Monthly Archives: August 2007

Disclosing Bias Doesn’t Cancel Its Effects

Trust but verify, especially when we’re paying someone for their advice. Because even when the professional discloses his bias — a banker who stands to gain from a merger, say — we still don’t discount it enough when coming to our conclusion.

We ordinary folks have to gauge, sometimes on the spot, whether a specialist’s opinion is worth the price, and whether that person stands to gain because you are not sure what they are talking about.

For example, a fair amount has been written about whether the perks that doctors receive from pharmaceutical companies bias the doctors. Other research suggests that consumers would do well to think twice before assuming a professional’s advice is worth the price.

In a study published in 2005 in The Journal of Legal Studies, 147 subjects were asked to assume either the role of an adviser or of someone depending on advice. The researchers set up two experimental conditions. In both, there was a conflict of interest: the advisers stood to gain financially if the clients followed their biased advice.

In the first condition, in which the advisers did not disclose their conflict of interest, they knowingly gave misleading advice. In the experiment, the clients lost money because they followed the advisers’ suggestions.

In the second condition, the advisers disclosed their conflict of interest: they conceded they would benefit if the clients heeded the advice. But coming clean didn’t have the expected result. Although the clients, now aware that their advisers were biased, were more skeptical about taking the advice, ”they didn’t discount it enough,” said George Loewenstein, a professor of economics and psychology at Carnegie Mellon University and a co-author of the study, which was conducted at the university.

And the advisers, still determined to make more money, exaggerated their claims. ”The advisers ended up making even more money than in the first condition, which is exactly the opposite of what you would hope for or expect,” he said.

From this Times$elect article, via my homeboy Ramit.

Thinking like an Entrepreneur in College

I wrote a brief commentary for Marketplace, a radio program that airs on NPR usually after "All Things Considered". The topic was "Thinking like an entrepreneur in college," since it’s back-to-school time. It aired a couple days ago.

Although I’ve done a couple dozen radio interviews / live conversations, I’ve never written anything in essay format. Much different than writing for print — I had a good time working with the producer to both write and record the piece in the studio (they mix and match your best lines).

I’m starting to like this "get paid to write" thing….

Text transcript below. Will I really be able to be entrepreneurial in college? Time will tell!

Most people, when they hear the word entrepreneur, think of someone who starts their own business.

And while that’s an accurate definition — I started my first company when I was 14 — it’s not the whole story.

Anyone can think like entrepreneur…even about going to college.

Acting like an entrepreneur means exposing yourself to randomness and being relentlessly optimistic.

But no matter how hard you try, you have to be in the right environment. That affects what kind of rebel you might become.

My parents instilled quiet confidence but they never said if you set your mind to it you can change the world.  They were sober.

So was I.  Local governments never go out of business and they have constant customer service needs. So, I created a software company filling those needs.

College has its own atmosphere and influences.

Some schools turn students into life-long learners and problem solvers. Others teach them how to be professional task masters.

But in the end it’s up to me to be as entrepreneurial as possible about my college experience.

I need to cold call professors I find interesting.

I need to do that old business thing known as networking, but in the sheltered world of higher ed, that means genuine friendship-building.

I need to remember that the benefit of going from an A- to A+ is probably not worth the all-nighters it would require. Just like companies need to ship, ship, ship and not tinker till perfection.

In other words, settle for good enough, not perfect.

Sure, like any good entrepreneur, I need to take risks, but this time of the intellectual sort. The college environment might be the one place where changing your mind is celebrated, not dismissed as flip-flopping.

Yes, famous entrepreneurs like Bill Gates and Steve Jobs dropped out of college. But to pass up such a defining experience without trying it first?

That’s not what a true entrepreneur would do.

What Was Your Most Frequent Mistake?

To further the riff on advice giving and receiving: Suppose you had the opportunity to ask a really successful person one question and you had to choose between:

  • What was you biggest mistake?
  • What was your most frequent mistake?

Most people ask for the “biggest”. Most people, in my experience, tend to ask for extreme examples to try to understand someone. “What was your most embarrassing moment?” is another common one.

Me? I’d prefer to learn what mistake a successful person committed over and over again before mastering it, rather than their one large lapse of judgment. Though I see the other perspective: if somebody successful committed the same mistake over and over, maybe it isn’t a very important mistake.

