Holiday Reading List 2018 – The Rationalist Delusion

Finally, this last year, long overdue, I picked up Daniel Kahneman’s Thinking Fast and Slow (2011). And what a book it is. If you still thought you were a rational human being, deliberately making judgements, weighing pros and cons for every decision you make, consider this quote from Thinking Fast and Slow:

(..) emotion now looms much larger in our understanding of intuitive judgments and choices than it did in the past. The executive’s decision would today be described as an example of the affect heuristic [a mental shortcut], where judgments and decision are guided directly by feelings of liking and disliking, with little deliberation or reasoning.

This resonates so strongly with the work of Jonathan Haidt in The Righteous Mind, that it made me think of one of the themes of that book, the rationalist delusion:

As an intuitionist, I’d say that the worship of reason is itself an illustration of one of the most long-lived delusions in Western history: the rationalist delusion. It’s the idea that reasoning is our most noble attribute, one that makes us like the gods (for Plato) or that brings us beyond the “delusion” of believing in gods (for the New Atheists). The rationalist delusion is not just a claim about human nature. It’s also a claim that the rational caste (philosophers or scientists) should have more power, and it usually comes along with a utopian program for raising more rational children.

How’s that for some provocative ideas worth exploring this holiday?

Haidt’s The Righteous Mind is not on this year’s list because I used it in the past for a number of blogs on biases (see this one on morality bias; and this one on confirmation bias). But the ideas of that book strongly influenced the way I progressed onto the books of this year’s list. Here we go:

Thinking Fast and Slow. Daniel Kahneman. A landmark book if you want to make better decisions. Kahneman shows, that by relying mostly on system 1 (mental shortcuts based on feelings, emotions and morality) in decision-making, and not on system 2 (our rationalist selves), we make predictable errors of judgment. The intuitive system 1 is a lot more influential than your think. Kahneman:

This is the essence of intuitive heuristics [rules of thumb]: when faced with a difficult question, we often answer an easier one instead, usually without noticing the substitution.

Learn how you fool yourself and read about: the availability heuristic (or What-You-See-Is-All-There-Is heuristic), anchoring bias, the law of small numbers, availability bias, the halo effect, and many, many more.

The Economist have their own way of describing the rationalist delusion in a review of this outstanding book:

As Copernicus removed the Earth from the centre of the universe and Darwin knocked humans off their biological perch, Kahneman has shown that we are not the paragons of reason we assume ourselves to be.

The Master and His Emissary – The Divided Brain and the Making of the Western World. Iain McGilchrist. A different dichotomy than intuition and reason is discussed in this ‘fascinating book’ (Financial Times). The leading question here is: ‘Why is the brain divided?’ McGilchrist:

(..) the hierarchy of attention, for a number of reasons, implies a grounding role and an ultimately integrating role for the right hemisphere, with whatever the left hemisphere does at the detailed level needing to be founded on, and then returned to, the picture generated by the right.

This book is almost two books into one: the first part is steeped into neuroscience, tells us why the brain is divided, and which functions the left and right hemispheres perform. (If I would have to place Kahneman’s systems 1 and 2 in McGilchrist’s left and right hemispheres, system 1 would reside in the left, and system 2 in the right hemisphere.) In the second part of the book (called ‘How the Brain Has Shaped Our World’), the story unfolds in a dramatic way. McGilchrist takes us on a tour through the Ancient World (Plato, again, also see my blog on him here), the Renaissance, Enlightenment and the Industrial Revolution, to come to some daring propositions. One of the most striking ones is that the left hemisphere (the Emissary) has become so dominant that it has seized power over the right hemisphere (the Master), creating a Western culture with an obsession for structure, narrow self-interest and a mechanistic view of the world. I had to think of books on the 2016 reading list by John Gray and Matthew Crawford when I read this. True, or not, it makes for some great reading and stuff worth discussing over a good glass of wine during the Holidays.

Why Buddhism Is True. Robert Wright. No, I’m not going religious on you. And no, I’m not going Buddhist on you. Lauded by The New York Times Book Review, The Guardian, The New Yorker and Scientific American, this book is Darwinian in nature. There’s also a good deal of Kahneman and McGilchrist here:

Again, the part of the brain that controls language [system 2; left hemisphere] had generated a coherent, if false, explanation of behavior  ̶  and apparently had convinced itself of the truth of the explanation. The split-brain experiments powerfully demonstrated the capacity of the conscious self to convince itself that it’s calling the shots when it’s not. (..) In short, from natural selection’s point of view, it’s good for you to tell a coherent story about yourself, to depict yourself as a rational, self-aware actor. (..) It is possible to argue that the primary evolutionary function of the self is to be the organ of impression management [note: Haidt has a similar wording in that he talks about the press secretary].

