You probably know about or at least
heard of loss aversion: people dislike loses more than they enjoy equivalent
gains:
Incurring a loss of 100$ hurts
roughly twice as much as gaining 100$ brings pleasure.
We know that all humans are loss
averse, to a greater or lesser extent. Why this is the case?
Living on the edge
One very elegant explanation comes
from evolutionary psychology. Our evolutionary ancestors lived in environments
with relatively scarce resources. Simply put, the resources available in a
certain area allowed for survival and successful reproduction, but not for much
more.
In this living on the edge setting, it is only natural to develop an
adaptation that says: not losing what resources you have is far more important
than acquiring new additional resources.
When one has barely enough resources to survive and successfully
reproduce, not losing current resources is much more important than acquiring new
resources.
Loss aversion is, probably, the
most prominent element of an adaptation with much wider effects in judgement
and decision-making which I will call a
preference for mediocrity.
Economic theory sees people as maximizers – trying to make the best
possible decision, trying to get as much benefit (utility) out of their actions
and transactions. This is not exactly senseless. After all, who would want to
get less when she can get more?
Yet, research in experimental
economics and behavioral science found that people are not exactly maximizers; rather they are satisfiers. In plain language:
People don’t necessarily go for The Best, rather, most settle for Good Enough.
This preference for mediocrity
(something that is good enough) makes
a lot of sense from an evolutionary perspective.
Imagine our evolutionary ancestors
in the African Savanah looking for berries. There are three types of berries:
(1) OK taste and OK nutritional value, (2) Delicious with very high nutritional
value and (3) Poisonous berries.
When picking berries, from an
evolutionary perspective, the most relevant goal is to not pick (and
eat) the poisonous ones. Sure, getting more of the delicious ones is very nice,
but the difference in benefit between getting OK berries and Delicious ones is
smaller than the benefit difference between getting poisonous berries and
getting OK berries.
The same broad pattern applies to mating,
as well. While both men and women would love to find the best possible partner (in
terms of gene quality and parenting quality) to have children with, the reality
is that the most important decision goal is to avoid having children with the
worst (bottom 10%) potential partner.
Let your imagination take you back
to the African Savanah when our evolutionary ancestors lived. Every female would
have loved to attract and mate with the healthiest, most handsome, most effective
hunter and bravest warrior. At the same
time, settling for the OK-ish guy to have children with would be considerably
better than having children with the least reliable male in the tribe.
For our ancestral grandmothers it
was more important to avoid getting knocked-up by a deceiving male who would
take the fruits and nuts she foraged and leave her alone to take care of their
children, who, very likely, inherited some of his defects.
This preference for mediocrity was,
most likely, shaped by evolutionary forces throughout millions of years. Not
surprisingly, our judgments and decisions are influenced – guided by it even in
the XXIst century.
Buying a used car
Nowadays, dealerships use the term
of pre-owned car, probably, because
it sounds slightly better. Regardless of how they’re called, used cars are a
pretty tricky product to buy. They cost a handsome amount of cash and for most
consumers cars are difficult to evaluate complex products. Simply put, the car
can look great and work just fine for the next two thousand miles (km) and then
collapse, leaving the new owner of a used car with huge repair and towing
bills.
Our judgment in buying a used car
is shaped by the same preference for mediocrity. Most sensible people want to
buy a used car that is good enough and, most importantly, want to avoid buying a lemon.
Referring to the used-car-purchase
example, in a recent interview, Rory Sutherland mentioned reputation-based
heuristics as being effective tools in avoiding disasters. He mentioned that his
first used car was bought from someone his parents knew because it was less
likely to be cheated by someone who drinks in the same pub as his father.
When my wife and I bought our first
used car, one of the sellers asked us to meet him in a supermarket parking lot in
a rather dubious area. Comparing that with people inviting us into their home
after we took a test drive, I believe we did the sensible thing when we decided
to not buy the car we saw in the supermarket parking lot.
I believe that reputation and trust
related heuristics are manifestations (second order adaptations?) of our preference for mediocrity.
Another adaptation related to the
preference for mediocrity is the compromise effect: our tendency to choose the middle option from a well-balanced choice set. Probably
the most used example of the compromise effect is the disproportionate choice
share of medium coffee (drinks).
