Category Archives: Business

Tyler Cowen discusses the economics of advice and makes two interesting claims:

You don't know what a person really thinks until you hear his or her advice. Along these lines, if you really want to know what a person thinks, ask for advice and he or she will open up.

and

Often we do not trust people until we hear their advice.  We suspect in any case that they wish to control us, and until we know what they have in mind, we remain wary.  Sometimes it is necessary to give advice — even pointless advice — to establish trust.

I have thought a great deal about giving and receiving advice. Below are 14 thoughts to add to the mix. I believe #12 is the most insightful (it comes from Chris Yeh).

1. Sometimes people ask for advice but really just want your attention. People like talking things through. 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. Books on gender say men usually try to play Mr. Fix-It right away while women are better listeners.

2. We overvalue advice on difficult decisions and undervalue advice on easy ones. So say some studies. During the college admissions process, kids get a million opinions on an admittedly important and difficult situation, but in the end receive so many contradictory thoughts that they end 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.

3. "Just get started" is the most popular advice dished to aspiring entrepreneurs. But it's a debatable point.

4. Advice is a form of nostalgia. For this reason, we should view advice from others primarily as an opportunity for greater insight into the mind of the advice-giver, rather than as something useful to be acted upon ourselves.

5. "Passion" and "Voice" are two of the most frequent and most vague pieces of advice. Career counselors tell young people to follow their passion and writing coaches tell writers to find their voice. Both are horribly misunderstood.

6. Beware of advice from meta-careerists. That is, beware of advice from someone who is a professional advice-giver (a full-time self-help author, say), rather than someone in the trenches.

7. When giving advice, include the word "because." It increases eventual absorption, regardless of what you say after the word "because."

8. When you give advice, give the person options, and let them choose the best path. People hate to be told what to do — need to make them feel empowered to make the decision for themselves.

9. When you seek advice, should you consult the domain expert or someone who knows you best? Your mother may know you best but she may not know your industry. The domain expert knows the market but doesn't know your individual preferences or history. Conclusion: Get advice first from the domain expert to get a model and assess your choices. Then consult the person who really knows you to understand which choice makes most sense for you.

10. People who are "unconsciously competent" are not the best people to ask for advice. True experts often can't explain what they're doing and why.

11. Actionable advice is best advice. Saying "speak up more" to someone who doesn't talk in meetings is not actionable; saying "say at least three things in the meeting" is more clearly actionable.

12. When you give advice, it's easy to fan the embers but hard to strike a new fire. So listen carefully to their situation and find some aspect of it that you can build upon and emphasize. This will result in best outcome, rather than trying to instill an entirely new idea or some concept that's not already part of their framework.

13. Even if you know the other person is biased, studies show you still don't discount that bias enough. Your car mechanic wants to sell you more parts, and you know that he wants to do that, but we still don't discount his advice as much as we should.

14. Bottom Line: It's fruitful to think about advice on the meta level before engaging in the critical business of asking for advice, or the tricky business of dishing it out.

Peter Thiel did a 25 minute video interview on Big Think, a wonderful site if you're looking for video brain food. He answered questions from Scott Summers, Will Wilkinson, Arnold Kling, and others. Embedded below. Full text transcript is available on the page. Some excerpts:

On a decreasing appetite for bailouts:

With respect to Dubai, the basic mistake people made was they assumed that it was all part of the United Arab Emirates. Everybody was in the same boat, Abu Dhabi had lots of money, and they would help Dubai out. In reality, Abu Dhabi was probably quite resentful of the shiny and glittering and fake city known as Dubai and when push came to shove didn't really want to give them more money. And I think that kind of emotional or political or social phenomenon is going to be much more widespread and the question that will come to the fore in the next few years is will Germany bail out Greece or Spain, or Italy, or Eastern Europe? Will the responsible people bailout those they deem to be less responsible? If General Motors goes bankrupt again, will it get a second bailout? Will there be a second bailout for the banks? Will there be a second stimulus bill? I think the answer to all of these things is, no.

On thinking about what the world will look like in 20 years rather than six months:

There have been many people ask many questions about whether the recession will end with the 'U' or 'L' or a 'V' shaped recovery and sort of a lot about the tactical questions, you know, how high is the employment rate going to go, is it ticking down, is things turning a corner. I tend to think the really important questions are not about the next six months, but are about the next 20 years. The next six months is driven by the financial system liquidity, what central banks do, what they don't do. The next 20 years are driven by science, technology, a set of questions that are very different from the ones people are focused on.

