The Art of Thinking Clearly

by Rolf Dobelli

  In the United States, elections increasingly revolve around nasty advertisements, in which candidates seek to tarnish one another’s record or reputation. However, by law, each political ad must disclose its sponsor at the end so that it is clearly distinguishable as an electioneering message. However, countless studies show that the sleeper effect does its job here, too, especially among undecided voters. The messenger fades from memory; the ugly accusations persevere.

  I’ve often wondered why advertising works at all. Any logical person must recognize ads for what they are, and suitably categorize and disqualify them. But even you as a discerning and intelligent reader won’t always succeed at this. It’s quite possible that, after a few weeks, you won’t remember if you picked up certain information from a well-researched article or from a tacky advertorial.

  How can you thwart the sleeper effect? First, don’t accept any unsolicited advice, even if it seems well meant. Doing so, you protect yourself to a certain degree from manipulation. Second, avoid ad-contaminated sources like the plague. How fortunate we are that books are (still) ad-free! Third, try to remember the source of every argument you encounter. Whose opinions are these? And why do they think that way? Probe the issue like an investigator would: Cui bono? Who benefits? Admittedly, this is a lot of work and will slow down your decision making. But it will also refine it.

  71

  Why It’s Never Just a Two-Horse Race

  Alternative Blindness

  You leaf through a brochure that gushes about the benefits of the university’s MBA degree. Your gaze sweeps over photos of the ivy-covered campus and the ultramodern sports facilities. Sprinkled throughout are images of smiling students from various ethnic backgrounds with an emphasis on young women, young Chinese, and young Indian go-getters. On the last page you come to an overview that illustrates the financial value of an MBA. The $100,000 fee is easily offset by the statistical extra income that graduates earn before they retire: $400,000—after taxes. Who wouldn’t want to be up $300,000? It’s a no-brainer.

  Wrong. Such an argument hides not one but four fallacies. First, we have the swimmer’s body illusion: MBA programs attract career-oriented people who will probably earn above-average salaries at some stage of their careers, even without the extra qualification of an MBA. The second fallacy: An MBA takes two years. During this time you can expect a loss of earnings—say, $100,000. So in fact the MBA costs $200,000, not $100,000. That amount, if invested well, could easily exceed the additional income that the brochure promises. Third, to estimate earnings that are more than thirty years away is idiotic. Who knows what will happen over the next three decades? Finally, other alternatives exist. You are not stuck between “do an MBA” and “don’t do an MBA.” Perhaps you can find a different program that costs significantly less and also represents a shot in the arm for your career. This fourth misconception interests me the most. Let’s call it alternative blindness: We systematically forget to compare an existing offer with the next-best alternative.

  Here’s an example from the world of finance: Suppose you have a little money in your savings account, and you ask your investment broker for advice. He proposes a bond that will earn you 5 percent interest. “That’s much better than the 1 percent you get with your savings account,” he points out. Does it make sense to buy the bond? We don’t know. It’s wrong to consider just these two options. To assess your options properly, you would have to compare the bond with all other investment options and then select the best. This is how top investor Warren Buffett does things: “Each deal we measure against the second-best deal that is available at any given time—even if it means doing more of what we are already doing.”

  Unlike Warren Buffett, politicians often fall victim to alternative blindness. Let’s say your city is planning to build a sports arena on a vacant plot of land. Supporters argue that such an arena would benefit the population much more that an empty lot—both emotionally and financially. But this comparison is wrong. They should compare the construction of the sports arena with all other ideas that become impossible due to its construction—for example, building a school, a performing arts center, a hospital, or an incinerator. They could also sell the land and invest the proceeds or reduce the city’s debt.

  And you? Do you often overlook the alternatives? Let’s say your doctor discovers a tumor that will kill you in five years. He proposes a complicated operation that, if successful, removes the tumor completely. However, this procedure is highly risky, with a survival rate of just 50 percent. How do you decide? You weigh up your choices: Certain death in five years or a 50 percent chance of dying next week. Alternative blindness! Perhaps there is a variant of the invasive surgery that your hospital doesn’t offer but a hospital across town does. This invasive surgery might not remove the tumor altogether, just slow its growth, but is much safer and gives you an extra ten years. And who knows, maybe during these ten years a more sophisticated therapy for eradicating tumors will be made available.

  The bottom line: If you have trouble making a decision, remember that the choices are broader than “no surgery” or “highly risky surgery.” Forget about the rock and the hard place, and open your eyes to the other, superior alternatives.

  72

  Why We Take Aim at Young Guns

  Social Comparison Bias

  As one of my books reached number one on the bestseller list, my publisher asked me for a favor. An acquaintance’s title was on the verge of entering the top 10 list, and the publisher was convinced that a testimonial from me would give it the necessary push.