With the help of modern evolutionary psychology, Wright explains that the mind is increasingly seen as having a modular design. Different modules were created by evolution to size up different situations and take action towards these situations. Much of this action goes on without you (the CEO) even knowing that action is being undertaken. Think about things such as fear, lust, love and many other feelings: are you calling the shots? From a very different angle than Kahneman’s, namely the angle from Buddhist mindfulness and meditation, Wright ends up at the same conclusion:

(..) our ordinary point of view, the one we’re naturally endowed with, is seriously misleading.

Wright goes on to explain why meditation can help us understand ourselves better:

Mindfulness meditation involves increased attentiveness to the things that cause our behavior  ̶  attentiveness to how perceptions influence our internal states and how certain internal states lead to other internal states and to behaviors.

This is an extraordinary book that takes mindfulness meditation out of the esoteric realm. It puts it straight into evolutionary psychology and hands us a tool to help us understand, and improve, our own decision-making.

Mindfulness for Creativity. Danny Penman. Now that I introduced mindfulness meditation above, there needed to be a book on the actual practice of meditation on this year’s list. Mindfulness meditation is still ‘weird’ enough that you have to explain to the world that you are not a tree-hugger, an anarchist or, well, a useless creature in general. Bill Gates, far from being a useless creature, put a book on meditation on his 5 best books of this year. However, even he still felt the needed to explain what the benefits of meditation for creativity are, and that it’s nothing to freak out over:

Back when I was avoiding music and TV in the hope of maintaining my focus, I knew that lots of other people were using meditation to achieve similar ends. But I wasn’t interested. I thought of meditation as a woo-woo thing tied somehow to reincarnation, and I didn’t buy into it. Lately, though, I’ve gained a much better understanding of meditation. I’m certainly not an expert, but I now meditate two or three times a week, for about 10 minutes each time. I now see that meditation is simply exercise for the mind, similar to the way we exercise our muscles when we play sports. For me, it has nothing to do with faith or mysticism. It’s about taking a few minutes out of my day, learning how to pay attention to the thoughts in my head, and gaining a little bit of distance from them.

Well, if it’s something that Bill Gates and Steve Jobs buy into (founders of two of the most valuable companies in the world), I think we should at least give it a try.

If you need more book recommendations, check out the summer reading lists of 2016, 2017 and 2018, and the holiday reading lists of 2016 and 2017.

Happy holidays, and happy reading!

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ESG-Disclosure Using The Economist as a Proxy (2)

The second installment in an effort to distill relevant ESG-topics from The Economist has notable differences from the first effort (see here). Digging through the second series of four months of articles (May to August), I found that:

  • climate change remains the number one topic;
  • green technology is in firm second place;
  • governance more or less keeps the same spot in the matrix;
  • pollution gets a lot less attention but remains important in terms of impact on a firm’s profitability;
  • environmental laws are a new category with potentially big impacts on business models (not including climate policies, which I include in the climate change category);
  • new these last months, is the coverage of ecology, conservation and environmentalism (which I grouped under ‘ecology’); although important from a stakeholder’s perspective, I opted to put ecology to the left of all other categories since the subjects at hand still need to find their way into the mainstream; on top of that, laws and regulations on these topics seem further away then the ones on, for example, climate change and governance.

The picture above follows, again, the format of a Materiality Matrix, with the number of articles per topic on the Y-axis and the – debatable – impact on a firm’s profitability if this topic is not tackled by its management, on the X-axis. If The Economist can be used as a guide, you should, in addition to the topics that were already present in last month’s Materiality Matrix (i.e. climate climate change, green technology, pollution and governance) consider disclosing information on your efforts towards a healthy ecology. As far as new environmental laws are concerned, these were of course already included in your risk management approach.

Below, some interesting snippets taken from the articles can be found, grouped per topic. (Most quotes are adopted directly from The Economist).

Climate Change

Interesting facts taken from all articles in the group ‘climate change’:

