in which Buffett can’t lose no matter how events turn out. Buffett spends a lot of time finding ways to reduce risk, and it’s [...] Read more – ‘Alice Schroeder on Buffett and Kraft’.
Never invest on the basis of forecasts. So says James Montier, recently anointed the dean of behavioural finance in the UK. Glance at the index of Value Investing, his superb collection of essays on the subject, and you will find that “forecast” appears more often than any other, with the exception only of the holy [...] Read more – ‘Folly of forecasting and useless data’.
Blaming mistakes on others is socially contagious, according to a new study. Just watching someone pawn their failures off on another can make you do the same to protect your self-image. The result can be detrimental to everyone involved, particularly in the workplace, researchers say. Whatever the blunder, from messing up at work to burning [...] Read more – ‘Workplace Blame Is Contagious and Detrimental’.
The aim of this paper is to study whether the student loan program can o ffer insurance against college failure risk. Participants in student loan programs must repay loans in full regardless of whether they complete college. But many students who take out a loan do not earn a degree (the dropout rate among college [...] Read more – ‘Insuring College Failure Risk’.
Ever wonder how Five Guys burger nudges you to get the big burger? The Nudge blog has the answer: Anywhere else, said larger burger would be deemed a “double” (“double cheeseburger”, “double double”). Not at Five Guys; for them a “hamburger” is two patties and a “little hamburger” is one patty. And, on the menu [...] Read more – ‘Nudge: Ordering the Big Burger’.
William Poundstone explores how the new psychology of decision making has transformed marketing in his book Priceless: The Myth of Fair Value. He raises some good points on free will in his blog: What if the smart retailer is able to persuade the consumer to buy, or to pay more, without any awareness of having [...] Read more – ‘The innocent little technique is going to sell a hell of a lot of goods.’.
The United States is the most obese nation in the world. Without knowing the real cause of why, lawmakers assume that people are just ignorant to what they are eating and thus consume too many calories. New York, for instance, created a law that required chain-restaurants to post calories in order to lower calorie consumption [...] Read more – ‘Does Calorie Labeling Nudge Eating Habits?’.
Interesting article from Wired on how group think influences what we like. Can you persuade someone to like a product by telling them that it’s popular? Do teenagers like Taylor Swift because she’s good or because everyone else they know likes her — so hey, she must be good, right?…So what about advertising, marketing, and [...] Read more – ‘How Group Think Rules What We Like’.
…Recently I’ve met three investors who have taken a page from aviation to incorporate formal checklists into their work. Mohnish Pabrai is managing partner in Pabrai Investment Funds in Irvine, California, and runs a $500m portfolio; Guy Spier is head of Aquamarine Capital Management in Zurich, a $70m fund; the third did not want to [...] Read more – ‘‘Airline pilot’ protocols in finance’.
nocebo: A substance which a patient experiences as harmful due to previous negative perception, but which is in fact pharmacologically (medicinally) inactive. Over the past few months a battle between certain concerned Craigavon residents and iBurst reached fever pitch, with residents demanding that iBurst move a tower that was erected in Fourways Memorial Park on [...] Read more – ‘Department of Placebo Effects’.
Shortly after Carol Bartz took over as chief executive of Yahoo Inc. early last year, she met with Prabhakar Raghavan for an overview of the Sunnyvale Web giant’s research division. As the head of Yahoo Labs ran through the catalog of computer scientists on staff, Bartz turned to him and asked: “Where are your psychologists?”…This [...] Read more – ‘Social science meets computer science at Yahoo’.
WOW! IN 2004, STEVEN ALM, a state trial judge in Hawaii, was frustrated with the cases on his docket. Nearly half of the people appearing before him were convicted offenders with drug problems who had been sentenced to probation rather than prison and then repeatedly violated the terms of that probation by missing appointments or [...] Read more – ‘Prisoners of Parole: How a judge in Hawaii changed convicted offenders behavior.’.
Great article from the PSYBLOG. Despite their bad name, stereotypes can be handy short cuts that give us useful information about the world and other people. For example the stereotype of psychologists is that they are going to analyse you, then start meddling. There’s certainly some truth to that, after all that is their job.…What [...] Read more – ‘Stereotypes: Why We Act Without Thinking’.
Like alcoholics and cocaine addicts, people with an impressive tolerance for coffee and tea may find themselves chasing a caffeine high in a losing battle against fluctuating neuroreceptor growth patterns. The typical caffeine dose in a cup of coffee–between 50 and 200 milligrams, with an average of about 115 milligrams–is enough to produce a measurable [...] Read more – ‘The pharmacology of caffeine.’.
Atul Gawande and his co-authors discover some surprising results: most technical errors are in routine operations with experienced surgeons…to prevent the largest number of injuries and make greatest improvements in surgical safety, further research should focus on designing targeted interventions to improve decision-making and performance in routine operations for high-risk patients and circumstances. Abstract: Most [...] Read more – ‘Patterns of Technical Error Among Surgical Malpractice Claims’.
Over the past decade, it has become increasingly apparent that error in medicine is neither rare nor intractable. Traditionally, medicine has down- played error as a negligible factor in complications from medical intervention. But, as data on the magnitude of error aceumulate—and as the public learns more about them—medical leaders are taking the issue seriously. [...] Read more – ‘Atul Gawande: Error in Medicine: What Have We Learned?’.
Atul Gawande, author of The Checklist, Complications, and Better, co-authored a paper in 2000 on the impact of the internet on quality measurement that is worth reading. Consumers are eager for information about health. However, their use of such data has been limited to date. When consumers do consider data in making health care choices, [...] Read more – ‘The Impact Of The Internet On Quality Measurement’.
When does the wisdom of crowds give way to the meanness of mobs? …He blames the Web’s tradition of “drive-by anonymity” for fostering vicious pack behavior on blogs, forums and social networks. He acknowledges the examples of generous collaboration, like Wikipedia, but argues that the mantras of “open culture” and “information wants to be free” [...] Read more – ‘The Madness of Crowds and an Internet Delusion’.
We view things we want as being physically closer to us than they actually are… Writing in Psychological Sciences, researchers from New York University and Cornell University say they’ve demonstrated that our desires influence how we see our environments. According to the new research, we view things we want as being physically closer to us [...] Read more – ‘Keeping your goals close’.
We’ll pay more for items with a unique tale. Would you pay $76 for a shot glass? What about $52 for an oven mitt? And $50 for a jar of marbles? You may shake your head and say no way, but in a recent series of eBay auctions, the consumers did just that: they shelled [...] Read more – ‘Paying for a unique tale’.
Information without context is falsely empowering and incredibly dangerous. As an adult, have you ever picked up a child’s shape-sorter and tried to put the square item through the round hole? Of course not. Adults know better, don’t they? I’m not so sure. We take square solutions and cram them into circle problems all the [...] Read more – ‘Information Without Context’.
Use tall narrow glasses. See why below. William Poundstone, author of the excellent Fortune’s Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street, writes: In an amusing experiment, Brian Wansink and Koert van Ittersum, of Cornell and Georgia Tech, asked student volunteers and professional bartenders to pour out [...] Read more – ‘If you’re having a party, what’s the best way to encourage safe driving?’.
A great talk by Jonah Lehrer on loss aversion, stock purchases, and how we decide. It was delivered last week at the Commonwealth Club in San Francisco. H/T Paul http://fora.tv/embedded_player Read more – ‘Jonah Lehrer on Loss version’.
William Poundstone, author of Priceless: The Myth of Fair Value, shows how Starbucks subtly manipulates our thinking and nudges us to the middle. The Starbucks menu uses the “rule of three.” The menu offers three sizes of coffees, given the enigmatic names of Tall, Grande, and Venti. (They’re 12, 16, and 20 ounces respectively; 24 [...] Read more – ‘Starbucks And The Rule of Three’.
H/T Zain “The ‘Eureka’ moment was when I could draw a data point between a hotshot, investment bank-oriented star lawyer and an elementary school principal,” Mr. Martin recalls. “I thought: ‘Holy smokes. In completely different situations, these people are thinking in very similar ways, and there may be something special about this pattern of thinking.’” [...] Read more – ‘Multicultural Critical Theory. At B-School?’.
“They competed on the basis of raising prices. What other industry do you know that gets away with that?” Charlie Munger talks about how you can bribe the purchaing agent. I have one more anecdote: I have fun with this when I speak in front of students and professors. I say, “You all understand supply [...] Read more – ‘How credit cards bribe the purchasing agent’.
Thus, it’s important not to draw the wrong conclusions from the market’s inefficiency. “The evidence does suggest that the market is not rational,” says Meir Statman, a finance professor at Santa Clara University in California. “But watch out for the voice of the devil inside of you saying that therefore it must be easy to [...] Read more – ‘Inefficient Markets Are Still Hard to Beat’.
Chapter 1. Thomas Sowell introduces his new book, “Intellectuals and Society,” and expounds on what he calls “the fatal misstep of intellectuals.” Chapter 2. Thomas Sowell offers examples of why intellectuals are so often wrong about economics. Chapter 3. What is the vision to which contemporary intellectuals subscribe? Thomas Sowell responds. Chapter 4. Thomas Sowell [...] Read more – ‘Thomas Sowell on “Intellectuals and Society”’.
4. You can hiccup while asleep.29. Parts of cremated bodies are recycled.68. Bees warn other bees about flowers where dangers can be expected.88. In the early days of barcodes, there was a plan for round ones. Continue Reading Read more – ‘100 things we didn’t know last year’.
I had never really thought of it in this way. I know a lot of people run into the “stop being negative” response in their organization. As it turns out, overly positive thought has drawbacks too. The excerpt below is from Christopher Hart’s review of Bright-sided: How the Relentless Promotion of Positive Thinking Has Undermined [...] Read more – ‘Smile or Die’.
Stanislas Dehaene, a distinguished French cognitive scientist, who wrote Reading in the Brain is reviewed by the NYT’s Sunday Book Review. In one of the most interesting chapters, he argues that the shapes we use to make written letters mirror the shapes that primates use to recognize objects. After all, I could use any arbitrary [...] Read more – ‘Mind Reading’.
In Priceless: The Myth of Fair Value (and How to Take Advantage of It), author William Poundstone writes that the central principle of infomercials is what the economist Richard Thaler calls “Don’t wrap all the Christmas presents in one box,” meaning that consumers value freebies that come with a purchased item more than purchasing the [...] Read more – ‘Infomercials: The one thing you can’t buy is one thing.’.
Interesting read. In an ideal world, contracts would explicitly allocate rights and responsibilities between contracting parties for all possible contingencies that might arise over the life of the contract. In reality, of course, contracting parties cannot foresee all possible contingencies that might bear on the operating of the contract. Furthermore, preparing for all foreseeable contingencies, [...] Read more – ‘The Status Quo Bias and Contract Default Rules’.
Michael O’Leary, CEO of Ryanair, has an interesting way to keep people around at lunchtime. As I try to prise off the worryingly sturdy wrapper on the bagel, he says there are two “great things” about lunchtime in an out-of-the-way office like Ryanair’s. “One, there’s nowhere to go and eat,” and two, the only time [...] Read more – ‘Nudging People To Work Over Lunch’.
It turns out that cultivating an active idle mind might actually encourage a higher IQ. In essence, they suggest that in smart people, distant areas of the brain communicate with each other more robustly than in less smart people. In a recent paper, researchers at the Chinese Academy of Sciences, led by Ming Song, examined [...] Read more – ‘Idle Minds and What They May Say about Intelligence’.
Bruce Schneier, a security technologist and author of several books on computer security, says no. There are two kinds of profiling. There’s behavioral profiling based on how someone acts, and there’s automatic profiling based on name, nationality, method of ticket purchase, and so on. The first one can be effective, but is very hard to [...] Read more – ‘Does Profiling Work?’.
We have this book on our bookshelf. We’ll be reading it shortly. (Update, I’ve read The Checklist Manifesto and recommend you read it as well.) Over the past decade, through his writing in The New Yorker magazine and his books Complications and Better, Atul Gawande has made a name for himself as a writer of exquisitely crafted meditations on [...] Read more – ‘Amazon Exclusive: Malcolm Gladwell Reviews The Checklist Manifesto’.
We talk about the framing bias (how you frame something can encourage a particular outcome) quite a bit at Farnam Street. It seems like politicians are catching on (and even testing wording before going live). Calling something the “Patriot Act” for instance, is a form of framing. …Exactly what it means to ”frame” issues seems [...] Read more – ‘The Framing Wars’.
This could equally be titled the myth of objectivity. Thanks to the dorsolateral prefrontal cortex not all data is created equal in our mind’s eye: We see what we want to (confirmation bias). One mechanism to help overcome this is to explain your idea to someone else. Other people help us out of our own [...] Read more – ‘Accept Defeat: The Neuroscience of Screwing Up’.
Have you ever noticed that people with weight problems drink diet soda? It’s just correlation, not causation, right? Well, maybe yes and maybe no. As you sit down to Sunday brunch, perhaps it’s time to reconsider that Diet Coke according to Ryan Sager at neuroworld. Research suggests that artificial sweeteners — which basically fool our [...] Read more – ‘Diet Soda: The Brain Knows Better’.
The latest neuroscience research suggests spreading resolutions out over time is the best approach What follows below is an excerpt from an excellent article in the WSJ. Willpower, like a bicep, can only exert itself so long before it gives out; it’s an extremely limited mental resource. Given its limitations, New Year’s resolutions are exactly [...] Read more – ‘Blame It on the Brain’.
Can an extreme response to fear give us strength we would not have under normal circumstances? The following is an excerpt from Extreme Fear: The Science of Your Mind in Danger by Jeff Wise Here’s how it is: one minute, you’re going through your daily routine, only half paying attention. And the next you’re sucked [...] Read more – ‘Can Fear Give Us Superpowers?’.
Loneliness isn’t being alone, it’s feeling alone. Even as public health officials exhort people to get their shots and sneeze into their sleeves, a more insidious, if less acute, threat to our health may be taking advantage of the holiday season to spread: loneliness. Loneliness is bad for us. A substantial body of research links [...] Read more – ‘Strange as it sounds, loneliness may be contagious’.
It appears so, at least when it comes to presents. But are presents really as much of a waste as the poindexters would have us believe? Or do they play a slightly more complicated role in the emotional economy that can’t necessarily be measured in dollars? A recent study of how men and women react [...] Read more – ‘Are men more sensitive?’.
Interesting post on cognitive biases and pop culture. It would be interesting to study how this impacts our thinking. I was at the gym the other day and Alexandra Burke came on the TV, singing “The bad boys are always catching my eye.” Well of course they are. Bad boys hang around on street corners [...] Read more – ‘COGNITIVE BIASES IN POPULAR SONGS’.
Megan McArdie with an interesting point of view on moral hazard and the current crisis. The sticking point for me is twofold. The first is that we had crises before there was moral hazard–really, really dreadful crises, crises far worse than the one we’re having now. I just don’t see how you can look at [...] Read more – ‘How Big a Problem is Moral Hazard?’.
Common practice replaces common sense so easily. Why does it seem that it’s always Christmas in corporate boardrooms? And how can investors tell whether those glittering pay packages are worth the cost? The answer sounds obvious: Pay the boss more for good results now, and you should get even better results later. But the evidence [...] Read more – ‘Does Golden Pay for CEO’s Sink Stocks?’.
What happens when people try to switch rapidly between one task and another? What happens when they try to do more than one task at the same time? The first of these two fundamental questions is chiefly discussed in a modest-sized literature under the label “task switching” or “mental set”; the second, in a much [...] Read more – ‘Task Switching and Multitask Performance’.
How many things can we do at once? Fewer than we think,say psychologists, who are identifying “bottlenecks” in the processContinuing with recent posts on dual task performance (doing two things at once), i found this article very enlightening. People routinely do two or more things at the same time. They eat breakfast while reading the [...] Read more – ‘Doing Two Things at the Same Time’.
At the heart of this question is how the algorithm in our head prioritizes. You would think breaking to avoid an accident would be more important than a simple multiplication question, wouldn’t you? IntroductionUnderstanding the human limits of dual-task performance has long been of interest to both basic and applied researchers. From the theoretical perspective, [...] Read more – ‘Doing two things at once while driving? Think Again.’.
It turns out that over-learning, that is continuing beyond successful recall once, is a waste of time. Abstract Because people forget much of what they learn, students could benefit from learning strategies that yield long-lasting knowledge. Yet surprisingly little is known about how long-term retention is most efficiently achieved. Here we examine how retention is [...] Read more – ‘Increasing Retention Without Increasing Study Time’.
Even in tough economic times, you may find yourself with a bit of cash to spare. You’ve been working hard, and you want to treat yourself. Should you spend it on an experience, such as a baseball game or concert, or a material object? Psychological research suggests that, in the long run, experiences make people [...] Read more – ‘Experiences make us happier than possessions’.