On his least favorite economist:

My villain in economics is clearer. I believe the villain is Keynes and there was a Keynes line that in the long run we are all dead. Whether or not that is true, I believe that in the long run Keynesianism will be dead and that the problem with never thinking about the long run is that in the long run, the short run becomes the long run. And I wonder whether the crisis of 2008-2009 was not just a crisis about finance or about technology, but also a crisis about short run thinking and it was a point in time where short run thinking had run out and there was no more time to think about the short term and that actually a lot of long term problems we have been putting off and deferring had finally come home to roost.

On his favorite thinker overall:

My favorite thinker remains a French philosopher named Rene Girard. He developed an account of human nature in which one thinks very hard about the question of imitation and the role it plays in the ways in which culture and societies form.

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Here are my past posts on Thiel. Here's my post of icons / heroes.

Good decisions require a mix of dispassionate, rational analysis and emotion.

Though we often hear of emotion and passion clouding the decision making process, research shows that feelings help us make better decisions. Specifically, emotions aid decisiveness. Humans who have suffered damage to the part of their brain responsible for emotions are prone to crippling indecisiveness.

Here's a metaphor I came up with that conveys the mix: reason is the steering wheel, emotion is the gas and brake pedal.

When you get in a car, you first need to decide where to go. You need to think clearly and objectively about the best route. Once you've decided on a route, you need to press the gas pedal at different intervals to move forward, to go faster, or to slow down and come to a stop.

Suppose you brainstorm a new business idea. You want to think about the idea clearly and assess honestly the pros and cons, market size, competitive landscape, etc. You don't necessarily want your emotional side to dominate this assessment process. Once you've decided you want to pursue an idea, dreams of success and emotional excitement enable you to press the gas pedal and put in 12 hour days.

If the business is headed for the gutter, and you need to take immediate action to right the ship, emotions such as fear of failure and embarrassment will accelerate the actions prescribed by a rational cost-benefit analysis.

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I frequently have to remind myself that good decisions can have bad outcomes. Also, I'm still unsure of the role of intuition in good decision making, but I agree with Auren that it's better to trust your gut when it tells you not to do something.

From Gary Hamel’s CliffNotes version of how to “outrun change”:

Yet to outpace change, every organization is going to have to master the art of rapid prototyping. Here the goal is to maximize the ratio of learning over investment — to find the sweet spot of demand for a new product, or perfect a nascent business more rapidly and inexpensively than your competitors. Listen to Google’s CEO, Eric Schmidt, on this point: “Our goal is to have more at bats per unit of time and money than anyone else.” Your goal should be the same.

Exactly. Here’s my long article on the importance of side projects to innovation. Institutionalized side project time is fundamentally about increasing the number of at-bats on the R&D front.

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Bob Sutton blogs about the one definitive paper on which employee selection methods are best at predicting job performance. Top three: work sample tests, general mental ability (IQ, etc), and structured interviews.

Econ blogger Steve Waldman, who recently participated in a meeting with Treasury Department officials, takes note of the technique employed by officials to dodge difficult questions:

In response to a several difficult questions, one official enthused that what the interlocutor had brought up was an important concern, something he really cared about, but then quickly went on to assert that, in his judgment, it was unlikely to be the pivotal or most challenging problem. I thought this a very effective trick to sweep an issue aside, a kind of jujitsu by which the official would render very sharp comments harmless by moving with rather than fighting against the questioner. After this move, the only possible disagreement is a judgment call about which of many problems is most pressing, and whose judgment would be better than that of a senior official immersed daily in the practicalities of policy?

Clever. Agree that it's an important question, but not the most important question. Then turn to the more important question. Perhaps even present the "more important" question back to the audience for their oh-so-valued feedback.

He then goes on to note how the Treasury officials employed the oldest trick in the book: flattery.

Twice Treasury officials commented on how uncommon a group we were, how we asked particularly pointed questions or were unusually bright. To borrow a cliché, I'll bet they say that to all the groups. One official made use of an expletive early in his discussion, which had the effect of making us feel like insiders, like this was not the sort of canned, guarded conversation one might see on CNN. The same official was quick to address us by first name when responding to questions. That wasn't hard, since our names were in front of us, written on placards in large letters. But it was still effective. Being addressed so familiarly makes you feel important, like you are someone powerful people deem worth their while to know. Obviously, the reality distortion field wears off when you leave, once you think it over. But these guys are pretty good at what they do.

Flattery, false bonding, etc: Even if you know it's happening, it doesn't mean it's not effective.