Monday, October 07, 2013

Fighting our Biases, Empathy Edition

Here is an example of how reporting on social science research can mislead rather than inform. The author tells us about new studies that show rich people are less empathic (i.e., they care less about others) than poor people. While this may be true on average (and the author gives several reasons why this might be so), the article likely inflames biases rather than illuminates reality.

Why? Because the author neglects to tell us: a) how big the difference in empathy between the two groups is, and b) the underlying distribution of empathy within the rich and poor groups.

The almost inevitable result is that the article will spur one group to be more self-righteous and confident and the other group to be more defensive and angry.  

The underlying analyses generally involve complex regressions, but let's simplify a bit so we can imagine two competing realities behind the results of the study cited.

Figure 1 reveals what most readers will take away from a newspaper story like this.  It shows two distribution curves, one of rich people, and one of poor people.

Figure 1: Huge difference; no overlap
In this scenario, not only do rich people have much less empathy (C) on average than do poor people (D), but ALL rich people have less empathy than ALL poor people. The two distribution curves don't even intersect.

Contrast this with Figure 2:

Figure 2: Small difference; large overlap
In this scenario, rich people do have less empathy on average than poor people.  But the difference (B-A) is much smaller.  And there is huge overlap between the two groups.  There are plenty of rich people who are empathic, and plenty of poor people who are not.

Figure 2 more accurately represents the results of most social science research.  When scientists get lucky, they find a characteristic (in this case, wealth) that has a statistically significant impact on another characteristic (in this case empathy).  But statistical significance does not mean that the difference is large. And even more rarely does it mean that the underlying groups have little or no overlap.

[PS:  Apologies for the poor graphing skills.]

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Wednesday, October 02, 2013

How to Get Lucky

Luck has a lot to do with success.  That is both my experience and the conclusion of a lot of research, including by Daniel Kahneman, winner of the 2002 Nobel Prize, who famously said:
Success = Talent + Luck. 
Great Success = A little more Talent plus a lot more Luck.
Many successful people find this assertion annoying, since they feel that they have worked very hard to succeed.  As noted in my previous post, these people suffer from survivorship bias: they fail to notice all the other people in the world who worked equally hard but failed to succeed.  (Warren Buffet is a noted exception; he has repeatedly noted that he was in the right place at the right time.)

But the good news for those less enlightened (and lucky) than Warren Buffet is that luck can be cultivated - it's not merely a matter of chance.  Psychologist Richard Wiseman argues that luck is the outcome of human interaction with chance:
Wiseman speculated that what we call luck is actually a pattern of behaviors that coincide with a style of understanding and interacting with the events and people you encounter throughout life. Unlucky people are narrowly focused, he observed. They crave security and tend to be more anxious, and instead of wading into the sea of random chance open to what may come, they remain fixated on controlling the situation, on seeking a specific goal. As a result, they miss out on the thousands of opportunities that may float by. Lucky people tend to constantly change routines and seek out new experiences. 
This at least leaves open the possibility that we can make ourselves luckier by changing our outlooks:
Wiseman saw that the people who considered themselves lucky, and who then did actually demonstrate luck was on their side over the course of a decade, tended to place themselves into situations where anything could happen more often and thus exposed themselves to more random chance than did unlucky people. The lucky try more things, and fail more often, but when they fail they shrug it off and try something else. Occasionally, things work out.
So luck is part persistence, but the speed at which we experiment is also key:
The people who labeled themselves as generally unlucky took about two minutes to complete the task. The people who considered themselves as generally lucky took an average of a few seconds. Wiseman had placed a block of text printed in giant, bold letters on the second page of the newspaper that read, “Stop counting. There are 43 photographs in this newspaper.” Deeper inside, he placed a second block of text just as big that read, “Stop counting, tell the experimenter you have seen this and win $250.” The people who believed they were unlucky usually missed both. 
And finally, part of the challenge is a willingness to abandon hypotheses and assumptions when they don't pan out:
What you can’t see, and what they can’t see, is that the successful tend to make it more probable that unlikely events will happen to them while trying to steer themselves into the positive side of randomness. They stick with it, remaining open to better opportunities that may require abandoning their current paths, and that’s something you can start doing right now without reading a single self-help proverb, maxim, or aphorism. 
[The quoted passages are from David McRaney.]

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Anybody Read the Latest MisFortune Magazine?