  • Businesses are overvalued because of a “carbon bubble” and could suffer if the climate threat is tackled resolutely. A study at Oxford University found that electricity producers would have to retire a fifth of capacity, and cancel all planned projects, if the Paris goals are to be met.
  • What is the single most effective way to reduce greenhouse-gas emissions? Go vegetarian? Replant the Amazon? Cycle to work? None of the above. The answer is: make air-conditioners radically better. On one calculation, replacing refrigerants that damage the atmosphere would reduce total greenhouse gases by the equivalent of 90bn tonnes of CO2 by 2050. Making the units more energy-efficient could double that. By contrast, if half the world’s population were to give up meat, it would save 66bn tonnes of CO2. Replanting two-thirds of degraded tropical forests would save 61bn tonnes. A one-third increase in global bicycle journeys would save just 2.3bn tonnes.
  • Scientists have laid out steps that Arab countries could take to adapt to climate change. Agricultural production could be shifted to heat-resilient crops. Israel uses drip irrigation, which saves water and could be copied. Cities would be modified to reduce the “urban heat-island effect”, by which heat from buildings and cars makes cities warmer than nearby rural areas. Few of these efforts have been tried by Arab governments, which are often preoccupied with other problems.
  • Virtually all simulations which chart paths toward meeting the Paris climate agreement – to keep temperature rise “well below” 2°C relative to pre-industrial levels – assume not just a sharp reduction in actual emissions but also the removal of carbon dioxide from the atmosphere on a massive scale.
  • In Canada, provinces can control emissions in their own way. British Columbia has already introduced a carbon tax (now C$35 a tonne). Alberta charges C$30 a tonne. Ontario’s cap-and-trade scheme would have qualified. If a province fails to tax or cap emissions, the federal government will impose a tax.
  • Three years after countries vowed in Paris to keep warming “well below” 2°C relative to pre-industrial levels, greenhouse-gas emissions are up again. So are investments in oil and gas. In 2017, for the first time in four years, demand for coal rose. Subsidies for renewables, such as wind and solar power, are dwindling in many places and investment has stalled; climate-friendly nuclear power is expensive and unpopular. It is tempting to think these are temporary setbacks and that mankind, with its instinct for self-preservation, will muddle through to a victory over global warming. In fact, it is losing the war.
  • Two social psychologists have found that Republican voters will back carbon taxes if they are told Republicans favour such a policy.
  • The number of Europeans who can expect to witness a temperature above the current record, wherever they happen to live, would double from 45m today to 90m if the planet warmed by another 0.5°C or so on top of the 1°C since the 1880s. If, instead of 0.5°C, it warmed by 1°C, the figure would rise to 163m.This looks even more alarming if you factor in humidity. Human beings can tolerate heat with sweat, which evaporates and cools the skin. That is why a dry 50°C can feel less stifling than a muggy 30°C. If the wet-bulb temperature (equivalent to that recorded by a thermometer wrapped in a moist towel) exceeds 35°C, even a fit, healthy youngster lounging naked in the shade next to a fan could die in six hours.
  • A report published on August 6th by Sarasin & Partners, an asset manager in London, suggests that oil firms are assuming that decarbonisation will be limited and are thus overstating their assets. Sarasin notes that eight European oil giants all used long-term oil price assumptions of $70-80 a barrel, rising by 2% a year with inflation to $127-145 by 2050, to price their assets. But that does not appear to assume any drop in demand. The International Energy Agency predicts a price of just $60 by 2060; Oil Change International, an activist think-tank, estimates one as low as $35. Oil firms could face a sticky mess of forced writedowns.
  • A new IMF working paper finds that taxes raise around twice as much revenue as today’s cap-and-trade schemes, and are roughly 50% better at cutting emissions.

Green Tech

Interesting facts taken from all articles in the group ‘green tech’:

  • Plastic production has tripled over the past 25 years, and the mess it causes has risen commensurately. Recycling is an option. Another is biology. At Stanford University, they found that bacteria in the guts of mealworms can break down polymers faster than fungi and bacteria can.
  • Six of the top ten producers of solar-panels are Chinese.
  • Though solar was the world’s biggest source of new power-generating capacity last year, it still generates a paltry 2% of global electricity.
  • Materials-science researchers are finding that plant fibres can add durability and strength to substances already used in the construction of buildings and in goods that range from toys and furniture to cars and aircraft. A big bonus is, because plants lock up carbon in their structure, using their fibres to make things should mean less carbon dioxide emitted. The production of concrete alone represents some 5% of man-made global CO2 emissions, and making 1kg of plastic from oil produces 6kg of the greenhouse gas.
  • In the bike-mad Netherlands nearly one in three newly bought bikes last year was electric.
  • Acid rain damages crops. In particular, it damages rice. I can be cleaned with water but it is not always obvious when it needs to be cleaned. A cheap method now has been found: rice plants sprayed with artificial acid rain, cut the release into the soil of three relevant bacterial food stuffs. The electric current the bacteria in the ground generate consequently drops. This is easily measurable using cheap electrodes.
  • India has plans for alternative means of generating electricity. Even before the Paris summit, Narendra Modi, the prime minister, aimed to install 175 gigawatts (GW) of renewable-energy capacity by 2022, a vast increase from today. That has now risen to 227GW. In the meantime, prices of wind and solar power have tumbled. Recent auctions have led to a 50% drop in the cost of solar power in the past two years, to about three rupees ($0.05) per kilowatt hour, about the same as wind. This can make both sources cheaper than building new coal-fired capacity. An excise tax on production and imports makes coal ever less attractive. After a massive spree of building coal-fired power plants in recent years, investment slumped last year, while that in alternatives surged.
  • A view prevails that the blockchain will guzzle too much electricity for energy applications to make sense. But this assumes that projects will use a public blockchain such as bitcoin, which anyone can access with the right software, requiring lots of computing power and time to verify each transaction and protect the blockchain. Energy firms could in fact employ blockchains in which only trusted participants can join, making the process of maintaining the blockchain faster and less energy-hungry.
  • America’s Forest Service uses a model to assess fire risk. This model feeds on data on the distribution and types of trees, bushes and other vegetable ground cover, and on construction materials used in an area. Such intelligence will be needed increasingly in the future. Predictions based on the likely effects of climate change suggest that, by the middle of the century, fires will burn twice as much acreage as they do today.