Fascinating! Ants disperse the seeds of several ‘ancient woodland species’ in the UK, such as dog’s mercury. These are woodland plants that take a long time to arrive when a new wood forms, so you tend to only find them in old woods. In the tropics, ‘ant plants’ take it even further: they house and [...] Read more – ‘How plants trick ants into carrying seeds’.
An interesting, game-theory derived, look at airport security. Suppose there is a game with players from a population of two different types: passengers and terrorists. Passengers want to take flights, and terrorists want to destroy/disrupt them. Each of these players are endowed with a specific skill; terrorists can execute an attack, and passengers can detect [...] Read more – ‘Airport Security and Game Theory’.
Pay attention to the how the menu is put together next time you’re dining out. …Some restaurants use what researchers call decoys. For example, they may place a really expensive item at the top of the menu, so that other dishes look more reasonably priced; research shows that diners tend to order neither the most [...] Read more – ‘Using Menu Psychology to Entice Diners’.
Article from the Sydeny Morning Herald Economics is about the trade-offs people – and societies – have to make, and about helping people improve the trade-offs they’re making. One common trade-off society faces is between efficiency and equity. Efficiency in the allocation of resources means society getting the most it can from its scarce resources. [...] Read more – ‘Life’s trade-offs in 10 easy principles’.
Doyne Farmer, originally trained as a physicist, writes an awesome paper that outlines the behavior of the stock market in biological terms. For example a species is a trading strategy.”The long-term evolution of the marekt can be studied in terms of flows of money. Financial evolution is influenced by money in much the same way [...] Read more – ‘The behavior of the stock market in biology terms’.
You are in a game show with nineteen other players. You don’t know the other players, you can’t see them, and you can’t communicate with them. The game you are in is called ‘Greed!‘, and is straightforward to explain. You are asked to write down a whole dollar amount in the range $1 – $1,000,000 [...] Read more – ‘Game Theory Gameshow’.
Gresham’s law is commonly stated as “Bad money drives out good.” The concept, more broadly stated as “the bad drives out the good” can be applied to many things. Whenever coins containing precious metals have been used along with base metal coins of the same denomination, the bad coins have driven the good coins out [...] Read more – ‘Mental Model: Gresham’s Law’.
The scientific method refers to a process of thought based on integrating previous knowledge, observing, measuring, and logical reasoning. Introduction to the scientific method (from wikipedia)Since Ibn al-Haytham (Alhazen, 965–1039), one of the key figures in the development of scientific method, the emphasis has been on seeking truth: Truth is sought for its own sake. [...] Read more – ‘Mental Model: Scientific Method’.
If you’ve ever sat through a teaching seminar, you’ve probably heard a lecture about “learning styles.” Perhaps you were told that some students are visual learners, some are auditory learners, and others are kinesthetic learners. Or maybe you were given one of the dozens of other learning-style taxonomies that scholars and consultants have developed. Almost [...] Read more – ‘Different Learning Styles Bogus?’.
The Hawthorne effect was first observed in a study in which it was found that the subjects under observation began to perform better even before any conditions were changed because they knew attention was on them. Thus, the Hawthorne effect is when subjects improve an aspect of their behavior or beliefs being experimentally measured simply [...] Read more – ‘Hawthorne effect’.
Occam’s razor recommends that, when faced with two equally good hypotheses, choose the simpler. The principle is attributed to 14th-century English logician, theologian and Franciscan friar, William of Ockham. Said another way, Occam’s razor encourages the reduction of unnecessary elements in a design or system to achieve maximum simplicity without compromising functionality. Scientists use Occam’s [...] Read more – ‘Mental Model: Occam’s Razor’.
The scientific method is based on logical reasoning. When you draw conclusions that support evidence gathered in an investigation, you are following logic. Two methods of reasoning that are involved in logic are inductive and deductive reasoning. Inductive reasoning involves drawing a conclusion by moving from specific observations to general ones. Deductive reasoning, on the [...] Read more – ‘Mental Models: Deduction and Induction’.
From predictibly irrational: Whatever your gift philosophy, you may be thinking that you would be happier if you could just spend the money on yourself – but according to a three-part study by Elizabeth Dunn, Lara Aknin, and Michael Norton, givers can get more happiness than people who send the money on themselves. Liz, Lara [...] Read more – ‘The Psychology of Gift Giving’.
From Thaler’s latest NYTimes article. Thaler responds to a federal advisory panel that set off a controversy by recommending that most women delay breast cancer screening until they turn 50, not 40 (among other things). what are the true costs of routine cancer screening for women in their 40s? The numbers show that about 2,000 [...] Read more – ‘Gauging the Odds (and the Costs) in Health Screenin’.
Growing access to information and the ease with which we can compare ourselves to others is making people less happy in life, says psychiatrist Rika Kayama Psychiatrist Rika Kayama is an outspoken doctor specializing in mental illness, a best-selling writer and a popular social commentator. * * * In your latest book, you said growing [...] Read more – ‘Finding satisfaction in being ourselves’.
From wikipedia: In psychology, the Zeigarnik effect states that people remember uncompleted or interrupted tasks better than completed tasks. Soviet psychologist Bluma Zeigarnik first studied the phenomenon after her professor, Gestalt psychologist Kurt Lewin, noticed that a waiter had better recollections of still unpaid orders. In Gestalt psychology, the Zeigarnik effect has been used to demonstrate the general presence of Gestalt phenomena: not just appearing [...] Read more – ‘Zeigarnik effect’.
“Honestly, the main reason most people read famous thinkers is to raise their status via affiliation, and to prepare to signal how knowledgeable they are. And yes reading old thinkers can, like travel, help you explore alien cultures. But what if you actually wanted to learn about the subjects on which famous old people wrote? [...] Read more – ‘Why do we read old thinkers?’.
…Negotiation doesn’t work that way. There is a zone of possible agreement (known to those who study this sort of thing as the ZOPA). You can’t negotiate your way out of that zone no matter where you start. Nor does starting from a more aggressive bargaining point always mean that you will do better in [...] Read more – ‘The Naive Negotiator’.
There are many possible reasons why, but this is fascinating. New federally financed drug research reveals a stark disparity: children covered by Medicaid are given powerful antipsychotic medicines at a rate four times higher than children whose parents have private insurance. And the Medicaid children are more likely to receive the drugs for less severe [...] Read more – ‘Poor Children Likelier to Get Antipsychotics’.
Despite trying to avoid it, we always do it. In experiments in the 1990s, with Ralph Erber of DePaul University in Chicago, Wegner tested the interplay of mental load and thought suppression. They found that undergraduates asked not to blurt out the word “house” while playing a word-association game involving related words, such as “home”, [...] Read more – ‘Foot-in-mouth syndrome: Pitfalls of the party season’.
H/T Enoch Enthusiasts of frequent-flier mileage have all kinds of crazy strategies for racking up credits, but few have been as quick and easy as turning coins into miles. At least several hundred mile-junkies discovered that a free shipping offer on presidential and Native American $1 coins, sold at face value by the U.S. Mint, [...] Read more – ‘Incentives and frequent flier miles’.
The popular idea that testosterone always makes people more aggressive has been debunked by researchers. A team based in Switzerland has shown that the hormone can make people behave more fairly in an effort to defend their social status. *** Neuronnarrative adds: A fair amount of evidence has surfaced that testosterone is a key ingredient [...] Read more – ‘Is Testosterone All in Your Mind?’.
Before this article in Psychology Today I hadn’t considered how the handshake could be used to form a halo effect. Use a handshake to reap the halo effect. The University of Alabama conducted a revealing study you should know about. Info is power and all that. Notice the positive and negative associations affiliated with a [...] Read more – ‘The Handshake and the Halo’.
The article below on Tiger Woods demonstrates the halo effect and the fundamental attribution error. The fundamental attribution error describes the tendency to over-value dispositional or personality-based explanations for the observed behaviors of others while under-valuing situational explanations for those behaviors. The ‘halo effect’ is the idea that global evaluations about a person (e.g. she [...] Read more – ‘Branded a Cheat’.
It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs [...] Read more – ‘Remember this the next time your criticize’.
H/T Simoleon Sense. “Too Big to Fail” is a dilemma that has plagued economists, policy makers and the public at large. In Nassim Taleb’s lastest paper (with co-author Charles S. Tapiero) he takes a look. Abstract This paper examines the risk externalities stemming from the size of institutions. Assuming (conservatively) that a firm risk exposure [...] Read more – ‘Taleb: The Risk Externalities of Too Big to Fail’.
An online mens magazine posted this article talking about many of the same things we talk about. * * * Have you ever find it difficult to say no to your friends, colleagues and family members? Ever felt trapped into buying something you didn’t really want or hoodwinked into saying yes? Time and again, people [...] Read more – ‘The Seven Powerful Principles of Persuasion’.
(Nudging people… with choice architecture) A recent study by David Hardisty, Eric Johnson and Elke Weber randomly offered participants various choices between different pricing options for airline tickets. The main distinction was between a surcharge described as a “carbon tax” and an identical charge described as a “carbon offset”. The tax was unpopular – no [...] Read more – ‘A Dirty Word or a Dirty World? Attribute Framing, Political Affiliation, and Query Theory’.
A reader sent this in and i think you’ll all find it quite interesting. * * * Just thought I’d add the slides from the Montier presentation from last week. They may not make sense without dialogue but should be mainly self-evident. Particular ones to emphasise were; Slide 3 – Economists can’t forecast for toffee [...] Read more – ‘James Montier Presentation: Ten Lessons (not) Learnt’.
Abstract:When several choice options are sampled one at a time in a sequence and a single choice of the best option is made at the end of the sequence, which location in the sequence is chosen most often? We report a large-scale experiment that assessed tasting preferences in choice sets of two, three, four, or [...] Read more – ‘Sequence of presentation influences choices’.
A fundamental mistake we often make when judging other people is assuming that their behaviour mainly reflects their personality. Unfortunately this ignores another major influence on how people behave staring us right in the face: the situation. Don’t take my word for it, though, consider a modern take on an ancient bible story. Prominent social [...] Read more – ‘When Situations Not Personality Dictate Our Behaviour’.
In The Progress Paradox, Gregg Easterbrook argues that, in some respects, happiness has actually fallen slightly in the last few decades. This is despite the fact that material conditions have improved significantly during the same time. To many people, this finding is confounding. If we’ve already exceeded the amount of money needed to “buy” happiness, [...] Read more – ‘Do People Want Riches to Buy Stuff or Status?’.
H/T Finance Professor We have developed for the first time a system level model of a large gene network to decipher the underlying principles of the bacteria game theory and how an internal network of genes and proteins is used to calculate risks in this complicated situation,’ he said. This has applications to human society [...] Read more – ‘Bacteria provide new insights into human decision making’.
(So many mental models at work here!) In his new book, Priceless: The Myth of Fair Value (and How to Take Advantage of It), author William Poundstone dissects the marketing tricks built into menus—for example, how something as simple as typography can drive you toward or away from that $39 steak. Puzzles, anchors, stars, and [...] Read more – ‘Menu Mind Games’.
What Tiger considerately did for our education was to show how the Halo Effect is a myth…. So if we observe a country is good at say, technological innovation, we assume that this country is also good at other good things like, say, visionary leadership, freedom from corruption, and a culture of trust. Since the [...] Read more – ‘Tiger Woods and the fallacy of the Halo Effect’.
Here, thanks to Seth Godin, are more than seventy big thinkers, each sharing an idea for you to think about as we head into the new year. From bestselling author Elizabeth Gilbert to brilliant tech thinker Kevin Kelly, from publisher Tim O’Reilly to radio host Dave Ramsey, there are some important people riffing about important [...] Read more – ‘Free e-book of great thinkers: WHAT MATTERS NOW!’.
An excellent article in the WSJ from Alan Greenspan talking about many mental models including: incentives, risk, black swan’s, association, models, forecasts, and many more! Risk of system-wide breakdown is an unavoidable characteristic of market economies Such evidence of failure is common to every crisis and points up the broader problem that forecasting the onset [...] Read more – ‘Addressing Systemic Risk’.
Something we all knew but didn’t want to believe: multitaskers are better at nothing. Think you can talk on the phone, send an instant message and read your e-mail all at once? Stanford researchers say even trying may impair your cognitive control. Attention, multitaskers (if you can pay attention, that is): Your brain may be [...] Read more – ‘Media multitaskers pay mental price, Stanford study shows’.
Yes, participants did naturally copy the confederate (who they’d only just met) as measured by face touching, foot waggling and smiling. Face touching only went up 20%, but rate of foot waggling went up by an impressive 50% when participants were inspired by another foot waggler. Does mimicry increase liking? In the second experiment Chartrand [...] Read more – ‘Do people automatically mimic others, even strangers?’.
When you watch someone else experience regret your brain areas for regret light up too Previous studies showed that the understanding of others’ basic emotional experiences is based on a “resonant” mechanism, i.e., on the reactivation, in the observer’s brain, of the cerebral areas associated with those experiences. The present study aimed to investigate whether [...] Read more – ‘Do you feel what i feel?’.
This goes to show how ‘common belief’ can be created… E-mails stolen from climate scientists show they stonewalled skeptics and discussed hiding data — but the messages don’t support claims that the science of global warming was faked, according to an exhaustive review by The Associated Press. The 1,073 e-mails examined by the AP show [...] Read more – ‘Science not faked, but not pretty’.
This is just Great!! 2 weeks ago, the U.S. Preventive Services Task Force came out with new recommendations on breast cancer screening, including, “The USPSTF recommends against routine screening mammography in women aged 40 to 49 years.” …. So, what cognitive bias let this government agency move the decimal point in their head at least [...] Read more – ‘Action vs. Inaction’.
Thanks Jeff for sending this in! From the NYT — It had all the markings of a television detective show. Posing as patients, three undercover observers got themselves admitted as patients to a locked psychiatric ward to investigate conditions on the inside. The times article also mentions the Rosenhan Experiment where psychologist David Rosenhan asked [...] Read more – ‘The Doctors Were Real, the Patients Undercover’.
It seems when bidding for games, countries aim for a halo effect As one Canadian airline executive put it, the Games are great for raising brand awareness, but bad for immediate returns. The airlines will see the bulk of their Olympics business on just two days — the first and the last days of the [...] Read more – ‘B.C. hopes for Olympic afterglow (Halo Effect)’.
Fascinating! Consumer choices not only reflect price and quality preferences but also social and moralvalues as witnessed in the remarkable growth of the global market for organic and environmentally friendly products. Building on recent research on behavioral priming and moral regulation, we find that mere exposure to green products and the purchase of them lead [...] Read more – ‘Do Green Products Make Us Better People?’.
Great article in the Washington Post. To a psychologist, “climate change” looks as if it was designed to be ignored. It is a global problem, with no obvious villains and no one-step solutions, whose worst effects seem as if they’ll befall somebody else at some other time. In short, if someone set out to draw [...] Read more – ‘It’s natural to behave irrationally’.
So what causes us to make such dumb, hugely consequential mistakes? We’re born that way, says Mauboussin. Drawing on research from psychologists, political scientists, and economists, he details eight of the most common mistakes we make. One is the tendency to misjudge behavior, especially our own; another is the confounding of cause and effect. My [...] Read more – ‘The Limits of Going with Your Gut’.
“So convenient a thing it is to be a reasonable creature, since it enables one to find or make a reason for everything one has a mind to do.” Benjamin Franklin Humans are masters of lying and self-deception. We want others to believe us good, fair, responsible and logical, and we place just as much [...] Read more – ‘Justifying and rationalizing questionable preferences’.
To top off the course The Moral Leader, Professor Badaracco’s students dissect Niccolo Machiavelli’s chilling classic The Prince. (“You may think that’s an odd place to end what is essentially a business ethics elective,” Badaracco acknowledged with a smile.) Students talk about what The Prince has to say on one crucial key to leadership: leading [...] Read more – ‘Four Princes of Pragmatism’.
Do you think that I can convince you that you did some action that you haven’t with only pictures? The answer might surprise you. A recent study in the journal Applied Cognitive Psychology tested whether showing people photos of completed actions–such as a broken pencil or an opened envelope–could influence them to believe they’d done [...] Read more – ‘A Fragile Memory’.
Counter to the “start high, end high” effect of anchors in individual judgments and dyadic negotiations, 6 studies using a diverse set of methodologies document how and why, in the social setting of auctions, lower starting prices result in higher final prices. Three processes contribute to this effect. First, lower starting prices reduce barriers to [...] Read more – ‘Starting low but ending high: a reversal of the anchoring effect in auctions.’.
Starting prices are a form of anchoring. In general, start high in negotiations, start low in auctions. * * * Whenever individuals put their firm up for acquisition, seek agreement on salary, or sell a used car, someone has to set the starting price. In these situations, what are the costs and benefits of starting [...] Read more – ‘To Start Low or To Start High? The Case of Auctions Versus Negotiations’.
