“What I tell you three times is true.” This line from a Lewis Carroll story largely sums up the cautionary tale behind the book. Using a myriad of anecdotal and scientific evidence, the authors, both brothers explain in a manner to persuade, or “sway,” the reader into believing that the human mind is far less rational than we believe, and how we constantly fall victim to psychological pitfalls that we are not even aware of. They also give useful suggestions on how to improve our decision making by taking our psychological biases into account. What the authors call a “Sway” is what is more generally called a cognitive bias.
The brain is a strange organ. It often thinks it is making logical decisions, but instead, it’s actually irrational. For example, in this book the reader will also discover – why Russians will do anything to keep a contestant from winning on the television show “Who Wants to be a Millionaire”; why you keep buying extra car rental insurance that you do not really need; and how having negative thoughts about aging will actually make you older.
The authors are not new to the study of human behaviour. Ori is an “organizational expert” and his brother Rom holds a doctorate in psychology. The book is not an original study by Ori and Rom, but it gathers a broad range of behavioural studies performed by others and presents them with simple summaries, free of scientific jargon and complexity. It may not be perfect, even then, the book is a quick and enjoyable read that provides several keen insights for anyone called upon to lead or manage.
Ori and Rom state their purpose right in the beginning of the book. It forces the reader to reflect on their natural tendencies to quickly “label a person or a situation.” Once labelled, we have shackled ourselves to that initial perception which then becomes our reality; objectivity is lost, and irrational thoughts tend to rule. The authors believe that most of our daily judgments are influenced by this “irrational” bias.
Insight 1 – Loss Aversion – Humans don’t like to lose; so to avoid a feeling of loss, we often act irrationally.
Humans are loss averse implying that we fear losses more than we look forward to gains, and it can lead to a whole host of irrational decisions. An interesting spin by the authors to this insight is that “our loss aversion makes us biased towards short term actions that can be harmful to our long-term well-being”. Even experts with extensive training, such as pilots and surgeons, make grave mistakes due to loss aversion.
An example can illustrate the point better. If you are driving and getting late for work and a driver in front of you is going too slow. Chances are that you will get nervous and attempt a risky overtake that could end up costing really big. Not only getting nervous is unhealthy, but the risk of a risky overtake far outweighs the limited advantage of a gain of a couple of minutes. The pain of loss is a much stronger feeling than the joy of winning; so, when faced with the prospect of losing, we will do anything we can to avoid it.
Our sensitivity to changes in the price of an item also illustrates this crisis. As an increase in price feels like a loss, we react to this much more intensely than we do a decrease in price. US Department of Agriculture professor Daniel Putler studied egg sales to see how people reacted to price increases and decreases. He found that when prices decreased, people only slightly increased the number of eggs they purchased. However, when prices rose, people cut their consumption of eggs by two and a half times. Since a price increase feels like we are losing money, we react disproportionately strongly to the change. Putler’s study shows how we often rush to make sacrifices just to avoid loss.
Sometimes we are so eager to avoid a big loss that we’ll do whatever it takes to avoid it and we often cause more damage than we originally feared.
Investment strategies can often encourage irrational behaviour. For example, a client decided to invest all his assets in a particular biotech company. When the price of the company’s shares dropped from $47 to $38, the client refused to sell, saying he would only do so when the price returned to $44. The client was chasing a loss – meaning he was ignoring the reality of his situation and trying to recover his loss, no matter what the cost. The result? The company’s share price plummeted to 12 cents, and the client lost nearly everything. Sometimes, we are even willing to pay more to prevent a loss.
Insight 2: Value Attribution – A great idea from a friend we might think is genius; a great idea from a foe, not so much.
First impressions count. Whether it’s a new pair of shoes, a new colleague or a new social situation, our first impression will almost definitely shape our later perceptions. One major component of this phenomenon is value attribution: our tendency to bestow certain qualities upon people or things based on the circumstances under which we first experienced them.
One such circumstance is the specific person or people involved. For instance, if we first hear of a business idea from someone we do not like, we may consider the idea a bad one – worse, that is, than if we had first heard the idea from someone we actually like.
In this way, that person’s value – in this case their likeability – is attributed to our first impression of their business idea.
