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Sotomayor Was Right the First Time: A Wise Latina Does Know More

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Supreme court nominee Sonia Sotomayor now-famously said, in 2001, that she would hope a “wise Latina would make better decisions because of her life experiences than a white male.” 

As she noted, those have become her most-quoted words, overwhelmed by a firestorm of opinion characterizing her as racist or worse.  Before long, she was forced to eat her own words (as in a Boston Globe headline, “Sotomayor Repudiates ‘Wise Latina’ Comment.")

She was right the first time.  A Wise Latina woman does know more. 

Notice your own reaction in this instant, after reading this blogpost title and that last sentence.

Most of you had a quick emotional reaction—negative for most, positive for some.  You interpret it as a political statement, and you probably made an inference about my own political views.

Let me try to find the rarified air wherein that statement has nothing to do with racism or politics, and should not provoke any emotions at all.  It is simply a statement about the dynamics of human beings when they are cast in roles of minority and majority.  It should provoke no more adrenaline than an observation about the feeding habits of penguins.

The Dance of Majority and Minority

People observe and believe very different things based on whether they are members of a minority, or of a majority.  One group, I suggest, notices more, and knows more, than the other.

This isn’t about race per se: it’s about a mixture of numbers and power.  Suppose Group A constitutes 70% of a culture’s population, and 85% of its economic and political wealth.  Groups B and C each represent 10% of the population, and 5% of its economic and political wealth.

All groups—A,B and C—will view Group A as the dominant culture.  The habits, opinions, styles, language, likes and dislikes, family patterns and ideologies of Group A will dominate in institutions, advertising, government, etc.

If you’re a young A person, you conclude that your culture is the norm.  Mathematically, you are absolutely right.  Emotionally, you conclude that you are also “right,” and that other cultures, being in the minority, are odd, unusual, out of the ordinary.

If you’re a young B or C person, you see the same facts.  You also know that A people are the norm–you can do the math too.  Unfortunately, you likely also internalize the majority view that B-ness or C-ness is somehow odd, unusual, out of the ordinary.

It is but the tiniest of steps from the above for an A person to judge a B or C person as “weird,” wrong, or inferior–and to simply not notice many differences. More insidiously, it’s also a tiny step for Bs and Cs to think the same of themselves.  (Being a minority is a helluva psychic challenge).

Each group understands the As.  But the As impute mainstream characteristics—which happen to be their own–to everyone.  Hence they literally do not notice many characteristics of Bs and Cs, assuming them to be identical to mainstream (and their own) ways of life.  The most “normal” Bs and Cs, to an A, are those who most resemble As.  (“But you don’t look Jewish…”)

An example: look at the photo on the top right of this page (go to the URL if you’re getting this by text).  In this picture, those are the feet of a white person.

Of all the feet on all the dashboards of all the cars in the US, what percentage of the time are those feet likely to be the feet of a black person?

a.    0%
b.    5%
c.    10%
d.    25%

If you’re a white person, you’re likely to guess a number in line with the black percentage of the US population.

But if you’re a black person, you know the answer is a, or just about 0%.  In the black community, putting one’s bare feet up on a car’s dashboard, or a table, is considered just plain rude. 

The reason white people don’t know this is that black people know what happens if they try to explain it.  Picture yourself as an African American, trying to explain to a white senator  that his kids are rude because they see nothing wrong with putting their feet on the dashboard.  Will the Senator hear it as anthropological information?  Or as insulting racist talk?  Take a wild guess. 

So we have:

1. Minority people (black, in this case) know what to expect from everyone on the foot test. 

2. Majority people (white in this case) do not know what to expect from everyone on the foot test. 

3. QED: minority people know more than majority people.  Sotomayor was dead right.

Then why did she repudiate herself?  Because majorities tend to hear statements of minority knowledge as insults to the majority.

And, since majorities can’t see what minorities can, it’s a losing battle to protest.  Easier to repudiate yourself.

If you’re white, and think that blacks overstate racism, then ask yourself: how emotionally disturbed was I by this headline?  If the answer was, ‘a lot,’ but you also see the point of this blog, then that tells you how deeply embedded majoritism (racism, sexism, etc.) is in this society.  Your gut instinct was to hear the truth as an insult.  Just like a Senator who heard "a double minority person knows more then a white male."