Despite the evidence that false confessions are a regular occurrence, most jurors struggle with the concept just like Kaine did with the Norfolk Four. Confessions are difficult to discount, even if they appear to be coerced. Years ago, Kassin noticed that cases with confessions have an unusually high conviction rate, and since then he has [...] Read more – ‘The Psychology and Power of False Confessions’.
Kevin Mitnic, one of the most famous hackers ever, says in his memoir The Art of Deception: Controlling the Human Element of Security: People in law enforcement, like people in the military, have ingrained in them from the first day in the academy a respect for rank. As long as the social engineer is posing [...] Read more – ‘How authority influences us’.
Fascinating (read the PDF! summary below) The seven principles of human behaviour that con artists exploit, according to the article: The distraction principle: While you are distracted by what retains your interest, hustlers can do anything to you and you won’t notice. The social compliance principle: Society trains people not to question authority. Hustlers exploit [...] Read more – ‘How con artists exploit human behaviour’.
Do those with more testosterone coursing through their bodies make riskier, more aggressive decisions? Popular culture and even rodent studies seem to have borne out thistrite truism about the sex hormone, but researchers in Switzerland and the U.K. tested whether this perception really held true for humans in a controlled environment—and arrived at counter-intuitive findings. [...] Read more – ‘Do those with more testosterone make riskier decisions?’.
By Atul Gawande Cost is the spectre haunting health reform. For many decades, the great flaw in the American health-care system was its unconscionable gaps in coverage. Those gaps have widened to become graves—resulting in an estimated forty-five thousand premature deaths each year—and have forced more than a million people into bankruptcy. The emerging health-reform [...] Read more – ‘Testing, Testing’.
Distractions are everywhere. And with the always-on technologies of today, they take a heavy toll on productivity. One study found that office distractions eat an average 2.1 hours a day. Another study, published in October 2005, found that employees spent an average of 11 minutes on a project before being distracted. After an interruption it [...] Read more – ‘The high cost of distractions’.
To test this in the context of interpersonal attraction they had male students hold conversations with female students they’d just met met through microphones and headsets. One of the quickest ways that people who’ve just met stereotype each other is by appearance. People automatically assume others who are more attractive are also more sociable, humorous, [...] Read more – ‘How expectations control us’.
Consider the common stereotype some male drivers hold regarding female drivers. A male driver might claim female drivers are inferior, often justifying that claim by citing examples from personal experience: “Well, in fact, just today I was driving to work and was cut off, and sure enough, there was a woman driving the car.” The [...] Read more – ‘Biases that Bind: The Role of Stereotypes in Decision-Making Processes’.
H/T David Lau “We evolved on the savannas of Africa; we now live in Candyland,” the authors declare. We eat out more than our parents did. We supersize: Twenty years ago, a typical bagel was three inches in diameter and had 140 calories; today’s bagel is six inches wide and contains 350 calories. We eat [...] Read more – ‘Click…Whir.’.
The ref that gambled on games said in an interview tonight: “Donaghy insisted he made wagers on NBA games based on his knowledge of other officials’ biases for and against certain players and teams, and that his officiating was not compromised — a claim that was backed up by the FBI.” Link Read more – ‘Referee Bias’.
“I think that the leadership at Google has an intuitive understanding of human nature, and the way attention is a limited resource.” —David Rock. When it comes to creating positive organizational cultures, small things may count more than we realize This talk is a summary of David’s Book: Your Brain at Work: Strategies for Overcoming [...] Read more – ‘David Rock: Your Brain at Work — Google Talk’.
In the current research, we test the hypothesis that concerns about infidelity will fundamentally bias the way people perceive and think about members of their own sex. Consider, for example, a man at a cocktail party with his wife, and imagine he has an inkling that his wife might be romantically interested in someone else [...] Read more – ‘Infidelity and Cognitive Biases’.
This study suggests that learning about/from our own emotions is difficult in practice despite what we think AbstractTwo studies explore the frequently reported finding that affective forecasts are too extreme. In the first study, driving test candidates forecast the emotional consequences of failing. Test failers overestimated the duration of their disappointment. Greater previous experience of [...] Read more – ‘Affective forecasting: Why can’t people predict their emotions?’.
Most people tend to focus their ‘‘if only . . .’’ thoughts on controllable actions; that is, actions that depended on a decision they made, rather than on uncontrollable events AbstractWhen people think about how a situation might have turned out differently, they tend to imagine counterfactual alternatives to their actions. We report the results [...] Read more – ‘How people think ‘‘If only . . .’’ about reasons for actions’.
I found this interesting — when you choose to focus on a person and not an action your mind associates the person with the result regardless of their actual impact (like a coin flip). The gambler’s fallacy and hot hand were studied in predictions about outcomes of coin tosses. A critical trial occurred when participants [...] Read more – ‘Sympathetic magic and perceptions of randomness: The hot hand versus the gambler’s fallacy’.
Subprime mortgage offers are perfectly optimized to take advantage of the “I want it now” system, as are chocolate cookies, temptations for marital infidelity and all manner of things that people choose now and regret later. People manage the influence of the short-term systems by proactively binding their future options. We see this when a [...] Read more – ‘The timeline’.
If I told you how much energy your neighbors use on average, and whether you fell above or below that average, would that induce you to save more energy? What if, depending on whether you came in above or below average, you got an emoticon on your energy bill? Say, a smiley face if you [...] Read more – ‘Making buildings more efficient: It helps to understand human behavior’.
(Takeaways for the quick reader: the climate change industry is shot through with groupthink & the climate industry really is an industry) * * * The Climatic Research Unit scandal unearths some very inconvenient truths — namely that scientific as well as journalistic tribalism have encumbered an honest debate. By now you might have heard [...] Read more – ‘Groupthink and the global warming industry’.
Good example of the halo effect, availability, and scarcity in making CEO decisions. On November 9, the CEO of the Innovation Group, a $200 million U.K. insurance software company, was unexpectedly fired by his board, who also announced they’d retained an executive search firm to find his outside successor. The company had consistently increased sales, [...] Read more – ‘Scapegoating and Savior Chasing’.
The kindle, is being sold in a very persuasive way. If anyone wants to buy me a kindle i’d love one for Christmas! (plus all of my readers would benefit, as i’d read and share more!) “It’s flying off the shelves faster than any other product Amazon sells,” Ian Freed, vice-president of the online merchandiser’s [...] Read more – ‘Framing and the Kindle’.
A European study shows that, over time, even the most sophisticated readers can be manipulated. T here’s nobody more cynical about the media than your average European. Only 12 percent of Europeans claim to trust the media, compared to 15 percent of North Americans, 29 percent of Pacific Asians and 48 percent of Africans, the [...] Read more – ‘Does Biased News Have a ‘Time Bomb’ Effect?’.
The Obama administration is talking to big home-improvement retailers about using more federal dollars to encourage homeowners to replace leaky windows and insulate the walls as part of a broader effort to spur hiring. Administration and congressional aides said the talks are at an early stage, and are among a variety of ideas for boosting [...] Read more – ‘Obama Administration Weighs Incentives for Home Improvement’.
The sound of a luxury sports car revving its engine makes women feel sexy, according to a survey. A study tested men’s and women’s responses to the roaring engines of three luxury cars, in addition to an everyday vehicle. The 40 participants listened to the recordings of a Maserati, a Lamborghini and a Ferrari, along [...] Read more – ‘Sound of sports car engine ‘arouses women’.
(H/T Enoch’s shared items) The paper Atul Gawande cited in his talk at The New Yorker. Abstract: Background Surgery has become an integral part of global health care, with an estimated 234 million operations performed yearly. Surgical complications are common and often preventable. We hypothesized that a program to implement a 19-item surgical safety checklist [...] Read more – ‘A Surgical Safety Checklist to Reduce Morbidity and Mortality in a Global Population’.
Great article by Al Gore and David Blood in today’s financial times on how we tend to discount the future at a very high cost and thus put more emphasis on the short term. Why do investors and business leaders continue to focus on the short-term and ignore the fact that businesses that think long-term [...] Read more – ‘Time is up for short-term thinking in capitalism’.
The extended warranty was designed to turn our brains into mush because it plays on a variety of fears. How? !) We’re averse to risk and uncertainty, so we’ll accept a worse deal for a more certain outcome; 2) We wildly over-estimate how many products fail (as an aside, if you think the product might fail, why are you [...] Read more – ‘How the Extended Warranty Rips You Off’.
Trends in economics and politics including consumerism and changes in democracy, and how research into psychology, social networks and behavioural economics is relevant. http://rsa.i2ic.com/player14.swf?filename=lectures/left-brain&filmed=October2009&posted=November2009&autoplay=false Read more – ‘Left Brain, Right Brain: Human nature and political values’.
We all are prone to “confirmation bias” which is a tendency to seek information in support of what we already believe, disregarding any contradictions. Religious orthodoxy over the centuries has refined confirmation bias into an art form called “apologetics.” Apologists start with a set of handed down conclusions and then reason backwards from there, drawing [...] Read more – ‘Everyday Confirmation Bias: Religion vs. Evolution’.
One of the most powerful social proof marketing strategies that I’ve used with promoting Amazon affiliate links is creating ‘Best Seller’ type lists for readers to show them what is currently popular in terms of purchases in our community. People are more willing to make a purchase if they feel that they’re not alone and [...] Read more – ‘Social Proof and $100,000 in Amazon Referrals’.
The reason talking on a cell phone makes drivers less safe may be that the brain can’t simultaneously give full attention to both the visual task of driving and the auditory task of listening, a study by a Johns Hopkins University psychologist suggests. The study, published in a recent issue of The Journal of Neuroscience, [...] Read more – ‘CAN WE REALLY MULTITASK?’.
I asked Ariely how he would set up his Thanksgiving feast to limit overeating without having to exercise self-control. His answer was to construct the “architecture” of the meal beforehand. Create conditions that guide people toward good choices, or even use their irrationality to your benefit. “Move to chopsticks!” he exclaimed, making bites smaller and [...] Read more – ‘Dan Ariely: Limit overeating by nudging’.
Entertaining. The trouble with the commercial is that the dog, after seeking out ways to protect his most prized possession, finds a solution in purchasing insurance. Keep it on your person? Too hard. Put it in a bank? Too risky. But with insurance, you can just leave it out in plain sight and go out [...] Read more – ‘Moral hazard, via dumb commercials’.
Nassim Nicholas Taleb is not afraid to say “I don’t know.” In fact, he’s proud of his ignorance. A mathematician, philosopher and hedge-fund manager all in one iconoclastic package, Taleb demonstrates the wisdom in admitting the limitations of our knowledge. Nassim Taleb is the author of The Black Swan, Fooled By Randomness, and recently, The Bed of [...] Read more – ‘Nassim Nicholas Taleb – PopTech 2005’.
“It is better to fail conventionally than to succeed unconventionally.” – Keynes. I love football examples and the decision by Bill Belichick to go for it on 4th and 2 from his own 28 while up six points is one of the best decisions the author of Farnam Street has witnessed this year. Belichick had [...] Read more – ‘The Patriots’.
THE EIGHTEEN TRUTHS The first few items explain that catastrophic failure only occurs when multiple components break down simultaneously: 1. Complex systems are intrinsically hazardous systems. The frequency of hazard exposure can sometimes be changed but the processes involved in the system are themselves intrinsically and irreducibly hazardous. It is the presence of these hazards [...] Read more – ‘18 truths: The long fail of complexity’.
THE SCIENCE OF MEMORY: Memories are processed and formed in different areas of the brain.”If you look at a visual scene, the memory of that visual scene is being processed by the visual cortex, but if you’re talking about it at the same time, that memory is going to be processed in the auditory cortex, and [...] Read more – ‘Strong Memories Develop When We Experience Emotional Arousal’.
Fortunately for American democracy, one-sidedness is not the case (at least in theory). We have what are called checks and balances. This is essential so as to restrict any of the three branches of government from monopolizing resources with their own self-interests and agendas. This is not to say that the judicial, executive, and legislative [...] Read more – ‘Eleven Cognitive Biases that Help Sustain the Anti-male Double Standard in Society’.
It is relatively common for listeners to “hear” sounds that are not really there. In fact, it is the brain’s ability to reconstruct fragmented sounds that allows us to successfully carry on a conversation in a noisy room. Now, a new study helps to explain what happens in the brain that allows us to perceive [...] Read more – ‘Can you hear what i hear?’.
In any complex system, the linkages between cause and effect are extremely difficult to discern. Apparently discrete interventions can lead to unintended consequences in faraway parts of the system. Senge encourages leaders to exhibit curiosity and openness in their analysis of root causes. The Toyota Way (the 14 management principles of the car manufacturer) offers [...] Read more – ‘Defying demographic gravity’.
As a psychologist who has spent much time studying the subject of influence, I can tell you that we are much more influenced than we think by the macro-culture and more importantly, the micro-culture, in which we live. This is called “social proof” — we look to others for validation and guidance for our own [...] Read more – ‘Social Proof of Obesity’.
“She has a halo effect on the entire syndication industry,” said Jason Kanefsky, senior vice president of national broadcast at ad-buying firm MPG. “It helps the overall syndication business.” Read more Read more – ‘CBS loses Oprah ‘halo’’.
Stimulus… response. New psychology research demonstrates a direct effect of snack food adverts on increased consumption for both adults and children. Nowadays the word ‘obesity’ is rarely seen in print without its partner-in-crime, ‘epidemic’. The developed world seems to be intent on eating itself to death and no small proportion of the newly obese are [...] Read more – ‘Click … Whirr (Ads For Unhealthy Foods Increase Children’s Consumption 45%)’.
H/T Paul Kedrosky Great new Watson Wyatt report on extreme risks in society and economics: 23068799 Extreme Risks From Pandemics to Currency Crises http://d1.scribdassets.com/ScribdViewer.swf?document_id=23081098&access_key=key-rlqqlis0t3yt2bwj2lf&page=1&version=1&viewMode=list Read more – ‘Extreme Risks From Pandemics to Currency Crises’.
A wise man once said: don’t provide the wrong incentives, even when you think you are doing the right thing. A Correlation Between Obesity and Medicare Costs Is Apparent. How About Some Incentives? Two new health reports — one mapping the prevalence of obesity and another mapping Medicare expenditures — appear to show a clear [...] Read more – ‘Obesity’s Cost’.
A new study shows that the use of social media is particularly prevalent among Inc. 500 companies and provides new insight on the role social media plays in running a business. For the third consecutive year, the Center for Marketing Research at the University of Massachusetts Dartmouth, has conducted a study on social media usage [...] Read more – ‘Social Media: The new institutional imperative?’.
Psychologist George Kelly recognized the problem of observer bias in sciences such as psychology and desired to create a theory as well as a clinical research technique that would remove the influence such bias has on the observer; the result being Kelly’s Personal Construct Theory. From a constructivism standpoint, emotion is a manifestation of a [...] Read more – ‘Personal Construct Theory and the Reality of Threat’.
It can take some bottle to share an anecdote, so it’s somewhat harsh when your friend shoots you down with an impatient accusation that you’ve told them this story before. You’d think they’d be more understanding – most of us seem to be far better at remembering who’s told us what compared with to whom [...] Read more – ‘You told me that already! Why we’re so poor at remembering to whom we told what’.
We generally think of mindfulness as an idea that has been around for thousands of years, originally emerging out of Buddhist traditions. Many Buddhist researchers are doing great studies showing that mindfulness has an impact on many aspects of human experience. I have a bit of a problem with that. When you understand the underlying [...] Read more – ‘The neuroscience of mindfulness’.
Mental Models: Bias from emotional arousal, Decision making, Do Something Syndrome Hershey is smaller and brings less to the table than Kraft Foods in a potential takeover battle for Cadbury. But Hershey may have one distinct advantage over Kraft: a potentially irrational owner The Milton Hershey School Trust, which controls Hershey, has exhibited a different [...] Read more – ‘The Emotions of Hershey’s Bid’.
“I’m Not Going to Hire Anybody in the United States” Now, to tell you how bad this is and tell you what I think Washington is doing right now, Washington is doing everything in their manpower capability to destroy US manufacturers, fundamentally destroy US manufacturers. Cap and trade, medical reform, labor rules, whatever they want [...] Read more – ‘Second order effects of U.S. Decisions’.
Farnam Street Comments:Research has proven that expensive complex models provide little or no benefit over a simple linear framework. Robyn Dawes argues that linear models are superior because people are must better at selecting and coding information (such as what variables to put in the model) than they are at integrating the information (using the [...] Read more – ‘Simple Model Leaves Expensive Climate Models Cold’.