This effect was illustrated in 1916, when Nathan Handwerker started a hot dog stand on Coney Island in New York. Though his hot dog prices were less than half of those of his competitors, he still struggled to attract customers. Handwerker came up with a clever solution: he hired doctors, wearing recognizable white lab coats, to hang around his stand and eat hot dogs. Potential customers recognized that respected, knowledgeable doctors were also Handwerker’s customers. Thus, they had attributed value to Handwerker’s product, prompting as a result – high demand for his hot dogs.
Value attribution also influences our judgment even in terms of entertainment. As part of a study at Ohio State University, 60 people purchased theatre season tickets, yet the tickets’ cost for each customer was randomized. Twenty people paid full price at $15; 20 people received a $2 discount; and the last 20 received a $7 discount. In the end, those who paid full price for their season tickets actually attended more shows than those who received a discount. This is because those who purchased cheaper tickets assumed that the productions, as they were discounted, must have been inferior. This made the season ticket holders attribute less value to the shows, and in turn, they found them less enjoyable.
Insight 3: We often judge our partners on intuition, ignoring objective data; that is why love is blind!
Most people think they are a good judge of character. But how objective or reliable can our evaluations of other people really be?
To study this, a professor at the Massachusetts Institute of Technology hired a substitute teacher to run his class. Before doing so, he gave his students two different biographies of the substitute. One half of the class read that the substitute was “a warm person,” while the other half learned that he was “cold.” Afterwards when the students were asked to assess the substitute, the two groups offered quite different judgments. Those who read that the teacher was “warm” found him “good natured, considerate of others and sociable.” The other group, however, thought he was “self-centred, unsociable, irritable and humourless.” Same teacher, same class – yet two totally different viewpoints.
In the same vein, a Canadian study of college freshmen shows how intuition can blind us to the plain facts in front of us. Students in a new relationship were asked about the quality of their relationship, and how long they thought it would last. Most were able to identify a few potential problems but were regardless optimistic that their relationship would last for a long time.
A year later, researchers discovered that less than half of the students were still in the same relationship. While the students originally had correctly identified the problems that would later result in a breakup, they had ignored those facts when estimating their love’s longevity.
What is more, when researchers looked at how optimistic the students’ roommates and parents had originally been about the relationships, they found the predictions of these groups to have been far more accurate. They had identified the same problems but could consider them objectively without love’s rose-coloured glasses!
Insight 4: Diagnosis Bias – We perform better when we’re told we’re winners; we often fail when we’re told we’re losers.
Do you feel more attractive when a lover tells you that you look great? Or do you feel self-conscious about your weight if a friend suggests that you should work out more? It’s true that we are much more likely to take on a certain characteristic once we’ve been labelled with it. Doing so can impact us either positively or negatively.
The Pygmalion effect explains this effect in the positive: when expectations of us are higher, we perform better.
As an example, Israeli soldiers participated in a commander training program, in which they were told before the program started that they had been ranked: high, regular or unknown command potential. Yet the rankings were simply made up. However, the soldiers who were told they were part of the high command potential group performed noticeably better – they had involuntarily assumed their superior ranking to the rest and acted on it.
But what about the other soldiers? They may have fallen under the Golem effect, in which a person takes on the negative traits with which they are labelled. The Golem effect can have just as great an impact as its corollary, the Pygmalion effect.
In fact, even having negative feelings about aging can actually make people age faster.
Yale researchers witnessed this effect as part of a study at a retirement home. A group of senior citizens were first given a hearing test; then, they were asked to list five words that came to mind when they thought of old people. Responses ranged from the positive (compassionate) to negative (feeble) and from external (white hair) to internal characteristics (experienced).
Three years later, the researchers conducted the test again. While the average score on the hearing test had declined as expected, scores curiously declined much more for those seniors who described old age as something external and negative. The participants’ perception of age was actually making them suffer the effects of aging more intensely!
Insight 5: What is fair play and what is not is often culturally defined and is also often irrational.
Whether playing sports, angling for a job promotion, or winning the lottery, most of us feel that a sense of fairness is a crucial element in our interactions. But bizarrely, in our insistence for fairness, we sometimes behave unfairly.
The behaviour of audience members in the international television show, “Who Wants To Be a Millionaire”, is a curious example of this. As part of the show, a contestant may ask the audience to help them with a question. This is what a French contestant chose to do, after being stuck on a surprisingly easy question: What body revolves around the earth – the moon, the sun or the planet Mars?
The French audience offered their “help”: Two percent voted for Mars, 42 percent voted for the moon, and 56 percent voted for the sun.
