The Failure of Success Stories: Despite Doing Exactly Like in the Success Stories He Failed… It’s not Despite; it’s Because (8)

We’ve all heard “success stories” and felt fascinated about them. In many ways everyone likes to envision themselves as characters of success stories. However, doing as in the success stories is not necessarily a bright idea. In this post I’m going to go through the short comings of “success stories” and explain why it is not good to “do as in the success stories”.

Now, I have to make one thing clear. There are “success recipes” and “success stories”. The “success recipes” are usually invented by charlatans that promise to teach you “how to make one million euros on the stock market in five easy steps” or “how to effectively tie your shoelaces in 10 easy steps”. I’m not referring to these “hear what you want to hear” products. I’m referring to those real stories of people or firms that became successful and that have become part of (western) culture. The idea of this post came when I was writing a project on how to encourage and support entrepreneurship in IT and I could not ignore the “two young men in a garage” stereotype.

Let’s come back to “success stories” and focus first on the “story” part. Stories have been immensely important in human history. Stories and storytelling played a fundamental role in human culture and civilization. Culture, in the broad sense, means information that is transmitted from one generation to the next through non-genetic means. As you might know, language developed earlier than writing in human evolution and stories were the main component of culture. Even after writing appeared, reading and writing were the privileges of the elites for most of human history. Not until the XIX-th century and only in the western world was there a public education system to provide mass learning of reading and writing. Even in our times there are areas in the world where illiteracy is a major issue.

So stories were and still are highly important in transmitting information. What is really interesting is that our brains are adapted to learning through stories. At the same time, stories have a major characteristic, namely they need to be coherent. The coherence of a story is crucial in ensuring its viability as an element of culture. The problem is that coherence is not the same thing as “truth”, validity, reliability etc.  

To better understand the difference between coherence and validity think of “fairy tales”. They are highly coherent, but everyone (at least the ones that passed childhood) knows that they are not true and only fictions. Despite knowing that “fairy tales” are products of imagination with zero validity in the real world they are appealing even for adults. Think only about the huge audiences that movies like Harry Potter, Lord of the Rings and Star Wars have made.

Another example to better understand the difference between coherence and validity is “home shopping”. All the programs that present and invite people to buy the magnificent limited offer unbelievable product are extremely coherent stories but have (close to) zero validity. You don’t believe me? Then think, I repeat THINK about losing weight without any effort … is there any possible physical, chemical, biological way to do that apart from starving?

To make a long story short, humans substitute coherence for truth. A coherent story is perceived as true and valid even if in fact it is not so. Success stories are coherent (and desirable) and people believe them as being true. Moreover, people perceive success stories as reliable models.

Now going to the “success” part of “success stories” there is a bit of a “circle reasoning” in the sense that these stories are “success” stories because the characters in the story became successful. Because the protagonists of success stories have been successful people imply that their story is a story of success. In decision making psychology terms this is called “outcome bias” and it means that people judge the outcome and then infer if the “road” to the outcome was right or not. So people seeing that others have been successful they imply that what those people did is the right way to achieve success. However, this is fundamentally wrong because a huge number of RELEVANT factors are usually discarded.

Let’s start with the first flaw in success stories, namely the “starting low” part of most stories. In your typical “success story” the protagonists start usually at a low level that is quite ordinary and most people can relate to it. In a typical success story the main characters start their business project in a “garage” (e.g. Apple), or in a student dorm room (e.g. Facebook) etc. In other stories the main character starts with a low level job such as “moping the floors” or being a waiter. The appeal of this part of success stories comes from the fact that virtually everyone can relate to this low starting level. Most people had a garage or dorm-room or held low level jobs and this makes it easy to imagine yourself in the shoes of the main character in a success story.

To better understand try to make a comparison between a “success story” of someone who started their business in a “garage” or “dorm room” and a “success story” of someone who started their business in an office building in the city center. Which story is more appealing? With which character can you relate with more? Most likely the first, right?

If we go beyond appeal and identification with a character’s starting situation we will see that this information is perfectly useless in assessing the validity of a success story. What is going on here is what I call “observation bias” or in more scientific terms “availability heuristic”. If you ask anyone if they know a story about someone who started a successful business in a garage, dorm-room, studio etc. for sure people will be able to say about Apple, Google or Facebook. These businesses and the stories behind them are widely known as mass media, books and movies have presented them to the general public. However, this is what we can retrieve from memory about starting a business in a garage, dorm-room etc. It has virtually nothing to do with the overall figures of businesses that started at a low level and their rate of success.

To better understand think about lottery winners. In the media there are stories and news about people who have won the lottery. Everyone has heard at least one or two of these stories and in everyone’s memory there is available information on lottery winners. If one is asked to estimate the chances of winning the lottery he or she will retrieve from memory instances of people that have won the lottery and make an estimate that is for sure wrong. The reason for which it is wrong is that people have never heard stories about people losing the lottery. Assuming that for every lottery winner there are at least a few hundred thousand people who lost the lottery, imagine how a news bulletin that presents people who have lost would look like. Even if for every loser there would be only one second of air-time the news bulletin would have to last for at least 10 hours.  Now, 10 hours of seeing 1 second for each lottery loser is not something that people would watch and TV stations restrict themselves to presenting one winner for one minute.

Going back to “success stories” and applying the same REASONING we will understand that for every business that has started in a garage and was eventually successful there are at least a few thousand businesses that have started in a garage and failed. Similarly for dorm rooms, studios, garden sheds etc. The same goes for the successful people that have started as waiters or floor cleaners. For each one that has started so low and later became some top-manager hot-shot, there are tens or hundreds of thousands of people who started as waiter or floor cleaner and never got to be even “chief waiter” or chief floor cleaner.

To sum up, starting at a low level is appealing for the public because people can relate to this “starting low”. At the same time, starting low has absolutely zero relevance for the success of the business or of the person.

The second flaw of success stories is that they lack information that is highly relevant. The typical “success story” goes something like this: “There were two young men that have started a business in a garage and 20 years later they were multi-millionaires.” The problem with this is that it lacks two major chunks of information. First, what has happened in those 20 years and second, when did they start the business.

People, in general, attribute outcomes to individual traits and generally ignore contextual factors. “If someone else does something good or bad it is because of his or her character, personality etc. If I do something good it is because of my skills, qualities, character etc. If I do something wrong it is because the context made me do it.” This is essentially how most people think and unless there is discomfort (me doing something bad) about one’s self, everything is attributed to the individual’s character, skills, traits etc.

