The frame problem should warn us that when we do this, we are bound to make mistakes. And we do, all the time. But unlike the creations of the AI researchers, humans do not surprise us in ways that force us to rewrite our whole mental model of how we think. Rather, just as Paul Lazarsfeld’s imagined reader of the American Soldier found every result and its opposite is equally obvious, once we know the outcome we can almost always identify previously overlooked aspects of the situation that then seem relevant. Perhaps we expected to be happy after winning the lottery, and instead find ourselves depressed—obviously a bad prediction. But by the time we realize our mistake, we also have new information, say about all the relatives who suddenly appeared wanting financial support. It will then seem to us that if we had only had that information earlier, we would have anticipated our future state of happiness correctly, and maybe never bought the lottery ticket. Rather than questioning our ability to make predictions about our future happiness, therefore, we simply conclude that we missed something important—a mistake we surely won’t make again. And yet we do make the mistake again. In fact, no matter how many times we fail to predict someone’s behavior correctly, we can always explain away our mistakes in terms of things that we didn’t know at the time. In this way, we manage to sweep the frame problem under the carpet—always convincing ourselves that this time we are going to get it right, without ever learning what it is that we are doing wrong.
Nowhere is this pattern more evident, and more difficult to expunge, than in the relationship between financial rewards and incentives. It seems obvious, for example, that employee performance can be improved through the application of financial incentives, and in recent decades performance-based pay schemes have proliferated in the workplace, most notably in terms of executive compensation tied to stock price.20 Of course, it’s also obvious that workers care about more than just money—factors like intrinsic enjoyment, recognition, and a feeling of advancement in one’s career might all affect performance as well. All else equal, however, it seems obvious that one can improve performance with the proper application of financial rewards. And yet, the actual relationship between pay and performance turns out to be surprisingly complicated, as a number of studies have shown over the years.
Recently, for example, my Yahoo! colleague Winter Mason and I conducted a series of Web-based experiments in which subjects were paid at different rates to perform a variety of simple repetitive tasks, like placing a series of photographs of moving traffic into the correct temporal sequence, or uncovering words hidden in a rectangular grid of letters. All our participants were recruited from a website called Amazon’s Mechanical Turk, which Amazon launched in 2005 as a way to identify duplicate listings among its own inventory. Nowadays, Mechanical Turk is used by hundreds of businesses looking to “crowd-source” a wide range of tasks, from labeling objects in an image to characterizing the sentiment of a newspaper article or deciding which of two explanations is clearer. However, it is also an extremely effective way to recruit subjects for psychology experiments—much as psychologists have done over the years by posting flyers around college campuses—except that because workers (or “turkers”) are usually paid on the order of a few cents per task, it can be done for a fraction of the usual cost.21
In total, our experiments involved hundreds of participants who completed tens of thousands of tasks. In some cases they were paid as little as one cent per task—for example, sorting a single set of images or finding a single word—while in other cases they were paid five or even ten cents to do the same thing. A factor of ten is a pretty big difference in pay—by comparison, the average hourly rate of a computer engineer in the United States is only six times the federal minimum wage—so you’d expect it to have a pretty big effect on how people behave. And indeed it did. The more we paid people, the more tasks they completed before leaving the experiment. We also found that for any given pay rate, workers who were assigned “easy” tasks—like sorting sets of two images—completed more tasks than workers assigned medium or hard tasks (three and four images per set respectively). All of this, in other words, is consistent with common sense. But then the kicker: in spite of these differences, we found that the quality of their work—meaning the accuracy with which they sorted images—did not change with pay level at all, even though they were paid only for the tasks they completed correctly.22
What could explain this result? It’s not completely clear; however, after the subjects had finished their work we asked them some questions, including how much they thought they ought to have been paid for what they had just done. Interestingly, their responses depended less on the difficulty of the task than on how much they had been paid to do it. On average, subjects who were paid one cent per task thought they should have been paid five cents; subjects who were paid five cents thought they should have been paid eight cents; and subjects who were paid ten cents thought they should have been paid thirteen cents. In other words, no matter what they were actually paid—and remember that some of them were getting paid ten times as much as others—everyone thought they had been underpaid. What this finding suggested to us is that even for very simple tasks, the extra motivation to perform that we intuitively expect workers to experience with increased financial incentives is largely undermined by their increased sense of entitlement.
It’s hard to test this effect outside of a laboratory setting, because workers in most real environments have expectations about what they should be paid that are hard to manipulate. But consider, for example, that in the United States women get paid on average only 90 percent as much as men who do exactly the same jobs, or that European CEOs get paid considerably less than their US counterparts.23 In either case, could you really argue that the lower-paid group works less hard or does a worse job than the higher-paid group? Or imagine if next year, your boss unexpectedly doubled your annual pay—how much harder would you actually work? Or imagine a parallel universe in which bankers got paid half of what they get in ours. No doubt some of them might have chosen to go into other professions, but for those who remained in banking, would they really work less hard or do a worse job? The outcome of our experiment suggests that they would not. But if so, then you have to wonder how much influence employers can have on worker performance simply by changing financial incentives.