By ROBERT J. SHILLER Beyond fiscal stimulus and government bailouts, the economic recovery that appears under way may be based on little more than self-fulfilling prophecy. Consider this possibility: after all these months, people start to think it’s time for the recession to end. The very thought begins to renew confidence, and some people start [...] Read more – ‘What if a Recovery Is All in Your Head?’.
In the spirit of Charlie Munger, Michael J. Mauboussin Writes (We love Mauboussin, If anyone wants to send us a copy of his new book, please shoot us an email!) Warren Buffett says that smarts and talent are like a motor’s horsepower, but that the motor’s output depends on rationality. “A lot of people start [...] Read more – ‘Mauboussin: Pitfalls To Avoid’.
Merely observing someone publicly blame an individual in an organization for a problem — even when the target is innocent — greatly increases the odds that the practice of blaming others will spread with the tenacity of the H1N1 flu, according to new research from the USC Marshall School of Business and Stanford University. Link Read more – ‘Shifting Blame Is Socially Contagious’.
Many people quite naturally believe they are good ‘intuitive psychologists’, thinking it is relatively easy to predict other people’s attitudes and behaviours. We each have information built up from countless previous experiences involving both ourselves and others so surely we should have solid insights? No such luck. In reality people show a number of predictable [...] Read more – ‘The False Consensus Bias’.
This classic social psychology experiment shows how little excuse people need to form into groups and start discriminating against others. People’s behaviour in groups is fascinating and frequently disturbing. As soon as humans are bunched together in groups we start to do odd things: copy other members of our group, favour members of own group [...] Read more – ‘Why Groups and Prejudices Form So Easily: Social Identity Theory’.
What psychological experiment could be so powerful that simply taking part might change your view of yourself and human nature? What experimental procedure could provoke some people to profuse sweating and trembling, leaving 10% extremely upset, while others broke into unexplained hysterical laughter? What finding could be so powerful that it sent many psychologists into [...] Read more – ‘Stanley Milgram: Obedience to Authority Or Just Conformity?’.
The best psychological experiments ask timeless questions about human nature, like what makes a person evil? Can a good person commit evil acts? If so, what can make people cross the line? Is there some set-point which when crossed unleashes the evil? Or is it something about the situations in which people are placed that [...] Read more – ‘Our Dark Hearts: The Stanford Prison Experiment’.
The typical retelling of Sherif’s classic Robbers Cave experiment highlights the resolution of intergroup prejudice, but recent interpretations suggest a darker conclusion that demonstrates the corrupting influence of power. The Robbers Cave experiment, a classic study of prejudice and conflict, has at least one hidden story. The well-known story emerged in the decades following the [...] Read more – ‘War, Peace and the Role of Power in Sherif’s Robbers Cave Experiment’.
We all know that humans are natural born conformers – we copy each other’s dress sense, ways of talking and attitudes, often without a second thought. But exactly how far does this conformity go? Do you think it is possible you would deny unambiguous information from your own senses just to conform with other people? [...] Read more – ‘I Can’t Believe My Eyes: Conforming to the Norm’.
In social psychology the ‘bystander effect’ is the surprising finding that the mere presence of other people inhibits our own helping behaviours in an emergency. John Darley and Bibb Latane were inspired to investigate emergency helping behaviours after the murder of Kitty Genovese in 1964. Link Read more – ‘Why We Don’t Help Others: Bystander Apathy’.
Bargaining is one of those activities we often engage in without quite realising it. It doesn’t just happen in the boardroom, or when we ask our boss for a raise or down at the market, it happens every time we want to reach an agreement with someone. This agreement could be as simple as choosing [...] Read more – ‘How to Avoid a Bad Bargain: Don’t Threaten’.
The ‘halo effect’ is a classic finding in social psychology. It is the idea that global evaluations about a person (e.g. she is likeable) bleed over into judgements about their specific traits (e.g. she is intelligent). Hollywood stars demonstrate the halo effect perfectly. Because they are often attractive and likeable we naturally assume they are [...] Read more – ‘The Halo Effect: When Your Own Mind is a Mystery’.
A classic 1959 social psychology experiment demonstrates how and why we lie to ourselves. Understanding this experiment sheds a brilliant light on the dark world of our inner motivations. The ground-breaking social psychological experiment of Festinger and Carlsmith (1959) provides a central insight into the stories we tell ourselves about why we think and behave [...] Read more – ‘How and why do we lie to ourselves?’.
Between 1950 and 1990, the aggregate population of central cities in the United States declined by 17 percent despite population growth of 72 percent in metropolitan areas as a whole. This paper assesses the extent to which the construction of new limited access highways has contributed to central city population decline. Using planned portions of [...] Read more – ‘DID HIGHWAYS CAUSE SUBURBANIZATION?’.
Because ability makes a difference in competitions of skill, we make the mistake of thinking that it must also make a difference in competitions of pure chance… —Malcolm Gladwell Read more – ‘Skill’.
Mental Models: Insensitivity to Sample Size, Insensitivity to base rates, Conjunctive and Disjunctive-Events Bias,There is a significant growth of behavior economics in the last decade. The goal of the behavior research is aimed at the deviations from rationality in order to improve the predictive power of economic models. In this paper, attached to the specific [...] Read more – ‘A Review Research of Errors Caused in Auditing Process’.
One limit of traditional policies, Volpp said, was that “they assume that people know what’s best for themselves.” However, there is evidence that people are categorically bad at evaluating what is best for them. People are biased towards rewards in the present; they are bad at evaluating small probabilities and they tend to choose the [...] Read more – ‘Kevin Bolpp: Behavioral Economics and Healthy Behaviors’.
Behavioral economist Dan Ariely, in the following video, describes one of his fascinating studies on the situation of cheating. H/T Read more – ‘Cheating’.
What will solve climate change? Will it be technology? Policy? A growing number of researchers and activists say it’s what’s behind it all: people. And understanding them is vital to addressing climate change. The problem is that people don’t understand people very well. In the 1970s, a researcher at Virginia Polytechnic Institute and State University [...] Read more – ‘How Understanding the Human Mind Might Save the World From CO2’.
“The realignment of GE’s priorities could ripple through the media industry, as well. Liberty Media Corp. Chairman John Malone on Thursday said he will be watching to see how much market power regulators will let Comcast have if it takes a majority share in NBC Universal, making Comcast not only a competitor, but a major [...] Read more – ‘Institutional Imperative: Anything you can do, I can do better’.
Traditionally, the most common game-theoretic model of the Soviet-US nuclear arms race has been an iterated Prisoner’s Dilemma. According to such a model, on any given trial both superpowers are better off arming regardless of what the other side chooses, but if both sides arm the outcome is less desirable than had both sides reduced [...] Read more – ‘The Nuclear Arms Race: Prisoner’s Dilemma or Perceptual Dilemma?’.
A lot of mental models in here. * * * I went to a totally fascinating talk at MIT given by Kevin Woods from the Institute for Defense Analyses. Woods interviewed Saddam’s key henchmen, like Chemical Ali and Tariq Aziz, who were captured after the invasion. He also has access to documents in Saddam’s palaces [...] Read more – ‘The Delusions of Saddam’.
A new study about a different kind of audio approach during sleep gives insight into how the sleeping brain works, and might eventually come in handy to people studying a language, cramming for a test or memorizing lines in a play. Scientists at Northwestern University report that playing specific sounds while people slept helped them [...] Read more – ‘Sounds During Sleep Aid Memory’.
The coroner’s report left no doubt as to the cause of death: toxic loans. That was the conclusion of a financial autopsy that federal officials performed on Haven Trust Bank, a small bank in Duluth, Ga., that collapsed last December. What went wrong? In many instances, the financial overseers failed to act quickly and forcefully [...] Read more – ‘Post-Mortems Reveal Obvious Risk at Banks’.
When people with high testosterone levels aren’t in leadership positions, “they can find it stressful and uncomfortable when denied the status that they crave.” A bit more surprising is that the reverse is true as well, that “people low in testosterone find it uncomfortable to be placed in positions of authority.” The main finding from [...] Read more – ‘Testosterone and Teams’.
Today’s idea: More and more, we place our trust in “algorithmic authority,” a new-media professor writes. We “regard as authoritative an unmanaged process of extracting value from diverse, untrustworthy sources.” On his blog, Clay Shirky, professor of new media at New York University, offers a tentative description of what’s eroding the “institutional monopoly” of trust [...] Read more – ‘The Rise of ‘Algorithmic Authority’’.
I respect Bill Belichick more today than I ever have. Last night he made a decision in the final minutes that led his team the New England Patriots to defeat. It will likely go down as one of the most criticized decisions any coach has ever made. With his team leading by six points and just over [...] Read more – ‘Belichick’s Rational Decision’.
Pinker’s book review. Galdwell’s reply Steven Pinker reviewed my new book “What the Dog Saw,” in the New York Times Book Review this past Sunday. I sent the following letter to the editor in response: It is always a pleasure to be reviewed by someone as accomplished as Stephen Pinker, even if—in his comments on [...] Read more – ‘Gladwell replies to Pinker’s book review of What the Dog Saw’.
From Jonathan Haidt’s book The Happiness Hypothesis. and the gap between action and perception is bridged by the art of impression management. If life itself is what you deem it, then why not focus your efforts on persuading others to believe that you are a virtuous and trustworthy cooperator? Natural selection, like politics, works by [...] Read more – ‘Moral Hypocrisy’.
Abstract: This article looks at business schools and the failures in their curriculum that contributes to a lack of management skills among graduates. Business schools are on the wrong track. For many years, MBA programs enjoyed rising respectability in academia and growing prestige in the business world. Their admissions were ever more selective, the pay [...] Read more – ‘HOW BUSINESS SCHOOLS LOST THEIR WAY’.
Today, credit cards and online shopping make deferring gratification harder than Ben Franklin ever could have imagined. And Americans are in hock up to their ears, with $10.5 trillion in mortgages and another $2.6 trillion in consumer credit. It isn’t any wonder that saving feels impossible to many people. But psychologists have long known that [...] Read more – ‘NUDGE: Using the Lottery Effect to Make People Save’.
The healthcare debate: Jonathan Haidt on how our moral roots skew our reasoning I think there are three basic principles of moral psychology, and I find it helpful to approach any new puzzle by applying them. The first principle is intuitive primacy: Peoples’ judgments are based primarily on their intuitive reactions — on quick gut [...] Read more – ‘Video: The healthcare debate:’.
IF a business school professor is running short on cash, there is a sure-fire solution: run a dollar auction game in class. To start, the professor offers to sell the class a $20 bill. Bidding starts at $1 and goes up in $1 increments. The winner pays the professor whatever the high bid was, and [...] Read more – ‘Thaler: Paying a Price for the Thrill of the Hunt’.
It’s frightening to think that you might not know something, but more frightening to think that, by and large, the world is run by people who have faith that they know exactly what’s going on. Read more – ‘Thought Provoking Quotes’.
H/T Zain! What a great find! “But understanding the psychological nuances of how a price plan affects customers’ behavior is at least as important to running a cellphone company today as knowing how radio waves spread over a city. Those high charges for going over your allotted minutes, for example, are designed to cause you [...] Read more – ‘Is There a Method in Cellphone Madness?’.
We are generally all too willing to rely on automated, habitual responses or cognitive shortcuts that ignore possibilities that are not glaringly obvious. Or we let emotional responses, such as fear of one outcome or desire for another, dictate our behavioural responses so that we end up with the very outcome we fear the most. [...] Read more – ‘What Intelligence Tests Miss’.
(Full paper below) A short intro to Peter M ToddI received a BA in mathematics from Oberlin College, an MPhil in computer speech and language processing from Cambridge University, and an MA in psychology from the University of California at San Diego. I completed my PhD in psychology at Stanford University in 1992, working with [...] Read more – ‘Must READ! — Précis of Simple heuristics that make us smart’.
Incentives consistently backfire when efforts to boost bonuses override moral considerations. An Article by Barry Schwartz in Business Week. Incentives don’t just fail; they often backfire. Swiss economists Bruno Frey (University of Zurich) and Felix Oberholzer-Gee (Harvard Business School) have shown that when Swiss citizens are offered a substantial cash incentive for agreeing to have [...] Read more – ‘The Dark Side of Incentives’.
The City of Atlanta is excited to present the ReCART (Rewards for Collecting All Recyclables Together) Curbside Recycling Pilot Project! ReCART is a one year pilot program (with (2) two one year renewals at the City’s discretion), whose premise is to measure change in recycling habits of an initial 10,000 city households to determine the viability [...] Read more – ‘RecycleBank Points’.
We’re all for fair play so long as it helps us. There’s even a biblical parable about this, in which the owner of a vineyard rounded up labourers at different times of the day. Early in the morning, he went out to find labourers, offering each 1 denarius. But he offered the same to those [...] Read more – ‘Monkeys share our sense of injustice’.
People with a specific low efficiency variant of the gene for monoamine oxidase A are significantly more likely to have credit card debt. This paper presents the first evidence of a specific gene predicting real world economic behavior. Using data from the National Longitudinal Study of Adolescent Health, we show that individuals with a polymorphism [...] Read more – ‘The Debt Gene’.
Often, in movies or books, two characters are swept away in “the heat of the moment” and commit sexual acts they might not have otherwise. With so many societal warnings against “heat of the moment” activities, Dan Ariely and George Loewenstein found it odd that little research has been conducted on the impact of sexual [...] Read more – ‘The Influence of Arousal’.
From Alice Schroeder’s new chapter: THE CRISIS: The decline of Berkshire Hathaway’s stock from Triple-A status in the updated (and condensed) version of The Snowball. As the financial crisis evolved, the lame-duck Bush administration and the new Obama administration followed a consistent course under Federal Reserve Chairman Benjamin Bernanke and Treasury Secretary Timothy Geithner, with [...] Read more – ‘THE CRISIS: The decline of Berkshire Hathaway’s stock from Triple-A status’.
Vanity Fair profiles Larry Summers. (Note, Charlie Munger calls Summers ferociously smart.) Some interesting points: No less an authority on presidential power than Henry Kissinger once told Tim Geithner, now the Treasury secretary, that Summers should have a permanent job at the White House, solely to sort out for the president—any president—the good ideas on [...] Read more – ‘Endless Summers’.
Richard Thaler outlines how principles from behavioral economics can help policymakers — and managers — achieve better outcomes. Q: Could you explain some of the key ideas in Nudge: nudges, choice architecture, and libertarian paternalism? “Libertarian paternalism” suggests that these two seemingly contradictory terms can actually define a non-contradictory and attractive policy alternative. By “libertarian” we [...] Read more – ‘Do you need a nudge?’.
Here is how a range of leading authors describe their approach to writing—a process that can be lonely, tedious, frustrating and exhilarating. NICHOLSON BAKER Most days, Nicholson Baker rises at 4 a.m. to write at his home in South Berwick, Maine. Leaving the lights off, he sets his laptop screen to black and the text [...] Read more – ‘How to Write a Great Novel’.
Would it make a difference to you if the tax was added at the cash register or would you rather see the full price on the item you buy? Consumers are less likely to buy an item if a sales tax is explicitly listed on the product than if the same tax is instead added [...] Read more – ‘Nudge and Taxes’.
This excellent article focuses on hindsight bias, getting a drivers license in India, financial literacy among the poor, and interest rates … He bears a striking resemblance to Tamil Nadu cricketer Lakshmipathy Balaji. But, that’s where the similarity ends. “The thing I like most in the world is being correct,” Sendhil Mullainathan, professor of economics [...] Read more – ‘Many think they saw the financial crisis coming. It’s hindsight bias’.
Blair’s like a very sweet pudding. The first mouthful is nice, but then it becomes nauseating. The present research shows that although people believe that learning more about others leads to greater liking, more information about others leads, on average, to less liking. Thus, ambiguity—lacking information about another—leads to liking, whereas familiarity—acquiring more information—can breed [...] Read more – ‘Less Is More: The Lure of Ambiguity, or Why Familiarity Breeds Contempt’.
Saturated fat dulls the brain’s response to key appetite hormones, an effect useful in our evolutionary past during times of scarcity, but not so much in a well-fed society. As a result of the hormone resistance, a meal high in saturated fat can crank up our appetite well after dessert. “Taking time off from a [...] Read more – ‘Lard Lesson: Why Fat Lubricates Your Appetite’.
Kitty Genovese, was a New York City woman who was stabbed to death near her home in the Kew Gardens section of Queens, New York on March 13, 1964. Genovese was buried in a family grave at Lakeview Cemetery in New Canaan, Connecticut. The circumstances of her murder and the supposed lack of reaction of [...] Read more – ‘(Video) The Bystander Effect: The Murder of Kitty Genovese’.
