Back many years ago, when stock brokers received orders from their customers to buy or sell stocks there was trust that the broker would work in the best interests of his client. He would find the best price in the market and sell it there. Some brokers abused this trust and used markets that had better kickbacks for them rather than what was best for their customer. Not good. So congress stepped in to intervene and passed a law requiring each broker to find the best price for their client when selling stock. Seems fine until some people realized that meant they could set up small orders on some exchanges as a way to get a tip that a big transaction was coming and react by beating the broker at other exchanges (by having a faster network connection or being more collocated) and as a result drive the price up (or down) so that they could skim some money off the transaction. This doesn’t make the market better, but brokers hands were tied to prevent this as well.
Michael Lewis outlines this in his new book “Flash Boys”. As he unfolds the mystery behind how we got into this situation, he reveals that most of this was a result of congress continuing to enact laws to protect the consumer in one way, without realizing how that might open up a new form of abuse somewhere else. Intervening in a complex system often introduces new wrinkles that end up causing more harm than what we are trying to avoid.
Bruce Schneier, a security expert, outlined this process for evaluating a solution to some perceived security risk:
1) What problem does it solve?
2) How well does it solve the problem?
3) What new problems does it add?
4) What are the economic and social costs?
5) Given the above, is it worth the costs?
The third one is the one we often miss. When we change a system, what new problems is it likely to create that didn’t exist before?
Even though most of us are not implementing legislation or solving security problems, this process is effective anytime we take action due to a fear or worry we might have. We shouldn’t only think about what we are trying to avoid, we should also think about how our action to avoid the situation may create new risk. For example, after 9/11 many people drove their cars instead of flying because of their fear. As a result, driving fatalities went up because driving was and is still more risky than flying. By avoiding the risk that seemed the most scary, they failed to check the cost of changing to a different solution.
Something to think about when we’re thinking about the next big problem we have the perfect solution to fix. Intervening and doing something different isn’t without consequence.
Photo Credit: Now and Here cc
Sometime ago, my wife and I were on a plane from Bangalore, India to New Delhi. I opened up the Air India In-Flight magazine to find a picture of a man who I’d seen on a number of billboards and various advertisements. I wondered who this guy was, and now had the opportunity to find out, so I asked the Indian sitting next to me, “Who is this “? After looking at my incredulously, he responded, “You don’t know who Amitabh Bachchan is?!?! He’s a Bollywood Superstar!”
Indeed. One website lists him as the #1 Bollywood actor of all time. The funny thing is that until then if I had sat next to him at a coffee shop, I would have not had a second thought about him. Here’s a guy known by hundreds of millions of people around the world, and to me, he was just another human trying to make his way in the world. Fame is funny that way — no one is famous to everyone.
This applies to all famous people. The CEO may be revered within his own company, yet to those outside, he’s just another guy. He wakes up tired, has to get dressed, eat breakfast and worry about what things he needs to get done today. Famous people are just like us. Maybe that’s because all of us are famous.
While fame carries nearly universal appeal, it turns out we experience the best part of fame, being known and liked, everyday. We have friends who look forward to seeing us. They recognize us in the store and come say hello to us. Even the people we work with do the same. Sure, our group of fame is smaller than Amitabh Bachhan, but we enjoy similar affection and without the cost of strangers interrupting our lunch to ask for our autograph.
[Photo Credit: http://www.bollywoodhungama.com/]
We’re all familiar with the rather silly adolescent game of chicken — A group of people stand in the middle of on-coming traffic and the last one to jump out of the way “wins”. Or in another version, two kids drive cars toward one another and the one that swerves “loses”. As adults, we look down on such ridiculous games, but then go on to play them in different forms at work. One of the more common incarnations is affectionately called “schedule chicken”. Instead of oncoming cars, it’s oncoming deadlines and the first one to admit they are going to be late, loses, allowing all the other team members to silently miss their deadlines without the shame of being the one who had to fess up to it. Somehow this has become an accepted modus operandi within many companies, managers rewarding those who never announce their slips even though the same ones rarely hit their deadlines.