Pollution

Interesting facts taken from all articles in the group ‘pollution’:

  • Two books have been reviewed that have the Flint water pollution disaster as a subject: Had the dirty river water been treated with the right chemicals, thousands of people would not have been poisoned by lead and bacteria, including one that causes Legionnaires’ disease. But to save more cash, the city declined to add anti-corrosion agents that would have stopped the water eating away at the lining of the pipes, thus preventing lead from leaching out. That might have cost around $100 a day—peanuts compared with the hundreds of millions that the state and federal governments are now forking out to repair some of the damage. These two books both show how an austerity drive with racial undertones led to the mass poisoning of mostly poor and black residents, and how officials tried to cover it up, attempting to discredit anyone who came up with proof that the water was tainted.
  • Also on Flint: to almost everyone’s surprise, the citizens of Flint prevailed in March 2017, when the government agreed to an expensive settlement in the first type of lawsuit. The state of Michigan agreed to spend at least $87m to replace lead-contaminated water pipes in Flint within three years. The settlement also required the city to run at least two centres where residents could pick up free bottled water and tap-water filters until September 2017, and beyond that if tests continued to show that Flint’s water was contaminated. The government stopped the giveaway in April this year, saying the city’s water passed the test; Karen Weaver, the mayor of Flint, retorts that many of her constituents still do not trust it.
  • Kapuas, Indonesia’s longest river, is murky because of deforestation. Since the 1970s, logging has enriched locals while stripping away the vegetation that held the soil in place. The Centre for International Forestry Research (CIFOR) found that between 1973 and 2010 over 100,000 square kilometres of forest was lost on Kalimantan, or a third of the original coverage. A national moratorium that began in 2011 has done little to still the axes. As a result, torrential tropical rains wash lots of loose earth into the Kapuas.

Governance

Interesting facts taken from all articles in the group ‘governance’:

  • Plato argued that the richest members of society should earn no more than four times the pay of the poorest. John Pierpont Morgan, a banker, reckoned that bosses should earn at most 20 times the pay of their underlings. Investors today hold chief executives in vastly higher esteem: America’s largest publicly listed firms on average paid their CEO 130 times more than their typical workers in 2017.
  • “I fear that we may be at a peak of anti-bribery efforts”, says a spokesperson of Transparency International. Western firms in the mining and oil-and-gas industry grumble that rivals from China, Russia or elsewhere have “advantages” bidding for contracts in say, parts of Africa, as they face few limits on bribe-paying. If such complaints grow loud, pressure not just to stand still on anti-bribery standards but actually to lower them could return.
  • In India, women are less likely to work than they are in any country in the G20, except for Saudi Arabia. They contribute one-sixth of economic output, among the lowest share in the world and half the global average. The unrealized contribution of women is one reason India remains so poor.
  • On Danone: The latest effort is to win certification as a “B Corporation”, a label meant to reflect a firm’s ethical, social, environmental practices. Smaller outfits, such as Patagonia, a clothing firm, or Ben and Jerry’s ice-cream (now part of Unilever) were early B Corps. Some 2,500 have been certified in the past decade or so.

Ecology

Interesting facts taken from all articles in the group ‘ecology’:

  • Humans have had a profound impact on the prevalence of other species: the biomass of wild mammals has decreased to a sixth of its previous value. Meanwhile, the carbon count of domesticated poultry grew to three times higher than that of every species of wild bird combined.
  • Columbia BIO is a huge project to survey Columbia’s biological assets. The government’s aspiration is that biodiversity itself might be harnessed as an economic resource, and that this might contribute as much as 2.5% of Columbia’s GDP by 2030.
  • The Great Barrier Reef has died and then been reborn (with rising and falling sea levels) five times during the past 30,000 years. Bleaching is now threatening the reef for the sixth time. In the short term, global warming really does look like a serious threat.
  • Sudan, the last male northern white rhinoceros on Earth, died in March. He is survived by two females. IVF seems the last hope for the northern white rhino.
  • Around 40% of bee species globally are in decline or threatened with extinction. Beekeepers in North America and Europe are losing hives at an abnormally high rate. Why? Diana Cox-Foster, an entomologist, offers the theory of the four Ps: parasites, poor nutrition, pesticides and pathogens.