Very sad, perhaps.  Yet also, simply very true.
 

Markets, Relationships and Trust

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Dan Ariely’s Predictably Irrational is one of several in the “Malcolm Gladwell” category of books.  Such books point out the counter-intuitive, and debunk the rational, linear, deductive explanations that we so often assign to social phenomena.

It’s an antidote to any professional (economists come to mind) who believe man is a rational, transacting, self-interest-maximizing calculator.

One of his most compelling points happens at the intersection of relationships and markets.  In his example, imagine a great Thanksgiving dinner at your mother in-law’s—all the fixin’s.  And then you offer to pay her, say $150, for the experience.  To your surprise, she feels insulted!

You are now persona non grata at your in-laws’.  As Ariely explains, you reacted to a social situation with a market response. 

What happens when social norms collide with market norms?  As Ariely says: “the social norm then goes away for a long time.”

Ariely channels Alfie Kohn, who 15 years ago in Punished by Rewards  pointed out the de-motivating effect of monetary rewards.  The intrinsic pleasure children took in games was destroyed when researchers paid the kids to play the same games. 

Extrinsic incentives work, said Kohn: they work to incent more extrinsic incentives.  But at the cost of destroying intrinsic motivation.

Ariely cites a day care center where parents occasionally came late to pick up their kids.  To reduce tardy pickups, a penalty was assessed.  Whereupon tardiness increased.  Parents were grateful for the “permission” to pay a fine rather than incur social guilt.

On the face of it, then, companies ought to use more social incentivizing.  Or should they? Companies built around devotion to shareholder value and metrics that devolve to financials are asking for trouble when they try to play an honest game of relationships. Then the social norms are gone, for a long time.

Markets do two great things: they tend to make things less costly or more efficient.  And, they require more transparency.

Take my blogpost of two days ago, A Case Study in Low Trust, about untrustworthy behavior in the financial planning sector.  The problem with industry associations like NAPFA is that, despite failing the public, they insist on concocting arguments to transparency.  Here’s a case where markets—in the sense of freely available information, and a reduction in personal relationships—is precisely what’s required.

Too many policy debates these days take place on the ideologically rigid dimensions. 

-in finance, “markets” vs. “relationship” is a useless debate; it depends
-in health care, it isn’t “markets” vs. “socialism;" it depends
-“government should be run like a business” vs. “government should be run for the people” is a red herring; it depends.

Where corruption exists we need markets and transparency.  Where children are educated, as Ariely suggests (and Gladwell and Kohn tend to agree), we need focus on relationships and intrinsic motivation. 

Trust is not automatically the province of either one–again, it depends.  Market-driven transparency  can increase our trust in financial planners.  More relationships can increase our trust of suppliers.  It depends.

How about your issue?  Is it better served by markets, or by relationships?
 

A Case Study in Low Trust: NAPFA

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Industry associations occupy a rare and privileged status in our society. Associations serve two masters: their industry membership, and the consumers those industries serve. 

Largely unregulated themselves, if they do a good job they can avoid regulation for their industry.  If they do a bad job, they can accelerate abuses–and end up getting regulated.  You’d think most associations would want to avoid regulation.  And so, they trumpet their service to the consumer.

The question is, what do their actions say? 

All too often, it’s food for cynicism.   The National Association of Personal Financial Advisors  has lately exhibited such cynical behavior. 

Last week NAPFA’S chairwoman Diahann Lassus represented the Financial Planning Coalition in front of the House Committee on Financial Services.  She testified strongly in favor of a fiduciary standard for all individual financial planners.  So far, so good.

Then yesterday NAPFA issued a press release sounding a different tone, commenting on proposed custody-related SEC regulations put in place partly to curb Madoff-like abuses.  One clause in particular proposes spot-audits of RIAs (registered investment advisers) who deduct their fees directly from clients’ accounts.  

NAPFA Says It’s Pro-consumer, but it’s Hard to See How.

To read NAPFA’s press release headline, you’d think they were the Consumer’s Friend:

NAPFA Believes SEC Mission for Custody Rule Changes is Commendable, but views Commission’s Proposed Changes as Not a Proper ‘Means to an End’

OK. The SEC would like to audit certain advisers.  NAPFA thinks that’s a bad idea.