In success stories the success is assumed to be (only) due to the personality, skills, qualities etc. of the characters in the story. Most people ignore completely the contextual factors. The reality is that contextual factors are much more powerful that we would like to think. I don’t want to go into a lengthy argumentation on the power of context, but let’s THINK about one contextual factor extremely relevant for success stories that is ignored and this is the “Market trend” or “Economy trend”.

Everyone knows that a business or a job is not isolated from the rest of the world and is subject to influences from the market in which it “plays” and the overall economic environment. Despite knowing this, somehow people ignore these contextual factors when it comes to success stories.  Ignoring these influences and trying to replicate a success story is not exactly smart.

To go a bit more in detail here, you know that in economy there are cycles and even if there is not a pin-point accurate duration of an economic cycle, there is a pattern, namely that there are approximately 7-10 years of growth followed by 1-3 years of recession. I am aware that it is not very accurate, but for the sake of the argument let’s agree on this broad description of economic cycles. 

Now, which business do you think will be more successful: one that “goes to market” in the second year of a growth cycle and benefits of at least 5 years of economic growth or the one that “goes to market” in the last year of growth and then has to go through 1-3 years of recession?

The answer is obvious, but most people ignore the timing and economic context of the occurrence of a successful business that ends up in a “success story”.

Going even further in analyzing the economic context of success stories, there is a belief that many successful companies are started during recession periods and that in fact these new businesses are the engine of the new growth. Now, I’m not in the position to deny the effects of some new firms on the overall economy, but let’s see things from a different perspective. If a firm is set up sometime in the middle of a 2-3 years recession, then there are two major factors here. First, resources are relatively cheap in a recession period (or at least cheaper than in an economic boom period) and second, if it takes about 1-1.5 years to set up a new firm and its products, then it means that by the time that business “goes to market” the recession period is (almost) over and subsequently it will benefit from a relatively long period of economic growth.

To sum up, success stories ignore almost completely the contextual factors and most importantly ignore the broader economic context in which a success story takes place.

The third flaw of success stories is that they promote behaviors that in general are detrimental. Many of successful entrepreneurs make a big thing about them dropping out of school. Personalities such as Sir Richard Branson, Steve Jobs and even Bill Gates have dropped out of school and they somehow never forget to mention this when telling their stories. Is dropping out of school a general characteristic of successful entrepreneurs? Could be, but is it in any way relevant?

Here, again we have a case of “availability heuristic”. Since high profile personalities say that they have dropped out of school, many people have this available in their memory and subsequently imply that dropping out of school is something good. On a “softer” side, people imply that education is not that important for one to achieve success. Again these are only a few instances and the huge mass of school drop-outs is ignored. In general people who drop out of school are worse off than people who complete their studies and this is a widely accepted truth. Moreover, the more education, the better is the outcome in life quality, income etc. I accept that there are several controversies of the exact impact of an additional year of education in one’s overall well-being  but there is no controversy on the overall positive impact of education.

In a similar line of thought, what is missing from these “success stories” is the fact that even if the “stars” of a business have dropped out of school, the business heavily relies on highly trained professionals. Of course glamorous personalities like Bill Gates and Sir Richard Branson are in the spotlight, but do you actually believe that their businesses have developed to this level without people who were formally trained to do the business? Behind every successful entrepreneur that has dropped out of school, there is an (invisible) army of highly schooled people who are doing the work.

To sum up, following a success story that includes dropping out of school or giving little importance to education is in fact detrimental for the individual.  

The fourth failure of “success stories” is that they ignore the money factor. If you ask a wannabe entrepreneur about her project, sooner or later the topic of money and financing the investment will come up. Even if money is not the most important thing in the success of a business (or person), it is highly important and it is one of those things that if it is lacking then it is a big issue. The typical success story usually ignores this component or it mentions something very briefly about someone mysterious who made an initial (small) investment.

Money issues are somehow taboo in many cultures and people prefer not to talk about them. However, in real life financing an investment or a career is a big thing and in many situations it makes a difference between a success and a failure.   

The fifth failure of “success stories” is that they ignore what has not happened. I’ve left this point at the end because I believe it to be very important and a bit hard to digest. By its very nature a story is a listing of facts – things that have happened. At the same time, for everything that happens there is at least one thing that has not happened.

To better understand this, let’s get back to the lottery example. If you win the lottery this means that, apart from being extremely lucky, many other people that have played the lottery did not win. If you win the lottery then it means that “not playing the lottery” did not happen. If you win the lottery it means that other people that would have picked the same numbers did not play the lottery or changed the numbers.

For everything that happens there are countless things that did not happen. Why they did not happen is a very broad topic of discussion, but overall it’s simply luck.

Not one single “success story” takes this fact into account, but the truth is that in all successes there is a huge amount of luck. For example what would have happened to the great success story of Apple if someone else had invented the technology behind the iPod? What would have happened to Facebook if Mark Z. would have been born a girl (there is a 50:50 chance for a human to be male or female)?

The examples above might be a bit too extreme, but let’s think of some more digestible ones namely the actions of the competition of all these examples of success. All success stories somehow ignore what the competition has done or most importantly what it has not done. One company’s success implies as in the lottery example the lack of success of another company. So in order for some company or person to be successful others (direct competitors) have to not exist or fail somewhere down the road.

In the same line of thought, if the guy that started as a floor cleaner got a promotion that in turn led to another promotion and so on up to top management it means that other people did not get the promotions (or jobs if they were external candidates). He might have got the promotion(s) because he was better than the others, but then there is the question why was he better? If he was better than the other candidates it means that candidates better than him did not apply for the job; it also could mean that the other candidates had a bad day when the interview took place or simply missed the train or got stuck in traffic. Again, for everything that happens there are countless things that do not happen for extremely various reasons.

To sum up the fifth shortcoming of success stories, they focus only on what has happened and somehow infer that the protagonists were the only cause for what has happened. Success stories rule out major factors such as luck and actions of competitors.

In conclusion, it is not despite following the examples of success stories; it is because such examples are followed to the letter that people fail. In the end, success stories are very nice narratives that have the role of inspiring people, but nothing more. Their validity as examples to be followed is virtually zero. There is no “success recipe” (in 10 easy steps).