Environmental Laws

Interesting facts taken from all articles in the group ‘environmental laws’:

  • Since the 1970s enormous farms growing irrigated crops such as cotton and nuts spread across the Murray-Darling basin in Australia. Illegal extraction of water is a problem. Farmers are meant to use meters to monitor how much they pump. But last year, cotton irrigators were accused of tampering. Wide-scale abuse has been possible because states and local governments have failed to enforce the rules.
  • Shipping accounts for only around 2% of global carbon emissions, but is quite dirty. Burning heavy oil, the industry produces 13% of the world’s sulphur emissions and 15% of its nitrogen oxides. And by 2050 ships will be producing 17% of all carbon emissions if left unregulated.
  • The International Maritime Organisation agreed to halve the industry’s carbon emissions by 2050.
  • The Trump administration is committed to undoing the Clean Power Plan —which sought to reduce carbon-dioxide emissions from power plants by 32% from their levels in 2005 by 2030—before it comes into effect. Its new proposal, the Affordable Clean Energy (ACE) rule, is much less ambitious because it would let states decide their emissions-reductions targets (including having none at all). Its name is Orwellian. The EPA’s own analysis shows that retail electricity prices would be reduced by a mere 0.1%-0.2% by 2035—but that use of coal, a pollution-belching fuel, would shoot up by as much as 9.5%.
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Decision Making: What We Can (Not) Learn from Plato

                  “An early management training on rational decision making(Hulton Archive/Getty Images)

When I started this blog, I was determined to write some posts on decision making. I am fascinated with the fact that humans think we are rational beings, while all the latest research (on moral psychology, neuroscience, etc) clearly contradicts this. I have tried to write about what I ‘discovered’ to be true (by reading other people’s books that is): that we suffer from a number of ‘errors’ that keep us from taking rational decisions. See for example my posts ‘morality binds and blinds and ‘three tools to overcome conformation bias.

How we came to worship reason: enter Plato

As interesting as new research on these topics is, how we came to think of ourselves as rational decision-makers in the first place, seems a relevant topic in itself. In an – undoubtedly futile – attempt to work through the entire list of Great Books, I managed to make it through a number of works by Plato. As everybody who enjoyed the classical education will surely know, Plato is considered the high priest of ratio. Two quotes from Republic (Plato’s attempt to describe the ideal state) show just how high his regard for reason was:

‘.. when one tries to get at what each thing is in itself by the exercise of dialectic, relying on reason without any aid from the senses, and refuses to give up until one has grasped by pure thought what the good is in itself, one is at the summit of the intellectual realm.’

.. reason ought to rule, having the wisdom and foresight to act for the whole, and the spirit ought to obey and support it.’ [Italics added.]

I often found it hard not to be dragged along by Plato’s arguments. He writes with such passion and comes up with many wonderful stories that are still known today. Think about the myth of Atlantis (to be found in the Timaeus), the metaphor of the cave (see Republic), and the famous comparison of the soul to a charioteer with two horses (read Phaedrus). It all makes for fantastic literature actually.

Plato’s unrelenting belief in reason, however, turns him into an enemy of anything that distracts us from pure thought. Poetry, art, passion, emotion, he will have nothing of it. Why? What follows takes quite some effort to grasp (and likely some leaps of faith):  Plato argues that reason leads to pure knowledge, and only pure knowledge can lead to what’s truly good, and what’s truly good ultimately leads to happiness. He then argues (in Republic) that everything that is in the realm outside pure thought – like impressions, appearances, beliefs, emotions, and opinions – could thus never lead to a happy life. In short, using rational thought is the only way to go about your life; emotions and the senses do not have a place in leading a good life or making the right judgments or decisions. This was a defining moment in history: reason won, emotions were out. Or as Jonathan Haidt puts in The Righteous Mind:

‘Western philosophy has been worshiping reason and distrusting the passions for thousands of years. There’s a direct line running from Plato through Immanuel Kant to [20th century psychology].’