Why?  Get this.  Because, NAPFA says, audits:

1.    won’t protect consumers
2.    would cost more than they’re worth
3.    will cost consumers additional expense and inefficiency.

Are you kidding me?  In this post-Madoff  environment you’re telling us that spot-auditing some RIAs won’t help consumers?  Tell it to Madoff whistle-blower Markopolis, who clearly disagrees. Cost more than it’s worth?  I think a few Ponzi schemes prevented or uncovered would easily cover costs.

NAPFA’s better idea?  Leave it to NAPFA.

The industry, including NAPFA, suggests that instead of the SEC, we rely on a professional oversight board made up of–the industry.

A little problem with that.  There are NAPFA members out there today who have been convicted in court of professional malpractice–with no NAPFA action taken.  There are RIAs out there who violate ethics guidelines by lending to their clients.  In fact, just recently a former NAPFA president was sued by the SEC for accepting $1.2M in kickbacks. 

The response of NAPFA chairwoman Diahann Lassus to that last one? “’The reality is that this situation, in comparison to the Madoff scheme, and many other things that have happened out there, is very small,’ Lassus said.”  Well that’s a relief.  And Nixon wasn’t a crook.

Not a good track record.  So just what does NAPFA suggest?  Hold on to your hats.

  1. Encourage consumers to thoroughly read and review all statements to identify all questionable account activity
  2. Offer incentives for whistleblowers who bring to light dishonest advisor activity
  3. Provide means for consumers to report fraudulent activity anonymously

In other words: the way to protect consumers is to encourage the consumers to read more fine print, find financial Dog the Bounty-Hunters, and offer an anonymous tip line.

Enforce ethical and fiduciary standards?  Do audits themselves?  Nah, that’d cost the planners too much.

Suppose this were legislation about child abuse at daycare facilities, and the government proposed spot-audits to prevent it.  How would parents react to a daycare association recommendation that, instead of audits, parents read the fine print of their daycare contracts, and phone any concerns into a tip-line?

If NAPFA won’t even discipline its own court-convicted members–arrogantly flunking a rather basic test of ethical self-enforcement–what right do they have to claim that they’re better qualified to protect consumers than the SEC?  I cannot see it.

There are many very fine, ethical financial planners.  There are of course a few bad apples as well (Lassus herself says she hears "nightmare" stories, and "sadly, these stories are not unusual").  But when it comes to NAPFA, you can’t help but notice the rot in the barrel itself.

Can Financial Planning Avoid More Regulation?

I’m all in favor of industry associations behaving responsibly, realizing that the long-term health of the industry depends on feeding the long-term and short-term health of the consumer, rather than serving short-term member greed.  That means self-enforcement, and I would love to see it happen. 

But at some point, an industry forfeits its right to be trusted anymore on its own.  The financial planning industry–as represented by its associations–has about crossed that line.  It’s hard to take seriously the idea that they have earned the right to self-enforce.  Bring on the SEC.
 
 

Webinar this Thursday: Dealing with Difficult Clients

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We’re doing a webinar we’d like you to know about.

Ever have a difficult client relationship?  I don’t mean the client from hell.  I mean your every-day, garden variety, plain old difficult client relationship. 

Sure you have.  You know all-too-well the client who complains; who doesn’t get back to you on time; who always seems to interpret scope creep in their favor; who won’t admit when you’re right; who sullenly resists your well-intended attempts to get things moving. 

If you’re like me, you’ve had your share.  Though, I’ll be honest: there is a common denominator with all of them.  And that’s me.

If there’s one thing I’ve gotten better at recognizing, it’s that I don’t control much in this universe.  Certainly not my difficult clients.  Turns out it’s more productive to focus on the relationship, rather than them.

I hope you’ll join me and Associate Andrea Howe in a webinar on this important subject, where we’ll offer four methods and a sack ‘o practical tips to transform client relationships gone bad.  Hosted by RainToday.com, it is being given this Thursday, July 23, at 2PM EST.  You can register here.  The cost is $99 per connection (which means you can gather your friends and colleagues ’round the screen like an old-time radio broadcast) to non-RainToday members; it’s a 90-minute webinar, including 30 minutes of Q&A.