In any case, how you ask questions makes a difference. How many times do you think Warren Buffett has been asked the eminently stupid question, “What is the single most important characteristic / habit / lesson / whatever to being successful?” If I could ask Buffett just one question, I would ask about his most frequent mistake, or perhaps what he regrets not doing when he was at my stage in life.

(hat tip, once again, to Eliezer, for sparking this)

How Not to Lose vs. How to Win

More military battles are lost by stupidity than won by genius.

Too many business gurus focus on the secret techniques for winning instead of showing the proven path to failure. Instead of promising clever tactics and lessons — which, if they were actually effective would be employed by everyone and therefore no longer be clever — books and gurus would be better if they focused on all the tactics, strategies, and decisions that went terribly wrong. I talked about some of my failures and poor decisions in my own book, but could have done more.

This idea is similar to a post I did on an Arnold Kling quote which said the most important knowledge in business is the stuff that ought to work, but doesn’t.

(Hat tip to Eliezer Yudkowsky for fueling pretty much this whole post including the first sentence.)

When You Can’t Understand Someone

Who’s speaking a foreign language, and it’s an inconsequential interaction (like at a street-corner) your first task is to determine whether they uttered a statement or question. If a statement, you can just smile and nod. If a question, you have to come up with a reply!

Inspirational Music and Movies

I love inspirational music, movies, speeches, stories. Who wouldn’t want to be more inspired to feel more, do more, love more, dream more?

I recently came across the YouTube video of We Are The World, the #2 most popular music single of all-time in the United States. I had never heard of it, but apparently it was a music sensation in the 80’s. Some of the biggest American pop stars of the day came together and collectively recorded the song to raise money for African relief work. To see Paul Simon, Michael Jackson, Bruce Springsteen, Ray Charles, Tina Turner, Lionel Richie, and many others all together is magical. If you want an inspirational boost to start your day, watch the performance.

Elsewhere in the inspiration category, I saw the movie Joyeux Noel ("Merry Christmas" in English). This tells the true story of Christmas Eve, 1914 during World War I. The Germans, French, and Scottish lay down their arms and sing carols together. Touching, and highly recommended. I also saw The Pursuit of Happyness, the true story of a near-homeless man in San Francisco who turns his life around after numerous bad breaks and financial challenges.

Here’s my tag (other links) for "inspiration". Leave other recommendations in the comments.

Great Leaders Talk to Dead People

David Brooks gave the Wake Forest graduation speech last spring — and it’s great.

It’s titled "The River of Knowledge" — you can never go wrong with water or river metaphors. He talks about how really great people "talk to dead people":

Merely famous people have pictures of themselves on the wall. Really great people have pictures of dead people on the wall, and on their desks. It’s one of the first things I look for when I go into somebody’s office.

And they talk about these dead people. John McCain, who was here a few years ago, talks a lot about Mo Udall, a Democratic politician he loved being around. He wrote a book called "Faith of My Fathers" about his father and his father’s father and so on. Barack Obama wrote a book called "Dreams From My Father" about his own father.

All his life, Abraham Lincoln talked with the founders of this country. Winston Churchill talked with the Duke of Marlborough. Theodore Roosevelt talked with the men and women who settled the West.

The dead were alive to them, and looking over their shoulder.

In other words, really great people try to learn and understand those who came before them. He raps on this point for a bit, and then continues:

…It’s not right to say that success is something we achieve individually. Success is not something that we do or that happens to us. Success is something that happens through us.

We inherit, starting even before we are born, a great river of knowledge, a great flow from many ages and many sources. The information that comes from millions of years ago, we call brain chemistry. The information that comes from hundreds of thousands of years ago from our hunter and gatherer ancestors we call genes. The information that was handed down thousands of years ago we call religion. The information passed along hundreds of years ago we call culture. The information passed along from decades ago we call family. The information you absorbed over the past few years at Wake Forest we call education.

But it is all information, and it flows from the deep past through us into the future. It flows from the dead through us to the living and the unborn. We exist as creatures within this hidden river of knowledge the way a trout exists in a stream or a river. We are formed by the river. It is the medium in which we live and the guide about how to live.

The great people I’ve seen talking to the dead do so because they want to connect with the highest and most inspiring parts of the river. When people make mistakes, often it is not because they are evil. It’s because they don’t have an ideal to live up to.