  It always amazes me that these little testimonials work at all. Everyone knows that only favorable comments end up on a book’s jacket. (The book you hold in your hands is no exception.) A rational reader should ignore the praise or at least consider it alongside the criticism, which is always available, albeit in different places. Nevertheless, I’ve written plenty of testimonials for other books, but they were never for rival titles. I hesitated: Wouldn’t writing a blurb be cutting off my nose to spite my face? Why should I help someone who might soon vie for the top slot? As I pondered the question, I realized social comparison bias had kicked in—that is, the tendency to withhold assistance to people who might outdo you, even if you look like a fool in the long run.

  Book testimonials are a harmless example of the social comparison bias. However, the phenomenon has reached toxic levels in academia. Every scientist’s goal is to publish as many articles as possible in the most prestigious scientific journals. Over time, you make a name for yourself, and soon editors ask you to assess other scientists’ submissions. In the end, often just two or three experts decide what gets published in a particular field. Taking this into account, what happens if a young researcher sends in an earth-shattering paper that turns the entire department on its head and threatens to knock them off their thrones? They will be especially rigorous when evaluating the article. That’s social comparison bias hard at work.

  The psychologist Stephen Garcia and his fellow researchers describe the case of a Nobel laureate who prevented a promising young colleague from applying for a job at “his” university. This may seem judicious in the short term, but in the long run it is counterproductive. What happens when that young prodigy joins another research group and applies his acumen there—most likely depriving the old institution of maintaining its world-class status? Garcia suggests that social comparison bias may well be the reason why hardly any research groups remain at the top for many years in succession.

  The social comparison bias is also a cause for concern with start-up companies. Guy Kawasaki was “chief evangelist” at Apple for four years. Today he is a venture capitalist and advises entrepreneurs. Kawasaki says: “A-players hire people even better than themselves. It’s clear, though, that B-players hire C-players so they can feel superior to them, and C-players hire D-players. If you start hiring B-players, expect what Steve [Jobs] called ‘the bozo ex
plosion’ to happen in your organization.” In other words, start hiring B-players and you end up with Z-players. Recommendation: Hire people who are better than you, otherwise you soon preside over a pack of underdogs. The so-called Duning-Kruger effect applies to such Z-players: The inept are gifted at overlooking the extent of their incompetence. They suffer from illusory superiority, which leads them to make even more thinking errors, thus creating a vicious cycle that erodes the talent pool over time.

  While his school was closed due to an outbreak of plague in 1666–67, twenty-five-year-old Isaac Newton showed his professor, Isaac Barrow, what research he was conducting in his spare time. Barrow immediately gave up his job as a professor and became a student of Newton. What a noble gesture. What ethical behavior. When was the last time you heard of a professor vacating his post in favor of a better candidate? And when was the last time you read about a CEO clearing out his desk when he realized that one of his twenty thousand employees could do a better job?

  In conclusion: Do you foster individuals more talented than you? Admittedly, in the short term, the preponderance of stars can endanger your status, but in the long run, you can only profit from their contributions. Others will overtake you at some stage anyway. Until then, you should get in the up-and-comers’ good books—and learn from them. This is why I wrote the testimonial in the end.

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  Why First Impressions Are Deceiving

  Primacy and Recency Effects

  Allow me to introduce you to two men, Alan and Ben. Without thinking about it too long, decide whom you prefer. Alan is smart, hardworking, impulsive, critical, stubborn, and jealous. Ben, however, is jealous, stubborn, critical, impulsive, hardworking, and smart. Who would you prefer to get stuck with in an elevator? Most people choose Alan, even though the descriptions are exactly the same. Your brain pays more attention to the first adjectives in the lists, causing you to identify two different personalities. Alan is smart and hardworking. Ben is jealous and stubborn. The first traits outshine the rest. This is called the primacy effect.

  If it were not for the primacy effect, people would refrain from decking out their headquarters with luxuriously appointed entrance halls. Your lawyer would feel happy turning up to meet you in worn-out sneakers rather than beautifully polished designer oxfords.

  The primacy effect triggers practical errors, too. Nobel laureate Daniel Kahneman describes how he used to grade examination papers at the beginning of his professorship. He did it as most teachers do—in order: student 1 followed by student 2 and so on. This meant that students who answered the first questions flawlessly endeared themselves to him, thus affecting how he graded the remaining parts of their exams. So, Kahneman switched methods and began to grade the individual questions in batches—all the answers to question one, then the answers to question two, and so forth. Thus, he canceled out the primacy effect.

  Unfortunately, this trick is not always replicable. When recruiting a new employee, for example, you run the risk of hiring the person who makes the best first impression. Ideally, you would set up all the candidates in order and let them answer the same question one after the other.

  Suppose you sit on the board of a company. A point of discussion is raised—a topic on which you have not yet passed judgment. The first opinion you hear will be crucial to your overall assessment. The same applies to the other participants, a fact that you can exploit: If you have an opinion, don’t hesitate airing it first. This way, you will influence your colleagues more and draw them over to your side. If, however, you are chairing the committee, always ask members’ opinions in random order so that no one has an unfair advantage.

