Iconoclast: A Neuroscientist Reveals How to Think Differently

by Berns, Gregory

  Arnold Schwarzenegger is a good example of an individual who has banked on his aura of familiarity to effect legislative change in California. A self-described iconoclast, he was born in 1947 in Austria. Schwarzenegger has traced his nonconformist tendencies to his childhood rebellion against a strict Austrian upbringing. “It was all about conforming. I was one who did not conform and whose will could not be broken. Therefore I became a rebel. Every time I got hit, and every time someone said, ‘you can’t do this,’ I said, ‘this is not going to be for much longer, because I’m going to move out of here. I want to be rich. I want to be somebody.’” Schwarzenegger also knows the power of appearance. “The bigger you are and the more impressive you look physically, the more people listen and the better you can sell yourself or anything else.”19

  On the surface, Schwarzenegger would appear to be an unlikely candidate for governor, especially a Republican one. But his aura of familiarity, coupled with the invincibility of the Terminator, made him an easy winner in California politics. Certainly, his legislative policies have gone far to the left of Republican ideology. From stem cell research to children’s health insurance, Schwarzenegger has taken stances that are nonconformist with party politics but resonate deeply with the masses. Were it not for Article II of the Constitution, which requires the president to be born in the United States, it is almost a sure bet that Schwarzenegger would be president.

  Why the Brain Likes Familiarity

  In November 2004, Rolling Stone magazine published its list of the five hundred greatest songs of all time. Although the editors gave the nod to Bob Dylan’s “Like a Rolling Stone,” it is the second song on their list that contains the most recognizable five notes in all of rock and roll history. For any fan of rock and roll, hearing Keith Richards’s fuzzed-out riff that opens “Satisfaction” can’t help but bring a smile to the face. It really is quite an impressive feat that the human brain can take five notes and instantly identify where they come from. In fact, two suffice for most people. Sure, the song is vastly overplayed, but it continues to show up on every list of top rock and roll songs of the past fifty years. One might debate endlessly the merits of the song and what accounts for its popularity, whether it’s the disaffected lyrics or the catchy riff itself. Regardless, the fact that it has become so familiar guarantees it a permanent place in the pantheon of popular music. The human brain comes to like that with which it is familiar. And it is this sort of familiarity that the successful iconoclast must strive for. Rightly or wrongly, people put their money into things that they are familiar with.

  In the 1960s, the University of Michigan psychologist Robert Zajonc further refined our notion of how familiarity defines what we like. Using pictures instead of music, Zajonc showed pictures of irregularly shaped octagons to his subjects. The pictures, however, were flashed so briefly on the screen that the subjects had insufficient time to process them. Later, Zajonc showed the pictures again and asked the subjects two questions. The first question asked how confident they were that they had seen a particular picture. The second question asked how much they liked it. Zajonc found that people liked pictures that they had seen previously, even though the pictures had been flashed so briefly that they were effectively unaware of having seen them. He termed this phenomenon “the mere exposure effect.”20

  Does familiarity with someone increase the likelihood of doing business with him? A wealth of economic data suggests that the answer is yes. Gur Huberman, a professor of finance at Columbia University, has examined where investors place their money as a result of familiarity. People who own stock in Regional Bell Operating Companies (RBOCs) tend to invest in the companies that provide their service. For example, whether someone invests in BellSouth or NYNEX is determined primarily by whether they live in the South or the Northeast. Huberman found that the fraction of people investing in local RBOCs was 82 percent higher than that of the next RBOC. From an economic point of view, this is irrational. One should not expect a local company to be a superior investment to any of the other national companies that provide essentially the same service. All of the RBOCs are listed on the NYSE, so there is no barrier to investment in any of these companies. Yet the local bias remains.