As an added inducement, we’re giving away to participants a free personalized Trust Temperaments report, based on our online Trust Quotient (TQ) self-assessment. This is a feature not yet available to the public, and to be priced at $29.95 when it becomes available.

I hope you can join us.

 

Dealing with Difficult Clients: How to Transform Client Relationships Gone Bad

with Charles H. Green and Andrea Howe
 
Date: Thursday, July 23, 2009

Time: 2:00 pm to 3:30 pm EDT

Format: Webinar

Price: $99
 
 
Registration Includes:
 

  • A 60-minute presentation and a 30-minute audience Q&A session with Charles H. Green and Andrea Howe
  • Unlimited access to the webinar recording and a PDF of the presentation slides
  • A personalized Trust Temperaments report, based on Trusted Advisor Associates’ online Trust Quotient (TQ) self-assessment. This is a feature not yet available to the public, and to be priced at $29.95 when it becomes available.

Register online at Raintoday.com
 

 

Why Walter Cronkite Was the Most Trusted Man in America

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I can’t add much to the list of eloquent obituaries for Walter Cronkite, other than to say I agree with them. 

Cronkite taught all of us the way things were.  But the passing of the man known universally as The Most Trusted Man in America also offers us one last chance to learn from him.

Like obscenity, trust is awfully hard to define; but as Justice Potter said, you can recognize it when you see it.

The definition of trust is even more contextual; there are dozens of meanings of trust, yet we nearly always recognize them when we see them.

And so: when so many people from so many eras and walks of life agree that Walter Cronkite was TMTMA—he must have touched more than a few trust bases.  What were they?

Reading the encomiums in his honor—and watching the raw man-in-the-street interviews Friday night—there is a clear hierarchy of what people meant when they said they trusted Walter Cronkite.  And it wasn’t fluffy—it was very clear.

Cronkite’s Big Three Trust Factors

#1 – Honesty.  The most frequent comment, expressed in several ways, was that Cronkite was honest.  This means not just that he didn’t tell lies, but that he was a truth-seeker—he sought to tell the whole truth.  A reporter of the old school, he believed that there was such a thing as the truth, and his job was to find it. He had no truck with deconstructionists who believe it’s all subjective, he was a midwest pragmatist of the William James school.  "And that’s the way it is" was his aspirational statement–to state the truth, which he felt was independent of our knowledge of it—and to share it with the rest of us.

#2 Selflessness.  The Most Trusted Man in America didn’t get there by calling himself the Most Trusted Man in America.  Not a hint of self-promotion, no self-serving cause, no work in service to his own ego or career.  His only agenda was his professionalism, about which he was quite clear.

#3 Integrity.  He kept his opinions, like his emotions, largely to himself.  This he saw as a natural outgrowth of professional principles; it also fit his personality like a glove.  He was television’s version of Gary Cooper—stoic, his own man, capable under stress of expressing deep feelings—but in a highly controlled manner.  He kept his own counsel; until and unless he felt there was no alternative but to share it.

It was this Cooper-like reserve that gave him such power on the few occasions he did weigh in with a Big Opinion.  LBJ, a great judge of politics, said, "If I’ve lost Cronkite, I’ve lost middle America."  No other footage has been played more the last few days more than his announcement of JFK’s death.  In a world saturated with reality TV and tell-all blogs, you have to look harder to see it—that sense of self-reserve, tough but with a soft center—that used to be middle America’s ideal self-image.  But you can still see it.

And one last thing.  His voice.  A baritone drenched in overtones conveyed each of those character traits. 

Of those attributes—honesty, selflessness, integrity, and vocal cords—perhaps it’s only his voice that we cannot aspire to.   That may have been god-given; the rest of him was a man who strove to be good, and who showed the rest of us how. 

We can all still learn from him.
 

Elton John, Billy Joel and the Likeability Factor

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39,000 fans witnessed a bizarre and unexpected series of events unfold at the Billy Joel/Elton John Face to Face Tour Concert in Washington, DC Saturday night.  After the first two songs, the stage went silent.   