A number of studies, in fact, have found that financial incentives can actually undermine performance. When a task is multifaceted or hard to measure, for example, workers tend to focus only on those aspects of their jobs that are actively measured, thereby overlooking other important aspects of the job—like teachers emphasizing the material that will be covered in standardized tests at the expense of overall learning. Financial rewards can also generate a “choking” effect, when the psychological pressure of the reward cancels out the increased desire to perform. Finally, in environments where individual contributions are hard to separate from those of the team, financial rewards can encourage workers to ride on the coattails of the efforts of others, or to avoid taking risks, thereby hampering innovation. The upshot of all these confusing and often contradictory findings is that although virtually everyone agrees that people respond to financial incentives in some manner, it’s unclear how to use them in practice to elicit the desired result. Some management scholars have even concluded after decades of studies that financial incentives are largely irrelevant to performance.24
No matter how many times this lesson is pointed out, however, managers, economists, and politicians continue to act as if they can direct human behavior via the application of incentives. As Levitt and Dubner write, “The typical economist believes that the world has not yet invented a problem that he cannot fix if given a free hand to design the proper incentive scheme.… An incentive is a bullet, a lever, a key: an often tiny object with astonishing power to change a situation.”25 Well, maybe, but that doesn’t mean that the incentives we create will bring about the changes we intended. Indeed, one of Levitt and Dubner’s own vignettes—of th
e high-school teachers cheating on the tests—was an attempt by policy makers to improve teaching through explicit performance-based incentives. That it backfired, producing outright cheating and all manner of lesser gaming, like “teaching to the test,” and focusing exclusively on marginal students for whom a small improvement could generate an additional passing grade, should give one pause about the feasibility of designing incentive schemes to elicit desired behavior.26
And yet common sense does not pause. Rather, once we realize that some particular incentive scheme did not work, we conclude simply that it got the incentives wrong. Once they know the answer, in other words, policy makers can always persuade themselves that all they need to do is to design the correct incentive scheme—overlooking, of course, that this was precisely what they thought they were doing previously as well. Nor are policy makers uniquely susceptible to this particular oversight—we all are. For example, a recent news story about the perennial problem of politicians failing to take long-term fiscal responsibility seriously concluded blithely, “Like bankers, politicians respond to incentives.” The article’s solution? “To align the interests of the country with those of the politicians who are guiding it.” It all sounds so simple. But as the article itself concedes, the history of previous attempts to “fix” politics has been disappointing.27
Like rational choice theory, in other words, common sense insists that people have reasons for what they do—and this may be true. But it doesn’t necessarily allow us to predict in advance either what they will do or what their reasons will be for doing it.28 Once they do it, of course, the reasons will appear obvious, and we will conclude that had we only known about some particular factor that turned out to be important, we could have predicted the outcome. After the fact, it will always seem as if the right incentive system could have produced the desired result. But this appearance of after-the-fact predictability is deeply deceptive, for two reasons. First, the frame problem tells us that we can never know everything that could be relevant to a situation. And second, a huge psychological literature tells us that much of what could be relevant lies beyond the reach of our conscious minds. This is not to say that humans are completely unpredictable, either. As I’ll argue later (in Chapter 8), human behavior displays all sorts of regularities that can be predicted, often to useful ends. Nor is it to say that we shouldn’t try to identify the incentives that individuals respond to when making decisions. If nothing else, our inclination to rationalize the behavior of others probably helps us to get along with one another—a worthy goal in itself—and it may also help us to learn from our mistakes. What it does say, however, is that our impressive ability to make sense of behavior that we have observed does not imply a corresponding ability to predict it, or even that the predictions we can make reliably are best arrived at on the basis of intuition and experience alone. It is this difference between making sense of behavior and predicting it that is responsible for many of the failures of commonsense reasoning. And if this difference poses difficulties for dealing with individual behavior, the problem gets only more pronounced when dealing with the behavior of groups.
CHAPTER 3
The Wisdom (and Madness) of Crowds
In 1519, shortly before he died, the Italian artist, scientist, and inventor Leonardo da Vinci put the finishing touches on a portrait of a young Florentine woman, Lisa Gherardini del Giocondo, whose husband, a wealthy silk merchant, had commissioned the painting sixteen years earlier to celebrate the birth of their son. By the time he finished it, Leonardo had moved to France at the invitation of King François I, who eventually purchased the painting; thus apparently neither Ms. del Giocondo nor her husband ever got the chance to view Leonardo’s handiwork. Which is a pity really, because five hundred years later that painting has made her face about the most famous face in all of history.