One of the reasons for which people
choose the middle option (compromise) is that we want to avoid extremes, since
they come with risks associated. The middle option is a safe one since the risk
of getting too little quality / quantity is mostly related to the smallest and
cheapest option, while the more expensive and higher quantity / quality option
comes with the risk of overpaying or waste.
While the preference for mediocrity has a huge explanatory value of human behavior, it also has broad implications.
Implications
For applied behavioral science and
behavioral design, the preference for avoiding the worst outcome (over getting
the best possible option) suggests that removing barriers (anti-nudges) that
prevent the desired behavior to occur might (will?) have a greater effect than
trying to (actively) encourage the occurrence of the desired behavior.
For improving services and even for
our own self-improvement, instead of becoming (even) better at what we already
are good at, it might be a good idea to stop sucking at what we’re not doing so well (what we’re worst at).
Take the example of medical
practices (offices). Many of the (negative) comments on Yelp regarding doctors
concern over-booking, unwelcoming waiting rooms and not-so-pleasant clerical staff
(e.g. receptionist). Another big chunk of both positive and negative reviews
concern doctors’ bed side manners, or
simply put how well they interact with their patients.
Medical competence and the quality
of a medical act (e.g. diagnostics accuracy, choosing the right treatment) are
very difficult to evaluate, particularly for people without medical training.
The upside is that someone who managed to graduate from medical school and
completed her / his residency, most likely, isn’t a bad (terrible) doctor.
When it comes to bed side manners and more practical
issues such as scheduling, waiting room quality and clerical staff politeness
anyone can assess them.
If you would run (own) a medical
practice with negative reviews, the first focus should not be to hire
even better doctors (from a technical point of view); rather your first
priority should be to make sure that scheduling issues do not lead to (very)
long waiting times, that the waiting room looks like it is from this century
and work a bit on employees’ people skills.
Such an approach would most likely
not make the practice win any prizes or glorifying reviews, but at least it
will stop annoying people and reduce the number of bad reviews. Moreover, it
should stop the bleeding of clients
who just take their business somewhere else.
The same approach works similarly
for self-improvement. If someone is a very good specialist in given field, say
statistics, but (like someone I know) isn’t all that great at social
interactions (i.e. people skills), it might be a good idea to work on the later
and not try to become even better statistician.
Let’s give some random, yet
illustrative numbers. Mark – the statistician – is very competent from a
technical perspective scoring 85 out of 100 on statistics skills. However, on
social skills Mark scores only 15 (out of 100) and 25 is the threshold for not sucking.
If Mark is looking for a job, his
situation isn’t great. Indeed he is a very good statistician, since most of the
jobs on the market require a technical skill level of 70 (remember, Mark scores
85). Despite him being over-qualified for most of the jobs, it might very well
be that he can’t find a job even if he is invited for some interviews.
Even in a job such as data analysis
(statistician), one has to interact with other people, be able to write reports
for non-statisticians and co-exist in an office environment. Mark may very well
be rejected for jobs that he’s perfectly qualified because of his poor social
skills. From a recruiter’s (hiring manager’s) point of view, very poor social
skills are deal-breakers because
someone who sucks at interacting with
others will probably deteriorate the current team-environment, will most likely
require more attention – which translates in putting more on the manager’s plate – and might lead to more
serious disturbances in the work environment such as sexual harassment complaints
from other employees. Most likely, Mark is neither a horrible person nor a sex-maniac.
He just sucks at interacting with
others.
Mark can either improve his
statistical skills or he can improve his social skills. If he goes for the
former, he could try to enter the narrow job market for hyper-specialists (95+
on stat skills) where being a jerk is tolerated (sometimes is part of the job
description).
If Mark, however, decides to
improve his social skills, then it is possible for him to reach the mediocrity
threshold (25) where he’ll be seen as yeah,
whatever, he’s not great, but won’t cause any trouble. Only when Mark will reach this mediocrity
level, will his very good statistical skills actually be considered.
I am aware that this is an over-simplification,
but I believe I managed to explain the core idea.
Stop Sucking!
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