Biases

If You’re Looking for Bad Luck, You’ll Soon Find It

August 16, 2021 By Nagesh Belludi Leave a Comment

Consider a woman who complained that her neighborhood dry cleaner ruined her expensive slacks. “Last month, he spoiled my wool blazer. Last Christmas, he … . It always happens,” she grumbled.

This woman knew she was taking chances with this dry cleaner. She allowed it to happen.

Luck is sometimes the result of taking appropriate action. And, bad luck is sometimes the result of tempting fate.

Say, you’ve been planning for weeks for your next big trip. You got an incredible deal on the day’s very last flight to your destination. On the day of departure, your late-night flight gets canceled. Sure, you’re a victim of back luck—but you invited it. Think about it. Odds are, you’re more likely to have a flight delay or cancellation later in the day because airlines schedule their rosters tightly to maximize aircraft and flight crew utilization. Delays and disruptions from earlier in the day propagate onward to the late flights.

Often, luck has nothing to do with bad luck. “The fault,” as Shakespeare wrote, “is not in our stars, but in ourselves.”

Sometimes you can be your own worst enemy. Don’t self-sabotage yourself by tempting fate.

Idea for Impact: Bad choices beget bad luck

You have to be lucky to get lucky. You have no control over many outcomes in life, but you can always increase the odds of getting lucky by taking appropriate action. More importantly, you can minimize the chance of bad luck by decreasing its odds.

Remember, a good mathematics student never buys a lottery ticket, and if he does, he never grumbles about not winning the jackpot!

Why Your Judgment Sucks

April 5, 2021 By Nagesh Belludi Leave a Comment

Israeli-American psychologist Daniel Kahneman’s bestselling Thinking, Fast and Slow (2011) describes the finer points of decision-making. It’s an engaging showcase of the innate biases of the mind and unthinking approaches to decision-making.

Human Beings are Intuitive Thinkers

Kahneman is a behavioral economics pioneer and the winner of the 2002 Nobel Memorial Prize in Economic Sciences. His lifelong collaboration with Amos Tversky (1937—96) has molded humans’ thinking about human error, risk, judgment, decision-making, happiness, and more. Tversky died in 1996, so he did not share in the Nobel.

Thinking, Fast and Slow explores what Kahneman calls the “mind’s machinery” as two coexisting modes of thought (“fast and slow,” as the title says.) Kahneman splits the brain into two radically divergent ways, employing a two-tier model of cognition.

System One makes judgments instantly, intuitively, and automatically, as when a cricket batsman decides whether to cut or pull. A significant part of System One is “evolved heuristics” that lets us read a person’s expression in a microsecond from a block away, for example. And it can’t be switched off. System One’s thinking is fast and effortless. It often jumps to the wrong conclusions, relies on hunches and biases, and perhaps overconfident.
System Two is slower, conscious, calculated, and deliberate, like long division. Its operations require attention. System Two is what we think of as “thinking”—slow, tiring, and essential. It’s what makes us human. Even if System Two believes it is on top of things, System One makes many of our decisions.

System One Isn’t All Flawed

In a world that often necessitates swift judgment and rapid decision-making (e.g., fight or flight,) a person who solely relies on deliberative thinking (System Two) wouldn’t last long. Doctors and firefighters, for example, through training and repetition, develop what’s called “expert intuition” that helps them identify patterns and impulsively devise the right response to a complex emergency.

We as humans are not simple rational agents. Consequently, our thinking boils down to two “Systems” of thinking/processing. As we strive to make better decisions in our work and personal lives, it benefits us to slow down and use a more deliberate System 2 way of thinking. Learn to doubt your fast/quick way of thinking!

Human Intuition is Imperfect

Thinking, Fast and Slow is an eye-opener in various ways. It can be a frightening catalog of the biases, shortcuts, and cognitive illusions that come to err our judgment—the endowment effect, priming, halo effect, anchoring effect, conjugation fallacy, the narrative fallacy, and the rest. Such mental processes are not intrinsically flawed; they are heuristics—rules of thumb, stereotypes, shortcuts. They are strategies the mind embraces to find a path in a tsunami of data.

Kahneman teaches how to recognize situations that require slower, deliberative thinking. Kahneman asserts that the value of the book is to give people the vocabulary to spot biases and to criticize the decisions of others: “Ultimately, a richer language is essential to the skill of constructive criticism.”

Recommendation: Read Daniel Kahneman’s Thinking, Fast and Slow (2011.) As one of the most popular non-fiction books in the last decade, it’ll open your eyes to the quirky and error-prone ways in which you can be influenced in ways you don’t suspect.