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Despite Being a Nice Guy He Did Something Really Bad... It’s Not Despite; It’s Because! (7)

Last week in Romania a known stock broker suddenly disappeared and most of the media started speculating that he ran or lost his clients’ money and so on.  It was (and partially still is) a real time live soap opera. The element that brought attention to this case was the profile of the broker. He was (and still is) well known in the mass media and most importantly was a really agreeable person to see on TV. Most TV producers were eager to invite him since he was charismatic, funny, competent (or at least he seemed so) and kind of cute, well… as cute as a person who works in financial speculations can be. 

Everyone was surprised about this person’s disappearance and everyone said “He was such a nice / charming / funny guy, how could he have done it?”.

Another situation of nice guys that did something wrong was at the university where I did my Research Master. In 2012 a high profile professor was found to have done some unethical things in some of his research projects and he had to resign. I don’t intend to develop the story, but one thing that was on everyone’s lips was that this professor was a really nice person. I had the opportunity to have met him and I can say that he was really nice, diligent, helpful and agreeable. Moreover, this person was an exceptional teacher. When the ethics commission has concluded its investigation, everyone was more than surprised that the really nice professor did something so bad (at least by academic standards).

As you see people are highly surprised by the fact that nice, charismatic, pleasant people do things that are dishonest, unethical or unprofessional. Now, this surprise is justified, but at the same time what do niceness, charisma and being pleasant have to do with honesty, ethics and professionalism?

Now, really, has no one seen a charismatic crook? Or a pleasant cheater? Of course it is not easy to mentally process these associations of highly positive and highly negative words that seem like an oxymoron. At the same time, if you make a (mental) effort, you’ll see that you’ll be able to find some examples.

Why do we find it so hard to believe that nice people are not necessarily honest? The assumption of equality between niceness and honesty (or competence) is supported by two psychological effects, namely the “halo effect” and “attribute substitution”. I’ll present each of them briefly.

The “halo effect” means that someone identifies that a person scores high (or low) on a certain trait and subsequently infers that that person scores high (or low) on all other traits. For example if someone sees that a person in good looking, he or she will infer that the person is also highly intelligent, kind, agreeable, competent etc. In the case of “nice guys” we realize that they are nice and infer that they are also honest (smart, good professionals etc.). 

What is very important in understanding the halo effect is that there is a “spill-over” phenomenon. In essence our good impression on one trait spills-over or propagates onto other traits. There is an interesting thing with regard to the types of traits that are evaluated and on which the initial evaluation spills over. Usually we first evaluate a trait that is highly visible such as physical attractiveness, agreeableness or kindness. In general these are traits that are easy to evaluate having very little information available. It is easy to see if a person is attractive and it is easy to perceive if someone is agreeable or kind. On the other hand, the traits on which the initial evaluation of, let’s say, attractiveness spills over are less visible and much more difficult to evaluate.

The second psychological effect that leads us to think that there can’t be nice cheaters is “attribute substitution”. What is going on in this case can be summed up into one idea: When asking a difficult question, it’s much easier to answer a simple one.

To better understand this you need to accept one truth, which is that the brain is inherently lazy. If something can be done with the least effort, it will be done so. This means that when answering the easy question, we don’t do it consciously. The “lazy brain” does so without us being aware. But let me explain how the “Attribute substitution” works.

When we ask ourselves a question such as “is this person honest?” or “is this person competent?” it is rather hard to find the answer. Things like honesty and competence are hard to assess and one would need to put in a lot of mental effort and gather information which is not easily available in order to evaluate these attributes. Of course it is possible to evaluate them, but then one would need to put in a lot of work and in many instances in life we don’t bother to do so or simply we find it not to be that important to objectively evaluate these attributes. After all who even thinks that the good looking neighbor could be a cold blooded killer and the nicely dressed (financial) consultant could have been in the bottom 10% of his class in college?

When faced with a hard question the “lazy brain” finds it much more convenient to answer an easier one such as “is this person good looking?” or “is this person agreeable?” or even “is his watch expensive?”. As I said when discussing the halo effect, these traits or attributes are easy to assess. We can tell in less than one minute of interaction if a person is agreeable, good looking or if a watch looks expensive.

What the attribute substitution does is that instead of answering the hard question of “Is this person honest?” we answer the easier question “is this person agreeable?”. Thus in our evaluation we substitute the attribute of “honesty” with the attribute of “agreeableness”. I repeat, we do so without any awareness.

Up to this point I have demonstrated that “being a nice guy” has virtually nothing to do with “not doing bad things”. The feeling of surprise that people experience when saying “despite being a nice guy he did a bad thing” comes from realizing the truth of the lack of relationship between being nice and not doing bad things.  But this is only the first part of the title “Despite being a nice guy he did something really bad. It’s not despite, it’s because!”. How about the second part – “It’s not despite; It’s because”? I have to admit that being nice has no causal relationship with doing bad things. However, there is a factor that favors “nice guys” to do “bad things” and I’ll explain what it is.

If we assume through attribute substitution that “being nice” is equivalent with “being honest” or “being competent” then in our minds nice people are honest and competent. This belief influences our personal, group and organizational behavior. Having the feeling of being surrounded or simply having to do with honest, competent people (that are in fact only nice) leads to a weakening of control and vigilance. It is easy to accept a not so thorough control on the nice, charismatic and funny stock broker. After all, how can he be dishonest or incompetent? Why waste his and our time on controlling his activity when there are other things to do?

Little by little the system in which a “nice guy” activates becomes more loose and permissive. This will in turn lead to more opportunities for doing “bad things”. As I wrote in “Badapples or Bad barrels”, it is not only the person’s characteristics that lead to “bad behavior” it is also the system and environment in which one is active. If this environment is permissive it will encourage (or at least not discourage) negative behavior.

Now, don’t get me wrong. I’m not advocating for keeping all “nice guys” under very close surveillance and be suspicious about their activity. At the same time it is not a good idea to loosen the control mechanisms simply because someone is agreeable and makes nice jokes.