A new study in the journal Psychological Science investigated the dynamics underlying why we repeatedly convince ourselves that we’ve overcome impulsiveness and can stop avoiding our worst temptations. This particular tendency toward self-deception is called restraint bias, and four experiments were conducted under this study to test the hypothesis that it’s rampant in our bias-prone species. [...] Read more – ‘Are you in control?’.
So you might wonder why Wal-Mart recently decided to start its own price war, taking on Amazon in the online book market. Wal-Mart began by marking down the prices of ten best-sellers—including the new Stephen King and the upcoming Sarah Palin—to ten bucks. When Amazon, predictably, matched that price, Wal-Mart went to nine dollars, and, [...] Read more – ‘Game Theory and The Amazon Wal-Mart Price War’.
Charlie Munger said one way to make more money was to charge more for your products and use some of the increased profits to bribe the purchasing agent. It seems, at least one person took him seriously. Alan Scott Huey, who served as a senior vice president at SK Foods between 2004 and 2008, is [...] Read more – ‘Bribing the purchasing agent: Tomato Prices’.
The video is about an experiment where children are asked to share a pile of chocolate coins. The twist to is they had to follow the rules of the ultimatum game Specifically, here is how the game worked. One child got to offer a split of the chocolate (“9 pieces for me, 1 for you”). [...] Read more – ‘Video: The Ultimatium Game’.
Ahh, the famous game show problem (also known as The Monty Hall Problem). This is a probability puzzle you’ve likely heard of: Suppose you’re on a game show, and you’re given the choice of three doors. Behind one door is a car, behind the others, goats. You pick a door, say #1, and the host, [...] Read more – ‘The Famous Game Show Problem’.
A new brain imaging study by Josh Greene and Joe Paxton at Harvard University published in the Proceedings of the National Academy of Sciences suggests that what separates the well-behaved from the poorly-behaved might not be the ability to control your temptations but rather what kind of temptations you have. For example, foregoing the opportunity [...] Read more – ‘Can you resist temptation? It depends’.
How can someone with a high IQ have these kinds of intellectual deficiencies? Put another way, how can a “smart” person act foolishly? Keith Stanovich, professor of human development and applied psychology at the University of Toronto, Canada, has grappled with this apparent incongruity for 15 years. He says it applies to more people than [...] Read more – ‘Clever Fools’.
However, money is a relatively recent invention, and despite its incredible economic usefulness it does come with its own set of problems. In particular, it turns out that decisions about money are often non-intuitive and, in fact, quite difficult. Consider the following situation as an example: You are thirsty, tired, and annoyed and just want [...] Read more – ‘The psychology of money and habits’.
The relentless influx of emails, cellphone calls and instant messages received by modern workers can reduce their IQ by more than smoking marijuana, suggests UK research. Far from boosting productivity, the constant flow of messages and information can seriously reduce a person’s ability to focus on tasks, the study of office workers found. Eighty volunteers [...] Read more – ‘‘Info-mania’ dents IQ more than marijuana’.
Jared Diamond’s journey of discovery began on the island of Papua New Guinea. There, in 1974, a local named Yali asked Diamond a deceptively simple question: “Why is it that you white people developed so much cargo, but we black people had little cargo of our own?” Charlie Munger and Bill Gates are huge fans [...] Read more – ‘Documentary: Guns Germs and Steel’.
We all know the scene: the departmental coffee room, with the price list for tea and coffee on the wall and the “honesty box” where you pay for your drinks – or not, because no one is watching. In a finding that will have office managers everywhere scurrying for the photocopier, researchers have discovered that [...] Read more – ‘‘Big Brother’ eyes make us act more honestly’.
Russell James is an assistant professor in the Department of Housing and Consumer Economics at the University of Georgia. His presentations on behavioral economics are fantastic. I’ve posted some in an attempt to catalog them with the various mental models we talk about on the site. Check the link above for even more presentations! Read more – ‘Russel James: Presentation Collection’.
Key Concepts Brain structure and metabolic efficiency may underlie individual differences in intelligence, and imaging research is pinpointing which regions are key players. Smart brains work in many different ways. Women and men who have the same IQ show different underlying brain architectures. The latest research suggests that an individual’s pattern of gray and white [...] Read more – ‘What Does a Smart Brain Look Like?: Inner Views Show How We Think’.
People who cheated in high school are more likely to cheat on their taxes or lie to spouses or customers and otherwise bend the truth, a Los Angeles-based ethics institute’s report shows. * * * And the findings suggest that habits formed in childhood persist: Those who cheated in high school are more likely as [...] Read more – ‘Seeds of adult dishonesty are sown in youth, study finds’.
Amy Edmondson’s wonderful research on how, when nurses feel as if they have psychological safety, they openly talk about and try to correct drug treatment errors, but when they work in a climate of fear, they are afraid to even admit when they have made mistakes — which led to a rather bizarre finding in [...] Read more – ‘Reducing Interruptions and Saving Lives: New Study on Drug Treatment Errors’.
Why this universe? What is everything made of? How does complexity happen? From the unpredictable behaviour of financial markets to the rise of life from inert matter, Leo Kadananoff, physicist and applied mathematician at the University of Chicago, finds the most engaging questions deal with the rise of complex systems. Kadanoff worries that particle physicists [...] Read more – ‘Seven questions that keep physicists up at night’.
Supermarket Chain Says Healthy Living Incentives for Employees Reduce Health Care Costs Safeway CEO Steve Burd tells NPR that employees receive a discount on their health insurance if their body mass index is below 30 (a higher number is considered obese). “If it’s above 30, that means they pay about $318 more than someone who is in the [...] Read more – ‘Incentives: Cutting Calories for Cash’.
Mathematics might seem a logical fit for the courts, then. Judges and juries, though, all too often rely on gut feeling. A startling example was the rape trial in 1996 of a British man, Dennis John Adams. Adams hadn’t been identified in a line-up and his girlfriend had provided an alibi. But his DNA was [...] Read more – ‘Importance of Math: Probably Guilty’.
Can we pull the wool over our own eyes or do we see through our mind games? In theory the one person we should never, ever, lie to is ourselves. Surely lying to ourselves is counter-productive? Like calmly and deliberately shooting yourself in the foot or taking a hot toasting fork and plunging it into [...] Read more – ‘The Truth About Self-Deception’.
Pilots’ Use of Laptops Violated Company Policy, Investigators Say Federal safety investigators said the pilots of Northwest Flight 188 violated company policy by opening up laptops in midair, as the distracted pilots discussed work-scheduling issues while failing to monitor the airplane or calls from air-traffic controllers. In an update of its investigation, the National Transportation [...] Read more – ‘Mundane human factors can combine to create major distractions’.
Faced with a budget crunch and the possible closing of some state parks, Washington state legislators have switched the default rule on state park fees that drivers pay when they renew their license plates. Previously, paying the $5 fee had been an option for drivers. The state switched to an opt-out arrangement where drivers are [...] Read more – ‘Another example of the status quo bias’.
Fascinating. This great article by Loren Steffy deserves a wider audience. The real cause of our economic crisis can’t be found by searching Google or YouTube. It doesn’t reside in an old newspaper story or in some long-forgotten video of congressional hearings. If we want the answer, we need a mirror. This crisis isn’t just [...] Read more – ‘Seduced by Irrational Capitalism’.
Psychology has profound effects on decision making. Within the business world, psychology can explain the processes through which organizations and individuals develop fraudulent and unethical behavior. Through analysis of the psychology behind the decision making and considering examples of corruption within the corporate world, precautions may be made to prevent similar fraudulent practices from occurring [...] Read more – ‘Psychology and Fraud’.
THE Wall Street Journal has a fascinating story today about a man named Ralph Anspach—an economist—who created a board game called Anti-Monopoly and was sued by actual Monopoliy producer Hasbro for his trouble. As a defence, Mr Anspach decided to challenge the traditional story of the game’s origination: that it was created by Charles Darrow [...] Read more – ‘How a Fight Over a Board Game Monopolized an Economist’s Life’.
Our internal body clocks are shaped by the weather as well as by the seasons, scientists have discovered. Researchers used computers to model the workings of internal biological clocks. They found the mechanism had to be so complicated because it was able to deal with varying amounts of light from hour to hour, as well [...] Read more – ‘Weather ‘shapes human body clock’’.
Self-perceived incompetence, not actual incompetence, can provoke a person in power to abuse their authority. * * * The basis for the new research was the idea that people who are in a position of power, but who believe they are incompetent, are likely to feel threatened. Cornered managers, like trapped animals, lash out. The [...] Read more – ‘Why your boss is a bully’.
A great interview in the NYT today with Carol Bartz, the CEO of Yahoo, discussing feedback, leadership, and career advice *** Q. What are the most important leadership lessons you’ve learned? A. I grew up in the Midwest. My mom died when I was 8, so my grandmother raised my brother and me. She had [...] Read more – ‘Interview with Carol Bartz: Imagining a World of No Annual Reviews’.
In 1988, an associate professor started growing cultures of Escherichia coli. Twenty-one years and 40,000 generations of bacteria later, Richard Lenski, who is now a professor of microbial ecology at Michigan State University, reveals new details about the differences between adaptive and random genetic changes during evolution. By generation 20,000, for example, the group found [...] Read more – ‘Evolution details revealed through 21-year E. coli experiment’.
If you thought you could improve your odds over Vegas by counting cards, think again. First they start paying out 6 to 5 on natural blackjacks, and now this? The little guy gets the short end of the stick once again, as UK researchers say they’ve developed a computer algorithm that can analyze how Blackjack [...] Read more – ‘Computers to crack down on card counters’.
The placebo effect is not only real; its ability to deaden pain has been pinpointed to cells in the spinal cord. That raises hopes for new ways of treating conditions such as chronic pain. The researchers who made the discovery scanned the spinal cords of volunteers while applying painful heat to one arm. Then they [...] Read more – ‘Placebo effect caught in the act in spinal nerves’.
Low-quality females prefer low-quality males, at least in the avian world. his is according to research published in the Royal Society journal Proceedings B, testing female zebra finches’ taste in males. As adults, the low-quality females showed a preference for the songs of males of the same quality, and for the male birds themselves. Evolutionary [...] Read more – ‘Lowly females pick mediocre mates’.
The optimal moment to address the question of how to improve human decision making has arrived. Thanks to 50 years of research by judgment and decision- making scholars, psychologists have developed a detailed picture of the ways in which human judgment is bounded. This article argues that the time has come to focus attention on [...] Read more – ‘Improving your decision making!’.
This has interesting ramifications on a lot of psychology studies. ABSTRACT—Psychology is the luckiest of the sciences be- cause it owns the most interesting questions, the foremost being, ‘‘Why do people do what they do?’’ Naively, one might expect that research addressing this question would focus on the most important behaviors, but instead most studies [...] Read more – ‘Naive and Obvious Questions’.
Remember the apple polisher? In my school days, apple polishers were kids who kissed up to the teacher. They would tell their biology teacher, I’ve wanted to be a biologist since I was 3; or say to the English instructor, I’m reading Faulkner’s novels on my own time, just for fun. They’d ask for permission [...] Read more – ‘Does kissing up to the teacher work?’.
We compare people’s evaluations of uncertain prospects with people’s predictions of others’ evaluations of uncertain prospects. We restrict our attention to prospects, such as those arising in principal-agent interactions, which offer rewards for success at some task. We argue that the construction of evaluations and predictions often includes two sub-steps, involving likelihood judgment and likelihood [...] Read more – ‘Uncertain prospects’.
Paul Ekman, the real-life guy behind lie to me, wrote this interesting piece on Darwin’s Contributions to Our Understanding of Emotion and Expression. The Expression of the Emotions in Man and Animals by Charles Darwin was published in 1872, a year after The Descent of Man. It is, without a doubt, a brilliant book, forecasting [...] Read more – ‘Darwin’s Contributions to Our Understanding of Emotion and Expression’.
A common social comparison bias—the better-than-average-effect—is frequently described as psychologically equivalent to the individual-level judgment bias known as overconfidence. However, research has found ‘‘Hard–easy’’ effects for each bias that yield a seemingly paradoxical reversal: Hard tasks tend to produce overconfidence but worse-than-average perceptions, whereas easy tasks tend to produce underconfidence and better-than-average effects. We argue [...] Read more – ‘Comparison Bias: the better-than-average-effect’.
People are inaccurate judges of how their abilities compare to others’. J. Kruger and D. Dunning (1999, 2002) argued that unskilled performers in particular lack metacognitive insight about their relative performance and disproportionately account for better-than-average effects. The unskilled overestimate their actual percentile of performance, whereas skilled performers more accurately predict theirs. However, not all [...] Read more – ‘Skilled or Unskilled, but Still Unaware of It: How Perceptions of Difficulty Drive Miscalibration in Relative Comparisons’.
Fascinating Read. “Making the scale bigger also made the difference appear more exaggerated, so emotionally consumers feel like they’re getting much better service or a big savings in cost.” There are so many things you can purchase or accomplish for just pennies a day. You can get lots of interesting magazine subscriptions, or a good [...] Read more – ‘For just pennies a day”’.
By directly manipulating the activity of individual neurons, scientists have given flies memories of a bad experience they never really had, according to a report in the October 16th issue of the journal Cell, a Cell Press publication. “Flies have the ability to learn, but the circuits that instruct memory formation were unknown,” said Gero [...] Read more – ‘Is that Memory False?’.
Nice read Via Enoch‘s shared items Information, the very thing that makes it possible to be an engineer, a doctor, a lawyer, or any other kind of modern information worker, is threatening our ability to do our work. How’s that for irony? The global economy may run on countless streams, waves, and pools of information, [...] Read more – ‘How to beat information overload’.
The results of this study, if accurate, are stunning. Adopting E-ZPass reduces low birth rate in 2km range. Congestion in America is pretty costly even without taking these negative effects into account. And in most cases, the back-ups aren’t due to toll booths, but to the fact that roads are free to use. * * [...] Read more – ‘Negative Externalities of a toll booth’.
You read it here first. The much-discussed Comcast-NBC Universal deal is going to happen. Or at least, that’s what the numbers on the spreadsheet predict. That spreadsheet is the work of Bruce Bueno de Mesquita, an unassuming-looking New York University and Stanford University researcher prone to big claims: Namely, that by using a mathematical model, [...] Read more – ‘In NBC Deal, Learn From Game Theory’.
In a terrific book by William Poundstone, Fortune’s Formula: The Untold Story of the Scientific Betting System that Beat the Casinos and Wall Street, is the story of a 1968 dinner meeting between mathematician Edward Thorp and fund manager Warren Buffett. Poundstone casually mentions that Buffett and Thorpe discussed their shared interest in nontransitive dice. [...] Read more – ‘Nontransitive Dice and Buffett’.
Edward Thorp on the Mathematics of Gambling. From Amazon: This book gives a quick overview of making money, or losing money more slowly, at various games of chance. Thorpe was best known for “inventing” a system of card counting for blackjack and basic strategy. He wrote the 1962 book “Beat the Dealer” which spawned a [...] Read more – ‘Free Book : The Mathematics of Gambling’.
A presentation given at the Santa Fe Institute by Edward Thorp on March 29, 2005. Nobel prize-winning economists have claimed for forty years that investors cannot to any significant extent “beat the market” through skill. This is the content of various forms of their “efficient market hypothesis” or EMH. But they are wrong, as shown [...] Read more – ‘Gambling, Derivatives and Market Inefficiency’.
For the entertainment of an audience and the chance of a payday.… In a fighting dog, the quality that is prized above all others is the willingness to persevere, even in the face of injury and pain. A dog that will not do that is labelled a “cur,” and abandoned. A dog that keeps charging [...] Read more – ‘Malcolm Gladwell: OFFENSIVE PLAY How different are dogfighting and football?’.
Even well-respected journals fall victim to the halo effect. In a study on peer review practices of learned journals Peters and Ceci 1982 found the following example of the halo effect in action. They selected 12 well-known journals of psychology and to each one they sent an article to be considered for publication. These articles [...] Read more – ‘Would you publish this trash? depends on who submitted it’.
How important is handwriting? Hardly at all you might say, especially today when most people use a computer. The evidence, however, says otherwise. In a revealing experiment (Nisbett and Wilson 1977), a number of exam scripts were copied twice – once in good handwriting and once in bad handwriting. They were then passed on to [...] Read more – ‘How Important is Handwriting?’.
Most people think the Halo effect applies only to people. Most people would be mistaken. The Halo and Devil Effects are another manifestation of the Availability Bias. If a person has one salient (available) good trait (or bad trait as the case is with the devil effect), his other traits are likely to be judged [...] Read more – ‘The Halo and Devil Effects’.
This calls into question a lot of the foundations of the young behavioural economics discipline. *** At a recent conference on experimental economics, John List, professor of economics at the university of chicago, shared a beer with other delegates and opined, “I think I used to be the most hated guy in this field.” His [...] Read more – ‘How an inconvenient economist upset the cool crowd’.
