by Dan Ariely
Edison’s folly is also a demonstration of how badly things can go when we become too attached to our own ideas because, despite the dangers of AC, it also had a much higher potential to power the world. Fortunately for most of us, our irrational attachments to our ideas rarely end as badly as Edison’s.
OF COURSE, THE negative consequences of the Not-Invented-Here bias extend beyond the examples of a few individuals. Companies, in general, tend to create cultures centered around their own beliefs, language, processes, and products. Subsumed by such cultural forces, the people working within a company tend to naturally accept internally developed ideas as more useful and important than those of other individuals and organizations.*
If we think about organizational culture as an important component of the Not-Invented-Here mentality, one way to track this tendency might be to look at the speed in which acronyms blossom inside companies, industries, and professions. (For example, ICRM stands for Innovative Customer Relationship Management; KPI for Key Performance Indicator; OPR for Other People’s Resources; QSC for Quality, Service, Cleanliness; GAAP for Generally Accepted Accounting Principles; SAAS for Software as a Service; TCO for Total Cost of Ownership; and so on). Acronyms confer a kind of secret insider knowledge; they give people a way to talk about an idea in shorthand. They increase the perceived importance of ideas, and at the same time they also help keep other ideas from entering the inner circle.
Acronyms are not particularly harmful, but problems arise when companies become victims of their own mythologies and adopt a narrow internal focus. Sony, for example, had a long track record of highly successful inventions—the transistor radio, the Walkman, the Trinitron tube. After a long string of successes, the company drank its own Kool-Aid; “if something wasn’t invented at Sony, they wanted nothing to do with it,” wrote James Surowiecki in The New Yorker. Sony’s CEO, Sir Howard Stringer, himself admitted that Sony engineers suffered from a damaging Not-Invented-Here bias. Even as rivals were introducing next-generation products that flew off shelves, such as the iPod and Xbox, the people at Sony did not believe that those outside ideas were as good as theirs. They missed opportunities on products such as MP3 players and flat-screen TVs, while investing their efforts in developing unwanted products, such as cameras that weren’t compatible with the most popular forms of memory storage.8
Opposing Currents
The experiments we carried out to test the IKEA effect showed that when we make things ourselves, we value them more. Our experiments testing the Not-Invented-Here bias demonstrated that the same thing happens with our ideas. Regardless of what we create—a toy box, a new source of electricity, a new mathematical theorem—much of what really matters to us is that it is our creation. As long as we create it, we tend to feel rather certain that it’s more useful and important than similar ideas that other people come up with.
Like many findings in behavioral economics, this, too, can be both useful and detrimental. On the positive side, if you understand the sense of ownership and pride that stems from investing time and energy in projects and ideas, you can inspire yourself and others to be more committed to and interested in the tasks at hand. It doesn’t take much to increase a sense of ownership. Next time you unpack a manufactured item, look at the inspection tag; you might find someone’s name proudly displayed on it. Or think about what might happen if you helped your kids plant vegetables in the garden. Chances are that if your kids grow their own lettuce, tomatoes, and cucumbers and help prepare them for a dinner salad, they will actually eat (and love) their veggies. Analogously, if I had run my presentation for the bankers less like a lecture and more like a seminar in which I asked them a series of leading questions, they might have felt that they had come up with the ideas on their own and hence adopted them wholeheartedly.
There’s also a negative side to this, of course. For example, someone who understands how to manipulate another person’s desire for ownership can lead an unsuspecting victim into doing something for him. If I wanted to make a few of my doctoral students work on a particular research project for me, I’d have only to lead them to believe that they came up with the idea, get them to run a small study, analyze the results—and voilà, they’d be hooked. And, as in Edison’s case, the process of falling in love with our own ideas may lead to fixation. Once we are addicted to our own ideas, it is less likely that we will be flexible when necessary (“staying the course” is inadvisable in many cases). We run the risk of dismissing others’ ideas that might simply be better than our own.
Like many other aspects of our interesting and curious nature, our tendency to overvalue what we create is a mixed bag of good and bad. Our task is to figure out how we can get the most good and least bad out of ourselves.
AND NOW, IF you don’t mind, please sort the following words into a sentence and indicate how important you find this idea:
a basic important part and ourselves of irrationality is.
On a scale from 0 (not important at all) to 10 (very important) I find this idea to be _________ in terms of its importance.
Chapter 5
The Case for Revenge
What Makes Us Seek Justice?
In Alexandre Dumas’ novel The Count of Monte Cristo, the protagonist, Edmond Dantès, spends many years suffering in prison under false charges. He eventually escapes and finds a treasure left to him by a fellow prisoner that transforms his life. Under an assumed identity as the Count of Monte Cristo, he uses every ounce of his wealth and wit to entrap and manipulate his betrayers, exacting terrible revenge on them and their families. After surveying the human wreckage in his wake, the count finally realizes that he has taken his desire for revenge too far.