If you are thinking about opening a restaurant because there are so many successful restaurants in your hometown, you are ignoring the fact the only successful restaurants survive to become examples. Maybe on average 90 percent of restaurants in your city fail in the first year. You can’t see all those failures because when they fail they also disappear from view.  
These words of wisdom are from David McRaney, whose work illuminates common human mistakes - in this case, survivorship bias. If we want to know how to succeed, shouldn't we look to successful people and companies for lessons to follow? The paradox is that we can often learn more from those who fail:
Survivorship bias pulls you toward bestselling diet gurus, celebrity CEOs, and superstar athletes... You look to the successful for clues about the hidden, about how to better live your life... Colleges and conferences prefer speakers who shine as examples of making it through adversity, of struggling against the odds and winning. The problem here is that you rarely take away from these inspirational figures advice on what not to do, on what you should avoid, and that’s because they don’t know. Information like that is lost along with the people who don’t make it out of bad situations or who don’t make it on the cover of business magazines – people who don’t get invited to speak at graduations and commencements and inaugurations.  
McRaney goes on:
If you spend your life only learning from survivors, buying books about successful people and poring over the history of companies that shook the planet, your knowledge of the world will be strongly biased and enormously incomplete. As best I can tell, here is the trick: When looking for advice, you should look for what not to do... [K]eep in mind that those who fail rarely get paid for advice on how not to fail, which is too bad because despite how it may seem, success boils down to serially avoiding catastrophic failure while routinely absorbing manageable damage.

Thursday, June 27, 2013

How I Made 12% Over Two Years by Sheer Procastinastion

Here is an update on a piece I wrote about gold fever in early 2011.  By failing to jump on the bandwagon, I made over 12% on my non-investment (i.e., I avoid losing it).

PS:  The guy I (fortunately) did not listen to worked for a celebrated hedge fund investor who made billions of dollars in 2007 by short selling sub-prime mortgages.

PPS: Check out the excellent comments on that post by Ian Thorpe, Guy Pfefferman, and April Harding.

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Saturday, June 22, 2013

Fetishes in Successful Companies

Affluent companies and organizations often develop fetishes.  These fetishes are practices that get associated with the success of a company or organization, but which are only enabled by - rather than drivers of - the organization's affluence.  Sometimes these fetishes are harmless; they are uncorrelated with success and just a minor "tax" on the system.  Sometimes the correlation is actually negative, but the company is doing so well that no one in management or on staff realizes the impact on performance.

You can surely think of many examples of this - maybe even in your own organization.  Here is one example with a happy ending, however.  Google has been known from its earliest days for hiring people who are among the smartest in the world. The ways in which Google went about assessing candidates was legendary.  It asked for college transcripts and SAT scores, invited the "smartest" people tom come in for an interview, and then subjected the candidates to brainteasers such as:

  • How much should you charge to wash all the windows in Seattle? 
  • How many times a day does a clock’s hands overlap? 
  • You are shrunk to the height of a nickel and your mass is proportionally reduced so as to maintain your original density. You are then thrown into an empty glass blender. The blades will start moving in 60 seconds. What do you do? 
As Google's revenues and stock price soared, so did the legend surrounding its staff selection process.  The impression was created - inside and outside Google - that that selection process was helping drive the company's success. (Some have even credited the free food in Google's cafeteria.)

But, alas, the selection process has turned out to have no predictive relationship to the actual performance of staff. Laszlo Bock, an SVP at Google, said: "We found zero correlation.  It's a complete random mess..."

This example is noteworthy because Google itself did the analysis, and in the process they turned a fetish into a hypothesis that was found to be wrong. Now Google is using what they call behavioral interviewing: “Give me an example of a time when you solved an analytically difficult problem.” This approach is a lot less clever than the brainteasers they used to prefer - but it seems to work much better.

(And, by the way, following these changes, Google now has teams where 14 percent of the members have never even been to college.)

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Friday, May 10, 2013

Complexity and Humility

The recognition of complexity is at its core a view of the world that that makes us more humble and more open. It is the awareness that too often our interventions will not achieve what we wanted and we will be shocked by unintended consequences. (The fact that, following the creation of the Cap-and-Trade Carbon Emission Scheme as a clever new artificial market, more coal is being burned in Europe than before is a mind-boggling example.) At the same time, it is the acknowledgement that simplistic “can do” thinking and linear approaches in organizations and markets, which are by definition complex, won’t be sufficient. And it is the prod to us to better understand why.
That is from a nice recent post by Ben Ramalingam.  He notes:
Of course we know [my note: a lot of leaders still don't!] that constantly dialing down expenses and investments to boost short-term margins inevitably damages the long-term health of the company. It takes a complexity approach to keep competing values and priorities and the effects of decisions on all of them in view — and not just for management, but equally for investors, analysts, and regulators.
And goes on to say:
There has been no watershed event to make it true that managers will apply complexity science to their work today, whereas they could not, or would not, yesterday. Rather, there has been a gradual change in mindset, pushed along by the increasingly evident damage of narrow, simplistic thinking. The toolkit that allows us to understand the dynamics of large systems has continued to evolve. And the reassuring truth has been reasserted that, on top of the logic of algorithms, human values and judgment are essential.
Managers, I think, should now get ready to face the full complexity of their organizations and economic environments and, if not control them, learn how to intervene with deliberate, positive effect. Embracing complexity will not make their jobs easier, but it is a recognition of reality, and an idea whose time has come.