As we’ve discussed here before, knowledge work is difficult to plan and predict. Inevitably we miss some predictions because of various uncertainties about what we know. As a result, it’s common to introduce the concept of risk as a way of representing this uncertainty. We believe that we can get something done in two weeks, but there is some amount of risk that it won’t happen. We can then represent changes to the plan as either increasing or decreasing our risk of hitting the schedule. Done well, this can help teams discuss the difficulties in a way that allows for discussions of tradeoffs.
Discussion of risk only works well though if we’re not playing chicken. If we don’t want to announce a change in the schedule or say that we can’t meet some particular deadline, when we get asked to make a change, we still discuss its impact on the risk. At the beginning, this is meaningful but eventually we’ve taken on so much risk while still committing to the schedule, that taking on more is really not going to change the outcome – missing the deadline is inevitable.
Imagine if we found ourselves jumping out of an airplane without a parachute but with a helmet. The amount of risk that we’ve already taken is ridiculously high. If we’re then asked to take off our helmet and shoes, while we can say it increases risk, the additional risk is negligible compared to the ground barreling down at us. At this point, the conversation of risk loses it’s meaning. Just like Gandalf and Bilbo, we’re just waiting for the eagles to come.
When we reach this point, we’ve essentially decided to make the ultimate chicken gambit. We will not lose, we will not jump out of the way, we will just hope that the car swerves (or that the eagles arrive). Maybe some miracle will occur and our project will be delivered on time or the other guy will admit they need more time. If it does not, at least we didn’t lose or perhaps, at least we didn’t lose alone. But we do lose. Maybe not our lives, but our integrity. Even if by some miracle, no one notices because someone else gives in first, it doesn’t make the decision right. At work, with critical projects on the line, having a meaningful discussion of risk needs to be maintained since it provides the ability to openly communicate both about the intent to deliver as close to on-time as possible while honestly representing why it might not happen. It allows others to plan their actions likewise and work together toward mutual success. Having these realistic discussions should be rewarded instead of punished by management.
As adolescents driving cars, or as adults working with our teams or partners, getting into a game of chicken is not a recipe for success, it’s a recipe for getting fried.
[Photo Credit: Fantasy Flight Games from their awesome game Lord Of The Rings]
A couple weeks ago, I attended my high school reunion and saw several friends I haven’t seen for many years. One of them is now a mother of four and a missionary in China. Almost immediately after exchanging initial greetings she said, “Back in High School, we got in an argument and you said that kids don’t look at your mouth when they are learning how to pronounce things and I said they do. All of my children look at my mouth as they are learning to talk, so…” I quickly conceded the point to her and wondered why on earth would I have thought to take a stand on how children learn to speak back in High School!?!?
Later in the evening, I caught up with a friend who is now a pediatrician in Texas. Again, almost immediately after greeting me he said, “Back in that American studies class, you and I got into an argument about whether Compact Discs or Digitial Audio Tape would win and I said CD’s”. So apparently I was the proponent of fairly ridiculous ideas back in High School. I admitted that he was clearly right. Who must I have been in High School that many years later, the strongest memory of not one, but two different people was arguing about a very specific thing where I was clearly wrong.
I expressed this out loud at the dinner table and they all confirmed that I really liked to argue in High School. It didn’t matter what side I was on. I have vague memories of this since I was on the debate team, but sometime in college I realized that I was often wrong and that’s okay. I’d rather just concede and be on the right side. Moreover, I learned that arguing wasn’t very effective for conflict resolution. It also helped that my younger brother started following my lead and argued everything when he started High School which made me think, “Wow, that’s really obnoxious. I should stop doing that”.
I’m still completely up for a good contest of ideas when it’s not personal and often make strong arguments for an idea, not for the hope that I will be seen as right, but instead for the hope that someone will show me how I’m wrong. Ultimately, I’d like to find the best and strongest idea than have it be my idea. I’ve had to learn to temper that desire though. As a good friend told me, “If you sound like you completely know what the right answer is, it will cause others to just acquiesce and not engage in helping sharpen your idea. They will simply think that you know what you’re doing and not even try to figure out how it could be better. Sometimes your strength is a little like a bull in a china shop and that situation calls for a little more delicacy.” Indeed.