Do you think the French don’t know that the moon revolves around the earth? Of-course they do! What happened was that the audience upheld their idea of fairness: that is, if the contestant really didn’t know the answer to such a basic question, then he doesn’t deserve to win, and it wouldn’t be fair to help him, either.
Fairness in certain cultures does appear to vary, however. Data shows that American audiences tend to help a contestant out, regardless of her abilities, as some 90% of answers given by the audience are correct. In Russia, however, it’s just the opposite. Russian audiences tend to offer incorrect answers, no matter how the contestant is doing.
Insight 6: Fairness Expectation – We are more likely to accept an outcome, even if negative, if we feel the process was fair.
We know that our behaviour is heavily influenced by our perception of fairness. But that’s not all. Our satisfaction with the outcome of negotiations, for example, is also dependent on how fairly we feel that outcome was reached.
A study in Berlin isolated two people in separate rooms. One person received €10 and was told he could decide how to split the money with the other person. The second person was then asked if she would accept the split. If yes, the money was split accordingly; if no, neither would get a cent.
When the second person considered a suggested split unfair, she rejected it. So even though some money technically would be better than nothing at all, the perceived unfairness of the offer left her so dissatisfied with the outcome that she declined.
Interestingly, when subjects were told that their partner was a computer, they often accepted even the unfair offers that they probably would have rejected if from a human! Why? Because a computer knows nothing of fairness. In its offers, it wasn’t deliberately being unfair, so for the human partner, the offers weren’t as insulting. So what makes us feel that something is fair?
One major component of fairness is being able to voice an opinion. This was demonstrated in a study where researchers asked hundreds of felons to fill out a survey about the fairness of their trial.
In general, felons who received shorter sentences thought their trials were fair, while those given longer sentences didn’t.
But, more important for all the people surveyed was the amount of time they were able to spend with their lawyer. Doing so helped them feel that they had a voice, which made the whole ordeal seem fairer, regardless if they received a longer sentence in the end.
Insight 7: Work to curb irrational behaviour by always thinking about the big picture.
You are driving to an important business meeting when suddenly, you get a flat tire. You quickly change the tire and get back on the road, but you are now running late. You remember a shortcut off the highway that could save some time, but you have never taken it before. What do you do? Typically, our first impulse would be to take the shortcut, as our irrational loss aversion comes into play. However, if we consider the big picture, it would be best to stay with the familiar route.
The familiar route you know will get you there, and in the long run, being 15 minutes late is not a crisis. Yet if you take the shortcut, you could make up time, but you could also get lost and miss the meeting entirely. This scenario shows how important it is to put aside past mishaps and focus on the bigger picture.
On an organizational level this also holds true. In 1985, Intel faced a serious competitive threat from Japanese high-quality but low-cost memory chips. As the company’s main business was memory chips, it was difficult to assess the situation objectively Yet at the time, CEO Andy Grove and co-founder Gordon Moore realized the importance of looking at the big picture, from the present-day moment. They asked themselves, what would a new board of directors do if they were hired today? The answer seemed straightforward: Get out of memory chips, no matter how painful the decision. So Grove and Moore did just that. They refocused the company on microprocessors, and it was the right decision; Intel today is a huge success story in the business of global technology.
So whether you’ve just made a mistake or are facing a legacy of historical behaviour, you need to always be willing to forget the past and think of the big picture, as you see it today.
In a Nutshell
Without consciousness, we see our identity and reputation as having to be protected and this protecting serves as a psychological force that will steer us off the path of reason. There exists an array of such psychological undercurrents which are much more powerful and pervasive than most of us realize. The interesting thing is that these forces, like streams, converge and become even more powerful. Three core blinders:
- Loss aversion (our tendency to go to great lengths to avoid possible losses)
- Value attribution (we imbue a person or thing with certain qualities based on initial perceived value)
- Diagnosis bias (our blindness to all evidence that contradicts our initial assessment of a person or situation)
- First impressions: we diverge from rationality from the moment of first impressions of a person. It can be altered by a mere word, why interviews are a terrible way to determine a job candidates’ future performance. Or a pretty face makes us an offer we cannot refuse.
It takes place as a result of Brodman’s Brain area 10 (BA10 – frontopolar prefrontal cortex, rostrolateral prefrontal cortex, or anterior prefrontal cortex). It is where taking initiative, planning ahead, silent thought, and daydreaming happens. It makes abstract thought possible. Value attribution is such a strong force that it has the power to derail our objective and professional judgment.