  People root for the home team, and they feel comfortable investing their money in a business that is familiar to them. Familiarity bias is not limited to telephone companies. U.S. equity managers tend to prefer domestic stocks, and their portfolios reflect this bias. This home-country bias extends to other countries as well. German business students, when compared with their American counterparts, view German stocks more favorably than American ones.21

  While familiarity increases the chances that people will like something, it also makes them feel comfortable. To bridge the gap between the mere exposure effect and the closing of a business deal, the iconoclast eventually needs to make his audience feel comfortable with his idea. From the perspective of the brain, familiar items are not necessarily more pleasurable or rewarding; it is simply that unfamiliar things tend to be alarming and potentially dangerous. Familiarity quiets the amygdala.

  The iconoclast has several means at his disposal for increasing the familiarity of his idea with his intended audience. Publicity exposure and liberal use of mass media outlets certainly create an aura of familiarity. Schwarzenegger is proof of the benefits of good PR. Being prolific, like Picasso and Chihuly, also helps create an omnipresence of work and increases the chance that people will run into the iconoclast’s ideas. Exposure creates inroads to tamp down the amygdala, but neuro-economic evidence suggests that something else is required to elicit actual investment decisions. There is the issue of reputation.

  Shadow Networks and Why Who Knows Whom Matters

  Milgram’s lost-letter technique seems quaint, almost antiquated in today’s world of digital communication. Apart from the occasional holiday card, written mail has ceased to be a useful form of correspondence. And while grammarians and future historians may bemoan the death of letter writing, snail mail has suffered the fate of all technologies—obsolescence. Every technology, even one that has been around for millennia, such as written correspondence, will eventually be replaced by something that is more efficient. So one might wonder in today’s networked world whether people are really just six e-mail hops away from anyone in the digital domain as they are in the physical world.

  In 2003, Duncan Watts, a professor at Columbia University who studies social networks, conducted a digital version of the Milgram experiment.22 Watts set up a Web site where people could register to participate. Each of the 98,847 people who registered was randomly assigned to get an e-mail message to one of 18 targets. There was a huge attrition rate. Even though almost 100,000 people registered, data was recorded on 24,163 chains, and of these, only 384 reached their targets, for a 1.6 percent completion rate. Nevertheless, these 384 chains allowed Watts to estimate the average degrees of separation to be 4.05. But this estimate reflected the level of connectedness for successful chains only. Incomplete chains might have failed because some people were more distant and required more steps. Because each step incurred a probability of the person dropping the ball, the incomplete chains provided important data for the true degrees of separation. Taking this into account, Watts found the average degrees of separation to be closer to 7. This was a somewhat larger number than Milgram found, but then again these were international targets. Watts also found no evidence of funneling. He concluded that “social search appears to be largely an egalitarian exercise” and not dependent on a small minority of connectors.

  On the surface, this may seem to be good news for iconoclasts. If there are many routes to reach any individual, then it might not really matter which route a person uses. This conclusion, however, ignores the issue of provenance. A message originating from a good friend or trusted business associate carries more weight than one coming from the high school acquaintance to whom you haven’t spoken in twenty years. And a message originating from a stranger carries alm
ost no value at all. Watts’s study also underscored the high attrition rate of digital messages. Even in 2003, before spam really started to choke in-boxes, recipients tended to ignore these e-mail messages and effectively terminated a chain. If we make the rather optimistic assumption that the odds are fifty-fifty that a random recipient will pass along a message, after six steps, only 1.5 percent of the messages will remain—a percentage that is almost identical to the rate Watts found.

  Perhaps the world really is bigger than we would like to think. Jon Kleinberg, a computer scientist at Cornell University, proved mathematically that small-world networks don’t arise from random connections.23 Messages won’t reach their intended recipient by bouncing randomly between people, in the hopes that someone will serve as a connector to another small world. People in a network need to know something about the other members, such as who they are likely to be connected to. You need a sort of shadow network, what Kleinberg called an underlying lattice, that serves as a black book of who knows whom.