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Despite Addressing a General Audience, Professionals Speak Using Complicated Jargon … It’s Not DESPITE; It’s BECAUSE! (6)

Sometimes when professionals such as medics, police people, financial specialists and others appear on TV or in the newspapers, they use very complicated language specific to their profession (jargon). Sometimes what they say is more of a “wooden language”. Virtually no-one in the audience fully understands what they say since “normal” or “regular” people don’t know the meaning of the words used. Now, it’s a bit paradoxical since these professionals realize that when speaking on TV or giving a statement in the newspapers they “talk” to people who are unaware of the specific jargon for each profession. Moreover, the media wants such specialists, who are credible sources, to explain to the masses. So the media is interested that the audience actually understands what the specialists say.

I have to make a note. I’m not referring to specialized spokes persons who appear often in the media, who are trained in addressing the general public and know how to translate complicated words into more digestible ones. I am referring to people who are professionals with little PR training and who appear in the media seldom, usually invited as “experts”.   

In order to understand the reason behind this paradoxical behavior we should shift the perspective through which we analyze this phenomenon. The current perspective is from the side of the audience, namely “regular” people who have very little knowledge on specific jargon  Regular people don’t understand word “expert” professionals say on TV and they feel frustrated since they were expecting to get some high quality information. However, if we shift the perspective and see things from the “expert’s” point of view things change dramatically.

Such an “expert” professional that gets a chance to appear on TV or give a statement in a high audience newspaper, has different goals than just making the audience understand what they are supposed to explain. As I said before these people don’t get too much media attention and appear seldom in the eyes of the wide public. When they do, the reason behind the media attention is their expertise and they are expected to show it. And they do show it, but not to the audience that the newspaper or TV station.

In order to better understand, imagine yourself in the shoes of such an expert. You get to appear on TV and millions of people will see you. Since you don’t appear frequently on TV this is a special event in your life that will be the subject of discussion with your friends, colleagues, family and even rivals. Adding to this people you know both friends and rivals will talk about your TV appearance. Knowing this would you be more likely to try and make a good impression on your social group than try to explain to the old lady living 500 km away what is happening with the stock market or with some patient you have. Anyhow she will not understand too much of what you are saying anyway. Moreover, she doesn't know you and most likely she will forget you even exist half an hour after your appearance on TV.

So it is in your best interest to try and impress your social group. Now, if you are a professional in let’s say the stock market, then most of the people you know (social group) know what you are doing and know your level of expertise. Moreover, a considerable proportion of people in your social group have similar education and occupations as you have. It is very likely that at least some of your friends and rivals have jobs related to the stock market. So in order to impress them you will get use all your specific knowledge and skills in the field and show them on TV. In doing so, you will completely ignore 99.99% of the people who will see you.

The reasons why professionals in different fields use quite complicated jargon are various. One reason is that in each field there are concepts, objects, processes that don’t exist in other areas of activity. This way, there was a need to create words for them. Another reason is that although there are (normal) words that describe the concepts, object and processes, they are non-scientific terms and thus considered inappropriate.

Focusing on the later situation, here we have a typical case of “arms race”. Let’s make a thought exercise and imagine that at point zero everybody speaks using regular words and these words are sufficient for expressing all what is needed in a profession. In this case, one professional would be perceived as more competent, smarter and more educated if he or she would use one scientific, more complicated term. Since this person would have an increase in social (professional) status, then all other professionals in the field will have an incentive to use that work in order to achieve parity, namely to be perceived as smart, competent and educated. Moreover, each professional will have an incentive to use another (or more) pretentious scientific complicated term(s). The cycle repeats itself and we assist to an “arms race” where everyone wants to show how great he or she is by using a language that is virtually unknown to normal regular people.

Now you realize that when being on TV or making a statement in a newspaper, one would feel the need to use the entire arsenal that is in his or her possession. And so the regular TV watchers or newspaper readers fall (linguistic) victims of the status arms race of professionals in various fields.

An additional explanation could be that some people working in a certain profession master the specific jargon and all people with whom they interact have the same vocabulary, thus having the false impression that everybody understands these terms. Although this is highly plausible, it fails to explain why people use these terms after being made aware that the audience is a “general” one. Moreover, most of the appearances on TV and statements in the newspapers are prepared in advance, thus giving enough time for thought on who is in the audience.

So it is not that despite addressing a general audience, professionals speak using complicated jargon. It is in fact Because they have a chance to get in the media that addresses a general audience they try to emphasize on their sophisticated knowledge, skills, education etc.

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Praising Normality

Normality is a relative term which can mean a lot of things such as: what is the behavior of a majority of people; something that has a rational explanation or simply something that is in accordance with social norms and in the end what people believe it is normal.

At the same time, what the majority of people do does not necessarily equal normality. If a majority of people behave in a certain way it does not mean that it is the right way. For example if a majority of people use public transport without paying a ticket it is not normal. Similarly a behavior that is rationally explainable is not necessarily normal. For example it is rational for people to drive as fast as possible to save time, but going with 100 km/hour in a city is not exactly normal. For the sake of the argument let’s say that normality is something that balances the individual and communal interests. For example it is normal for an individual to want to get as fast as possible from point A to point B and at the same time it is normal to have road safety. So in this case normality would be driving with maximum 50 km/hour in a city.

Going a bit back, what if normality is not the most common behavior? What if normality is driving with 50 km/hour but the general behavior is driving with 80 km/hour? Is that a case where normality should be praised? Or would it be simpler to severely punish the abnormal majoritarian behavior (e.g. give huge fines)? More so, what if the normal behavior is majoritarian, should normality be praised?   

These are really tricky questions. After all if people behave as they should why should we care? If something normal is happening, isn’t it simply normal to be that way? Most common knowledge and general social philosophy is centered on punishing “abnormal” behavior with the goal (hope) that people that have been punished and people who see others get punished would stick to the “Normal” behavior.

I believe that this way of thinking is flawed. I believe that normality should be praised (or at least congratulated). Don’t get me wrong. I have nothing against punishing abnormal behavior, but I know this way of guiding behavior through fear of punishment has its limits and believe me it is highly limited. I will not detail here the limits of the “principal – agent model” on which punishment is based since it would take a lot of time. What is important is that ONLY punishment will not have the desired results.

Let’s go back to praising normality. As you might know I come from a country where “normality” (in the sense of balancing self and group interests) is quite rare. Not to say that everything is abnormal in the country of origin, but there is A LOT to be improved. Not till long ago, I believed that normality should be simply acknowledged and abnormality should be severely criticized (or punished). However, living for more than 2 years in a society where normality is much more often encountered, I’ve realized that praising normality is a good idea.

