My Content List #15, Friday 2/14

Opening Rant: The Fundamental Attribution Error

Behavioral economics, if nothing else, is a study of human biases. The field blossomed out of classical “Keynesian” economics as soon as academics realized their eternally-rational models for supply&demand, opportunity costs, and decision optimization didn’t exactly hold up in the real world. That’s because the real world is where humans — yes, we oft fallible, ever-biased humans — exist.

You’d be surprised how numerous these biases are — how obvious they can seem once they’re defined/explained yet still so pernicious. Check out this exquisite Cognitive Bias Codex, an interactive mapping of the biases by category. There are a few hundred shown here and even this isn’t complete, but it does contain some of my favorites, such as…

• Loss aversion: how we hate losing FAR more than we love winning, and this can be mathematically/experimentally proven
• Selection bias: when trying to back up an opinion with facts or prove a point, we recall evidence that supports it and (subconsciously) filter facts that may weaken our stance
• Anchoring: we’re heavily influenced by the first piece of information we see, both qualitatively (in terms of direction/position) and quantitatively (in terms of size/numbers)… PS remember this one when negotiating your next salary
• The “hot-cold” empathy gap: when people underestimate the influence of visceral states (e.g. anger, hunger, pain, arousal, etc.) on their behavior or preferences
• … and so many more

I will likely devote future Opening Rants to delving deeply into other behavioral economic phenomena, but today I want to discuss what psychologists refer to as the “fundamental attribution error.” I remember the exact moment I learned about it (Spring 2015, sitting in SLS 20 next to my friend Ev, who was watching a Champions League fixture while Prof. Pinker lectured…) because its truth is so blindingly apparent that it sent me into an introspective conniption.

The principle of the fundamental attribution error is this:

• When assessing and explaining others’ behavior, we have a tendency to over-weight towards dispositions (i.e. their personality, character, intelligence level, who they are — broadly speaking — as a person) and under-weight circumstances/context.
• BUT…When we’re assessing our own behavior, the inverse is true: we give much more weight to circumstance than to dispositional attribution.

To illustrate, I’ll adopt the example Prof. Pinker used: performance on a test.

• Outward/Others’ Behavior: You learn person X didn’t perform well on the midterm → you regard him/her as less intelligent, less studious, less motivated, etc.
• Inward/Our Behavior: You perform badly on the midterm → Can’t you just hear that voice in your head? “I was so busy leading up to it… I had this project, that paper, the other exam… and I barely slept or had time to study…”

This is not to make the point that we tend to over-rationalize (N.B. we do; that’s another bias on the Codex and one that’s ubiquitous in everyday life). The takeaway is that we ought to give the rest of our world some of the benefits we give ourselves in “situational” vs. “dispositional” assessments. Maybe that friend who did badly on the midterm had even more competing priorities than you did, maybe they’re having issues on the home front, maybe they’ve been dealing with anxieties/depressions due to any number of reasons…

The principles from the midterm example can be generalized.

• When you get cut off on the road, you instantaneously deem that person “evil”/”reckless”/”[expletive]” → Maybe their wife’s in labor and they’re rushing to the hospital?
• At work, your counter-party blows up over what you think is the most inconsequential detail in a contract, so you mark that person as “volatile”/”a bad dealmaker”/”hot-headed” → Maybe this was the key component for the other side and YOU didn’t realize the gravity of that point?
• And so on…

So why does this matter?

Bridging the fundamental attribution gap, to me, is a core tenet of empathy. Striving for a mutual understanding of one’s circumstances *instead of* of jumping to crude character assessments would do a lot to strengthen interpersonal connection (in a general sense).

But that’s the issue with biases like this — they’re instinctive, ingrained within us, tough to shake. Is mindfulness of the phenomenon enough to mitigate its effects? In some cases, sure. Trusting that mere awareness would lead to lasting behavior change borders on hubris.

One interviewer asked Danny Kahneman (who’s up there on the Mt. Rushmore of behavioral economists) what he would eliminate in this world if he “had a magic wand”. His answer? Overconfidence.

As I’ve said before (and will say again): Life’s made on the margin. If we can allow ourselves just a moment’s pause before jumping to conclusions then try to put ourselves in others’ shoes, it’d go a long way. For the sake of bolstering empathy, it’s worth a shot.

PS: This is just scratching the surface; could rant a hell of a lot longer on all this. Hopefully this whet your appetite. For some great pieces on behavioral economics and biases, I’d recommend the following:

• Books: Nudge (a personal favorite), Thinking Fast and Slow, and The Undoing Project
• And this article on the Fundamental Attribution Error from the brilliant minds at Farnam Street

PPS: Happy Valentines Day, Zo!

Got something to contribute? Think my reasoning is flawed?

Drop me a note; I’d love to hear from you!

Follow me @James R. Shecter. Or don’t.

My Content List #15, Friday 2/14

Articles

How Will You Measure Your Life? | Clayton Christensen

• RIP to Clayton Christensen…
• There are so many amazing excerpts to share, but this one might be my favorite: “If you study the root causes of business disasters, over and over you’ll find this predisposition toward endeavors that offer immediate gratification. If you look at personal lives through that lens, you’ll see the same stunning and sobering pattern: people allocating fewer and fewer resources to the things they would have once said mattered most.”
• See also, for appreciation of the man that was Clayton Christensen, the Gentle Giant of Innovation

Why People Have Out-of-Body Experiences | The Atlantic

Move Over, Pot: Psychedelic Companies Are About to Go Public | Bloomberg

Debt is Coming | Alex Danco

Nobody Makes Money Like Apollo’s Ruthless Founder Leon Black | Bloomberg

Is Vulnerability a Choice? | Farnam Street

• “The only choice we really have when it comes to vulnerability is the choice to acknowledge it or not. There is no doubt it can be hard to be vulnerable, especially if we didn’t have positive experiences with it as children. But social connections sustain us, and meaningful social connections are hard to build and maintain without mutual vulnerability.”