Good or bad, live performances, where the risks of hiccups abound, can shape other’s perception of us.  This glitch, of major rock and roll proportions, revealed a dichotomy in personalities between these two legendary stars.

Let me rewind.

My daughter, now reaching those ever-increasing independent teenage years, asked me to go to the Billy Joel/Elton John concert.  As the melody of Cats in the Cradle played in my head, I didn’t blink.

The night was filled with anticipation; we settled in our seats at the newly constructed Nationals Park.  Here’s how the events unfolded:

7:30 PM – Scheduled start time – huddled masses finding their seats.

7:53 PM – Two black grand pianos emerge from beneath the stage like a phoenix rising from the ashes.

7:54 PM – The crowd roars as Billy Joel enters stage-left, followed by another roar as Elton John enters stage-right.  The two hug at center stage and retreat to their pianos.

8:05 PM – After trading verses of Your Song and Just the Way You Are, the two welcome the audience.  During the second song, however, Elton barked out orders, off-mic, in the general direction of his crew.

8:06 PM – Houston, we have a problem.  After tapping out the first two bars of Don’t Let the Sun Go Down on Me, Elton suddenly stops.  His face contorted and agitated, he lashes, "You know what, this is (blanking) ridiculous, I can’t play like this."  Billy Joel, who no doubt heard him light up the crew’s headsets between songs, let the rest of us in on the secret, "He’s having a little problem with his foot pedal–it’s sticking."  While four crew members dashed to John’s piano to free the pedal, Joel smiled and filled the time with his own impromptu version of the Battle Hymn of the Republic.

8:07 PM Joel turns back to John, "How we doin’?" John, now in full wrath mode, did not acknowledge him.  Joel then smiled and turned to the increasingly tense crowd, "Hey, at least it’s not freakin’ raining!"  This released some tension from those of us who felt like we walked in on a father about to unleash a good whooppin’ on his son.

8:09 PM – Without skipping a beat, Joel went back to his tap dancing music with a few bars of Yankee Doodle Dandy.   Then, in another attempt to work the crowd, he snickers, "You’ve just witnessed an authentic rock n’ roll (screw up)!  You don’t see too many of those anymore."  The sellout crowd lets out another nervous laugh.

8:10 PM – All eyes are on the stage as the drama unfolds.  Next, straight from his Long Island, blue collar roots, Joel throws his jacket on the Rocket Man’s piano, and dives under it on his back in an attempt to free the stuck pedal.

8:11 PM – No luck.  Joel retreats to his piano.

8:12 PM – Joel extends an entirely unselfish gesture, "Want to switch pianos?"  To which Elton John offers a non-response followed by another, "this is (blanking) ridiculous."

He then gets up from his piano bench and exits the stage.

Classic hissy fit.

Now what?

As John makes his unceremonious exit, Billy Joel calms the bewildered masses, "You know what? Let’s just go ahead with just my guys."  So, "The Entertainer" called an audible and pulled his band’s fire alarm.

8:16 PM – After a three-minute flurry of on stage activity that appeared as if the stage manager pressed the fast forward button, Billy Joel and his band stepped up like pros and dove into his band’s first song, ironically enough, Angry Young Man.

9:09 PM – After flip-flopping the order, now it was John’s turn.  The Baltimore Sun reporter wrote, "… the crowd held its collective breath that the piano’s surgery was a success." It was.

9:15 PM – After his first song back, Elton John addresses the audience regarding his child-like self-indulgent behavior with more of a statement than an apology. "Sorry for what happened earlier. The pedal was stuck and it was as if all the notes were the same.  Thanks to Billy Joel and his band for being so gracious and professional."

This isn’t a referendum on Elton John.  On our "grand stages" there’s lot that can go wrong.  It’s our reaction under stress that shapes how others perceive us; a perception that’s impacted more by likability than performance. (See Andrea Howe’s piece on competent jerks and loveable fools).  

BTW – Which souvenir t-shirt do you think my daughter wanted to buy after the concert?

Seller’s Remorse in the Marketing Business

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Courtesy of Advertising Age,  a peek into a catfight; a domestic squabble; a business story right out of a Hollywood fanzine.  Famous buyer vs. aggrieved seller.