If you remember, earlier I’ve asked if normality should be praised when the majoritarian behavior is the abnormal one. In more simple words: should normality be praised in my country of origin (where normality is quite rare)? The answer is YES! And I’ll explain why. But, what if the majoritarian behavior is the normal one, should normality be praised in this case too? The answer is again YES and I’ll explain why. However, in the latter case, maybe “Praised” is not the exact word, rather it should be rewarded with positive feed-back.

The essence of this post is “Positive Feed-Back” and this might come in the form of Praising or simply in the form of “Well-done!”. For better understanding of the argument, I’ll use the term “Positive Feed-Back” from now on.

Let’s take the first case where “Normal” Behavior is not the majoritarian behavior. Why do you think this could be?

One reason would be that people are simply unaware of what “normal” is. In more simple words: people don’t know how they should behave normally. Take the example of simply not knowing what the speed limit is in a certain area. If you’ve never encountered such a situation start driving in other countries outside the main roads. Similarly, when in a new situation, one might not know how to behave appropriately. One way of tackling this issue is to say what the norm is. Another one (not excluding the first one) is to give positive feed-back when the appropriate (normal) behavior occurs.

This positive feed-back when the appropriate behavior occurs is very similar to “vicarious learning”. This type of learning is very similar to the idea of “stumbling on the right behavior”. When not knowing what the right behavior is, one would simply behave “randomly” or does what others do. But if a positive feed-back comes when the “right” behavior occurs, one would learn what the right behavior is. On the other hand if only the “wrong” behavior is punished the person would simply learn what is “not right”, but not learn “what is right”.

Another reason why the “Normal” behavior is not the majoritarian behavior might simply be that the “social norm” is to exhibit another behavior than the “normal” one. In this case positive feed-back has the role of (attempting) to shift the “social norm”. If (some) people would find out that the “normal” behavior is different from “what the majority does” they are likely to change their behavior towards the “normal” one. If many enough people do this, then the appropriate behavior will become majoritarian and “doing what others do” will act in the favor of the normal behavior. In other words, if enough people would start behaving appropriately, then the social norm will become the appropriate behavior and thus, “following the herd” will act as an enforcer of the “normal” behavior.

In the case of the majoritarian behavior not being the “normal” one, (simply) punishing the abnormal behavior will be highly ineffective. People would be puzzled since they see that what they believed to be “normal” – namely what others do is punished. Moreover, not the entire majority exhibiting the abnormal behavior will be punished (due to physical limitations – e.g. the police can’t fine each and every driver that goes over the speed limit). This will lead to frustration on the part of the people being punished and it is rightfully so. In the end, others have the exact same behavior and they don’t get punished, or others have a more pronounced behavior and they don’t get punished. For example one might think that “other people drive with 100 km/hour in a city and they don’t get punished and I drove with only 80km/hour and I got a fine. This is unfair!”

Another issue in the case of “Normal” behavior not being the majoritarian behavior is the source of information used to learn or infer what the “social norm” is. One obvious source of information is what one sees around. If on a road a driver sees that all other drivers go over the speed limit, then this is the “social norm”. However, this is not the only source of information one has and there are many more other sources, but one stands out – mass media. If the media gives examples of people exhibiting the “abnormal” behavior, one can infer that this is the “social norm” (observation bias). Moreover, if the people exhibiting the “Abnormal” behavior get media attention, then this might be the way for others to get media attention. The need for status is a very powerful one and some people might believe that in order to get noticed (e.g. appear on TV or get his or her name in the papers) one should exhibit some sort of “severe case of abnormal behavior”.

This implies that mass media materials that are meant to publicly criticize and / or bring shame on the people that don’t obey the rules could have a very perverse effect. Even good intentions of publicly criticizing people who do “wrong” things can have the opposite effect for certain audiences. Imagine that for a young driver who has lot of money and a “muscle” car getting his face on TV news with the mention that he drove with 250km/hour (way above speed limits) is in fact an accomplishment. Now people (especially his social reference group) will acknowledge that “he is great” or “he is The MAN”.

In brief, if in order to get noticed one has to exhibit a severe abnormal behavior, then the “right” thing to do is to cut this media attention. Of course, this would be a form of censorship which in democratic countries is not used (or at least not overtly). At the same time there can be some sorts of “gentlemen’s agreement” that the media should not publicize such abnormal behavior.

At the same time, if media attention is given to the “normal” behavior (or to “severe cases of normal behavior”) then two effects will occur. First, people will infer that this is the “social norm” and conform to it, thus leading to exhibiting normal behavior. Second, people will see that in order to get noticed they have to exhibit “severe cases of normal behavior”.

Now, let’s go to the situation when the “normal” behavior is majoritarian. Should positive feed-back be used in this situation? As I said earlier, the answer is YES and here is why.

In this fortunate case where normality is normal, complying with the social norm is working in favor of the “normal” behavior. This means that there is already a mass of people that behave “normally” thus, anyone who would need to infer what the “rule” is would see that the majority of people behave in the “normal” way and mimic their behavior, thus behaving “normally” themselves. However, social norms can change and sometimes there what is needed for a social norm to change is just a hand-full of very salient disobeyers. 

Let’s take again the example of speeding. If on a road every driver obeys the speed limit (let’s say 90 km/hour) and there are 10 drivers going with 150 km/hour that are passing the drivers obeying the speed limit. Then for sure some of the drivers that were respecting the speed limit will accelerate a bit… maybe not to 150, but at least to 100 – 110 km/hour. Then other drivers will do the same and suddenly the ones that are obeying the 90 km/hour speed limit will be a rather small minority.

This is why positive feed-back is more than welcomed even when the social norm is to exhibit the “normal” behavior. Positive feed-back enforces the social norm.

The question that arises is “what is positive feed-back?”. Positive feed-back is again a very wide concept. It can take the form of a smiley face displayed on the radar in front of a school when one is driving below 50km/hour (it works wonders). It can also take the form of a “Good Job!” or “Nicely done!” coming from a supervisor of from a friend. It can also take the form of “a pleasant sound” when doing something right with a machine (such as checking in the tram in Rotterdam) etc. Positive feed-back can take many forms and a hint for those of you who are trying to figure out what to use is: try to generate positive emotions and not give just “information” (e.g. numbers).