Primacy error is where the first impression we have of someone or something continues despite contrary evidence. Later evidence is interpreted in light of our pre-formed beliefs. The Primacy error is one form of the availability error: the early opinions (or items) are immediately available in our minds when we encounter later information. These beliefs [...] Read more – ‘The Primacy Error’.
Smith’s basic idea was that business owners seeking to lure customers away from rivals have powerful incentives to introduce improved product designs and cost-saving innovations. These moves bolster innovators. profits in the short term. But rivals respond by adopting the same innovations, and the resulting competition gradually drives down prices and profits. In the end, [...] Read more – ‘The Invisible Hand, Trumped by Darwin?’.
What do Apple, Inc.’s craziest fanatics, Wall Street, and the case of the Harvard professor and the police officer have in common? Easy. They don’t just show a lot of bad thinking. They show a lot of the same bad thinking. After all, studies have found that human beings tend to fall back on a [...] Read more – ‘When Good Thinking Goes Bad’.
Research in psychology and economics argues that consumers sometimes make suboptimal decisions. Rational firms will optimally exploit such consumers and the resulting equilibria often generate deadweight losses. We would like to know whether these deadweight losses are robust. For example, market inefficiencies give an entering firm the incentive to educate other firms’ customers, debias them, [...] Read more – ‘Shrouded Attributes and Information Suppression in Competitive Markets’.
The CDC now says that 1 in 100 Americans has autism. But is the epidemic real? It turns out that many children with other developmental problems are being given autism diagnoses just to get them state funding. * * * This week, the journal Pediatrics released new statistics compiled by the CDC on the prevalence [...] Read more – ‘Follow the incentives: Behind the Autism Statistics’.
When someone insures you against the consequences of a nasty event, oddly enough, he raises the incentives for you to behave in a way that will cause the event. So if your diamond ring is insured for $50,000, you are more likely to leave it out of the safe. Economists call this phenomenon “moral hazard,” [...] Read more – ‘The Hazard of Moral Hazard’.
A well-reasoned article by Coke’s CEO says no and the evidence says no. Why don’t we believe him? “Will a soft drink tax change behavior? Two states currently have a tax on sodas—West Virginia and Arkansas—and they are among the states with the highest rates of obesity in the nation.” Muhtar Kent “Coke Didn’t Make [...] Read more – ‘Will a Soft Drink Tax Change Behavior?’.
1. How will this decision make things better for the organization? Consider how the decision will affect the organization’s ability to fulfill its mission. Managers who push their teams to achieve “stretch goals” without providing adequate support and resources may be seeking to get noticed by their bosses rather than helping the company serve its [...] Read more – ‘Three Questions to Remove Ego from Decision Making’.
In addition to assorted bad breaks and pleasant surprises, opportunities and insults, life serves up the occasional pink unicorn. The three-dollar bill; the nun with a beard; the sentence, to borrow from the Lewis Carroll poem, that gyres and gimbles in the wabe. An experience, in short, that violates all logic and expectation. The philosopher [...] Read more – ‘How Nonsense Sharpens the Intellect’.
Sometimes merchants play with you. Earlier today we noted how they use the availability bias to help with pricing. But they do other things too — like creating a false sense of scarcity. Companies such as Apple have understood this phenomenon for awhile. They even deliberately create scarcity, initial product shortages, to drive up excitement [...] Read more – ‘Why Apple Intentionally Causes Product Shortages’.
(Let’s call this one over-confidence.) Our experience over the years has shown us that the vast majority of managers and leaders in Fortune 1000 companies have deficiencies in their basic financial knowledge. We spend most of our time teaching managers and leaders in corporate America how to read their own financial statements, understand key financial [...] Read more – ‘The Dismal Financial IQ of US Managers’.
Statistics are abstract and pale which results in most people ignoring them. The knowledge that smoking increases the risk of lung cancer tenfold has little effect. People who give up smoking usually do so only when an isolated and dramatic event transpires. Smoking rates amongst doctors has been dropping (as with the overall population). In [...] Read more – ‘Lung Cancer and its impacts on Doctors’.
When driving down the highway a driver who has just passed an accident almost invariably slows down. The same can be said of someone who passes a police officer sitting on the side of the road. The accident makes available to the driver that possibility that he could crash too. The sight of a police [...] Read more – ‘Driving and Availability’.
Merchants have long manipulated shoppers throughout the world. Would you be more likely to buy a book costing $19.95 or one costing $20? The important figure is the number of dollars: it is therefore more available than the pennies and people seize on it, disregarding the fact that there is only a minimal difference in [...] Read more – ‘Consumer Prices and the Availability Bias’.
The organizers of lotteries give maximum publicity to past winners, and of course say nothing about the great majority who have won no prizes. By publicizing winners, they make winning foremost in the minds (making it available) of potential ticket buyers. This makes them believe they are more likely to win than they really are. Read more – ‘Lotteries and the Availability Bias’.
There is evidence of anchoring to the 52-week high (“The results show a visibly and statistically obvious effect of the 52-week high”) * * * The price that a bidding firm offers for a target is usually the outcome of a negotiation with the target’s board. The standard finance conception emphasizes synergies. The offer price [...] Read more – ‘The Psychology of Pricing in Mergers and Acquisitions’.
Nudging people doesn’t always work. Perhaps it works better when the amount of information provided to the consumer doesn’t increase but rather the way choices are presented does. * * * A study of New York City’s pioneering law on posting calories in restaurant chains suggests that when it comes to deciding what to order, [...] Read more – ‘Calorie Postings Don’t Change Habits, Study Finds’.
The evidence suggests that when hardened criminals are reasonably sure that they will be caught and punished swiftly, even mild sanctions deter them. … One way to make apprehension and punishment more likely is to spend substantially more money on law enforcement. In a time of chronic budget shortfalls, however, that won’t happen. But [Mark [...] Read more – ‘Game Theory: A Smarter (and Cost-Efficient) Way to Fight Crime’.
Relating Biases to investment decisions in the oil and gas industry. AbstractIt is argued that biases such as anchoring and overconfidence contribute to a US$30 billion/year loss in the oil and gas industry(Goode, 2002). The most commonly used debiasing technique, within the industry, is awareness-style training, where participants have the biases and debiasing techniques described [...] Read more – ‘Efficacy of Bias Awareness in Debiasing Oil and Gas Judgments’.
Separating decisions from outcomes is an important step. Uncertainty is the main underlying reason why we can have good decisions and bad outcomes (or vice versa). Like it or not, acknowledge it or not, uncertainty is an important element of most decisions. Probability is the language of uncertainty. It enables us to assess, and reason [...] Read more – ‘Would You Know a Good Decision if You Saw One?’.
By. William K. Clifford (a little philosophical but an interesting read) Originally published in Contemporary Review, 1877. Reprinted in Lectures and Essays (1879). Presently in print in The Ethics of Belief and Other Essays (Prometheus Books, 1999). THE DUTY OF INQUIRY A shipowner was about to send to sea an emigrant-ship. He knew that she [...] Read more – ‘The Origins of Belief’.
The ubiquitous nature of self-deception in daily life. RationalizationIn a now-famous experiment, Leon Festinger and Merrill Carlsmith of Stanford University had participants complete an excruciatingly boring series of peg-turning tasks for a full hour. The researchers then asked them to help create a positive expectation for the next participant–by telling that person the experiment would [...] Read more – ‘The Toolbox of Self-Deception’.
The Prisoner’s Dilemma game assumes that there is a conflict between self-interest and the benefits achieved through mutual cooperation. The Assurance game, also known as the stag hunt (see below), however, models interactions where mutual cooperation is the best possible outcome, but where cooperation may involve an element of risk. In such situations both players [...] Read more – ‘Game Theory: Assurance Game (aka why people arrive late)’.
(And other real-life adventures in the neglected art of negotiation.) Everything is open to negotiation. Everything. For three months, the author treated the world that way. This is what ensued.) * * * Buying a hot dog is an essential, unquestionable transaction, the lowest common denominator of American commerce. The sale of a hot dog [...] Read more – ‘Haggling for Hot Dogs’.
Psychology professor Walter Mischel’s 1960s experiment involving children, sugary sweets, and self-control has become a classic. The set-up is simple. A researcher lets a child pick a favorite food from a tray of cookies, marshmallows, candies, pretzels, and other sweets. The researcher puts that treat on the table in front of the child and makes [...] Read more – ‘What do marshmallows have to do with self-control?’.
Some really interesting statistics comparing the backgrounds of politicians in the United States with their Chinese counterparts. In the United States:54% Lawyers17% Business15% Other8% Teaching6% Military In China39% Engineers21% Civil Service21% Other7% Military6% Law6% Teaching Source (MP3 of Canadian Radio) Read more – ‘So, Who goes into politics?’.
“When certain cascading events line up, they can lead to a disaster that you just can’t anticipate.” —Michael Mauboussin Time Magazine recently interviewed Legg Mason Capital Management’s chief investment strategist Michael Mauboussin. This interview is full of Wisdom! When certain cascading events line up, they can lead to a disaster that you just can’t anticipate. [...] Read more – ‘Unanticipated Failure’.
“Bless me Father, for I have sinned. I have been with a loose girl”. The priest asks, “Is that you, little Joey Pagano ?” “Yes, Father, it is.” “And who was the girl you were with?” “I can’t tell you, Father, I don’t want to ruin her reputation”. “Well, Joey, I’m sure to find out [...] Read more – ‘Game Theory Joke: the strategy of a confession’.
The simple difference between the default (Status Quo Bias) can have huge impacts. In the article below, Richard Thaler talks about how opting out could have a positive effect while still allowing people the freedom of choice. * * * WHEN Steven P. Jobs, Apple’s chief executive, appeared in public recently for the first time [...] Read more – ‘Nudging: Opting in vs. Opting Out’.
Harvard School of Public Health commencement addressJune 4, 2009Atul Gawande Thank you to the graduates, Dean Bloom, and Dean Frenk for asking me to speak to you on the occasion of graduation. It is an honor. I am grateful. And I would now like to proceed by ignoring you. Instead, I would like to speak [...] Read more – ‘Atul Gawande: Harvard School of Public Health commencement address’.
Abstract: This paper provides an overview of the main theoretical elements and empirical underpinnings of a “managerial power” approach to executive compensation. Under this approach, the design of executive compensation is viewed not only as an instrument for addressing the agency problem between managers and shareholders but also as part of the agency problem itself. [...] Read more – ‘Executive Compensation as an Agency Problem’.
In his book, Complications, Atul Gawande references a very hard to find medical article written by two medical philosophers. The article (below) is a fascinating expose on the necessity of fallibility in the medical (and other) fields. Precisely because our understanding and expectations of particulars cannot be fully spelled out merely in terms of lawlike [...] Read more – ‘The Necessity of Fallibility in Medicine’.
Fascinating ideas on avoiding folly. To avoid the various foolish opinions to which mankind are prone, no superhuman genius is required. A few simple rules will keep you, not from all error, but from silly error. If the matter is one that can be settled by observation, make the observation yourself. Aristotle could have avoided [...] Read more – ‘Bertrand Russell: on avoiding foolish opinions’.
One of the myths about capitalism is that it is about incentives. It is also about disincentives. No one should have a piece of the upside without a share of the downside. However, the very nature of compensation adds to risk. If you give someone a bonus without clawback provisions, he or she will have [...] Read more – ‘Taleb: Myth about capitalism’.
Nassim Taleb (who wrote the best-selling books The Black Swan, Fooled By Randomness, and The Bed of Procrustes) and his coauthors argue that conventional risk-management textbooks don’t prepare us for the real world. For instance, no forecasting model predicted the impact of the current economic crisis. Black Swan events are almost impossible to predict. Instead of perpetuating [...] Read more – ‘Taleb:The Six Mistakes Executives Make In Risk Management’.
A report in the June 2009 Proceedings of the National Academy of Sciences showed that a nap with REM (or “dream”) sleep improves people’s ability to integrate unassociated information for creative problem solving, and study aft er study has shown that sleep boosts memory. If you memorize a list of words and then take a [...] Read more – ‘Reboot your brain’.
Whitney Tilson hosts an hour long conference call about Charlie Munger & Poor Charlies Almanack. Skip to minute 6 if you want to avoid the long (flattering) introduction. Whitney talks for 20-30 minutes on Munger and then takes a Q&A starting around minute 34 If You Have An Audio Player Then: Click Here For The [...] Read more – ‘Whitney Tilson on Charlie Munger’.
A groundbreaking four-year study, set for publication in the October issue of Harvard Business Review, seems to confirm that getting away from work can yield unexpected on-the-job benefits. When members of 12 consulting teams at Boston Consulting Group were each required to take a block of “predictable time off” during every work week, “we had [...] Read more – ‘Work Smarter, Not Longer’.
Wired reports on a fascinating new study showing how eyewitness memory can be influenced by video. Participants in the study were paired with a partner (who was actually part of the research team) to play a gambling-based computer game. The participants bet money on their own ability to answer multiple choice questions. The game relied [...] Read more – ‘Fake Video Can Convince Witnesses to Give False Testimony’.
The impact of the status quo bias. Some Terminated Employees Work Hard To Keep Up Appearance of Having a Job For weeks after he was laid off, Clinton Cole would rise at the usual time, shower, shave, don one of his Jos. A. Bank suits and head out the door of his Vienna home — [...] Read more – ‘Lying Low After a Layoff’.
Researchers Stumble Upon Alternative Explanation for the Lifelong Challenges Faced by Children Born in Colder Months: Children born in the winter months already have a few strikes against them. Study after study has shown that they test poorly, don’t get as far in school, earn less, are less healthy, and don’t live as long as [...] Read more – ‘New Light on the Plight of Winter Babies’.
Logic Takes a Back Seat — and Windows, as Auto Maker Plays Tariff Games BALTIMORE — Several times a month, Transit Connect vans from a Ford Motor Co. factory in Turkey roll off a ship here shiny and new, rear side windows gleaming, back seats firmly bolted to the floor. Their first stop in America [...] Read more – ‘To Outfox the Chicken Tax, Ford Strips Its Own Vans’.
Robyn Dawes, Richard Thaler Economics can be distinguished from other social sciences by the belief that most (all?) behavior can be explained by assuming that agents have stable, well-defined preference and make rational choices consistent with those preference in markets that (eventually) clear. An empirical result qualifies as an anomaly if it is difficult to [...] Read more – ‘Anomalies and Cooperation (Dawes and Thaler)’.
This is a great read on social dilemmas—Social dilemmas are situations in which each member of a group has a clear and unambiguous incentive to make a choice which, when made by all members, provides poorer outcomes for all than they would have received if none had made the choice. Some examples of Social Dilemmas [...] Read more – ‘Social Dilemmas (Dawes)’.
Making Policy for Complex Systems: A Medical Model for Economics IntroductionIn recent years, policy analysts have shown a growing interest in less rationalistic policymaking models. Medical knowledge may be useful to consider in this regard, since it combines practical knowledge with the findings of numerous analytic disciplines, and includes procedures for dealing with high uncertainty. [...] Read more – ‘High Uncertainty Resulting from Partial knowledge of Complex Systems’.
Ever want to know * Why the liberation of homosexuals may contribute to the end of homosexuality * Why men find large breasts of women attractive * Why parents kill their own children * Why men steal more than women * Why older siblings tend to do what their parents [...] Read more – ‘Why Beautiful People Have More Daughters’.
Peter Sedlmeier (University of Paderborn, Germany) , Gerd Gigerenzer (Max Planck Institute for Psychological Research, Germany) Received: 19 May 1995; Accepted: 29 May 1996 Journal of Behavioral Decision Making Abstract According to Jacob Bernoulli, even the ‘stupidest man’ knows that the larger one’s sample of observations, the more confidence one can have in being close [...] Read more – ‘Sample Size, representativeness heuristic’.
I don’t know about you but when I find something interesting I tend to immerse myself. For the last week, I’ve been learning everything possible about Atul Gawande. I’ve read every single one of his articles and I’ve started reading his books. Dr. Atul Gawande, is the author of Better: A Surgeon’s Notes on Performance [...] Read more – ‘Video: Atul Gawande @ Google’.
Competing with Amazon is tough. The article below highlights the network effect and how Amazon is using this to its advantage (and customers!) * * * In shoes, Nike is perhaps the best example. The shoe giant has steadfastly declined to allow Amazon and most other Web retailers to sell its sneakers, and only late [...] Read more – ‘Amazon and the Network Effect’.
You shouldn’t believe everything you read, yet according to a classic psychology study, we can’t help it. This argument about whether belief is automatic when we are first exposed to an idea or whether belief is a separate process that follows understanding has been going on for at least 400 years. The French philosopher, mathematician [...] Read more – ‘Why You Can’t Help Believing Everything You Read’.
