The Better Letter: Say What?! (Part 7)

We need help if we're going to make better decisions.

This week brings the seventh installment of my series on making behavioral finance actionable. The previous six are linked below.

• Part One: The Experiment

• Part Two: The Misinformation Milieu

• Part Three: The Method

• Part Four: The Mindset

• Part Five: The Great Mistake

• Part Six: Make Fewer Decisions

This week, I’ll continue outlining some techniques for making better decisions, focusing on our need for help if we’re going to do so.

The seven NFL officials on the field are there to enforce the rules of the game. They each have specific roles and responsibilities that make it possible for them “to correctly and consistently call games at football’s highest level.”

When one of a game’s head coaches thinks a (reviewable) call made by the officiating crew is in error, they have red flags which they can use to toss onto the field before the next snap, indicating to the officials that they should initiate a replay review of the previous play. The call will be reversed only if video replay shows “incontrovertible visual evidence” that the contested call was in error.

If we are effectively to mitigate the errors in judgment to which we are so prone, we need help. We need people in our lives, in effect, to throw red challenge flags when we have made bad calls. That’s the subject of this week’s TBL.

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Thanks for reading.

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Need Help

When little kids are learning to speak, it can be an adventure to figure out what they are trying to say. As a toddler, my oldest kept saying, “Dew-in,” especially while he was eating. It didn’t happen immediately, but my much-better-half deciphered it as, “Another one.” His then baby sister, Emily, was “Day-ee.”

There was only one expression Michael got right from the beginning. It rang crystal clear from his lips every single time, with just the right amount of plaintive intensity.

“Need help.”

Oh, that we could all ask for help at the right time and in the right way with regularity.

We are poor evaluators of our own evaluations. We can’t read our own label from inside the jar.

Our porous perceptions – how we see what’s happening now and how we remember the past – are much less accurate than we assume. They seduce and trick us into some distorted, sort-of-space between fabrication and reality, both of which feel exactly alike. The distortion then becomes internalized as fact, showing us to be utterly human and, in pertinent part, optimists, liars, fools, and lunatics.

We’re heroes in our self-published stories; reality is altered to protect the guilty.

Stephen Jay Gould, the celebrated 20th-century paleontologist, in his most famous work, argued persuasively that prejudiced scientists routinely allowed their social beliefs to color their data collection and analysis, especially when those beliefs were particularly important to them. He then went on – inadvertently yet conclusively – to prove his thesis in that very work. After all, as Russell Warne argued, “if you believe that the universe is made of cheese, you’re going to build a cosmic cheese whiz detector.” 

Our biases, flaws, and weaknesses are mostly opaque to us. They are, by and large, unknown, deniable, or undetectable right up until they snowball into disaster. They leave no cognitive trace.

In essence, if we believe something to be true, we quite naturally assume that those who think otherwise are the ones with some sort of problem. Our beliefs are deemed to reflect objective reality simply because we think they are true. Otherwise – Duh! – we wouldn’t believe them.

When Jane Curtin was asked if the person she was mimicking for a screen role knew that she was the source material, Curtin replied, “I used to do my aunt when I was doing improv, and she always thought I was doing my other aunt.”

Bias blindness is the most significant and dangerous bias of all. As Jesus said: “It’s easy to see a smudge on your neighbor’s face and be oblivious to the ugly sneer on your own.”

“For desired conclusions,” Thomas Gilovich wrote, “it is as if we ask ourselves ‘Can I believe this?’, but for unpalatable conclusions we ask, ‘Must I believe this?’” With the former, we’re seeking permission to believe. With the latter, we’re looking for an escape route. 

It’s the path of least resistance in each instance.

That’s why, for example, noted Hollywood liberal and nice guy Matt Damon insisted that more diversity within filmmaking is required, that there’s still “a long, long, long way to go,” while failing to see its relevance to him personally. 

During the fourth season premiere of HBO’s “Project Greenlight,” Damon sparked controversy after he interrupted a (black female) colleague’s concerns about the need for diverse hiring practices to dismiss them.

In the reality show, new and emerging filmmakers vied for a chance to direct a feature film. Show producers Damon and Ben Affleck enlisted a group of other Hollywood producers to help them choose their director finalists. Not surprisingly, the group included a bunch of white guys, just one white woman and no people of color. The finalists were flown to Los Angeles to meet in person with the producers. At these meetings, they introduce Effie Brown, an experienced Hollywood producer and a black woman, to the mix. Watch what happened.

Note the Damon quote (which is not completely captured in the video above).

“I’m glad Effie flagged the issue of diversity for all of us, because filmmaking should throw a broader net and it’s high time for that to change. But ultimately, if you suddenly change the rules of this competition at the eleventh hour, it just seems like you would undermine what the competition was supposed to be about, which is about giving somebody this job based entirely on merit and leaving all other factors out of it. It’s just strictly a filmmaking competition. I think the whole point of this thing is that you go for the best director, period. This is what we have and this is what we have to choose, and the only thing I can go by is the work that they’ve done.”

Brown later acknowledged that the edited version that aired (and which is shown and quoted above, in part) was more benign that what happened in real time: “That was a more polite version of that exchange.”