It’s hard for us to remember who we were. We tend to think we are as we always have been. Of course, when we make a sudden shift in mindset, we remember the before and after, but most of our shifts happen gradually over years. When that happens, we don’t really remember who we were before because the change, like aging, happens so gradually. I’m still learning to read the situation and decide when questions would be better than making lots of statements, though I can see I’ve come a long way.
Just as old photos show us how we are aging, going back and talking to friends that haven’t seen you for years can be a great mirror for remembering who we were because rarely will we be able to do that without significant help.
Anyone who has had a good coach recognizes their value. From outside the relationship, it can be hard to see why. Our coaches usually don’t look like they could do what they are asking us to do, usually they can’t. Their skill set differs from our skill set — we can do but they can stand outside of ourselves and see how we can do better. They push us when we are worried. They motivate us. They encourage us. They guide us. When we have an awesome coach, we experience the amazing growth and power both within ourselves and see it in our team.
Within the work environment, we find coaches in many places. Our peers serve as informal coaches to help get us past a particular problem or give us feedback on what we need to improve. Our friends help us deal with challenging relationships. Our managers have the more formal role of helping us get better and removing obstacles to our success. Every manager takes on the role to push their employees onward – to encourage them to work harder or smarter and get the job done. The best managers do this for the benefit of their employees, just as a coach serves those they are coaching. They desire to see us improve and grow. They want us to go on to do things they know they could never do but know we are capable of.
Up and down the management chain, managers push their employees to carry out things that the employees aren’t sure they can do. Because this is often successful, managers continue to push. In a good working relationship, this can be a great growth opportunity for us and we all get better; however, it often degrades overtime as managers stop listening to concerns and just start believing their employees can do anything. The managers take on greater risks and hope their employees will deliver the goods (and if not, at least be left holding the bag if things go south). This can work while the risks are paying off even if they result in some “Hail Mary’s”, but over time breaks down the trust. It stops being about the employees growth and starts being about the managers successes. Over time the employees sandbag their expectations so that when management pushes back, it’s still possible. Over time this creates a dangerous game of deceit where no one wins. It’s a recipe for catastrophe.
That’s not to say that managers shouldn’t push their employees either – we can do far more than we know how to do and often we need someone to push us into the challenge. When it’s happening properly, there is a give and take. A good manager will push their people but provide space for things not to work the first time. They will take the blame if they push to far instead of passing it through to their employees if things don’t go right. They listen to the amount of stress their employees are under, just as a coach recognizes they can hurt their performer by pushing them too hard.
We all have coaches, formal or informal, who can help us improve. We should seek out the good ones as they can have a significant positive impact on our lives. Likewise, we should be good coaches ourselves. If we find ourselves coaching others, we should take that role seriously, listening and working to help the one we coach grow. If we also succeed when they succeed, we should be careful of pushing too hard and instead continue to listen and develop trust. Both finding and being a good coach can be difficult, but it’s well worth the effort.
Photo Credit: T. Fernandes cc
Our team is down by 5 points, they are on the 40 yard line, 3 seconds left to play. Hike! Everyone scrambles for the endzone and the quarterback throws a high arching spiral that seems to hang in the air as the end of game whistle blows. It falls down into a mass of players, all jumping to try to bring the ball down in their hands. The pack consumes the ball into a sweaty heap and the referee slowly peels players off to find out whether it was caught. TOUCHDOWN! High fives and exhilaration and exciting story to recall for years to come.
We love dramatic endings in life just like we do in our stories. The hero overcomes incredible odds to slay the dragon and save the village. We see this modeled in sports but it also often happens at work. We find ourselves facing an insurmountable deadline and through the sacrifices of many, somehow we get it done. Just like a Hail Mary this requires as much luck as skill to carry out and just like a Hail Mary pass, there are far more misses than successes. Not being fond of stories with bad outcomes, we forget them. Who tells the story about the last-ditch that failed or the project deadline that was not met even though people sacrificed to try to make it happen? We don’t tell those stories. They’re depressing and so we forget them.
This can make us feel that a successful ending that required tremendous sacrifice and risk was a good thing rather than recognizing them as failures. Why did we let the game get to this point that such a high risk last-ditch effort was required? How did we not account for the risks earlier in this project to allow us to have to try to stop almost everything to get this project done? These aren’t the questions we ask because after all, we won. And yet, it’s important to recognize that finding ourselves in a situation where the only thing left is some crazy scheme is a failure regardless of its outcome.