I’ve given examples with regard to driving and speeding, but these are not the only areas where positive feed-back can work wonders. In the book “Nudge” by Thaler and Sustein, there is an example about “1 dollar per day for not getting pregnant”. I know that it sounds a bit weird, but when getting pregnant at the age of 15 when living in a poor environment, 1 dollar per day might be a good motivator.

In the end I’d like to make some final remarks on negative and positive feed-back. Much of what (western) society is about is to keep people behaving appropriately and condemning the violation of norms. Fear is a very important and powerful emotion that can have enormous effects in motivation to adopt or not a certain behavior. At the same time, Fear is not as effective as we might think if there is only a chance (and not certainty) of getting caught. Moreover, do we actually want to live in a society driven by fear?

Many attempts to guide behavior toward the “appropriate” one are biased by this “fear motivation”. As you may know my home country has issues with corruption and there are campaigns that promote not bribing public servants. However, no-one promotes being fair. No one promotes those people who do their job without bribery. Similarly most anti-drug and anti-smoking campaigns focus on the negative side of things. At the same time no-one focuses on the advantages of not taking drugs and not smoking.

Sometimes saying and punishing what’s “wrong” does not necessarily indicate what is “RIGHT”.

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Despite Being Praised for their Huge Potential, Many “Young Hopes” Never Fulfill their Potential and End up as “Old Disappointments” … It’s Not DESPITE; It’s BECAUSE! (5)

In many areas of sports, arts, academia or simply in various professions there are people (usually young ones) that show great potential for high performance. For this sometimes they are praised. At the same time many of the “young hopes” never come up to fulfill their potential and end up as “old disappointments”. Why is that?

One very simple explanation for this phenomenon is that simply not everybody that has potential for performance actually is good enough or has the right conditions to actually achieve high performance in a field. After all, if 1 out of 10 businesses survive the firs years, there are 9 potentially good businesses that fail. Simple laws of statistics can help explain why many “young hopes” end up as “old disappointments”.

Another simple explanation could be that these people do not really have a huge potential and their qualities are simply exaggerated by people who could have a personal gain. Imagine an artistic manager that manages a young music band. It is simply normal for the manager to say that his band will be a huge success and that it has enormous potential. In this way the artistic manager simply follows his own interest of getting contracts for his band.

However, these are not the cases that I want to focus on. It simply obvious that not everyone that has potential will end up a high performer and it is obvious that some people who have a personal interest will exaggerate the potential that one has. What I want to focus on is those cases where “real” potential is praised and then wasted. In order to better understand this (apparent) paradox we should think about the motivation of high performers.  

In order to make the explanation easier let’s take the example of a football young player. What drives a young man (boy) to go through rough training sessions, extended cantonments and usually a not very pleasant coach? Moreover, someone that takes such a path in life will most likely give up on academic performance (though not many footballers are cut out for school performance) and eventually give up on a “good job” after the sporting career is over.

One motivation is for sure money or at least the hope for money. Everyone sees on TV and in the press examples of high profile footballers that get paid millions of Euros per year. Similarly anyone knows about artists (singers, actors etc.) or other sports men and women that are highly paid. This is a very good case of observation bias (not seeing beyond what is in front of your eyes). For each highly paid star there are hundreds or thousands of footballers, athletes or artists that have low or regular incomes. I know that this sounds a bit counter-intuitive, but is it so unreasonable to acknowledge that for each star singer or band that can fill up a 50.000 seats stadium there are thousands of singers that perform in bars, at parties or simply on the street?

Now, the truth is that financial motivation is more a motivation by the possibility of earning a lot of money. If you accept a more far-fetched comparison it is somehow like the motivation of playing the lottery. More or less everyone knows that the chances of winning are more theoretical than real, but there is the hope of getting a huge sum of money. The difference in hoping for a high income due to excellent performance as compared to playing the lottery is the role of personal action. In the case of a lottery the only thing that one can do to win is to pick up the “right” numbers whereas in the case of excellent performance one can do much more.

Since financial motivation is not as strong as it seems at first glance, it is reasonable to assume that there is at least one more motivation for high performance in sports, arts and other fields.  In my opinion, the extra motivation is gaining (social) status.

When talking about social status there are two major issues that should have been presented clearly. First is that (having) financial resources are a part of social status. At the same time, money or wealth is ONLY a part of social status. One good example that illustrates this is professions that bring a lot of social respect but are not paid very much. Think about fire men (or women), police people and even people that work in education. It is not be understood that these professions are badly paid, but rather that they are underpaid. At the same time, these professions are usually respected by most members of society.

Moreover, social status includes visibility or being known by members of society. It might be that wealth and visibility are correlated to a certain degree, but there is not a perfect correlation. There are rich people that are not known and there are not rich people that are known in society.

Second, (social) status is relative to the group of reference. This implies that status does not have the same magnitude across different social groups. For example a football player can be the best footballer in the league he plays. Now… that league might be the third league (division) and the player to be an average player in the second league and a below average one in the first league. In status terms, this person would have high status in the social group of “fans of the third league teams” and at the same time have very low status among first league fans.

Why status is important? In brief, social status increases one’s value on the social market. Society and social relationships work as (economic) markets. Each human being has friends, has or wants sexual and romantic partners, competes with other humans for limited resources and so on. One’s value on the social market is strongly linked to the social, sexual and competitive success that he or she will have. Now, don’t make the mistake of judging only on the quantitative side. Indeed some people want to have as many friends and sexual partners as possible, but there is also a qualitative side to social relationships. Many people don’t want to have many friends; rather they want to have good friends. Similarly for sexual partners, some people want to have few high quality partners. As in the case of status, quality is also relative to reference points which are usually one’s own quality. This is an extensive topic and I don’t want to talk about it here.

The bottom line is that having high status in a group will lead to having social success in that group. Some examples are readily available: the best male athlete in a school will end up with the most popular girl in school (at least according to American teenage movies). The best performing student in a school will be very likely forgiven if he or she has a disciplinary mishap such as breaking a window with a football (or worse).

Now let’s go back to the apparent paradox of the effect of praising on early performance. Imagine a young (16 years old) football player that is a “young hope”. Let’s call him Joe. Joe has real potential to become a top 5% footballer. What do you think his reference group is? Most likely he comes from a family with a not so nice background, most likely he lives in a not so nice neighborhood, goes to a not so good school etc. This young man does his best to perform very well on the football field so that he would be appreciated by members of his broad social group and, why not, become a great player in the first division.