  The primacy effect is not always the culprit; the contrasting “recency effect” matters as well. The more recent the information, the better we remember it. This occurs because our short-term memory file drawer, as it were, contains very little extra space. When a new piece of information gets filed, an older piece of information is discarded to make room.

  When does the primacy effect supersede the recency effect, or vice versa? If you have to make an immediate decision based on a series of “impressions” (such as characteristics, exam answers, etc.), the primacy effect weighs heavier. But if the series of impressions was formed some time ago, the recency effect dominates. For instance, if you listened to a speech a few weeks ago, you will remember the final point or punch line more clearly than your first impressions.

  In conclusion: First and last impressions dominate, meaning the content sandwiched between has only a weak influence. Try to avoid evaluations based on first impressions. They will deceive you, guaranteed, in one way or another. Try to assess all aspects impartially. It’s not easy, but there are ways around it. For example, in interviews, I jot down a score every five minutes and calculate the average afterward. This way, I make sure that the “middle” counts just as much as hello and good-bye.

  74

  Why You Can’t Beat Homemade

  Not-Invented-Here Syndrome

  My cooking skills are quite modest, and my wife knows it. However, every now and then I concoct a dish that could pass for edible. A few weeks ago, I bought some sole. Determined to escape the monotony of familiar sauces, I devised a new one—a daring combination of white wine, pureed pistachio nuts, honey, grated orange peel, and a dash of balsamic vinegar. Upon tasting it, my wife slid her baked sole to the edge of the plate and began to scrape off the sauce, smiling ruefully as she did so. I, on the other hand, didn’t think it was bad at all. I explained to her in detail what a bold creation she was missing, but her expression stayed the same.

  Two weeks later, we were having sole again. This time my wife did the cooking. She prepared two sauces: The first was her tried-and-true beurre blanc, and the other, a new recipe from a French top chef. The second tasted horrible. Afterward, she confessed that it was not a French recipe at all, but a Swiss one: my masterpiece from two weeks before! She had caught me out. I was guilty of the not-invented-here syndrome (NIH syndrome), which fools us into thinking anything we create ourselves is unbeatable.

  NIH syndrome causes you to fall in love with your own ideas. This is valid not only for fish sauces, but for all kinds of solutions, business ideas, and inventions. Companies tend to rate homegrown ideas as far more important than those from outsiders, even if, objectively, this is not the case. I recently had lunch with the CEO of a company that specializes in software for health insurance firms. He told me how difficult it is to sell his software to potential customers, even though his firm is the market leader in terms of service, security, and functionality. Most insurers are convinced that the best solution is what they have crafted themselves in-house over the past thirty years. Another CEO told me how hard it is to get his staff in the company’s headquarters to accept solutions proposed from far-flung subsidiaries.

  When people collaborate to solve problems and then evaluate these ideas themselves, NIH syndrome will inevitably exert an influence. Thus, it makes sense to split teams into two groups. The first group generates ideas, the second rates them, and vice versa. We tend to rate our own business ideas as more successful than other people’s concepts. This self-confidence forms the basis of thriving entrepreneurship but also explains start-ups’ frequently miserable returns.

  This is how psychologist Dan Ariely measured the NIH syndrome. Writing in his blog at the New York Times, Ariely asked readers to provide solutions to six issues, such as “How can cities reduce water consumption without limiting it by law?” The readers had to make suggestions and to assess the feasibility of all the ideas proposed. They also had to specify how much of their time and money they would invest in each idea. Finally, they were limited to using a set list of fifty words, ensuring that everyone gave more or less the same answers. Despite this, the majority rated their own responses as more important and applicable than the others, even though the submissions were virtually identical.

  On a societal leve
l, NIH syndrome has serious consequences. We overlook shrewd ideas simply because they come from other cultures. In Switzerland, where each state or “canton” has certain powers, one tiny canton never approved women’s suffrage; it took a federal court ruling in 1990 to change the law—a startling case of NIH. Or consider the modern traffic roundabout, with its clear yield requirements, that was designed by British transport engineers in the 1960s and implemented throughout the UK. It took another thirty years full of oblivion and resistance until this obvious traffic decongestant found its way in the United States and continental Europe. Today France alone has more than thirty thousand roundabouts, which the French now probably falsely attribute to the designer of the Place de l’Étoile.

  In conclusion: We are drunk on our own ideas. To sober up, take a step back every now and then and examine their quality in hindsight. Which of your ideas from the past ten years were truly outstanding? Exactly.

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  How to Profit from the Implausible

  The Black Swan

  All swans are white.” For centuries, this statement was watertight. Every snowy specimen corroborated this. A swan in a different color? Unthinkable. That was until the year 1697, when Willem de Vlamingh saw a black swan for the first time during an expedition to Australia. Since then, black swans have become symbols of the improbable.