Because we are wired to love heroic endings, we won’t naturally remember to focus on preventing the problems and reward those who do instead of simply focusing on the heroes that save the day. While we should never underestimate the ingenuity of humans in distress, we should recognize that we are better off if we avoid needing to exercise that ability.
Related Post: Remembering The Non-Event: How we corrupt our own conclusions
Photo Credit: Paul L Dineen cc
The end of the world as we know it. This is how the Y2k bug was billed. Famous computer scientists staked their reputation on the gravity of the problem. Mobilize we did, dusting off the old Cobol books and scouring our software for dates shortened to two digits instead of four. Companies spent billions of dollars repairing their code and making it robust. Most thought in spite of all the work, we were still doomed. But doomsday arrived, not with a bang, but barely a whimper. Turns out it was not the end of the world as we know it. After the fact, people argued that all of our preparations were why so little happened, but even in countries where Y2K spending was limited, little happened. How did we get ourselves into such a frenzy?
Even as the hype about the problem grew, it became somewhat obvious it was being blown out of proportion. It started with a description of the bug, that when the year switched from 99 to 00 it would create a discontinuity that would cause programs to behave unexpectedly. Almost all computers have a clock and could have software that could be susceptible to this discontinuity. Sometimes the error would cause the program to crash. Sometimes the crash would cause the program to not start-up again or create problems in saved data. Sometimes that would cause the system to stop functioning or to send bad data to other systems causing them to stop functioning. Couple this with the fact that there are embedded computers in our power plants, cell phone networks, even cars. How will we even be able to fix those. So we have the possibility of all computer devices ceasing to function or putting out bad data, hence, death and destruction the likes of which the world has hardly known.
But this cascade didn’t happen and it’s easy to see in retrospect why. A small probability of a small probability of a small probability is so close to zero that it doesn’t matter any more. Yet at each stage, our fear tells us to think, “Yeah, but what if it was that way, then…”. We cascade down until we start seeing this as many people worded it: The Y2K bug will cause many computers to crash and never come back online. This is the Y2K fallacy. It’s a mix of the narrative fallacy (that we believe stories more than facts) mixed with hasty generalizations (generalizing from the small to the large without properly taking into consideration how things change).
It’s easy for us to tell ourselves similar stories about the things we are most worried about or the things we are most hopeful for — focusing in on a small thing and telling ourselves the story of the cascade, believing each stage. When we find ourselves in this situation, step back and consider the likelihood of each stage rationally, try telling yourself the opposite story, and see the situation for what it is. We’re probably not going to die (at least in any way that we see coming) and we probably also won’t land all three of the big whales on our horizon and become multi-billionaires — unless we’re fixing bugs for someone else’s terror.
Back in the 1990′s, Yahoo concluded that they understood where the market was going — they needed a curated index with a good portal. So they built one. During that time, Yahoo was offered to buy Google for $1M but turned them down because it’s not about search, it’s about portals. No one predicted Google coming nor it’s impact – even the founders of Google didn’t know it would become as big as it did. Of course, once Google splashed on the scene it became easy for us to tell ourselves a story about why search was so important and why we should have seen this coming.
Nassim Taleb calls this the black swan problem. We think we’ve got it all figured out, something comes that we didn’t see and that brings earth shattering consequences. Then we tell ourselves a story about why we should have seen it coming bringing us right back to believing we’ve got it all figured out.
We love certainty. We want to know what’s coming next. Astrologists and fortune tellers have been making money on this primal desire for millenia. When we hear various prognostications, we latch on to the ones that confirm either our deepest fears or our greatest hopes. We disregard contrary data or uncertainty in the prediction. We don’t even consider whether the person making the prediction has a track record of accuracy. We ignore all the misses and latch on to the successes, creating the delusion that we know what’s going to happen next.
We do the same thing with our own predictions. We forget the errors, or excuse them because of some factor we hadn’t considered. We remember the ones we got right, reinforcing our desire to keep predicting and increasing our confidence in those predictions. All because we don’t want to live in a world where we don’t know what comes next.