At this age Joe does not get paid too much for his football playing. He does not starve and maybe has slightly nicer clothes than other teenagers his age. But money is not  his primary motivation. Rather it is to be the best, to get the attention of first league scouters, to be appreciated and envied by other young men and to impress the girl(s) he likes. This young man wants STATUS.

Now further imagine that this young man with huge potential in football has a great accomplishment. Let’s say he ends up winning the European Cup for “under 17” and he is chosen as “best player” of the final tournament. That is something really big considering the age he has. At the same time being the best player at the “under 17” Euro cup is not a guarantee for a brilliant career in top football. A football player reaches his peak around the ages of 27-28. That is more than 10 years from this point in his life. Even the best player at the “under 17” Euro cup can become even better.

Do you know what would be the worst thing that can happen to Joe, apart from a serious injury? It’s being praised for his success and great accomplishment of wining the Under 17 Euro cup and being selected as best player of the tournament. If this young man is praised, there are huge chances that his career as a footballer will end before it starts. Let me explain why it is so.

Imagine that after this accomplishment Joe gets invited to give many TV interviews, the sports newspapers and magazines publish extensive materials about him and what a magnificent player he could become etc. More so, he is invited by the local city hall from this small community to give public speeches to other young people and as a reward for the community’s new football star the local football field is named after him. At first glance this is the best thing that could happen to him and he deserves it. But it is not so, it is in fact the worst thing that could happen to his footballer career.

If what is described in the above paragraph actually happens to Joe, he will be the star of his social reference group. He will have any girlfriend(s) he wants, all his friends will appreciate and envy him and so on. He will have high status in his group. If that is the outcome of being praised, then what is the motivation to work hard, endure rough training sessions and obey the unpleasant coach’s rules? He is the star now, he got what he wanted. Why make the extra effort, why be away from this girlfriends for weeks at a time, why obey that old nasty coach’s rules?

The truth is that 9 out of 10 Joes will not make the effort of hard work in training and simply cash in on this new social status. It could be that older and more experienced people would “know better” and still persevere in their efforts, but here we are talking about a teenager. 

If Joe simply goes with the flow and takes full advantage of his new social status, sooner or later his status will fade away and by the age of 27 when he could have reached his footballer’s career peak which is 10 years form his huge performance, he will be playing for some unknown fourth league team, most likely have a failed marriage, abuse alcohol and look with huge nostalgia at this trophy placed in the center of his small apartment in the same old and not so nice neighborhood from which he wanted so much to escape when he was a teenager.

Giving high status for rather small accomplishments is the sure way to long term failure. Now, don’t get me wrong. I’m not saying that Joe should not be congratulated for his performance at the age of 16. He should definitely be congratulated and rewarded for it. The media should give him his 5 minutes of TV glory. Maybe he deserves a nice holiday and a huge party with hundreds of liters of beer. But that is it! If Joe is ever to be a top 5% footballer he needs to get back to training and to work on his skills.

Media attention is one huge component of status. It is the means of becoming known in society. At the same time, media attention is the reward and if the reward comes “for free” or not for the “right reasons” (aka. Performance) then it is detrimental to performance.

I've illustrated my explanation using the example of a fictional young footballer with high potential, but football or athletics are not the only areas where (too) many “young hopes” end up being “old disappointments”. Anywhere status is gained “for free” or to be more accurate, wherever there is an imbalance between the levels of status one gets and the level of performance one has it is room for this sad story to occur.

The lesson of this apparent paradox is that status is highly desired and valuable, but at the same time status should come for real performance and not be fabricated. The “status game” is somehow unfair in the sense that it does not include equality. By nature there is ONLY ONE best!

And as a final note, I am all for positive feed-back, encouraging people, congratulating them for their efforts and accomplishments. But these are tools, and as you know tools can be used to do all kinds of things good or bad.

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Linked in Case Study on Decision Design

After presenting a few established psychological effects in Decision Making Psychology I believe it is time to present a case study of how these effects are used in “real life”. In this light, I will present the “Linked in case study”.

I assume that everyone reading this blog knows about or has an account on Linked in (professional) social network. Similarly I would assume that most of you have a basic account and are not users of the paid accounts. However, if you decide to upgrade your account then you will have to make a decision that will be strongly influenced by the people who designed the decision environment.

In order to see the “decision environment” you can log in your Linked in account and click on the top page link that says “Upgrade” Next I’ll present a picture (screen shot) of that page. (Click to enlarge)

Next I’ll present what I believe to be the elements of decision design used. This presentation will be done in a somehow non-intuitive order, so please bear with me and read to the end.

First, and not the most obvious, what type of linked in account is best is quite hard to evaluate since, especially first time users of premium accounts, don’t have much of an idea what they need or even what the features actually mean. This is a case of Ambiguity and we know that psychological effects in Decision Making occur especially when there is ambiguity.

If one would look at the bottom left of the picture she would find a link that says “Show more”. If that link is clicked on, then instead of 5 attributes (features) of each account one would see 11 attributes.  Why do you think that not all features are presented from the beginning? It might be that those features are not important, but if it is so, why even include them in the list. I believe that many people don’t even click on the “Show more” link and those who do are motivated by their wish to get more or “Full information”. However, the reality is that seeing more attributes of a “product” in fact increases the ambiguity and leads to “information overload”. Both ambiguity and too much information to process are causes for the use of heuristics (rules of thumb) and the occurrence of decision making psychological effects.

One proof that the high (11) number of attributes is meant to make comparisons more difficult is that for 5 out of 11 attributes there are no differences between the three types of accounts. For 2 more attributes there is no difference between two of the three options.

Second, (some of) the attributes of each “product” have quite ambiguous names such as: “Zero in on profiles with Premium Search Filters”. What does that really mean? If one does a “mouse over” there will be a text box that appears and explains what it is. See next picture as an example. (Click to enlarge)

But again, what does that really mean? And moreover, do I need it? How many filters do I really need? The more the better, but is it worth the extra price?

Similarly the attribute “See more profiles when you search” has three options (one in each type of account): 300, 500 and 700. But how many extra profiles in your search do you really need?