Evidence why Plato is wrong: enter ‘moral reasoning’

Plato beliefs that we use (should use) rational thinking because it will lead us to the truth. Plato believes that we argue to get to the truth. In fact, most of his dialogues feature Socrates engaging in arguments about all kinds of topics with the aim of getting  to the truth of the matter. An opposing view would be that we do not argue to get to the truth, but we argue to win the argument: we have a sense or intuition for the right course of action, and we use our reasoning to justify our intuition. This is exactly what the field of moral psychology is proposing, and there’s overwhelming evidence that our decision making is highly influenced by emotions (or gut feelings if you will) instead of pure reason. As journalist Stephen Hall puts it in his highly readable Wisdom:

‘What if moral judgment, so central a notion to all schools of philosophy and the centrepiece of every major religion, is not the conscious, deliberate, reasoned discernment of right or wrong we’ve all been led to believe, but is, rather, a subterranean biological reckoning, fed by an underwater spring of hidden emotions, mischievously tickled and swayed by extraneous feelings like disgust, virtually beyond the touch of what we customarily think of as conscience? What if Plato, Socrates, and Aristotle were nothing but a bunch of two-bit, fork-tongued, post hoc rationalizers? What if, every time we decide what is the “right” or “good” thing to do, we are merely responding, like dogs, to the otherwise inaudible whistling of the emotional brain? That is where moral philosophy is headed these days, and it’s being driven by a new generation of philosophers and social psychologists, who have adopted the uniform of the lab coat.’

One of these social psychologists is Jonathan Haidt, who did a lot of ground breaking work on understanding where our moral reasoning comes from. One of his catch phrases is ‘intuitions come first, strategic reasoning second’. To buttress this claim, he finds indications in research that shows that ‘moral thinking is more like a politician searching for votes than a scientist searching for truth’. Some disturbing conclusions he draws about our thinking are:

  • We are obsessively concerned about what others think of us, although much of the concern is unconscious and invisible to us.
  • Conscious reasoning functions like a press secretary who automatically justifies any position taken by the president.
  • With the help of our press secretary, we are able to lie and cheat often, and then cover it up so effectively that we convince even ourselves.
  • Reasoning can take us to almost any conclusion we want to reach.
  • In moral and political matters we are often groupish, rather than selfish. We deploy our reasoning skills to support our team, and to demonstrate commitment to our team.

Why should you care? Or: how can you improve your decision making?

Why should you care about what the latest research has to say about reasoning? You may think you always make use of rational thinking and never engage in moral reasoning, especially not in the workplace. Think again. There are very few domains that are immune to moral reasoning. The exception might be science. But science obviously does not include the business environment, which is highly politically motivated and thus vulnerable to moral reasoning.

To improve your business decision making, you might ask yourself these two questions prior to making decisions:

  1. Am I trying to get to the truth (and set my ego aside) or am I trying to win the argument?
  2. Am I tackling this problem logically or am I caught in moral reasoning to try to justify a position I intuitively feel is right (also known as post hoc rationalization)?

Whenever the answer points into the direction of argumentative reasoning or post hoc rationalization, seek the advice of others. Others that have opposing views that is. Because the research I have been discussing also shows that we are very well equipped with coming up with my-side arguments, but terrible in coming up with other-side arguments. Reading Plato is still recommended – especially to learn where and how our adulation of reason came about –, but to improve your decision making you had better stick to the latest insights from psychology and neuroscience.

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Three thinking tools to overcome confirmation bias

Understanding that your reasoning is undermined by bias, is one of the most valuable insights into your own decision making capabilities. I wrote another piece on biases (Morality Binds and Blinds), but the title might have been such that it was my least successful blog entry measured by number of reads. Or, it might just be too unsettling to think and read about the flaws in your own reasoning. Nevertheless, I think understanding biases are hugely important for better decision making, and offer you three thinking tools to overcome the arguably most famous of all biases: confirmation bias.

Falling into the trap of confirmation bias, we all do it

An intriguing discussion of confirmation bias can be found in Jonathan Haidt’s The Righteous Mind:

(…) confirmation bias, the tendency to seek out and interpret new evidence in ways that confirm what you already think. People are quite good at challenging statements made by other people, but if it’s your belief, then it’s your possession – your child almost – and you want to protect it, not challenge it and risk losing it.

People outside Haidt’s realm of moral psychology and moral philosophy also figured out that people mainly reason to be right instead of reasoning to get to the truth. Here are some quotes that sum up human nature pretty well, I feel:

The eye sees only what the mind is prepared to comprehend. (Robertson Davies, fiction writer, in: Tempest-Tost.)

For it is a habit of humanity to entrust to careless hope what they long for, and to use sovereign reason to thrust aside what they do not fancy. (Thucydides, chronicler of the Peloponnesian War, 4th century BCE.)

We human beings are egotistical animals; each of us wants to win the argument. (Garrett Hardin, human ecologist, in: Filters Against Folly.)

You would think that educating people will surely get rid of the confirmation bias. Or surely the more intelligent people are they will be able to come up with many more reasons for both sides of any argument? Think again. The opposite is quite true (again from The Righteous Mind):

The findings get more disturbing. Perkins found that IQ was by far the biggest predictor of how well people argued, but it predicted only the number of my-side arguments. Smart people make really good lawyers and press secretaries, but they are no better than others at finding reasons on the other side. Perkins concluded that “people invest their IQ in buttressing their own case rather than in exploring the entire issue more fully and even handedly”.