The Famous One here is Zappo’s, beloved by the online set and poster child du jour for customer service.  The aggrieved party (picture them throwing a pair of stiletto high heels at Zappo’s head) is marketing agency Ignited.

With what crime does Ignited accuse Zappo’s?  Disrespect, it would seem. The disrespect of a seller by a buyer. 

The horror.

When Buyers Disrespect Sellers

Seems that Zappo’s sent out an online RFP to some 100 or so of their closest-friend ad agencies, asking for first-round pitches.

Of course, Ignited didn’t make the first cut. Ah, but they had a trick up their sleeve.  Using Google Analytics allowed them to see how much time the reviewer—Zappo’s—had actually spent reviewing Ignited’s proposal.

Zappo’s had reviewed only 20% of the pages, about 15 seconds per page, before relegating Ignited’s work to the digital circular file.  Whereupon Ignited went public with its “gotcha,” announcing the horrible 15-second truth to the world.

Unfair! said Ignited. They didn’t even look at our brilliant methodology, insights, testimonials.  How dare they! And then–as if it were the clincher in an argument–Ignited’s Wolfsohn says, “they never clicked on the page that outlined our approach to measurement. Which may explain why they didn’t know we’d be monitoring how much time they spent looking at our proposal."  Gracious me.

What’s wrong here?  Where to begin…

The Customer Owes You Nothing

If you click on someone’s personal ad in an online dating service–what do they owe you in return?  Bupkus.  Zip.  Nada.  The same is true of a seller whose sole connection to the buyer is an online response to a 100-company RFP.

(Why Zappo’s would run a 100-company RFP is another question.  Maybe to screen out those who respond to mass RFPs?  Or those who can’t manage to get ‘round them?  Hey, maybe Zappo’s is clueless (though I wouldn’t put big money on that hypothesis)).

But that’s irrelevant to Ignited.  Or should have been. 

I know what I’d do with 100 first-round sections on qualifications, methodologies, and testimonials.  I’d ignore them completely until I’d seen if they had anything interesting, original, provocative, value-adding to say about me–the customer/client. 

If they do have something to say about me, then I’d go back and check the testimonials to see if I knew anyone.  I might or might not look at the qualifications or methodologies at all.

And if there was nothing in it about me in this first-pass attempt to impress me, the customer?  Then it’d take me, oh, I don’t know, maybe 15 seconds to conclude this act was not going on to Hollywood. Simon may get there faster than Paula, but they both end up at the same conclusion.  And purchasing people can make Simon look indecisive.

And from all that I have seen, my response is the rule, not the exception, on this one. 

Buyers Buy from Trust

One of the biggest fallacies sellers make is that buyers buy based on their own stated rational criteria.  The truth is, a dose of trust overwhelms rational data like methodologies—(which are, frankly, more similar than sellers like to think).

What sells best is a sense that the seller cares about the buyer—cares enough to actually distinguish this buyer from another, to take a risk and make a client-specific suggestion, to focus on the client rather than on oneself–to say something that is of value and that makes the buyer feel heard, seen, recognized, understood.  A sample of your wares, please, customized to me.

Earth to Ignited, a little multiple choice: every client’s favorite subject is:

a.    Ignited
b.    themselves

Think carefully now…

You can recognize sellers who don’t get this.  They confuse sample selling with theft of intellectual property.  Says Ignited’s Wolfsohn: “When I go to my mechanic, he won’t do work on spec. We’re a very rare industry that is willing to give stuff away for free, and it escalates to a point where it’s self-defeating to the industry that we’re all in." 

Maybe that’s true–if you’re a mechanic. (Though I’d love to hear from insulted mechanics who disagree with Wolfsohn).  It’s not true, however, in services businesses like marketing. You’re selling air, for heaven’s sake; give a little away to let them feel you.

Zappo’s response, incidentally—to publicly engage in a dialogue about the event—strikes me as incredibly gracious. 

Yet I suspect it’ll be a long time before Ignited does marketing work for Zappo’s.   

 

July Carnival of Trust is Up!

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The July Carnival of Trust is now up for your reading (and viewing, and listening) pleasure.

The Carnival is hosted this month by Adrian Dayton, who somehow lives the schizophrenic life of a lawyer who is social-media savvy.