  Both kinds of networks, whom-you-know and who-knows-whom, played critical roles in the development of Linux, the first computer operating system created using the open-source model of software development. In 1991, Linus Torvalds, a Finnish computer science student, famously posted this query on the USENET list comp.os.minix:

  Hello everybody out there using minix -

  I’m doing a (free) operating system (just a hobby, won’t be big and professional like gnu) for 386(486) AT clones. This has been brewing since april, and is starting to get ready. I’d like any feedback on things people like/dislike in minix, as my OS resembles it somewhat (same physical layout of the file-system (due to practical reasons) among other things).24

  Minix was a miniature version of the common, and bulky, operating system known as UNIX. It had the advantage of using very little memory, which meant it could fit within the paltry confines an IBM PC, which had less than 1 MB of RAM. Torvalds received a smattering of replies to his open call, but he also knew enough about what others were doing to not reinvent everything from scratch. Here is where Kleinberg’s shadow lattice came in handy. The USENET groups made such a network possible, providing a map of who was doing what and, most importantly, how to find people who could contribute chunks of computer code.

  The interesting thing about the Linux story is how USENET provided the lattice for the early hackers to communicate with each other. Because Linux was created in an open environment, everyone could see what everyone else was contributing. Code was tagged by who wrote it. And so not only did the network bootstrap itself; people began to develop a history. And this leads to the next critical element of social intelligence: reputation.

  Building Reputations for a Fair Deal

  Although our brains make snap judgments about the trustworthiness and familiarity of faces, these reactions are not the only determinants of building a social network. The strength of connections between people in a network depends on the history of their behavior. Both the Milgram and Watts small-worlds experiments illustrated that successful networking is not simply a matter of who knows whom. The high rate of dropped messages, especially the digital kind, means that strong connections in a social network may be more important than degrees of separation.

  A core attribute of integrity that is deeply wired in all primates is the ability to assess, and respond to, fairness. Individuals who make decisions that consider equitable outcomes for all participants possess a high degree of integrity. Those who do not, get labeled as selfish. The balance between self-interest and fairness shifts back and forth for everyone, but the importance for social networking lies in how other people perceive you. Given the choice, would you prefer to do business with a greedy person who you know will try to milk you for everything he can, or would you rather make a deal with someone who takes into consideration your needs? Some have called this the “win-win” approach to negotiation, but there is good biological reason for considering the fairness of business deals.

  In a remarkable experiment, the Emory University primatologists Sarah Brosnan and Frans de Waal found that even capuchin monkeys dislike unfairness. Brosnan and de Waal taught the monkeys to perform a simple token-exchange task. A token, in the form of a small granite rock, was placed in each monkey’s cage, and Brosnan simply stood in front of the cage with her hand stretched out, palm up. If the monkey gave her the token within sixty seconds, she uncovered a bowl with a piece of food in it, which was either a low-value food (a slice of cucumber) or a high-value one (a grape). The bowl was transparent, so the monkey could see its contents before deciding to exchange the token. In an interesting twist to this setup, Brosnan paired up the monkeys so that one could watch the other. Sometimes, while its partner was watching, Brosnan simply handed one monkey a grape without requiring any exchange. Brosnan then measured the rate at which the jilted monkey refused to exchange its token on the next round. After the partner witnessed an unfair exchange, its rate of participation plummeted. Like humans, Brosnan wrote, “monkeys, too, seem to measure reward in relative terms, comparing their own rewards with those available, and their own efforts with those of others.”25

  If monkeys have such strong reactions to unfairness, it is a sure bet that these responses are deeply wired in the brain. Although there may be a time and a place for the exploitation of inequities, the iconoclast who is building a social network is best served by fostering a perception of fairness and integrity. Recent neuroimaging experiments have revealed how the brain reacts to fairness and how these responses affect people’s subsequent decisions to trust a person.