The painting, of course, is the Mona Lisa, and for those who have lived their entire lives in a cave, it now hangs in a bulletproof, climate-controlled case on a wall all by itself in the Musée du Louvre in Paris. Louvre officials estimate that nearly 80 percent of their six million visitors each year come primarily to see it. Its current insurance value is estimated at nearly $700 million—far in excess of any painting ever sold—but it is unclear that any price could be meaningfully assigned to it. The Mona Lisa, it seems fair to say, is more than just a painting—it is a touchstone of Western culture. It has been copied, parodied, praised, mocked, co-opted, analyzed, and speculated upon more than any other work of art. Its origins, for centuries shrouded in mystery, have captivated scholars, and its name has leant itself to operas, movies, songs, people, ships—even a crater on Venus.1
Knowing all this, a naïve visitor to the Louvre might be forgiven for experiencing a sense of, well, disappointment upon first laying eyes on the most famous painting in the world. To start with, it is surprisingly small. And being enclosed in that bulletproof box, and invariably surrounded by mobs of picture-snapping tourists, it is irritatingly difficult to see. So when you do finally get up close, you’re really expecting something special—what the art critic Kenneth Clark called “the supreme example of perfection,” which causes viewers to “forget all our misgivings in admiration of perfect mastery.”2 Well, as they say, I’m no art critic. But when, on my first visit to the Louvre several years ago, I finally got my chance to bask in the glow of perfect mastery, I couldn’t help wondering about the three other da Vinci paintings I had just walked by in the previous chamber, and to which nobody seemed to be paying the slightest attention. As far as I could tell, the Mona Lisa looked like an amazing accomplishment of artistic talent, but no more so than those other three. In fact, if I hadn’t already known which painting was the famous one, I doubt that I could have picked it out of a lineup. For that matter, if you had put it in with any number of the other great works of art on display at the Louvre, I’m quite positive it wouldn’t have jumped out at me as the obvious contender for most-famous-painting award.
Now, Kenneth Clark might well reply that that’s why he’s the art critic and I’m not—that there are attributes of mastery that are evident only to the trained eye, and that neophytes like me would do better simply to accept what we’re told. OK, fair enough. But if that’s true, you would expect that the same perfection that is obvious to Clark would have been obvious to other art experts throughout history. And yet, as the historian Donald Sassoon relates in his illuminating biography of the Mona Lisa, nothing could be further from the case.3 For centuries, the Mona Lisa was a relatively obscure painting languishing in the private residences of kings—still a masterpiece, to be sure, but only one among many. Even when it was moved to the Louvre, after the French Revolution, it did not attract as much attention as the works of other artists, like Esteban Murillo, Antonio da Correggio, Paolo Veronese, Jean-Baptiste Greuze, and Pierre Paul Prud’hon, names that for the most part are virtually unheard of today outside of art history classes. And admired as he was, up until the 1850s, da Vinci was considered no match for the true greats of painting, like Titian and Rafael, some of whose works were worth almost ten times as much as the Mona Lisa. In fact, it wasn’t until the twentieth century that the Mona Lisa began its meteoric rise to global brand name. And even then it wasn’t the result of art critics suddenly appreciating the genius that had sat among them for so long, nor was it due to the efforts of museum curators, socialites, wealthy patrons, politicians, or kings. Rather, it all began with a burglary.
On August 21, 1911, a disgruntled Louvre employee named Vincenzo Peruggia hid in a broom closet until closing time and then walked out of the museum with the Mona Lisa tucked under his coat. A proud Italian, Peruggia apparently believed that the Mona Lisa ought rightly to be displayed in Italy, not France, and he was determined to repatriate the long-lost treasure personally. Like many art thieves, however, Peruggia discovered that it was much easier to steal a famous work of art than to dispose of it. After hiding it in his apartment for two years, he was arrested while attempting to sel
l it to the Uffizi Gallery in Florence. But although he failed in his mission, Peruggia succeeded in catapulting the Mona Lisa into a new category of fame. The French public was captivated by the bold theft and electrified by the painting’s unexpected recovery. The Italians, too, were thrilled by the patriotism of their countryman, and treated Peruggia more like a hero than a criminal—before the Mona Lisa was returned to its French owner, it was shown all over Italy.
From that point on, the Mona Lisa never looked back. The painting was to be the object of criminal activity twice more—first, when a vandal threw acid on it, and then when a young Bolivian, Ugo Ungaza Villegas, threw a rock at it. But primarily it became a reference point for other artists—most famously in 1919, when the Dadaist Marcel Duchamp parodied the painting and poked fun at its creator by adorning a commercial reproduction with a mustache, a goatee, and an obscene inscription. Salvador Dalí and Andy Warhol followed suit with their own interpretations, and so did many others—in all, it has been copied hundreds of times and incorporated into thousands of advertisements. As Sassoon points out, all these different people—thieves, vandals, artists, and advertisers, not to mention musicians, moviemakers, and even NASA (remember the crater on Venus?)—were using the Mona Lisa for their own purposes: to make a point, to increase their own fame, or simply to use a label they felt would convey meaning to other people. But every time they used the Mona Lisa, it used them back, insinuating itself deeper into the fabric of Western culture and the awareness of billions of people. It is impossible now to imagine the history of Western art without the Mona Lisa, and in that sense it truly is the greatest of paintings. But it is also impossible to attribute its unique status to anything about the painting itself.
Everything Is Obvious Page 6