How online ad targeting weaponizes political misinformation | Axios

How the Nike Vaporfly War Was Lost | Outside

• Did you know that Nike designed running sneakers that practically have springs inside them, and that these shoes can give runners up to a 4% edge? I didn’t either

Everyone now believes that private markets are better than public ones | The Economist

Facebook’s Platform Opportunity | Stratechery

Comedy Written for the Machines | NYTimes

Yes, It’s All Your Fault: Active vs. Passive Mindsets | Farnam Street

How Billie Eilish Is Reinventing Pop Stardom | Vogue

The Office of Tomorrow | WSJ

The Next Leadership Agenda for Private Equity | BCG

Visa, Plaid, Networks, and Jobs | Stratechery

Estimating Product Growth Potential | Merci Victoria Grace

Advertising Makes Us Unhappy | Harvard Business Review

Ready For Meat Grown From Animal Cells? A Startup Plans A Pilot Facility | NPR

Hollywood Embraces Recovery: How Industry Insiders Get and Stay Sober | Variety

The End of the Beginning | Stratechery

Compounding Knowledge | Farnam Street

• Knowledge compounds like interest!

My Instagram: We all die immediately of a Brazilian butt lift | N + 1

How ‘reading the air’ keeps Japan running | BBC

• In “high-context” countries where communication is indirect and messages are inferred — like Japan — situational awareness (i.e. EQ) is king.

Tradeoffs: The Currency of Decision Making | Farnam Street

Body Count Bull$hit | ZeroHedge

Elastic: Flexible Thinking in a Constantly Changing World | Farnam Street

• …“the capacity to let go of comfortable ideas and become accustomed to ambiguity and contradiction; the capability to rise above conventional mind-sets and to reframe the questions we ask; the ability to abandon our ingrained assumptions and open ourselves to new paradigms; the propensity to rely on imagination as much as on logic and to generate and integrate a wide variety of ideas; and the willingness to experiment and be tolerant of failure.”

The Power of Small Wins | Harvard Business Review

• Life’s made on the margin!

Why it only costs $10k to ‘own’ a Chick-fil-A franchise | The Hustle

Amazon’s Priorities Over the Years, Based on Jeff Bezos’s Letters to Shareholders | Harvard Business Review

The Questions Sex-Ed Students Always Ask | The Atlantic

Is The Mafia More Powerful Than It’s Ever Been? | Slate

Help! I’m Trapped Inside TIKTOK and I Can’t Get Out! | WSJ

No One Can Explain Why Planes Stay In The Air | Scientific American

Too Many Americans Will Never Be Able to Retire | Bloomberg

Why Philosophers Could Be the Ones to Transform Your 2020 | BBC

The Company of Second Chances | WSJ

The Equality Conundrum | New Yorker

The Conversation: Google and Alphabet CEO Sundar Pichai on managing a tech giant’s growing pains | Fortune

Fertility Inc.: Inside the big business of babymaking | Fortune

Jobs, Cook, Ive — Blevins? The Rise of Apple’s Cost Cutter | WSJ

Amazon Prime Video Gives Amateur How-To’s, Conspiracy Theories a Stage | WSJ

The Secretive Company That Might End Privacy as We Know It | NYTimes

The Craigslist of Guns | The Verge

Understanding India’s Chilly Reception of Jeff Bezos | Harvard Business Review

Mark Cuban Once Crashed the NBA’s Party. Now He Hosts It. | The Ringer

Millennials Love Zillow Because They’ll Never Own a Home | OneZero / Angela Lashbrook

These tailors show that custom suiting is no longer just for men | Fortune

Venture Capital Positively Disrupts Intergenerational Investing | Cambridge Associates

Why Private Equity Keeps Wrecking Retail Chains Like Fairway | Slate

Ari Emanuel, WME, and the Great Hollywood IPO That Wasn’t | Vanity Fair

You Bet! | Latest Memo from Howard Marks

• Marks draws parallels between gambling and investing, and underscores the importance of a decision making process → “If we aren’t wrong just because things didn’t work out, then we aren’t right just because things turned out well”
• Separately, has anyone read Thinking in Bets by Annie Duke? If so, would you recommend?

Podcasts

Consulting, Learned to Code, and Raised Over $55 Million in Venture Funding to Build Finix | Inc

Slowing Down | NPR’s TED Radio Hour

• “We’re always asked to be faster and more precise. But what can we learn from slowing down — even procrastinating?”

Passion Isn’t Enough: The Rise Of ‘Political Hobbyism’ in the United States | NRP’s Hidden Brain

When Things Click: The Power Of Judgment-Free Learning | NPR’s Hidden Brain

Emotional Currency: How Money Shapes Relationships | NPR’s Hidden Brain

It’s Been A Week | Stratechery’s Exponents Podcast

The Water We Swim In | Stratechery’s Exponents Podcast

Songs

1612 — Vulfpeck

Tell Me When — Christian Kuria

Where Angels Fear to Tread — Disclosure