In the Five Temptations of a CEO Patrick Lencioni lists five temptations of a CEO. These temptations are all derived from psychology. The desire to protect the status of your own career — Bias from incentives and reinforcement, Bias from self-interest. The desire to be popular. — Bias from liking/loving, reverse reciprocation, The need to [...] Read more – ‘The Five Temptations of a CEO’.
History is filled with moments of shared delusion and madness, from silly fads and popular crazes to the more extreme forms of collective panic and cult paranoia. They’re examples of what has come to be called ‘mass hysteria’. * * * Hilary Evans and Robert Bartholomew – who have spent many years exploring and cataloguing [...] Read more – ‘Mass Hysteria and Extraordinary Social Behavior’.
In 1954, Muzafer and Carolyn Sherif studied the origin of prejudice in social groups in a classic study called the Robbers Cave Experiment. The study divided 24 twelve-year-old boys with similar backgrounds into two distinct groups and took them to Robbers Cave State Park, Okla., for summer camp. Initially, the two groups were unaware of [...] Read more – ‘Group conflict and the need to belong’.
Math-based aids for making decisions in medicine and industry could improve many diagnoses–often saving lives in the process. A physician stares at a breast x-ray, agonizing over whether an ambiguous spot is a tumor. A parole board weighs the release of a potentially violent criminal. A technician at an airport worries over a set of [...] Read more – ‘Better Decisions Through Science’.
Providing health care is like building a house. The task requires experts, expensive equipment and materials, and a huge amount of coördination. Imagine that, instead of paying a contractor to pull a team together and keep them on track, you paid an electrician for every outlet he recommends, a plumber for every faucet, and a [...] Read more – ‘Incentives and Medicine’.
A wonderful article—possibly relating to our tendency to fall victim to do something syndrome. * * * When it comes to fighting headaches, instant gratification is ideal. It’s easy to pop a couple of pain pills and move on with your daily activities. But doctors say the most common remedy used by headache sufferers could [...] Read more – ‘Headache? Don’t just reach for that bottle of pills’.
This principle is not an esoteric possibility, identified by clever economists, in search of applications in reality; it’s not something that requires any unusual set of conditions in order to operate. It’s operation is nearly universal. It permeates our reality. All that it requires is that, as between any two potential trading partners, the cost [...] Read more – ‘A Note on Comparative Advantage’.
Excellent article in the Washington Post today on Moral Hazard. * * * Moral hazard already existed in the system on at least three levels. First, bank employees and managers had asymmetric compensation structures. In good years, they stood to make huge amounts of money; in bad years, even if the bank lost money, they [...] Read more – ‘Lehman Brothers and the Persistence of Moral Hazard’.
This is a great article on information advantage and purchasing a car. Would you find it more useful if I taught you how to buy your next car for the cheapest possible price or if I explained how to predict the foreign policy of South Korea? I thought so. I’ll tell you about the car. [...] Read more – ‘Game Theory: Buying a car’.
Thanks to Simoleon Sense for finding this! Journalist Misha Glenny spent several years in a courageous investigation of organized crime networks worldwide, which have grown to an estimated 15% of the global economy. From the Russian mafia, to giant drug cartels, his sources include not just intelligence and law enforcement officials but criminal insiders. http://video.ted.com/assets/player/swf/EmbedPlayer.swf Read more – ‘McMafia’.
Fascinating and effective. Have you ever gone to a restaurant and found some ridiculously priced item on the menu? Of course you didn’t buy it — you’re no sucker. Or are you? This Today Show piece on Gregg Rapp may surprise you. Rapp is a menu engineer. He helps restaurants maximize revenue by hacking common flaws [...] Read more – ‘What We Can Learn About Pricing From Menu Engineers’.
This interesting article from 2008 was sent over to us by Ryan. * * * You are wired to find meaning in the world, a predisposition that leaves you with less control over your beliefs than you may think. Even if you’re a hard-core atheist who walks under ladders and pronounces “new age” like “sewage,” [...] Read more – ‘You believe in magic!’.
Predictably Irrational is a fascinating examination of why human beings are wired and conditioned to react irrationally. We human beings are a selfish bunch, so it’s all the more surprising to see how easily we can be manipulated to behave in ways that run counter to our own self-interest. I: The Truth About Relativity When [...] Read more – ‘10 Irrational Human Behaviors’.
“Where all think alike, no one thinks very much.” —Walter Lippmann The five most dangerous words in business are: “Everybody else is doing it.” —Warren Buffett The principle of social proof derives from social comparison and conformity. We naturally compare our behavior to what others are doing. If we notice a difference we feel some [...] Read more – ‘Mental Model: Social Proof’.
In How We Decide, Jonah Lehrer offers how too much information can be harmful because we can’t separate the signal from the noise. In an experiment with MIT business students, one group is given extremely detailed reports on companies and asked to buy and sell their stocks based on what they learn. Another group is [...] Read more – ‘How We Decide’.
Bruce Pandolfini doesn’t know much about business plans or Internet deals. But he knows more than almost anyone else about thinking strategically. Pandolfini, 51, is one of the most sought-after chess teachers — and one of the most widely read chess writers — of the 20th century. Pandolfini carries an average of 15 private students [...] Read more – ‘Chess Master Teaches Thinking, Not Chess’.
What happens in a big bureaucracy? Poor decisions, stupid decisions, or no decisions. Common sense is lost. Consider this bit of news from the NYTimes on the Food and Drug Administration. A new food-labeling campaign called Smart Choices, backed by most of the nation’s largest food manufacturers, is “designed to help shoppers easily identify smarter [...] Read more – ‘What happens in a bureaucracy?’.
Organizational structure, conceptualized as the decision-making structure among a group of individuals, is shown to affect the number of initiatives pursued by organizations, and the omission and commission errors made by organizations. While the paper below relates to the mutual fund industry it highlights that organizational structure (the decision-making structure) can and should be designed [...] Read more – ‘Designing organizations to compensate for human bias’.
Conventional wisdom is often wrong. Forces (psychological or otherwise) acting on people make us prefer to fail conventionally than succeed unconventionally. Consider football and the choice of punting. Conventional wisdom tells us to punt on fourth down. If a coach ‘goes for it’ and misses he’s an idiot. If he goes for it and ‘makes [...] Read more – ‘Do Firms Maximize? Evidence from Professional Football’.
Bureaucracies are a great “ecosystem” to look at mental models and their impact. [The SEC report] offers a rare look into the inner workings of a government agency and how turf battles and poor communication hampered investigative efforts. It also reveals how the SEC’s various divisions didn’t always work together and how staff often looked [...] Read more – ‘SEC Releases Full Inspector General Report on Madoff Fraud’.
Economics, as a field, got in trouble because economists were seduced by the vision of a perfect, frictionless market system. If the profession is to redeem itself, it will have to reconcile itself to a less alluring vision — that of a market economy that has many virtues but that is also shot through with [...] Read more – ‘How Did Economists Get it So Wrong?’.
Pirates had strict but unconventional codes of behavior, and some historians claim them as early progressives—with democracy, economic fairness, racial tolerance, and even health care.(worth reading in its entirety) …Modern piracy has its origins in the wars that the great European powers fought over trade in the centuries following the discovery of the New World. [...] Read more – ‘BOOTYLICIOUS’.
In her intriguing book The Science of Sherlock Holmes, E.J. Wagner recounts the true tale of Sir Roger Tichborne. In 1854, Sir Roger was reported as lost at sea. His mother refused to believe that her son, whom she had lovingly raised in France, was gone forever. She kept putting out inquiries, asking for any [...] Read more – ‘Evidence’.
Abstract What affects individual investors’ willingness to invest in an asset? This paper presents evidence that — when there is no salient reference purchase price — investors tend to be return chasers and variance avoiders with respect to their idiosyncratic history with the asset. Using administrative panel data on 25,000 401(k) accounts at five firms, [...] Read more – ‘Reinforcement Learning and Investor Behavior’.
The term “critical mass” seems to have first appeared in nuclear physics. In this discipline, “critical mass” is the minimum amount of a given fissile material necessary to achieve a self-sustaining fission chain reaction. The term, however, is now used as a much broader construct. In astrophysics, for example, critical mass is a concept used [...] Read more – ‘Mental Model: Critical Mass’.
HOW DOES one escape a dilemma in which multiple individuals acting in their own rational self-interest can ultimately destroy a shared limited resource—even when it is clear this serves no one in the long run? … THE COMMONS problem starts at its base as a more sophisticated version of the prisoner’s dilemma, an exercise that [...] Read more – ‘Tyranny for the Commons Man’.
People separate knowledge into two major categories. The first consists of areas where they believe some people know more than others (math, physics, computer programming, history, linguistics, etc.) and the second consists of areas where they don’t (religion, politics, raising a family, etc.). The second area has always baffled me. Why will people willingly say they know [...] Read more – ‘Why Management Is Really Like Math’.
We now know that we can predict life outcomes by zip codes. We can predict relative earnings of children by zip code, morbidity rates by zip code. And so HUD has two strategies: The one is the restoration of communities, so we can begin to mitigate impact by zip code. But the other is to [...] Read more – ‘It’s the zipcode stupid’.
It’s not that the old meds are getting weaker, drug developers say. It’s as if the placebo effect is somehow getting stronger. *** His plan hinged on the success of an experimental antidepressant codenamed MK-869. Still in clinical trials, it looked like every pharma executive’s dream: a new kind of medication that exploited brain chemistry [...] Read more – ‘Placebos Are Getting More Effective. Drugmakers Are Desperate to Know Why.’.
The people who multitask the most are the ones who are worst at it. That’s the surprising conclusion of researchers at Stanford University, who found multitaskers are more easily distracted and less able to ignore irrelevant information than people who do less multitasking. “The huge finding is, the more media people use the worse they [...] Read more – ‘Can multitaskers ignore stuff that doesn’t matter?’.
Let me give you one example. Investors tend to think about each stock we purchase in a vacuum, distinct from other stocks in our portfolio. We are happy to realize “paper” gains in each stock quickly, but procrastinate when it comes to realizing losses. Why? Because while regret over a paper loss stings, we can [...] Read more – ‘The Mistakes We Make—and Why We Make Them’.
I was watching the TV show House recently and found a tidbit of great wisdom rephrased. This wording on House equally applies to life and investing:“If you’re not prepared to look stupid nothing great will ever happen.“ And of course, that is derived from John Maynard Keynes who said:“Worldly wisdom teaches that it is better [...] Read more – ‘Wisdom From The TV Show House’.
Do lost people really walk around in circles? In 2007, Jan Souman dropped three volunteers into the Sahara desert and watched as they walked for several miles, in an attempt to walk in a straight line. Souman was interested in the widespread belief that lost travelers end up walking in circles, a belief that has [...] Read more – ‘Do lost people really walk around in circles?’.
“This is a great model for understanding why we end up in a rut, and then dig ourselves deeper and deeper into that rut.” * * * Chronic stress has been shown to raise blood pressure, stiffen arteries, suppress the immune system, heighten the risk of diabetes, depression and Alzheimer’s disease and make one a [...] Read more – ‘Brain Is a Co-Conspirator in a Vicious Stress Loop’.
Noah Goldstein’s, Steve Martin’s and Robert Cialdini’s Yes! 50 Scientifically Proven Ways to Be Persuasive is a pop psych book, where a bunch of research in psychology is distilled into one readable volume. 50 scientifically proven ways constitute 50 chapters of the book, longest of which take 7 pages. The authors take the position that [...] Read more – ‘Yes! 50 Scientifically Proven Ways to Be Persuasive’.
Numeric judgments are often made under uncertainty. In such situations, they are easily influenced by a standard or anchor that may be explicitly or implicitly provided to the judge….Clearly, uncertainty about a judgment depends on what people know about its target: The less judges know about the target, the more uncertain they are about the [...] Read more – ‘Numeric Judgments under Uncertainty: The Role of Knowledge in Anchoring’.
We often pay attention to irrelevant information. This happens because we develop estimates by starting with an initial anchor that is based on whatever information is provided and adjust from the anchor (sometimes our adjustments are not sufficient). More problematic perhaps is that the existence of an anchor leads people to think of information consistent [...] Read more – ‘Mental Model: Anchoring’.
By WARREN E. BUFFETT (2009/08/19) IN nature, every action has consequences, a phenomenon called the butterfly effect. These consequences, moreover, are not necessarily proportional. For example, doubling the carbon dioxide we belch into the atmosphere may far more than double the subsequent problems for society. Realizing this, the world properly worries about greenhouse emissions. The [...] Read more – ‘The Greenback Effect’.
Dear David (if I may), You and your party may be the only hope we have for a resilient society insulated from negative Black Swans and in which everyone has the opportunity to benefit from positive Black Swans. For I despair of the Obama administration’s ability to fix this financial crisis and prevent future ones. [...] Read more – ‘Taleb to David Cameron’.
The term Ockham’s(Occam’s) Razor is attributed to a Franciscan Friar William of Ockham: William Ockham (c. 1285–1349) is remembered as an influential nominalist but his popular fame as a great logician rests chiefly on the maxim attributed to him and known as Occam’s razor: Entia non sunt multiplicanda praeter necessitatem or “Entities should not be [...] Read more – ‘Ockham and Investing’.
“The great defect of scale, of course, which makes the game interesting—so that the big people don’t always win—is that as you get big, you get the bureaucracy. And with the bureaucracy comes the territoriality—which is again grounded in human nature. And the incentives are perverse. For example, if you worked for AT&T in my [...] Read more – ‘Bureaucracy is not shareholder friendly’.
This industrial city, hard hit by the recession, has found a new, low-budget way to fight crime: Park an unmanned, former Brink’s truck bristling with video cameras in front of the dwellings of troublemakers. Police here call it the Armadillo. They say it has restored quiet to some formerly rowdy streets. Neighbors’ calls for help [...] Read more – ‘Fighting Crime with ‘Shame’’.
Knowing when you’ve mad a mistake and learning from that experience can be a very rewarding and profitable undertaking. If you can admit your mistake, you can learn from it. However, an inability to learn from mistakes can mean you make the exact same mistake again. Consider Steve Feinberg, the onetime owner of Chrysler, and [...] Read more – ‘Making A Mistake: Fienberg and Buffett’.
The study of how we form opinions of our own moral worth is a budding field, and it suggests that the human mind works in powerful, subtle ways to make hypocrites out of all of us – especially those who hold themselves in the highest moral esteem. People who inveigh against a vice in others [...] Read more – ‘The Nature Of Temptation’.
THE ANSWER IS MORE COMPLICATED THAN YOU MIGHT THINK. Lactation is perhaps one of the most curious natural systems ever to have evolved. For hundreds of millions of years, reptiles, fish, and amphibians flourished without milk. Then somehow mammals arose, simultaneously developing the ability not only to produce milk but also to digest it. There’s [...] Read more – ‘WHY DO ONLY SOME ADULTS DRINK MILK?’.
Can one of the nation’s great musicians cut through the fog of a D.C. rush hour? Let’s find out. It was 7:51 a.m. on Friday, January 12, the middle of the morning rush hour. In the next 43 minutes, as the violinist performed six classical pieces, 1,097 people passed by. Almost all of them were [...] Read more – ‘Pearls Before Breakfast’.
Bank of America lied about $3.6 billion in Merrill Lynch bonuses, and as a result will pay $33 million in fines to the SEC. That’s less than 0.92% of the bonuses in question. Link Read more – ‘Failed Incentives’.
The customer expects that the seller will provide advice on products that are in his or her best interest. The customer, however, is often not qualified to check whether the seller does in fact provide the right advice. Do not get too friendly with your investment adviser. It lowers your guard and increases your risk [...] Read more – ‘Fooled by your ‘friends’’.
Researchers have found that generic American parents, faced with a child who can’t do math or science, will say “Don’t worry, Johnny, because you have so many other talents.” Asian parents, supposedly, will say “Since you aren’t apparently naturally gifted at math or science you’ll have to study extra hard in these areas,” and not [...] Read more – ‘Comfortable with our stupid children’.
14 January 1995 was an evening that Alex White will never forget. He matched all six numbers on the UK National Lottery, with an estimated jackpot of a massive £16 million. Unfortunately, White (not his real name) only won £122,510 because 132 other people also matched all six numbers and took a share of the [...] Read more – ‘Unpopular Lottery Numbers’.
No one can predict the future, but the powers of probability can help. Armed with this knowledge, a high-school mathematics education and £50, I headed off to find out how Thorp, and others like him, have used mathematics to beat the system. Just how much money could probability make me? When Thorp stood at the [...] Read more – ‘What’s luck got to do with it? The maths of gambling’.
Many presidents have directed policy from on high, shunning the details of most issues. Mr. Obama has adopted a different style, particularly when it comes to economics, as he and his team wrestle with the worst financial crisis the nation has faced since the Depression. The president sometimes chafes at his advisers’ limitations, quizzing them [...] Read more – ‘The president as a leader and decision maker’.