The conceptions behind behavioral economics make Thinking, Fast and Slow a laborious read. Many chapters are bogged down by hair-splitting details of his rigorous scientific work and academic gobbledygook. It’s a commanding survey of this field, but it’s superbly written and intelligible to non-experts.

Complement with Rolf Dobelli’s accessible The Art of Thinking Clearly (2013.)

The Unthinking Habits of Your Mind // Book Summary of David McRaney’s ‘You Are Not So Smart’

April 1, 2021 By Nagesh Belludi Leave a Comment

Psychologists have argued that many cognitive biases are rooted in mental shortcuts. They are heuristics—rules of thumb, stereotypes, instincts—that help you make sense of the world. They aren’t intrinsically flawed, but, they’re often quirky and error-prone. Your mental models can affect you in ways that you don’t suspect.

David McRaney’s You Are Not So Smart (2011) suggests a brief—if hurried—tour of 48 cognitive biases that can deceive you. Based on the author’s popular blog, the book is a satisfying assessment of understanding people’s—and your own—behavior a little bit better.

There is a growing body of work coming out of psychology and cognitive science that says you have no clue why you act the way you do, choose the things you choose, or think the thoughts you think. … From the greatest scientist to the most humble artisan, every brain within every body is infested with preconceived notions and patterns of thought that lead it astray without the brain knowing it. So you are in good company.

Each chapter starts with a brief statement of a misconception followed by the fact. Then a synopsis of a related behavioral study shows how our brains produce the counterpart deception and the truth. Some of the less-known preconceptions discussed are,

Confabulation. You tend to create unreliable narratives to explain away your choices post hoc. These reassuring perceptions can make you think you’re more rational than you actually are.
Groupthink. People tend to fall in with the rest of the group to minimize conflict and foster group cohesiveness and social acceptance. No one wants to be the one person with a dissenting opinion.
Social Loafing. That others in a team will pick up your slack may induce you to put in less effort if you think you’ll get away with it. This can curb your own performance, even if you’re a conscientious, hardworking type. If you don’t feel your participation will be noticed, why bother putting in the effort?
Availability Heuristic. You’re likely to estimate the likelihood of an event based on your ability to recall immediate and easily accessed examples.
Fundamental Attribution Error. You tend to assign external reasons for your own behavior but internal motives to other people. For instance, if you’re late for a meeting, you’ll blame it on public transport. If someone else is running late for a meeting with you, you’ll blame it on her poor time-keeping.

Recommendation: Read David McRaney’s You Are Not So Smart. It’s an engaging, easy-to-read primer to how the mind works. Read it as a lead up to Daniel Kahneman’s bestselling dissertation Thinking, Fast and Slow (2011; summary forthcoming.)

Idea for Impact: Once you learn to spot the cognitive biases we all grapple with, they’re easier to overcome.

Five Ways … You Could Avoid Being Wrong

March 20, 2021 By Nagesh Belludi Leave a Comment

Beware exaggeration of a kernel of truth. For instance: indeed, many of us don’t realize our full intellectual potential; but that doesn’t give credence to the notion that most people use only 10% of their brainpower. Besides, beware of overstatements of small differences. Sure, men and women tend to differ somewhat in their communication styles, but declaring that “men are from Mars” and “women are from Venus” is taking a kernel of reality to an extreme, not to mention coercing psychology into stereotypes.
Don’t infer causation from correlation. Don’t be tempted to conclude that if two things co-occur statistically, they must be causally related to each other. (Rabbi Harold Kushner once asserted that circumcision seems to increase men’s chances of winning a Nobel Prize.) Seek contending explanation.
Beware biased sampling and extrapolation. Inferences from a biased sample are not as trustworthy as conclusions from a truly random sample—e.g., don’t ask people coming out of Sunday Mass if they have a personal relationship with Jesus Christ and infer that Americans are turning to God. Don’t ascribe to the whole any attribute of the part.
Don’t let stress impair your problem-solving capabilities. As many airline disasters confirm (example, example, example,) speed can narrow your cognitive map—small errors can quickly become linked up and amplified into disastrous outcomes. When you feel rushed, you’re likely to miss details. You’re not present enough in the moment to notice what’s important and make the most beneficial choices.
Beware argumentum ad nauseam. Don’t confuse a statement’s familiarity (such as urban legends) with its accuracy. The fact that you’ve heard a claim repeated over and over again (think of President Trump’s allegations of widespread voter fraud,) sometimes with rearranged phrasing and substitute terms, doesn’t make it correct.