I like this image: Connect with the highest and most inspiring parts of the river. Brooks concludes by telling the graduates to create a posse of dead people, an entourage of heroes.

Religion Quotes of the Day

Ross Douthat, on the danger of conflating the experiential and ideological aspects of religion:

But the "mainspring" of religious faith for most believers – and particularly for a mystic like Mother Teresa – is the personal experience of God as a being who loves them and communicates with them, rather than the intellectual experience of Catholicism (or some other specific faith tradition) as a philosophical system that persuades them.

Mark Lilla, in his long and interesting NYT Magazine cover story, on why the Great Separation of church and state is not and will not be a given in most of the world:

As for the American experience, it is utterly exceptional: there is no other fully developed industrial society with a population so committed to its faiths (and such exotic ones), while being equally committed to the Great Separation. Our political rhetoric, which owes much to the Protestant sectarians of the 17th century, vibrates with messianic energy, and it is only thanks to a strong constitutional structure and various lucky breaks that political theology has never seriously challenged the basic legitimacy of our institutions. Americans have potentially explosive religious differences over abortion, prayer in schools, censorship, euthanasia, biological research and countless other issues, yet they generally settle them within the bounds of the Constitution. It’s a miracle.

Here’s Christopher Hitchen’s response to Lilla.

Absent Fathers, Supportive Mothers

Some experts say the combination of a distant father and a nurturing mother is especially potent in awakening the leadership potential of their sons. "There is evidence that many successful male leaders had strong, supportive mothers and rather remote, absent fathers," Manfred Kets de Vries, a professor of leadership at France’s INSEAD business school. He cited Jack Welch, Richard Branson, and Bill Clinton. And Andrew Davidson, a writer for Management Today who spent 10 years interviewing entrepreneurs, said in a 2001 article that he had "lost count of the times I have sat in a room with a successful man telling me how close he was to his mother.

From Brent Bowers’ 8 Patterns of Highly Effective Entrepreneurs.

The Giving and Receiving of Advice

I received (an unusually high) 45 comments on my post asking for advice about studying Spanish vs. Japanese. I valued the advice, and it prompted thoughts about the fascinating world of advice giving and receiving.

As someone committed to personal growth and self-improvement, I count myself among those who look to others for feedback and guidance for how I can get better at any number of things. I’ve also given advice from time to time.

Here are some general observations on the topic from both perspectives:

* Sometimes people ask for advice but really just want your attention. People like talking things through in their own mind. Though it might appear they want explicit advice (“So I’m thinking about taking this new job, but I’m torn about the benefits package”) what they actually want is someone to hear them out, and perhaps probe a bit, but not prescribe a solution.

* Emulation: Peripheral or central. There’s a tendency to gaze at someone successful and want to copy every aspect of their life — even silly things like what they wear or eat. Emulating what a successful person does 100% rarely makes sense; when it does make sense, it’s only in situations where you’re imitating a peripheral habit. That is, it may make sense to directly copy someone’s email-management tactics if she’s superbly competent in this area, but don’t carbon copy their basic leadership style which is highly individual. When you feel the urge to emulate someone, first consider whether it’s a peripheral or central habit / characteristic.

* We get too much general advice, not enough specific. Jack Welch didn’t run a small business, and yet many small business owners look to him for specific guidance (on hiring, for example) when they’d be better off, I think, consulting a peer. Following Welch might be an act of self-protection: it’s easy to make excuses if you can point to a famous person’s piece of advice.

* It’s easy to appear to be an expert. You can speak authoritatively without being an authority.

* Overvaluing and undervaluing advice. People tend to overvalue advice when the situation is difficult and undervalue advice when the situation is easy. I saw this a lot in college admissions process — kids would get a million opinions on an admittedly important and difficult situation, but in the end they received so many contradictory thoughts that they ended up confused. On the other hand, when faced with where to go for lunch, people would do better to ask around a bit for a recommendation.

* Does money corrupt the process?. If you hire and pay a “life coach” to give you feedback on tough decisions, how does the compensation affect the coach’s advice? How does the paid nature of professional therapy affect the therapy? Is the most honest advice free? Do we overvalue advice we pay for?

Those are some initial musings. Agree? Disagree? Additions? Subtractions?