And his Carnival shows it.  He comes up with some doozy negative examples of trust.  I love negative examples, as I think we learn better this way. 

–Read about a classic Twitter tweet that is bound to destroy trust.

–Or–have you ever been badgered?  No, I mean Badgered–as in, by a Badger.  Great YouTube find.

–Or, 20 rules for trust in blogging. 

Want to know more about trust?  Or to get Adrian’s unique social media take on it?  Or merely read a few highly entertaining, insightful selected blogs and comments about trust in the world?  Then click here to view Adrian Dayton’s edition of the Carnival of Trust for July, 2009.

Many many thanks to Adrian for a fine job of hosting; please pop over and give him a look.

 

Arguing Rationally to the Irrational

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More and more research—from behavioral economists and psychologists—is pointing out ways in which our Renaissance-era views of human cognition are a bit off base.  It is one thing to say cogito ergo sum.  It is quite another to claim we cogit very well.

Perhaps the best-known of the new works is Predictably Irrational, by Dan Ariely.   Others include Sway and Nudge, and maybe Blink and Squawk.  And definitely Yes.  (See a pattern in these titles?).

However, the opening story in Ariely’s Predictably Irrational raises an interesting question.  To whom are these books addressed?

Does Convincing People Change Their Actions?

He tells a fascinating story of having suffered from third-degree burns, wondering why the nurses insisted on the all-at-once one method of bandage removal, rather than slow removal of the bandage.

The nurses insisted the all at once theory was the best for the patient.  Ariely concluded, based on research done afterward, that the nurses’ attraction to that theory was in fact based on their own need to curtail the empathetic pain that they felt for the patient.  If the patient’s pain were all that mattered, some version of slow removal turned out to be far better.

So far so good.  Ariely tells the story as an example of how irrational thinking often—and predictably–dominates rational decision-making.  Indeed, as he says, when he talked to the nurses about it:

“In the end, we all agreed that the procedures should be changed.”

Good. Clear thought (cognitive rational therapy?) triumphs, thanks to Ariely’s insightful analysis.  Right?  Well, not so fast.

“My recommendations never changed the bandage removal on a greater scale…”

This is ironic: but it should not be a surprise.  If you’re trying to convince people of the weakness of rational argument, then rational arguments are not likely to do the job.  In a similar vein:

•    You often can’t solve a problem by working at the same level at which it was caused.
•    Most people, if told what to do, are generally inclined not to do it.  (Underscore that for strangers, teenagers, relatives over the age of 14, and men—I think).
•    In the US, the self-help book market is $2 Billion.  That’s about $600 of self-help per person per year.  Clearly either the advice is bad or people don’t take it.  (Hint: put your money on the latter).

Corporate Implications of Non-rational Thinking

This raises interesting questions for the daily conduct of major parts of corporate business.

  • Why do salespeople spin lengthy arguments about value propositions?
  • Why do consultants use powerpoint for numbers and words alone?
  • Why do buyers spend time rationally justifying decisions?
  • Why do change initiatives spend so much effort developing convincing arguments?
  •  

So what’s a corporate change agent to do?  Let me offer a few very broad, inconclusive observations:

1. The likelihood of other people accepting suggestions is greatly improved if:

  •     They are presented in the form of a story
  •     They are presented at a time of crisis for which the suggestions offer a solution
  •     The recipients of the suggestions conceive of them as their own

2. People make decisions with their gut, and rationalize them with their brains.  The rationalization process is important: it dictates procedures, and positions logic as a kind of least-common-denominator quality requirement.  It also serves as an emotionally neutral (albeit manipulable) arbiter, which relieves us all of the emotional/political pressure of deciding based solely on argumentation.

3. We need to take these books seriously.  One b-school industrial economist who focuses on culture change told me, “Frankly, we know perfectly well how to manage organizational change.  It’s called propaganda, or the Big Lie.  Just keep saying the One Big Thing, over and over, and people will fall into line.”  You may not like his observation, but it makes a lot of sense, and there’s data to prove it.

Not that that proves anything…

    

 

The Boston Consulting Group Caused the Recession

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Like all good conspiracy theories, this one may have a few loose links.  But work with me here–it’s a good story.