Bonus: Be suspicious of any claim that doesn’t come with counterarguments or disconfirming evidence.

The Data Never “Says”

March 1, 2021 By Nagesh Belludi Leave a Comment

Data doesn’t say anything. Indeed, data can’t say anything for itself about an issue any more than a saw can form furniture, or a sauce can simmer a stew.

Data is inert and inanimate. Data doesn’t know why it was created. Data doesn’t have a mind of its own, and, therefore, it can’t infer anything.

Data is a necessary ingredient in judgment. It’s people who select and interpret data. People can turn it into insight or torture it to bring their agenda to bear. Data is therefore only as useful as its quality and the skills of the people wielding it.

Far more than we admit, subjectivity and intuition play a significant role in deciding how we collect, choose, process, explain, interpret, and apply the data. As entrepreneur Margaret Heffernan warns in Willful Blindness: Why We Ignore the Obvious at Our Peril (2012,) “We mostly admit the information that makes us feel great about ourselves, while conveniently filtering whatever unsettles our fragile egos and most vital beliefs.”

In the hands of careless users, data can end up having the opposite effect its creators intended. All data is good or bad depending on how it’s employed in a compelling story and what end it’s serving—neither of which the data itself can control.

Don’t let data drive your conclusions. Let data inform your conclusions.
Don’t declare, “The data says,” (as in, “the stock market thinks.”) Data by itself cannot have a particular interpretation.
When you find data that seems to support the case you wish to make, don’t swoop on it without caution and suspicion. Data can be very deceptive when used carelessly.
Be familiar with the limitations of your data. Investigate if your data informs any other equally valid hypothesis that could propose an alternative conclusion.

Idea for Impact: Beware of the risk of invoking data in ways that end up undermining your message.

Never Accept an Anecdote at Face Value

February 19, 2021 By Nagesh Belludi Leave a Comment

Human beings generally find anecdotes highly compelling. We’re not transformed as much by facts and statistics as we are by stories.

But anecdotes aren’t often objective. Anecdotes are uncontrolled individual observations—sometimes no more than one.

Reported experience is subjective. Our recollections are ever-changing, and they’re often amazingly imprecise. We often misrepresent events to agree with the audience—even embellish with made-up minutiae to render our stories more compelling.

And for that reason, anecdotes are usually the weakest form of evidence. Anecdotes are subject to a host of biases such as confirmation bias, generalization, and cherry-picking. Moreover, for every anecdote, an equal and contrary anecdote can be proffered.

Idea for Impact: Be deeply suspicious of anecdotes. Arguments that draw on anecdotal evidence to make broad generalizations are liable to be fallacious.

A Real Lesson from the Downfall of Theranos: Silo Mentality

February 4, 2021 By Nagesh Belludi Leave a Comment

The extraordinary rise and fall of Theranos, Silicon Valley’s biggest fraud, makes an excellent case study on what happens when teams don’t loop each other in.

Theranos’ blood-testing device never worked as glorified by its founder and CEO, Elizabeth Holmes. She created an illusion that became one of the greatest start-up stories. She kept her contraption’s malfunctions and her company’s problems shockingly well hidden—even from her distinguished board of directors.

At the core of Holmes’s sham was how she controlled the company’s flow of information

Holmes and her associate (and then-lover) Sunny Balwani operated a culture of fear and intimidation at Theranos. They went to such lengths as hiring superstar lawyers to intimidate and silence employees and anyone else who dared to challenge their methods or expose their devices’ deficiencies.

Holmes had the charade going for so long by keeping a tight rein on who talked to whom. She controlled the flow of information within the company. Not only that, she swiftly fired people who dared to question her approach. She also forcefully imposed non-disclosure agreements even for those exiting the company.

In other words, Holmes went to incredible lengths to create and maintain a silo mentality in her startup. Her intention was to wield much power, prevent employees from talking to each other, and perpetuate her deceit.

A recipe for disaster at Theranos: Silo mentality and intimidation approach

Wall Street Journal investigative reporter John Carreyrou’s book Bad Blood: Secrets and Lies in a Silicon Valley Startup (2018; my summary) is full of stories of how Holmes went out of her way to restrain employees from conferring about what they were working on. Even if they worked on the same project, Holmes made siloed functional teams report to her directly. She would edit progress reports before redirecting problems to other team heads.

Consider designer Ed Ku’s mechatronics team responsible for designing all the intricate mechanisms that control the measured flow of biochemical fluids. Some of his team’s widgets were overheating, impinging on one another and cross-contaminating the clinical fluids. Holmes wouldn’t allow Ku and his team to talk to the teams that improved the biochemical processes.