This is probably why rhetoric is simultaneously admired and met with scepticism. Is the rhetorician building a solid rational case? Or is she only trying to win people’s minds over for her own view? Plato famously bashed rhetoric and sophistry in his dialogues Gorgias and Republic, making the case that winning arguments with rhetoric is more about persuasion than knowledge. (Plato, in turn, was of course also accused of only coming up with supporting reasoning for his worldview. Even the greatest of thinkers are not immune to conformation bias it seems.)

If we agree that conformation bias is indeed a serious problem, it limits our capacity to reach the best outcomes by thinking that we are rational beings always arriving at rational conclusions. Haidt and others (e.g. John Gray; see my blog post on progress for a short discussion of his book The Silence of Animals – on Progress and Other Myths) even go so far as to call this the rationalist delusion. What to do?

Three thinking tools to overcome conformation bias

1. Put together a group consisting of members with different backgrounds.

Jonathan Haidt’s suggestion: always use several people with different ideologies and background when making a decision so they can disprove arguments put forward by individuals (emphasis added):

(..) each individual reasoner is really good at one thing: finding evidence to support the position he or she already holds, usually for intuitive reasons. We should not expect individuals to produce good, open-minded, truth-seeking reasoning, particularly when self-interest or reputational concerns are in play. But if you put individuals together in the right way, such that some individuals can use their reasoning powers to disconfirm the claims of others, and all individuals feel some common bond or shared fate that allows them to interact civilly, you can create a group that ends up producing good reasoning as an emergent property of the social system. This is why it’s so important to have intellectual and ideological diversity within any group (..).

This short passage reminded me of a method I used some time ago to try to get the most out of a group of experts who were all convinced of the superiority of their own solution to the problem at hand:

2. Use parallel thinking to have members look at the problem from the same angle and then switch angles a number of times using six different ‘hats’.

Once you have put together a diverse group of people, engage in parallel thinking. This method has been perfected by psychologist and management thinker Edward de Bono. In his book How to Have A Beautiful Mind, he echoes Haidt and others in noticing:

Argument is an excellent method and has served us well. At the same time (..) it is unsophisticated. Each side makes a ‘case’ and then seeks to defend that case and prove the other ‘case’ to be wrong. It says, in short: ‘I am right and you are wrong.’

De Bono gives a summary of his highly effective way of looking at decision making processes (emphasis added):

  • The direction of thinking is indicated by six coloured hats, each of which indicates a mode of thinking. At any moment everyone is ‘wearing’ the same colour ? hat. That is what is meant by ‘parallel thinking’.
  • The white hat indicates a focus on information. What do we have? What do we need? How are we going to get the information we need?
  • The red hat gives full permission for the expression of feelings, emotions and intuition without any need to give the reasons behind the feelings.
  • The black hat is for ‘caution’ and the focus is on faults, weaknesses, what might go wrong and why something does not ‘fit’. [This is the classical argumentative mode we often find ourselves in, trying to disprove other people’s arguments.]
  • With the yellow hat the focus is on values, benefits and how something can be done.
  • The green hat sets aside time, space and expectation for creative effort.
  • The blue hat is to do with the organization of thinking. This means setting up the focus and also putting together the outcome.
  • The hats make sure that everyone is using his or her own thinking fully to explore the subject. If you want to show off you now do this by out-performing others on each hat.

Using the six thinking hats is a useful approach to cure confirmation bias. The subject is really explored and should defuse argumentative behavior. The actual quality of the arguments put forward (checked through the black hat) can benefit from a third thinking tool proposed by Garret Hardin in Filters Against Folly:

3. For every argument put forward use the black hat to check against Hardin’s concepts ‘literacy’, ‘numeracy’, and ‘ecolacy’.

For everyone to understand what is put forward, Hardin proposes to pass an argument through three filters, because:

In the universal role of laymen we all have to learn to filter the essential meaning out of the too verbose, too aggressively technical statements of the experts. Fortunately this is not as difficult a task as some experts would have us believe.

Questions we should ask ourselves to understand any argument are:

  • On ‘literacy’. What are the words that we are using? What do they mean? What do these words mean in reality, if we start working with these concepts?
  • On ‘numeracy’. What are the numbers? What do the numbers mean? What is the relative size of quantifiable factors? Are there scale effects? Can we attach words to the numbers in order to convey meaning?
  • On ‘ecolacy’. In ecological thinking (or systems thinking) we introduce time into the equation of the words and numbers used. If we pursue this action, tactic, or strategy, what will happen next? And what if keep repeating this? What are the effects over time? What could the perverse effects be?