Sway is not without its faults. Many of the so-called “irrational” pulls are simply gambles that did not pay off. Is it always “irrational” to gamble? I would say no.
- The authors note that the University of Florida football program excelled in the 1990s because its new head coach, Steve Spurrier, was not afraid to play an aggressive “Fun-n-Gun” offense against more conservative coaches who were “playing not to lose.” The authors praise Spurrier for not being sucked into the “sway” of a loss aversion mentality, but had his offense failed, I must believe that the authors would be accusing him of an irrational emotional investment in a losing behaviour.
- The authors made this accusation when presenting the case of an ill-fated decision (or gamble) by an experienced KLM pilot who broke with normal procedures and attempted to take off in the fog without waiting for a final clearance from the tower. That decision ultimately resulted in the deaths of hundreds of passengers and aircrew when the pilot’s Boeing 747 slammed into another taxiing 747 that had not yet cleared the runway. The authors focused heavily on the fact that the pilot was preoccupied by an overriding concern about previous delays and the costs associated with another extended delay. Thus, the authors conclude, the pilot acted irrationally. The other side of the argument is that an experienced pilot took what he perceived at the time to be a relatively small risk. He likely assessed that the odds of another aircraft taxiing on the same runway were so slim as to be irrelevant. Had the pilot been correct, he may have avoided a further lengthy delay due to fog. The pilot, in this case, was the experienced head of KLM’s safety program. He was widely regarded as a “methodical” professional with a “spotless safety record.” If this professional pilot carried a burden of “loss aversion,” it is just as likely that he had an aversion to breaking from established flight procedures as he did to incurring further flight delays.
Viewed from this perspective, the only significant difference between the two risk scenarios is that Spurrier succeeded while the KLM pilot failed. This implies that risk-takers who fail have, by definition, been influenced by an “irrational pull.” It seems the authors want it both ways. The reader is told that when we break free from the “pull” of conservative loss aversion and succeed (like Steve Spurrier) we will be rewarded, but when we break free from the “pull” of conservative loss aversion and fail (like the KLM pilot) we have displayed an irrational, emotional weakness.
Notwithstanding the extensive research the book uses, I doubt, that our human inclination to take risks will ever change, nor is it clear that the authors are expecting as much. As a practical matter, humans must frequently act on less than full and accurate information. When we do, we have to invoke our “gut” instincts and emotions to fill the informational gap. The authors seem to view these informational shortcuts as “rational” or “irrational” depending on the ultimate outcome. But, without the benefit of hindsight, the incorporation of emotion into our daily judgment is quite rational and often accurate. That is exactly why its pull is so irresistible.
Overall, it is a good book. Young people coming into the real world need this book to help them avoid irrational behaviour, despite their good intentions. The insight, data, and real-life events as told by the Brafman brothers make any reader aware of their past and present decisions in order to help improve their future ones.
Suggested further reading: Predictably Irrational by Dan Ariely
Predictably Irrational explains the fundamentally irrational ways we behave every day. Why do we decide to diet and then give it up as soon as we see a tasty dessert? Why would your mother be offended if you tried to pay her for a Sunday meal, she lovingly prepared? Why is pain medication more effective when the patient thinks it is more expensive? The reasons and remedies for these and other irrationalities are explored and explained with studies and anecdotes.
About the Author
Ori Brafman is a Stanford University and University of California, Berkeley alumnus and a New York Times bestselling author. He specializes in organizational culture, leadership, change management, and conflict resolution. He is also a life-long entrepreneur whose ventures include a wireless start-up, a health food advocacy group, and a network of CEOs working on public benefit projects, which he cofounded with Rod Beckstrom. He advises Fortune 500 companies and all branches of the U.S. military, in addition to the Obama White House, the National Academy of Sciences, NATO, and YPO, among others. He is a Distinguished Teaching Fellow at UC Berkeley’s Haas School of Business focusing on improvisational leadership and the ethical use of artificial intelligence. He is the founder and president of Starfish Leadership and co-founder of the Fully Charged Institute.
Rom Brafman holds a doctoral degree in psychology. He has won awards for excellence in teaching and promoting positive human growth. He is interested in the topics of resilience, empowerment, and transformation, and their manifestation in individual and interpersonal dynamics. Rom has a private practice in Palo Alto.