Prognostications are cheap, telling us stories that we want to believe. We’d rather live with certainty in a probable lie than with the uncertainty that comes with not knowing. We should beware of those confident in their predictions of what’s coming next and be okay with not knowing, living with the uncertainty. In the end, we all live by faith and not by knowledge.
Photo Credit: Jason Samfield
There’s a probably apocryphal story of a man who wrote to a number of wealthy people telling him that if they paid him a dollar he would accurately predict the winner of an upcoming NFL game. If he was wrong, he would refund their money.
He got over a hundred takers and he sent half of them the prediction of the home team winning, the other half the guest team. He refunded the half that he got wrong and sent a follow-up letter to the half he got correct offering them a prediction of the next game for 5 dollars.
Again half got one prediction, the other half the other. Another set of refunds for the one, and another set of letters continuing to increase the price to the other half. After a few more rounds of this, he had two people left, both of whom had just had this guy predict correctly 6 games in a row. This time he offered to sell them the correct prediction for $100,000 with the same caveat that he would refund the money if he was wrong. Both took him up on it, but he got greedy and just ran away with the $200,000 instead of refunding half of it and so he was arrested on fraud.
Consider this from the perspective of those remaining two people, who felt they had found a modern-day fortune-teller, because they didn’t see all the wrong guesses only that he was always right. This is often called the survivorship bias – we only look at what remains standing to assess what is true and not recognizing all of those who died along the way.
This bias crops up everywhere. The investment company that for the last 10 years had better returns than the S&P 500, so they must be awesome neglecting the fact that there were thousands of other companies and so statistically one of them should have this record. The business book that looks at the most successful companies with 100,000 surveys neglecting all those who tried their sage wisdom and did not succeed. We commit this fallacy when we decide to start an enterprise pointing at the Mark Zuckerbergs or Larry Page and Sergey Brin’s as proof that billion dollar dreams can come true (ignoring the fact that hundreds of thousands who all had good ideas failed to deliver).
This is part of the WYSIATI (What You See Is All There Is) bias which does not allow us to consider all the events that we don’t know about or who are no longer around. When we find ourselves pointing at good examples, it’s important to try to consider whether there are any who might be dead who tried those same things. Not to depress ourselves, but simply as a reality check to the conclusions we are likely to make when all we see is the survivors.
We may think our conclusions are can’t miss. After all, up to the final prediction, our con-artist has gotten every single prediction correct. Presumably the people taking our fortune teller’s offer were using that information to make even larger bets on those games — trying to make some quick money. Yet even after so many successful predictions in a row, one of the parties still got the wrong prediction at the end. When we find ourselves in “can’t lose” situations because statistically we’ve never seen anything that would indicate otherwise, we should naturally wonder what we are missing, and seek out the data that has died.
Photo Credit: Tristan Martin
Sometime ago, the Colbert Report did an interview with a man who was protesting the creation of a particle accelerator. He argued this new accelerator was going to create a black hole that would destroy our entire planet. This shocking conclusion surprised most so the interviewer asked the man:
“What are the odds that this is going to happen?”
“Fifty Percent”, he replied.
“Fifty percent?! That seems high. How did you come up with that figure?”, the interviewer said.
“Well, either it’s going to happen, or it’s not going to happen, so it’s 50/50 either way.”
Laugh as we might at this example, our emotions take this exact view of statistics. For example, we see the odds of some horrific side effect of a medical procedure and we either dismiss it as not going to happen or we simulate what it will be like to get those effects, making us even more afraid, even to the point of feeling like it might be 50/50.
While statistics can be very useful in making good decisions in a world of uncertainty, it’s worth recognizing our own inability to deal emotionally with statistics. We don’t have an intuitive sense of 1 in 10, or even 1 in 3. Instead our brains break almost everything down into the it’s going to happen or it’s not going to happen.
If we want to dispel some of that fear, sometimes it’s useful to start thinking about more real world examples – 1 in 500 is about the same as someone guessing heads or tails correctly 9 times in a row. Doing this even once is an impressive feat and not very likely to occur, and neither will this side effect.
Without a doubt statistics can help us make better rational decisions, but as soon as we note our fears getting involved, it’s helpful to remember that our emotional brains don’t properly handle statistics. It’s not 50/50 that we’re going to die by black hole.
Photo Credit: NASA’s Marshall Space Flight Center