It seems clear that Damon was convinced of his own pristine purity as well as his team’s lack of bias and, therefore, there could be no problem with his simply picking the “best” candidate. Then – surprise! – they picked a white male for the highly coveted directing assignment.

Indeed, Damon and Affleck selected a top four and each of them was white and male. Damon never considered the possibility that he – like all of us – is biased and utterly blind to it.

I once asked Daniel Kahneman, the world’s leading authority on human error, what we might do to mitigate our inherent weaknesses in this area. He chuckled and replied, “Not much.” He then paused, tilted his head, and added, “Ask the smartest and least empathetic people you know to tear your ideas apart.” 

He was being funny. And honest.

Kahneman’s intellectual memoir of his life’s work, Thinking, Fast and Slow, is built on this amazing foundation: “The premise of this book is that it is easier to recognize other people’s mistakes than your own.”

We love to think that we’re like judges, objective and rational actors carefully examining and weighing the available evidence to reach the best possible conclusions. Instead, most of the time, we’re much more like lawyers, running around in search of something (anything!) that we can manipulate to the advantage of our preconceived notions while ignoring, objecting to, or denying all contrary evidence.

The philosopher José Medina has explained that our ignorance is invisible to us until it is met with resistance. We all need people to provide resistance.

If we’re going to recognize our own foibles, errors, and biases, we need help. Disbelieving is very hard work. Here are a few ideas for how we might get it.

1.     Outside Input.

Study after study shows that firms with diverse leadership perform better. Diversity improves decision-making at the group level and companies with more diverse workforces are more profitable (more detail here, here, and here). Indeed, racial diversity is associated with increased sales revenue, more customers, greater market share, and greater relative profits while gender diversity is associated with increased sales revenue, more customers, and greater relative profits.

We don’t often do it naturally, but real diversity – in outlook, ideology, race, gender, and politics – is worth going way out of your way to achieve.

From an investment perspective, everybody recognizes the value of diversification. Bear that in mind and look around. If your reading lists, your colleagues, your friends, your department, or your firm aren’t at least as diverse as you want your portfolio to be, you’re missing a major opportunity and making a major mistake.

We should move and read outside our own circles and interests. We all need outside input.

2.    Accountability.

We need (relative) objectivity if we are going to make good decisions unless we are extremely lucky. Having consistent accountability mechanisms is particularly important in this regard. Spouses can be very important here! Being accountable also means taking and dealing with criticism seriously; even welcoming and encouraging it. It shouldn’t be surprising to see so many people who experience great success suffer indifferent results or even subsequent failure. The more success and power we achieve, the easier it is to believe the hype. Accountability mechanisms that are maintained and honored can help to undercut that.

3.    Take a Tip from Attorneys. 

I often refer to myself as a recovering attorney, and there is a great deal about the practice of law that is frustrating and silly. But one excellent technique I learned from my time in that profession is to learn to argue the other side’s case. Understanding and even appreciating a contrary point of view is helpful to our own thinking and can provide a good check on the coherence of our own viewpoints. Understanding and seeking support for the opposition’s best arguments is a powerful learning tool. We might even decide that – gasp – mistakes were made (almost surely by someone else, of course).

4.    Empowered Teams.

If we are overcome our inherent biases, it has to start by being exposed to different data sets and viewpoints — whether by our own choices or via a recommendation engine — consistent with the benefits of what Kahneman calls “adversarial collaboration.” As he notes, organizations are more likely to succeed at overcoming bias than individuals. That’s partly on account of resources, and partly because self-criticism is so difficult. The best check on bad decision-making we have is when someone (or, when possible, an empowered team) we respect systematically sets out to show us where and how we are wrong.

5.    Red Team.

In 1587, the Roman Catholic Church created the position of Advocatus Diaboli (the “Devil’s Advocate”) to prepare and raise all possible arguments against the canonization of any candidate for sainthood. Military and similar organizations use the idea of a “red team.”

“Red Teaming is a flexible cognitive approach to thinking and planning that is specifically tailored to each organization and each situation. It is conducted by skilled practitioners normally working under charter from organizational leadership. It uses structured tools and techniques to help us ask better questions, challenge explicit and implicit assumptions, expose information we might otherwise have missed, and develop alternatives we might not have realized exist. It cultivates mental agility to allow Red Teamers to rapidly shift between multiple perspectives to develop a fuller appreciation of complex situations and environments. This leads to improved understanding, more options generated by everyone (regardless of rank or position), better decisions, and a level of protection from the unseen biases and tendencies inherent in all of us.”

In sum, a red team is incentivized and empowered to challenge current or conventional thinking by playing the role of a mindful adversary. Doing it well is enormously effective but is also exceedingly difficult, especially without strong support.

In his famous 1974 Cal Tech commencement address, the great physicist Richard Feynman emphasized our propensity to err: “The first principle is that you must not fool yourself — and you are the easiest person to fool.” If we’re to become harder to fool, we need help.

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Totally Worth It

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Benediction

This week’s benediction features Mary Gauthier and her song, “Mercy Now.”

Amen.

Thanks for reading.

Issue 120 (July 1, 2022)