Given the opportunity, most of us are generally more than happy to seek revenge, though few of us take it to the extremes that Dantès did. Revenge is one of the deepest-seated instincts we have. Throughout history, oceans of blood have been spilled and an endless number of lives ruined in an effort to settle scores—even when nothing good could possibly come of it.
BUT IMAGINE THIS scenario: You and I live two thousand years ago in an ancient desert land, and I have a handsome young donkey that you want to steal. If you thought I was a rational decision maker, you might say to yourself, “It took Dan Ariely ten full days of digging wells to earn enough money to buy that gorgeous beast. If I steal it one night and escape to a faraway place, Dan will probably decide that it’s not worth his time to chase me. Instead, he’ll just take it as a business loss and go dig more wells in order to make enough money to buy a new donkey.” But if you know that I’m not always rational and that in fact I’m the dark-souled, vengeful type who would chase you to the ends of the earth, take back not only my donkey but all of your goats, and leave you a bloody mess to boot—would you go ahead and steal my donkey? My guess is that you would not.
From this perspective, despite all the harm caused by revenge (and anyone who has ever gone through a bad breakup or divorce knows what I am talking about), it seems that the threat of revenge—even at great personal expense—can serve as an effective enforcement mechanism that supports social cooperation and order. Though I’m hardly recommending taking “an eye for an eye and a tooth for a tooth,” I do suspect that, overall, the threat of vengeance can have a certain efficacy.*
What, exactly, are the mechanics and motivations underlying this primal urge? Under what circumstances do people want to take revenge? What drives us to spend our own time, money, and energy and even take risks just to make another party suffer?
The Pleasure of Punishment
To begin to understand how deeply the human desire for vengeance runs, I invite you to consider a study conducted by a group of Swiss researchers led by Ernst Fehr, who examined revenge using a version of an experimental game we call the Trust Game. Here are the rules, which are explained in detail to all participants.
You are paired with another participant. You are kept in separate rooms, and you will never know each other’s identity.
The experimenter gives each of you $10. You get to make the first move. You must decide whether to send your money over to the other participant or keep it for yourself. If you keep it, both of you get to keep your $10 and the game is over. However, if you send the other player your money, the experimenter quadruples the amount—so that the other player has their original $10 plus $40 (the $10 multiplied by four). The other player now has a choice: (a) to keep all the money, which means that they would get $50 and you would get nothing; or (b) to send half the money back to you, which means that each of you would end up with $25.*
The question, of course, is whether you will trust the other person. Do you send them the money—potentially sacrificing your financial gain? And will the other person justify your trust and share the earnings with you? The prediction of rational economics is very simple: no one would ever give back half of their $50, and, since this behavior is so glaringly predictable from a rational economic perspective, no one would ever send over their $10 in the first place. In this case, the simple economic theory is inaccurate: the good news is that people are more trusting and more reciprocating than rational economics would have us believe. Many people end up passing along their $10, and their partners often reciprocate by sending $25 back.
This is the basic trust game, but the Swiss version included another interesting step: if your partner chooses to keep all $50 for himself, you can use your own money to punish the bastard. For each dollar of your own hard-earned money that you give the experimenter, $2 will be extracted from your greedy partner. This means that if you decide to spend, say, $2 of your own money, your partner will lose $4, and if you decide to spend $25, your partner will lose all his winnings. If you were playing the game and the other person betrayed your trust, would you choose this costly revenge? Would you sacrifice your own money to make the other player suffer? How much would you spend?
The experiment showed that many of the people who had the opportunity to exact revenge on their partners did so, and they punished severely. Yet this finding was not the most interesting part of the study. While making their decisions, the participants’ brains were being scanned by positron emission tomography (PET). This way, the experimenters could observe participants’ brain activity while they were making their decisions. The results showed increased activity in the striatum, which is a part of the brain associated with the way we experience reward. In other words, according to the PET scan, it looked as though the decision to punish others was related to a feeling of pleasure. What’s more, those who had a high level of striatum activation punished others to a greater degree.
All of this suggests that punishing betrayal, even when it costs us something, has biological underpinnings. And this behavior is, in fact, pleasurable (or at least elicits a reaction similar to pleasure).
THE URGE TO punish exists in animals, too. In an experiment carried out at the Institute for Evolutionary Anthropology in Leipzig, Germany, Keith Jensen, Josep Call, and Michael Tomasello wanted to find out whether chimpanzees had a sense of fairness. Their experimental setup called for putting two chimps in two neighboring cages and placing a table piled high with food within both their reach, just outside the cages. The table was equipped with roller wheels and a rope on each end. The chimps could grab the table and move it closer to or farther from their cage. The rope was connected to the bottom of the table. If a chimp pulled the rope, the table would collapse and all the food would spill onto the floor and out of reach.