  The classic economic game for studying fairness is called ultimatum. In this game, two participants who don’t know each other are given a pot of money—say, $100—to split. The first player offers to split the pot in any ratio he wants. If the second player accepts this offer, both players take home their share of the pot. But if the second player rejects the offer, nobody gets anything. Despite the apparent simplicity of the instructions, the decisions of what the first player offers and whether the second player accepts are wrapped in the essence of fairness. No matter the amount of money at stake, the second player will almost always reject offers less than about 15 percent of the pot.26 Apparently irrational from the perspective of giving up free money, it makes sense when one considers the value that we place on fairness. When individuals are faced with such an unfair split, the anterior insula—a part of the brain closely associated with disgusting tastes—becomes more active. The more active this part of the brain, the more likely a person will reject an offer.27

  It is significant that people forego free money, in effect paying to punish the other person for bad behavior. In these one-shot ultimatum games, the participants don’t know each other. Given our evolutionary heritage from small communities, however, we possess a reciprocity assumption—a biological golden rule. Our brains are wired to be sensitive to fairness because it might just come back to haunt us (and in the small communities of yore, it probably would). An efficient strategy for any social interaction is to assume that you will meet up again someday and the other person will remember how you behaved. Humans, in particular, have good memories and long lives, so behaving equitably toward others may well have evolved as a more adaptive strategy than short-term self-interest.

  Warren Buffett and the Evolution of Reputation

  In his efforts to bring his idea to the masses, the iconoclast runs the risk of being labeled a snake oil salesman. Our brains pick up anything that is unexpected. The amygdala, in particular, serves as radar for potential threats. Its biological xenophobia serves as a hair trigger on our bs detectors. The amygdala is good at what it does, but it is not an innate response. Both trust and its counterpart, distrust, are learned responses based on an individual’s past experience. And while the amygdalectomized patients appeared more trustworthy on some psychological tests, the iconoclast cannot count on putting potential investors’ amygdalae to sleep with hollow promises of security. The key t
o trust is through reputation.

  As Warren Buffett famously said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” Buffett’s reputation runs so deeply that it commands a premium unto itself. When word gets out that Buffett is adding a company to Berkshire Hathaway’s holdings, the company’s value immediately shoots up. Buffet adheres, more or less, to the value approach to investing that Benjamin Graham formulated and other contrarians like David Dreman and Bill Miller continue to use, and it is hard to argue with Buffett’s success. But what is unique about Buffett is his reputation for straight talk. His letters to shareholders are lessons in clarity. After Berkshire Hathaway suffered $3.4 billion in insurance losses from the 2005 hurricane season, Buffett answered the question on every investor’s mind about staying in the catastrophic insurance business. “I don’t know the answer to these all-important questions. What we do know is that our ignorance means we must follow the course prescribed by Pascal in his famous wager about the existence of God. As you may recall, he concluded that since he didn’t know the answer, his personal gain/loss ratio dictated an affirmative conclusion.”28 It was Buffett’s way of saying, assume the worst and only write catastrophic policies at higher prices.

  Buffett commands a reputation premium because people trust him. It is easy to see from a Darwinian perspective why reputation and trust may have evolved to be highly valued traits. Imagine a world of creatures that are completely self-interested. These creatures are the perfect embodiment of Adam Smith’s selfish individual. Each of these animals, in accordance with both Darwinian principles of natural selection and sexual selection, is primarily concerned with finding food to eat and someone with whom to mate. In the case of foraging for food, self-interest may serve the animal quite well, especially if it must compete with other animals. But imagine what would happen if two of these animals got together and somehow agreed to share the food that they found. As long as they trust each other, these cooperating creatures stand to do substantially better in the race for survival. In fact, evolution pretty much guarantees that such cooperative relationships will be discovered by animals because they are superior to completely self-interested strategies of survival. But there is a wrinkle in this story. Imagine an entire colony of these friendly creatures, which willingly cooperate with each other, sharing food and shelter. Such a lovefest creates the opportunity for more sinister operatives to take advantage of their trusting counterparts. In a culture of complete and absolute trust, evolution begins to favor creatures that can deceive other members of the species. The final balance between cooperation and deception is called an evolutionarily stable strategy. It means that in any society there will always be a mix of cooperation and deception. It is only the possibility of deception that confers value to cooperation.