We can improve our decision-making an awful lot by using checklists. The main way that I see it is that the investment world, either by design or by nature — and I think it is a combination of the two — throws up plenty of information that is designed to trigger one of two areas [...] Read more – ‘Improving Your Decision Making With Checklists (Guy Spier)’.
Wikipedia began in 2001, and what started as a tiny and dubiously optimistic site is now a household name. At its inception, and for years to follow, this constantly changing encyclopedia written entirely by volunteers was a radical and inconceivable venture. Today, it’s quite possibly the largest reference website there is, attracting around 65 million [...] Read more – ‘Video: The birth of Wikipedia’.
Someone pointed out that blaming economic crises on “greed” is like blaming plane crashes on gravity. Certainly planes wouldn’t crash if it wasn’t for gravity. But when thousands of planes fly millions of miles every day without crashing, explaining why a particular plane crashed because of gravity gets you nowhere. Neither does talking about “greed,” [...] Read more – ‘Greed’.
More than 45 million Americans now belong to a health club, up from 23 million in 1993. We spend some $19 billion a year on gym memberships. Of course, some people join and never go. Still, as one major study — the Minnesota Heart Survey — found, more of us at least say we exercise [...] Read more – ‘Why Exercise Won’t Make You Thin’.
“I can resist everything except temptation.” — Oscar Wilde It seems Oscar was right. Loran Nordgren at the Kellogg School of Management confirmed this while looking at the importance of “restraint bias” – the way people miscalculate how much temptation they can handle. They found that the people who were least confident at their ability [...] Read more – ‘Can you resist? We don’t appreciate how powerful temptation can be’.
Jared Diamond is the guru of collapse. Collapse is the title of one of the books that have made him a world-famous academic. It is a theme that captures the Zeitgeist: markets have collapsed, banks have collapsed and confidence, even in the capitalist system itself, has collapsed. Humans’ ability to destroy the basis of their [...] Read more – ‘Society and the Ability to Survive.’.
Is Anderson Silva just that good or have we been inflating Forrest Griffin’s status and abilities for some time? It’s interesting to consider that we over-valued Forest Griffin. While the article below has a catchy title it fails to really dive into whether we over-valued Griffin. Did we, the collective we, fall victim to liking/loving [...] Read more – ‘Did we over-value Forest Griffin?’.
What Internet search engine would you choose in a blind test? This brings back memories of the Coke versus Pepsi blind taste test. In a post last month we highlighted a study that found most people—drinking small quantities, i.e. a sip — prefer the taste of Pepsi to Coke (sweeter), however, people prefer to know [...] Read more – ‘Mental Models and Internet Search’.
Mental Model: Anchoring Suggesting artificially low minimum payments anchors credit card holders to the benefit of credit card companies (full study below). In the study below, Stewart found there is a strong correlation between the suggested minimum payment and the actual payment. * * * About three quarters of credit-card accounts attract interest charges. In [...] Read more – ‘The Cost of Anchoring on Credit-Card Minimum Payments’.
In economics, comparative advantage refers to the ability of a person or nation to produce a good or service at a lower opportunity cost than another person (or nation). This is why trade can create value for both parties—because each person (or nation) can concentrate on the activity for which they have the lower opportunity [...] Read more – ‘Mental Model: The Principles of Comparative Advantage’.
While most Americans think climate change is an important issue, they don’t see it as an immediate threat, so getting people to “go green” requires policymakers, scientists and marketers to look at psychological barriers to change and what leads people to action, according to a task force of the American Psychological Association. Scientific evidence shows [...] Read more – ‘Psychological factors help explain slow reaction to global warming’.
When does a Prius have the same environmental impact as a Hummer? The 95 percent of the time it’s parked. Most people don’t spend time thinking about parking spaces unless they’re looking for one. But these 9′ by 18′ rectangles of urban real estate have a vast impact on North American communities. They affect the [...] Read more – ‘The High Cost of Free Parking’.
Judgments about what is good and what is bad, what is worthwhile and what is a waste of talent, what is useful and what is less so, are judgments that seldom can be made in the present. They can safely be made only by posterity.– Tulving Hindsight bias occurs when we look backwards in time [...] Read more – ‘What Is Hindsight Bias?’.
We learn from our mistakes, right? Well, maybe not as much as we learn from our successes, according to a new MIT study that sheds light on the brain’s ability to change in response to learning. In the July 30 issue of the journal Neuron, Earl K. Miller, the Picower Professor of Neuroscience, and MIT [...] Read more – ‘Learning from Success’.
A Crow, half-dead with thirst, came upon a Pitcher which had once been full of water; but when the Crow put its beak into the mouth of the Pitcher he found that only very little water was left in it, and that he could not reach far enough down to get at it. He tried, [...] Read more – ‘Aesop: The Crow and the Pitcher’.
Details from the investment newsletter business on how investors fall prey to the hot-hand: If we have a good month, we get a flood of new subscribers. If we have a mediocre month, we get a mass exodus. I’m not talking the gentle ebb and flow of the ocean tides …our subscription business is always [...] Read more – ‘Real Life: Investors follow the mythical hot hand’.
This is very interesting — the study basically concludes that our bias to view experts (authority) as more reliable overrides our perceptions and objective evaluation of the situation under which information is obtained. Jurors, it is thought, tend to put themselves in the shoes of the person under duress and project their own principles. This [...] Read more – ‘Jurors Don’t Discount Evidence Obtained From Rough Treatment’.
Perhaps the contrast bias is more prevalent than we thought. This study indicates that we accept certain behaviors we wouldn’t normally if they are slow to change. Four laboratory studies show that people are more likely to accept others’ unethical behavior when ethical degradation occurs slowly rather than in one abrupt shift. Participants served in [...] Read more – ‘When misconduct goes unnoticed: The acceptability of gradual erosion in others’ unethical behavior’.
Individuals regularly succumb to greed, lust, and self-destructive behaviors. New research from the Kellogg School of Management examines why this is the case, and demonstrates that individuals believe they have more restraint than they actually possess—ultimately leading to poor decision-making. * * * Loran Nordgren, senior lecturer of management at the Kellogg School, said “People [...] Read more – ‘Greed, Lust, and Self-restraint’.
Elaine Morgan is a tenacious proponent of the aquatic ape hypothesis: the idea that humans evolved from primate ancestors who dwelt in watery habitats. Hear her spirited defense of the idea — and her theory on why mainstream science doesn’t take it seriously. * * * http://video.ted.com/assets/player/swf/EmbedPlayer.swf Read more – ‘We evolved from aquatic apes’.
In our battle to outwit bacteria are we fighting an impossible war? Bacteria has been around for some 3 billion years and over that time nothing has adapted to its surroundings quite like it. Bacteria’s ability to adapt and evolve creates interesting challenges for humans. As bacteria increasingly develops resistance to antibiotics our medical system [...] Read more – ‘The Evolution of Bacteria’.
Apparently that depends on whether you are mulling over an ethical decision from a position of power. “In determining whether an act is right or wrong, the powerful focus on whether rules and principles are violated, whereas the powerless focus on the consequences,” states the study “How Power Influences Moral Thinking,” in the Journal of [...] Read more – ‘Is That Behavior Ethical?’.
This is a great article from the Globe and mail on moral hazard. Gwyn Morgan is the retired founding CEO of EnCana Corp. From its origin in the 1600s, the term “moral hazard” has been used to express our revulsion toward protecting reckless risk-takers from downside consequences. Over time, it has also come to describe [...] Read more – ‘Moral Hazard’.
“The craving for that physics-style precision does nothing but get you in terrible trouble”—Charlie Munger In this video, Malcolm Gladwell speaks on the challenge of hiring in the modern world. One of those challenges, the mis-match problem, happens when we use criteria to judge someone for a job that is radically out of step with [...] Read more – ‘The Mis-Match Problem’.
What do you think are the odds that you will die during the next year? Try to put a number to it — 1 in 100? 1 in 10,000? Whatever it is, it will be twice as large 8 years from now. This startling fact was first noticed by the British actuary Benjamin Gompertz in [...] Read more – ‘Gompertz Law of human mortality.’.
To understand how climate change may affect species survival, we need to understand how climate influences their time-keeping. * * * “Our approach undoubtedly provides valuable predictive insights into extinction risk,” they continue. “Our claim is that an approach that focuses on time constraints provides additional insights into the mechanisms that underpin an animal’s relationship [...] Read more – ‘Research shows that animals need time to survive’.
A study by Richard Murnane at Harvard University found that, from 1917 to 1980, merit pay had been tried in more than 7,000 U.S. school districts, but the only plans that survived were those in which pay was token. Rewarding teachers with higher pay when their students score higher on tests represents a seductive thought [...] Read more – ‘Incentives and pay for teachers’.
Behind this humor lies a nugget of truth…. Our current financial crisis has its roots in a single easily identifiable source: the envy others felt toward Goldman Sachs. The bozos at Merrill Lynch, the dimwits at Citigroup, the nimrods at Lehman Brothers, the louts at Bear Stearns, even that momentarily useful lunatic Joe Cassano at [...] Read more – ‘Bashing Goldman Sachs Is Simply a Game for Fools—Michael Lewis’.
What a fool does in the end, the wise do in the beginning —Spanish proverb Can a good idea become a bad idea? Legitimate ideas frequently cause problems when carried too far. Consider the most recent financial crisis. Mortgage Backed Securities, by themselves, were not a bad idea. However, this idea went too far. The [...] Read more – ‘The Role of Excess’.
I believe Gresham’s Law can also be applied to human behavior in organizations. If, for example, bad behavior reaches a tipping point in an organization it becomes increasingly hard for any individual to behave in a good way. Watching those around you succeed for the wrong reasons isn’t very appealing—especially if they are all having [...] Read more – ‘Does bad human behavior drive out the good?’.
How do pirates decide what ransom to ask for? The answer, from an interview with an actual pirate, might surprise you. Reading The Invisible Hook really got me hooked on pirates. Despite what many think, they are very smart and intuitively grasp governance, incentives, and other aspects of human nature. The interview below touches on [...] Read more – ‘How do pirates decide what ransom to ask for?’.
What would happen to the demand for tea if there was a health scare regarding coffee. Obviously coffee and tea are substitutes. So if the health scare reduces the price of coffee then the demand for tea will . . . well, let’s think about it a bit more. Then a few years later I [...] Read more – ‘Why Is Supply And Demand So Confusing?’.
The constant search for precision affects more then just economists. The Functional Magnetic Resonance Imaging (fMRI) is quickly becoming popular for studies of emotion, personality, and social cognition. The fMRI scarcely existed 10 years ago and yet has enjoyed a meteoric rise in attention and popularity because, in part, of the precision it offers. If [...] Read more – ‘fMRI: False Signals Cause Misleading Brain Scans’.
This article incorporates several mental models such as misreading cause and effect, over-reacting to short term patterns, attribution error, framing, and incentives. John Walters had some data he wanted to make public, but he also had a credibility problem. Just two years earlier, in 2005, Walters, the country’s drug czar, had cited a hike in [...] Read more – ‘How phony statistics about cocaine prices hide the truth about the war on drugs’.
Most people prefer the taste of Pepsi over Coca Cola yet more people buy coke over Pepsi. Why? The article below looks at the science behind branding and why your brain is more powerful than your taste. Read Montague, Director of the Human Neuroimaging Lab at Baylor College of Medicine, has now provided proof that [...] Read more – ‘The Science of Branding: Coca Cola over Pepsi’.
“In the absence of feedback loops, the natural distribution of phenomena would be 50/50–inputs of a given frequency would lead to commensurate results. It is only because of positive and negative feedback loops that causes do not have equal results. Yet it also seems to be true that powerful positive feedback loops only affect a [...] Read more – ‘Feedback Loops’.
Of course people purchase things for all sorts of reasons. One of those reasons is to impress your friends and potential mates; You want people to know just how “cool” you are. This, in turn, creates problems for companies that upgrade product lines without offering meaningful visual differentiation from earlier releases. This excerpt of this [...] Read more – ‘The Cafe Table Effect’.
Economist Simon Johnson and “Obamanomics” author John Talbott say there’s plenty of blame to go around (and many mental models at work). “Economists and media pundits — themselves mostly gentlemanly elites anxious to please corporate America — are slow to make the accusation that what happened here was truly criminal, and so miss the real [...] Read more – ‘Who caused the economic crisis?’.
An old article in the New York Times on group think and the role it played in the housing crisis. Perhaps we should remember this the next time we “seek consensus” on an issue at a meeting. Consensus and right are not the same. In his classic 1972 book, Groupthink, Irving L. Janis, the Yale [...] Read more – ‘Challenging the Crowd in Whispers, Not Shouts’.
Academics, like teenagers, sometimes don’t have any sense regarding the degree to which they are conformists. This article from the New York Times highlights conformity, over-reliance on authority, and group-think in the science community. A remarkable first-hand description of this phenomenon was provided a few months ago by the economist Robert Shiller, co-inventor of the [...] Read more – ‘Researcher Condemns Conformity Among His Peers’.
Why do societies fail? With lessons from the Norse of Iron Age Greenland, deforested Easter Island and present-day Montana, Jared Diamond talks about the signs that collapse is near, and how — if we see it in time — we can prevent it. Still curious? Read Collapse: How Societies Choose to Fail or Succeed and [...] Read more – ‘Jared Diamond: Why Societies Collapse’.
“We sell luxury—it’s an emotion” Great Article discussing some of the interesting tricks used to sell expensive watches. This article highlights reciprocation, contrast, and framing. When a man in a Cartier watch stepped into the IWC Schaffhausen boutique in Beverly Hills recently, salesman Hua Huynh sprang into action. He led the customer to a case [...] Read more – ‘How to Sell a $35,000 Watch in a Recession’.
This article below takes a look at some of the possible psychology behind LeBron James recent actions and introduces the Pratfall Effect. Recently, LeBron James was dunked on at his basketball camp by a college sophomore named Jordan Crawford. This caused quite the stir, not necessarily because a 20-year-old dunked on James, but because of the reaction by James and [...] Read more – ‘Image is Everything: LeBron James and the Pratfall Effect’.
A must read article from Malcolm Gladwell: In 1996, an investor named Henry de Kwiatkowski sued Bear Stearns for negligence and breach of fiduciary duty. De Kwiatkowski had made—and then lost—hundreds of millions of dollars by betting on the direction of the dollar, and he blamed his bankers for his reversals. The district court ruled [...] Read more – ‘Cocksure: The Psychology of Overconfidence’.
An interesting New York Times article on the the associative powers (mind share) companies gain from verbs. There is a lot of psychology at work in the simple use of the, now common, “google” verb. If you say you’re going to “google” something, we can probably assume that you use google, will use google for this [...] Read more – ‘Mindshare and the Brand Verb’.
In a recent paper, “Harnessing Crowds: Mapping the Genome of Collective Intelligence,” Thomas Malone and his two co-authors, Robert Laubacher, a research scientist at M.I.T., and Chrysanthos Dellarocas, a professor at the University of Maryland, use a biological analogy in calling the design patterns of collective intelligence systems “genes.” They studied the genelike building blocks [...] Read more – ‘Collective Intelligence’.
The human brain is trained to respond to large and abstract threats in a way that is far from ideal. According to research by Harvard professor Daniel Gilbert, there are four key elements a threat must have for us to act on. The threat must: (1) have a face; (2) incite moral sensibility; (3) clear [...] Read more – ‘Food Inc. The Psychological Weapons of Protest’.
“The only proven way to raise your odds of making a good decision is to learn to use a good decision-making process–one that can get you the best solution with a minimal loss of time, energy, money, and composure.”—John Hammond A good decision making process can literally change the world. Consider the following example from [...] Read more – ‘An Introduction to Decision Making’.
The following article was sent to us by a reader (original, full article) and offers an excellent mental-model based approach to explaining the financial crisis similar to the article we posted this morning. In my view, there were three problems that led to the collapse of financial markets: misaligned incentives, poor risk management, and needless [...] Read more – ‘Mental Model Approach To the Financial Crisis’.
The law of demand states that there is an inverse relationship between the price of a good and the quantity of the good demanded. Demand can be influenced by: the income level of the buyer, the price of the good, the availability of substitutes. Stepping outside of economics, demand can be influenced by, among other [...] Read more – ‘Mental Model: Supply and Demand’.
The combination of incentives, reinforcement, positive feedback loops, over-reliance on authority, and poor accounting contributed to the current mess. Bailing out these institutions, while necessary, creates a moral hazard going forward. And now, having lost money, institutions, like gamblers, will now be more likely to take risky bets with unfavorable odds in an effort to [...] Read more – ‘The Present Mess’.