Hardin stresses the importance of using all three filters:

The skills of Readin’, Writin’, and ‘Rithmetic need to be combined with an attitudinal checklist that asks if the best words have been used, if quantities have been duly considered, and if the consequences of time and repetition have been taken into account. The “bottom line” of an analysis needs to be subjected to filtration that is simultaneously literate, numerate, and ecolate. (..) We use the ecolate filter to ferret out at least the major interconnections. Every proposal of a plausible policy must be followed by the question “And then what?” Not until we have asked this question (and answered it to the best of our ability) are we ready to put a plan into action.

By way of summary: understand what confirmation bias is, acknowledge that any individual falls victim to it, and then apply the three thinking tools discussed in this blog. Now you are well underway to better decision making.

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How to Beat Morality Bias in Decision Making

June 2016 was one of those months where groups took center stage over individuals. As Euro 2016 got underway, people no longer supported Man United or Man City, Lazio or Roma, Barça or Real. Instead, they support another group, their country. Then, June 23rd witnessed a clash of supporters and opponents of a Brexit. The lead-up to the referendum made me think: it seems nearly impossible to be persuaded by rational arguments of the other side. Why are we so groupish in our thinking? And, if you consider yourself to be part of a group, will you agree with all or most of the group’s standpoints and base your decisions on those? An Economist article reported that even ‘economists tend to fall into rival camps defined by distinct beliefs’.

In his landmark contribution to humanity’s understanding of itself (according to The New York Times), moral psychologist Jonathan Haidt has some interesting thoughts on why we are so groupish in the first place. Haidt (in his book The Righteous Mind) proposes that natural selection in humans not only took place on the individual level but also on group level:

Most of human nature was shaped by natural selection operating at the level of the individual. Most, but not all. We have a few group-related adaptations too (. . .). We humans have a dual nature – we are selfish primates who long to be a part of something larger and nobler than ourselves.

When everyone in a group began to share a common understanding of how things were supposed to be done, and then felt a flash of negativity when any individual violated those expectations, the first moral matrix was born.

Natural selection favored increasing levels of (. . .) “group-mindedness”—the ability to learn and conform to social norms, feel and share group-related emotions, and, ultimately, to create and obey social institutions, including religion.

This is a huge insight. Once you are caught in group thinking it becomes really hard to see the other side of the story. The story of people in other groups with other moral matrices:

Moral matrices bind people together and blind them to the coherence, or even existence, of other matrices. This makes it very difficult for people to consider the possibility that there might really be more than one form of moral truth, or more than one valid framework for judging people or running a society.

One of the phrases Haidt uses throughout the book is therefore: ‘Morality Binds and Blinds.’

“Yes, but …” I hear you protesting just reading this. Because we are rational human beings and our rational nature will overcome our biases. We are surely always trying to get to absolute truth? Haidt’s research leads him to disagree with the rationalists:

We do moral reasoning not to reconstruct the actual reasons why we ourselves came to a judgment; we reason to find the best possible reasons why somebody else ought to join us in our judgment.

You’ll misunderstand moral reasoning if you think about it as something people do by themselves in order to figure out the truth.

What, then, is the function of moral reasoning? Does it seem to have been shaped, tuned, and crafted (by natural selection) to help us find the truth, so that we can know the right way to behave and condemn those who behave wrongly? If you believe that, then you are a rationalist, like Plato, [and] Socrates (. . .). Or does moral reasoning seem to have been shaped, tuned, and crafted to help us pursue socially strategic goals, such as guarding our reputations and convincing other people to support us, or our team, in disputes? If you believe that, then you are a Glauconian. [Glaucon, Plato’s brother, famously claims that people are only virtuous because of fear of a bad reputation. His argument can be found in Plato’s Republic.]

Haidt makes a very convincing case that our thinking is mainly an after the fact activity to justify our quick intuitive moral judgment. And moral judgments are based on moral matrices of the group you are a member of.

My point here is not to counter the idea that we at least try to make rational decisions. But it is worthwhile to keep Haidt’s warning in mind (‘Morality Binds and Blinds’) the next time you enter a project, program or decision making process in which several groups with different backgrounds take part. Ask yourself if your thinking is really an objective weighing of pros and cons, or your thoughts fall prey to a morality bias.

A good counter measure to prevent yourself from falling into the trap of a morality bias – and maybe other biases too – is a rule the investor and Berkshire Hathaway Vice Chairman Charlie Munger uses:

I have what I call an iron prescription that helps me keep sane when I naturally drift toward preferring one ideology over another. And that is I say “I’m not entitled to have an opinion on this subject unless I can state the arguments against my position better than the people do who are supporting it. I think that only when I reach that stage am I qualified to speak.” Now you can say that’s too much of an iron discipline..it’s not too much of an iron discipline. It’s not even that hard to do.

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