When the researchers placed one chimp in one of the cages and left the other cage empty, the chimp pulled the table over, ate contentedly, and didn’t pull the rope. However, things changed when a second chimp was put in a neighboring cage. As long as both chimps shared the food, all was well; but if one happened to roll the table very close to its own cage and out of the reach of the other chimp, the annoyed animal would often pull on the “revenge rope” and collapse the table. Not only that, but the researchers reported that when the table rolled away from them, the annoyed chimps exploded in rage, turning into screeching black furballs. The similarity between humans and chimps suggests that both have an inherent sense of justice and that revenge, even at personal expense, plays a deep role in the social order of both primates and people.
BUT THERE IS more to revenge than merely satisfying a personal desire to get back at the other guy. Revenge and trust are, in fact, opposite sides of the same coin. As we saw in the trust game, people are generally willing to put their faith in others, even in people they don’t know and will never meet (this means that, from a rational economics point of view, people are too trusting). This basic element of trust is also why we get so upset when the social contract, founded on trust, is violated—and why under these circumstances we are willing to spend our own time and money, and sometimes take physical risks, to punish the offenders. Trusting societies have tremendous benefits over nontrusting societies, and we are designed to instinctively try to maintain a high level of trust in our society.
* * *
A LAWMAKER’S ANGER
The following excerpt of a letter from an anonymous lawmaker posted on the politically progressive Web site Open Left does a good job of describing the rage many people felt in response to the 2008 banking bailout:9
Paulsen and congressional Republicans, or the few that will actually vote for this (most will be unwilling to take responsibility for the consequences of their policies), have said that there can’t be any “add ons,” or addition provisions. Fuck that. I don’t really want to trigger a worldwide depression (that’s not hyperbole, that’s a distinct possibility), but I’m not voting for a blank check for $700 billion for those mother fuckers.
Nancy [Pelosi] said she wanted to include the second “stimulus” package that the Bush Administration and congressional Republicans have blocked. I don’t want to trade a $700 billion dollar giveaway to the most unsympathetic human beings on the planet for a few fucking bridges. I want reforms of the industry, and I want it to be as punitive as possible.
Henry Waxman has suggested corporate government reforms, including CEO compensation, as the price for this. Some members have publicly suggested allowing modification of mortgages in bankruptcy, and the House Judiciary Committee staff is also very interested in that. That’s a real possibility.
We may strip out all the gives to industry in the predatory mortgage lending bill that the House passed last November, which hasn’t budged in the Senate, and include that in the bill. There are other ideas on the table but they are going to be tough to work out before next week. I also find myself drawn to provisions that would serve no useful purpose except to insult the industry, like requiring the CEOs, CFOs and the chair of the board of any entity that sells mortgage related securities to the Treasury Department to certify that they have completed an approved course in credit counseling. That is now required of consumers filing bankruptcy to make sure they feel properly humiliated for being head over heels in debt, although most lost control of their finances because of a serious illness in the family. That would just be petty and childish, and completely in character for me. I’m open to other ideas, and I am looking for volunteers who want to hold the sons of bitches so I can beat the crap out of them.
* * *
Rotten Tomatoes for Bankers
Not surprisingly, the desire for revenge struck many a citizen in the wake of the financial meltdown of 2008. As a result of the collapse of the mortgage-backed securities market, institutional banks fell like dominoes. In May 2008, JPMorgan Chase acquired Bear Stearns. On September 7, the government stepped in to rescue Fannie Mae and Freddie Mac. A week later, on September 14, Merrill Lynch was sold to Bank of America. The following day, Lehman Brothers filed for bankruptcy. The day after that (September 16), the U.S. Federal Reserve loaned money to AIG to prevent the company’s collapse. On September 25, Washington Mutual’s banking subsidiaries were partially sold to JPMorgan Chase, and the following day, Washington Mutual’s holding company and remaining subsidiary
filed for Chapter 11 bankruptcy.
On Monday, September 29, Congress voted against the bailout package proposed by President George W. Bush, resulting in a 778-point drop in the Dow Jones Industrial Average. And while the government worked to build a package that would pass, Wachovia became another casualty as it entered talks with Citigroup and Wells Fargo (the latter bought the bank on October 3).
When I looked around at the outraged public reaction to the $700 billion–plus bank bailout plan, it seemed as if people really wanted to bust the chops of the bankers who had flushed their portfolios down the toilet. One nearly apoplectic friend of mine promoted the idea of an old-fashioned solution: “Instead of taxing us to bail out those crooks,” he ranted, “Congress should put them in wooden stocks, with their feet and hands and heads sticking out. I bet everyone in America would give big bucks for the joy of throwing rotten tomatoes at them!”
Now consider what transpired from the perspective of the trust game. We entrusted those bankers with our retirement funds, our savings, and our mortgages. Essentially, they walked away with the $50 (you may want to put a few zeroes behind that). As a consequence, we felt betrayed and angry, and we wanted the bankers to pay dearly.