Silo mentality can become very problematic when communication channels become too constricted and organizational processes too bureaucratic. Creativity gets stifled, collaboration limited, mistakes—misdeeds in the case of Theranos—suppressed, and collective objectives misaligned.

Idea for Impact: Functional silos make organizations slow, bureaucratic, and complicated

Innovation hinges increasingly on interdisciplinary cooperation. Examine if your leadership attitude or culture is unintentionally contributing to insufficient accountability, inadequate information-sharing, and limited collaboration between departments—especially on enterprise-wide initiatives.

An Olympian History of Humanity // Book Summary of Yuval Noah Harari’s ‘Sapiens’

September 10, 2020 By Nagesh Belludi Leave a Comment

Israeli historian and philosopher Yuval Noah Harari’s bestselling 464-page Sapiens: A Brief History of Humankind (2015) retells the 13.5 billion years-long odyssey of human evolution from the Big Bang to the near-future. Harari accounts for how Homo sapiens (the ‘wise man’) overcame the most extraordinary odds and numerous arbitrary inevitabilities to dominate the world the way we do at present.

Harari’s narratives span the cognitive revolution (70,000 years ago,) agricultural revolution (11,000 years,) scientific revolution (500 years,) industrial revolution (250 years,) and information revolution (50 years.) The first of these epochs, the cognitive revolution, coupled with a genetic mutation, was the real game-changer: Homo sapiens didn’t evolve efficiently from stooping apes to standing individuals. There were previously no less than six distinct homines, of which Homo sapiens came out top.

Sapiens argues that what made Homo sapiens special was our ability to develop networks and communities and tell stories, i.e., to organize and build large, connected communities around “shared fictions” or narratives—religion, nationalism, capitalism, trade groups, social institutions, for example. It was only through such intangible beliefs—not biological realities—that Homo sapiens were able to get the better of the physical world.

Homo sapiens’ talent for abstraction set us apart

Language made it easier to dwell upon abstract matters and flexibly cooperate in ever-larger numbers. Harari’s examples cite how Homo sapiens—from our ancestors all the way up to today—are so willing to create and believe in such conceptual paradigms that have been the key to our success and the key to our problems.

Large numbers of strangers can cooperate successfully by believing in common myths. Any large-scale human cooperation—whether a modern state, a medieval church, an ancient city or an archaic tribe—is rooted in common myths that exist only in people’s collective imagination.

Harari’s inquiry is extensive. His scholarship is rigorous, and his interpretation creative. Yes, most of the book restates familiar facts and theories. Harari does an excellent job synthesizing a lot of information. What makes Sapiens exceptional is it gives culture a starring role in the human drama—something that many in science and sociology are hesitant to do, instead preferring to depict culture as transient, nebulous, and “soft.”

Harari builds on some provocative ideas about Homo sapiens, but sets out his anthropological interpretations with vim and vigor:

The emergence of agriculture—especially livestock farming—is “the greatest crime in history … The domestication of animals was founded on a series of brutal practices that only became crueler with the passing of the centuries.” [Harari has said that he became a committed vegan while writing Sapiens.]
Organized religion is predictably contemptible, “You could never convince a monkey to give you a banana by promising him limitless bananas after death in monkey heaven.” The emergence of religion “was one of the most important revolutions in history, and made a vital contribution to the unification of humankind.” But the notion of supernatural being is increasingly inconsequential as humans are acquired divine abilities and relying increasingly upon ourselves for creating life forms and averting death and destruction. Then, “Is there anything more dangerous than dissatisfied and irresponsible gods who don’t know what they want?”
Consumer capitalism is a dreadful prison. “For better or worse, in sickness and in health, the modern economy has been growing like a hormone-soused teenager. It eats up everything it can find and puts on inches faster than you can count.”

Recommendation: Read Harari’s astonishing history of the species, from insignificant apes to rulers of the world

Yuval Noah Harari’s Sapiens: A Brief History of Humankind (2015) is a must-read. It is a brilliantly executed examination of who we are and of our behaviors. Notwithstanding the seeming overstatements and the occasional drift to sensationalism, Sapiens is extremely interesting and thought-provoking. It is written elegantly, in a clear and engaging style, with a skeptic’s eye and irreverent—and sometimes-sarcastic—sensibility.

We are more powerful than ever before…Worse still, humans seem to be more irresponsible than ever. Self-made gods with only the laws of physics to keep us company, we are accountable to no one.