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Friday, April 26, 2013

100 Days of Gratitude, Day 35 - Ibu Sophia

While I was living in Jakarta from 1987 to 1992, I was the luckiest person in the world.  Why?  Because I got to eat Ibu Sophia’s cooking every day.  I ate like a king – and many guests did as well.  During those years, I traveled all around the country and ate in food stalls, cheap restaurants, fancy restaurants, and many homes.    She was the best cook in Indonesia, hands down.

But she not only fed me.  Even though I was in my late 20s and early 30s, she looked after me like a mother.  Born in the Semarang area, probably in the 1930s, she had little formal schooling, but nonetheless had great curiosity about the world.
She loved having guests and finding out what they did. 

One night, we had General Olusegun Obesandjo, the former (elected) President of Nigeria, to dinner.   He was majestic in bearing and arrived in very colorful robes.  He ate a huge amount, and then he went into the kitchen.  I peeked in through the door. Though he could not speak her language he spent several minutes with Ibu Sophia, complimenting her cooking and even flirting.  When I asked her about it the next morning, she blushed deeply and said, "Where is he from?  What does he do?  He is a very interesting man."  

How grateful I am to have known – and been cared for – by Ibu Sophia.  She died last month, peacefully, surrounded by her family.  I will miss her.

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Tuesday, March 26, 2013

Leadership Principles 1-3

After spending the last decade in a start-up environment, I have recently joined the senior team at a more established global organization.  This has made me reflect on some things that I learned about leadership and management earlier in my career, when I was at a large organization.  Here are a few:

  1. Good leaders help synthesize a compelling vision that motivates people and helps guide their action.
  2. But good leaders don't just enunciate a vision; they also create a context that enables their teams to succeed.
  3. Good leaders assemble teams with a variety of backgrounds and perspectives relevant to the opportunities and challenges at hand.  And then they create processes that enable these perspectives to be productively brought to bear as teams plan, debate, and execute.

More to come. I welcome your comments, corrections, and additions.

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Thursday, January 24, 2013

Feedback Loops for Aid?

My dishwasher died over the holidays.

The first thing I did was go to Consumer Reports to find out what their experts considered the best bet for a replacement.  I was on the verge of ordering one of their top-ranked models when I decided to click on the “User Reviews” tab.  I was shocked to see that the model was ranked only 2.5 out of 5 stars by actual users.  Consumers had a wide range of complaints, describing how hard it was to load and the length of the wash cycle, and others complained the thing broke down too often.  So I kept going down the list of recommended models until I found one that the experts liked and the users loved, and then I went online and ordered it.  It was simple, and it took less than an hour.

What if governments – and even regular citizens – had a similar tool to use in development projects?  Or better yet – why don’t they?   Read more...

[Cross-posted from my blog at the Center for Global Development.]

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Saturday, January 12, 2013

100 Days of Gratitude - Day 34: GlobalGiving Gang

[Cross-posted from the GlobalGiving Blog]
The other day a friend asked me to look back at my professional career and tell her what I was most proud of.
“What do you mean?” I asked.
“Well, you did all those multi-hundred million dollar projects at the World Bank in the 1980s and 1990s.  And then you were instrumental in creating the original Innovation and Development Marketplaces there.
“And now GlobalGiving has helped over 7,000 projects around the globe get $100+ million in funding from 300,000 donors and some of the most innovative companies in the world.  Plus, GlobalGiving is one of the few online giving platforms that has attained financial self-sustainability.  So which of those things are you most proud of?” she asked.
I paused, but only briefly.
“What I am most proud of is the team that we have built.  Every time I walk in the office I have an almost overwhelming sense of pride in the people there.  If you come visit some day, you will feel a hum in the large, wide-open space. People will be concentrating intensely, but periodically the room will be punctuated by laughter or by a bang on the office gong, signaling some milestone or breakthrough.
“If you keep watching, you will see that someone has hit a road block or has a question, and he will walk over to a colleague’s desk to ask for help.  The two of them will confer quietly. Someone else will look up from their work and come over to join the conversation. If you get closer, you will hear that the task at hand involves something that most teams would consider impossible.  And yet the problem gets solved, and the impossible is achieved – if not the same day, then the next day, or in any case soon.
“In the area where we have our weekly all-hands meetings, you will see what some team members have inscribed in big letters high on the wall:
“Those are not just words – they really are the tenets that guide our actions and decisions day in and day out.
“They are the values that explain why the team can do exceptional things when others are stymied.
“They are the principles that explain why forty people can run and continually improve a platform that supports thousands of heroic project leaders and hundreds of thousands of donors in over one hundred countries.
“They are the reason why you ain’t seen nothing yet.  GlobalGiving has achieved a lot in its first ten years.  But just wait until you see what GlobalGiving does in the next decade.”
That’s what I told my friend.
Good ideas are a dime a dozen. Well-executed ideas are rare, and there is no team that can execute like the gang at GlobalGiving.  My deepest appreciation goes to everyone who has been on our team since we first opened our doors ten years ago. Thank you all for making me so proud.

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