Third, offering three types of accounts (plus the ambiguity and information overload mentioned above) creates all conditions for the “compromise” effect (or the “Not Too…, But not Too…” effect). As you remember from the post that described it, the compromise effect leads to the choice of the “middle option”. 

So Linked in wants you to choose the “Business plus” account.

Fourth, one option is already preselected and surprisingly or not it is the same “Business plus” account that is set as a “default choice”. As we already know from “Just leave it like that” the “default option effect” is very strong and most people don’t change a default setting or choice.

Thus Linked in not only makes you think that you want the middle option of “business plus”, but encourages you to make that choice by setting it as a default.

Fifth, we know (from previous posts on this blog) that people do what other people do (check “Despite 30People Witnessed a Crime No One Intervened”) and even more so people like to conform to social rules. Thus, Linked in inserted the word “Recommended” in red and capital letters above the “Business plus” account. 

Now, not only Linked in made you think that you want the “Business plus” by using the compromise effect, and not only did it make it easy for you to choose it by setting it as a default choice, but even more it makes you feel that it is a good decision because it is “Recommended”. One simple question: “Recommended by whom?”

Sixth, the “Business plus” option is highlighted by making the background grey instead of white. One might think that the highlighting is due to the fact that this option is preselected, but when selecting another option the highlighting does not change and the “Business plus” is still highlighted. This highlighting draws the attention and visual focus toward the preferred option of Linked in which is “Business plus”.

Seventh, the sequence in which the account options are presented is very interesting. Usually we tend to start from the cheapest and least complex to the most expensive and complex. However, Linked in does something very smart by reversing the sequence. This reversed sequence from the most complex and expensive to the least complex and cheapest makes use and creates conditions for the occurrence of some psychological effects that some have been presented on this blog, others not. First, there are priming and anchoring effects. By presenting first the most complex and expensive account type the person that sees the options has already been primed with a high value. This creates an interesting effect, namely that the “Business plus” seems a very good deal compared to the “Executive” (most complex and expensive type of account). It is cheaper than the first option read (the executive). If the order would have been from the cheapest (“Business”) to the most expensive, then the “Business plus” would seem expensive in comparison with the first option read (The “Business” which is the cheapest and least complex type of account).

The sequence from the most complex and expensive to the least complex and expensive leads to the appearance of “loss aversion” (people hate losing) which was presented in “Hard to saygood bye”. Since a person would see first the benefits (features) of the most complex account, he or she would perceive the decreasing benefits of the second and third account as losses. For example the first feature of the three types of accounts is “Contact anyone directly with InMail”. For the most complex and expensive type of account (Executive) the amount per month is 25. For the second most complex (and what Linked in Recommends) “Business Plus” it is 10, while for the cheapest and least complex type of account (Business) it is 3.

Basically people are “primed” with having 25 “direct InMail” and if they go to a less complex and cheaper account they “Lose” out of that amount. If the sequence of account types would have been the other way around (from the cheapest to the most expensive) then people would have “Gained” more “direct InMail”. We know that losses hurt about twice the amount of pleasure given by a gain, thus it is much smarter to make people believe (consciously or not) that they are losing something by going for the cheaper option.

At the same time, we’ve seen that Linked in wants to sell the “Business plus” and not the “Executive” type of account, this meaning that the use of loss aversion might lead people to go more for the “Executive” account. I believe that this is not a real danger and here is why. The “Business plus” account is 45% cheaper than the “Executive” and this means a lot… maybe people don’t think that they need 25 “direct InMail” each month (by the way that represents more than one per working day – 22 working days in a week). Moreover, there is a very interesting sequence in decreasing the “amount of an attribute” in the three options sequence.

If we look at “Executive” vs. “Business Plus” we see that the difference in the amount of “Direct InMail” (25 for Executive, 10 for Business Plus) is of 60%. However, when we look at the “Business Plus” vs. “Business” (10 for Business Plus, 3 for Business) the difference is 70%. Similarly for the amount of other attributes, the relative difference increases more steeply from the second to the third option in comparison with the decrease from the first to the second option.

Moreover, the relative difference in price is not as steep as the difference for benefits. The “Business Plus” costs 45% less than the “Executive” while the “Business” costs 50% less than the “Business plus”. So even if someone would do a thorough “cost – benefit analysis” the most reasonable option would be the “Business Plus”. Now, you might think why I have used relative measures and not the absolute “Cost per unit of benefit”. The answer is that people are very bad at processing absolute values and think in more relative terms. You can check this out in “Despite Having Huge Salaries, Top Managers Have Immense Bonuses”.

Eighth, the price for an annual contract is expressed in “Per month”. The main effect here is that it makes it easy to compare with the price for the monthly contract which obviously is higher. By making this comparison easy it “helps” people make a choice. Now, the choice is obvious because one is better (cheaper) than the other. At the same time I believe that many people are drawn in to get a yearly contract and maybe they don’t really need it. The second effect that occurs here is called “Pennies per day” and it basically means that prices are presented as a small regular payment and not as a big overall cost. In the case of the “Business Plus account” the price for the annual contract is 29.95 Euros / month, but, in fact the price is 359.4 Euros / year. Of course 29.95 / month seems much cheaper than 359.4 / year.

Another thing about presented prices is that they are excluding VAT which means that to each price presented in bigger font sizes and bolded 19% (at least in The Netherlands) should be added. Now this might not be such a big issue for companies since the VAT is deductible, but for people that actually pay themselves it is a bit of an issue. At the same time, it is true that the price including VAT is presented in smaller font size and the customer does not have to compute it him/her-self.

At the end of this analysis the conclusion is that Linked In wants to sell as many “Business Plus” accounts with an annual contract.

Before ending this post, I’d like to make some observations. I have absolutely nothing against Linked In and in fact I believe it to be a very nice service. The analysis was done from a strictly professional perspective on decision making.

I do not know why Linked in wants to sell that type of account. It could simply be that market research has shown that this is what fits best the needs of most premium account users.

Using Decision Design techniques is neither immoral nor illegal. The advantage of “Libertarian Paternalism” is that it still allows for free choice. In more simple words, even if Linked In encourages the choice of “Business Plus” it does not restrict the liberty of choosing one of the other two types of accounts.

I believe that the above presented case study on Linked In is a very good example of Decision Design (or Choice architecture) that makes use of many “tools” and at the same time it allows for freedom of choice.

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