Harari is implacably cold and literal, abstaining from political correctness and pro-Western predispositions. Sapiens concludes with spine-tingling predictions about the future. Perhaps as a cliffhanger to his subsequent Homo Deus: A Brief History of Tomorrow (2016,) Harari contends that we’re the primary destructive force.

Homo sapiens are sowing the seeds for our own destruction. The forthcoming biotechnological revolution, Harari speculates, may signal the end of sapiens. Bioengineered “amortal cyborgs” may replace us. These post-human organic and inorganic organisms won’t necessarily be immortal but, absent an accident, can live forever. Homo not so sapiens?

Food Delivery Apps are Eating Up Your Money

August 3, 2020 By Nagesh Belludi Leave a Comment

Food delivery apps have been the salvation for restaurants—and laid-off workers—during the COVID-19 pandemic. However, the promotions and fees charged by the likes of Uber Eats and GrubHub are bleeding restaurants dry. According to the Washington Post, one restaurant with $1,043 in food sales was left with just $377 after GrubHub’s charges for delivery, commission, processing, and promotions.

The food delivery startups’ #eatlocal and #keeprestaurantsopen promotions are exploiting customers’ generosity. Customers aren’t really helping out local restaurants as much as they may think. WIRED notes,

Uber Eats has waived delivery fees to consumers on most phone orders but still charges a 25% commission on orders from restaurants it partners with.

On a normal Wednesday night, [one Miami restaurateur] would expect roughly $5,000 in revenue. This Wednesday, the total was $665. Of that, $523 came through delivery apps, primarily Uber Eats. Those commissions totaled $131, leaving him just $534 to cover rent, plus the cost of food and staff. His typical daily overhead is about $3,000. With reduced staff, it’s now $1,200—more than twice as much as his revenue Wednesday. “It’s not sustainable,” he says.

Uber Eats isn’t the only company accused of trying to capitalize on the crisis. GrubHub’s “Supper for Support” initiative, meant to encourage buying from local restaurants, drew widespread criticism. The deal offers a $10 discount on certain orders between 5 pm and 9 pm, but restaurants that opt in cover the discount, and GrubHub still charges its commission on the full price.

Customers ought to know about these apps’ deceptive business practices and be able to make meaningful choices about patronizing local businesses.

In 2018, food delivery raked an estimated $161BB in sales worldwide, and the potential market size has attracted a great deal of startup funding. En bloc, the food delivery business has struggled to sustain itself profitably. The restaurants are particularly agitated, not least because food is a low-margin business, and the fiercely competitive meal-delivery firms just can’t recompense restaurants and riders as much as needed.

Idea for Impact: If you want to support your local businesses, patronize them directly. Call your order in. Pick up the order yourself or get your food delivered by the restaurant itself. Cut out the intermediary.

Steak, Not Sizzle

July 23, 2020 By Nagesh Belludi Leave a Comment

Mark Hurd, the recently-departed executive of NCR and CEO HP and Oracle, recalled this best advice he ever got:

When I moved to a head-office in Dayton in 1988, an NCR executive was giving a presentation; he had great slides and an even better delivery. The CEO, Chuck Exley, listened to the entire presentation in his typically gracious, courteous manner. At the conclusion, he nodded and said something brief but profound: “Good story, but it’s hard to look smart with bad numbers.” And as I reflected on it, the presenter, articulate as he was, as good as his slides were, simply had bad numbers.

That comment has always stayed with me. You have to focus on the underlying substance. There’s just no way to disguise poor performance. I’ve tried to follow that advice throughout my career. Deliver good numbers, and you earn the right for people to listen to you.

Idea for Impact: Don’t Succumb to Hype

Marketing and branding have conditioned society to play up—and be attracted to—sizzle over steak. Style over substance.

Sizzle can only get you so far.

Focus on the steak. It is considerate and farsighted and more fulfilling to focus on substantive ideas, products, and presentations.

For sure, sizzle is important. Only when you have a good steak, add some sizzle to promote the bejesus out of whatever it is you have to offer.

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Biases

Idea for Impact: Bad choices beget bad luck

Wondering what to read next?

Human Beings are Intuitive Thinkers

System One Isn’t All Flawed

Human Intuition is Imperfect

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At the core of Holmes’s sham was how she controlled the company’s flow of information

A recipe for disaster at Theranos: Silo mentality and intimidation approach

Idea for Impact: Functional silos make organizations slow, bureaucratic, and complicated

Wondering what to read next?

Homo sapiens’ talent for abstraction set us apart

Recommendation: Read Harari’s astonishing history of the species, from insignificant apes to rulers of the world

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Wondering what to read next?

Idea for Impact: Don’t Succumb to Hype

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