The 70s: When Strategy Became Competitive Strategy

Back in the 60s, Bruce Henderson, chafing at Arthur D. Little, re-conceived competitive strategy.  He founded the Boston Consulting Group, who in the 70s introduced the world to concepts like the experience curve, the Doom Loop, and the barnyard strategy matrix. 

Together with Michael Porter, they redefined strategy from a vague, military idea, to a disciplined, quantitative analysis based on a Hobbesian view of the business world: a State of Nature as Competition.  Competitors lurked everywhere–including masquerading as your suppliers and your customers.  Henceforth, all talk of "strategy" would implicitly have “competitive” as a leading adjective.

It is hard to describe today the impact this new ideology had on the business community.  Suddenly the world made sense—everything was about competition, and everything was quantitative.  It was about winning, and the winner was the one who ran the numbers best.  Peter Drucker was so 10 minutes ago–now, if you couldn’t measure it, you couldn’t manage it.

The 90s: When Organizations Became Processes

In the early 90s, Michael Hammer  and James Champy wrote Reengineering the Corporation, and the other shoe dropped.   The other shoe was business process re-engineering.  Pre-Hammer, companies were functional organizations.  Post-Hammer, they were bundles of processes. 

Functional organizations were messy things that needed coordinating, leading, managing.  Processes could be broken out, modularized, tinker-toy-rebuilt, outsourced, and re-assembled—and despite Hammer’s later protestations, the idea remained attractively impersonal to its fans. 

The 00s: Metrics, Competition and Process Prepare the TinderBox

BCG, B-schools and other leading business thinkers embarked on a decade of exploring the implications.  The Holy Grail of business had become sustainable competitive advantage, which produced economic value added, which produced maximal shareholder value. 

You got there by achieving global scale in every business process: if you weren’t #1 or #2 in any process, you outsourced it to one who was.

Outsourcing to achieve scale through best practices meant multiplying transactions, reducing time-frames, and replacing messy relationships with tightly written contracts–or, better yet, markets, the truly impersonal solution.  Performance was quantitatively defined, included not only in contracts between companies, but in employee relationships with people (who were renamed “human capital” to fit the new business Esperanto—finance).  No need to inspire or manage through people; just craft a blend of  metrics and incentives, the way Skinner incented those white mice in his boxes.  Poster child: Jack Welch.

An example: the mortgage industry.  The purveyors of the competitive/process/metric paradigm saw mortgage as an industry that was regionally fragmented, structurally clumpy, high cost, stodgy, inefficient, illiquid, and highly subjective.

In 15 years, they transformed it.  The mortgage business became globally integrated, highly specialized (substituting markets for organizations via disintermediation), low-cost, nimble, cutting edge, efficient, liquid, and highly impersonal.  It became a market-driven, process-linked, globally efficient industry.  That’s all true.

It also became bereft of relationships; laden with perverse incentives; managed by serial transactors; stripped of any sense of responsibility; and governed solely by financial metrics.  In a business whose product already was money, the doubling-up emphasis on financial metrics obliterated any memory of other principles or values that might have once existed in the financial sector. 

The new mantra was IBGYBG. I’ll be gone, you’ll be gone; do the deal and let the next sucker clean it up.  The entire Meaning of Business became—to make more money than the other guys.  Period.

You work for your company–in theory, the shareholders.  Your company’s job is to win.  You win by beating others before they beat you.  Customers are walking wallets, sources of the poker chips you use to measure success.  Suppliers are to be played off against each other.  All parties are to be managed in clumps of processes, carrotted-and-sticked to behave in certain ways.  That, simply, is how it was supposed to work.  According to this mantra.

This ideology didn’t just happen.  It was four decades in the making. 

Bruce Henderson didn’t mean to do it—but he set the wheels in motion.  BCG, Hammer, Porter, and CSC-Index made it look enticing.  Economists and quant-wannabes from the HR, exec-comp and leadership world added their hops and spices to the brew.  Goldman Stanley and Morgan Sachs refined it; private equity and financial engineers distilled it; and Merrill Stearns, mortgage brokers and Joe the Plumber  got drunk on it.

Complicated?  Yes.  That’s where conspiracy theories come in; they let you simplify.  So pardon me if I just use the shorthand version: BCG caused the recession.