Rationalizing Archive

This entry is part 1 of 4 in the series Apocalyptic Decision Making

The four horsemen of apocalyptic decision making are Volatility, Uncertainty, Complexity and Ambiguity or VUCA for short. Just as customers do when they don’t understand, we tend to procrastinate, postpone or avoid decisions on events we don’t understand. These horsemen thwart our decision making in this way causing lost opportunities and more problems.

Four Horsemen of Apocalyptic Decision Making

The Four Horsemen of Apocalyptic Decision Making

Nathan Bennett and G. James Lemoine in “What VUCA Really Means for You” (Harvard Business Review, January 2014 edition) provide basic definitions, examples and approaches for each in a brief table. Still, not understanding an event might diminish it in our minds but not in reality. Problems, like squirrels, don’t care about our mental boundaries.

Each horsemen strikes fear in our decision making. Since urgency and immediacy often drive us, we’ll waffle trying to keep up with volatility. Since we prefer certainty, we’ll discount or ignore uncertain factors. To simplify things, we’ll look for the silver-bullet rather than coordinate many solutions. To achieve understanding, we’ll create definition and quantification even if it means leaving out ambiguous intangibles. That is why these horsemen are also four of eight alerts that help us anticipate problems.

Rather than deal with the horsemen as Bennett’s and Lemoine’s table suggests, our fears will encourage us to see stability where volatility exists (prices won’t change anymore [see table’s examples]), to see certainty where uncertainty hides (competitor’s product launch won’t muddy the waters), to see simplicity in place of complexity (all customers basically need our product), and definition rather than ambiguity (we’ve done this before and succeeded so just follow the template).

Our emotional triggers for security (stability, certainty, simplicity and definition) are often so strong and the four horsemen so nebulous that rationalizing like this is easy. That is what makes them so apocalyptic and what we commonly call “being blindsided.”

 

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Busy Bees Can Sting

Busy Bees Can Sting

A friend once pointed out that business is derived from busy, not from productive or profitable. Since business is not guaranteed to be productive or profitable, business is a very good name for business as it hides within it the very demon that can bring down any business: busyness.

As it turns out, this demon is as subversive as any vice because as Julian Birkinshaw and Jordan Cohen in “Make Time for the Work That Matters” (Harvard Business Review, September 2013 edition) state:

We instinctively cling to tasks that make us feel busy and thus important . . .

They found knowledge workers averaging 41% of their time going to activities that didn’t need to be done and offered little personal satisfaction. These were activities that they didn’t want to do, but yet, they still did. In addition to feeling busy, workers felt drawn to helping someone by doing these undesirable tasks.

Still, let’s ask this: What makes us feel more important, tasks at which we are proficient or ones we are not? Just because we can do something well doesn’t mean it’s productive or profitable for our businesses. Conversely, what we aren’t proficient at could be very productive or profitable. This is especially true of implementing new things we’ve learned.

Even though Birkinshaw and Cohen recommend being more conscious of such activities and delegating, it’s very easy for us to rationalize them especially if they feed our ego or assuage our anxieties of worth to the team. By feeding these self-interests, they influence our decisions in a unconsciously biased way. They compound when managers do little to help us feel good about our work.

As with any demon, it hides. Busyness is no different. It hides in every business. Look no further than the word for the clue.

 

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Pricing, The Secret

By Mike Lehr

This entry is part 1 of 4 in the series Pricing, The Secret

Secret to PricingThe secret to pricing is its arbitrariness, subjectivity. What disrupts this is anchoring, a preconceived benchmark of what should be the price. Classical economics describes consumers as rational purchasers of goods and services weighing benefits and costs. In reality, that weighing is just a rational wrapping for subjective tendencies. Traditional pricing methodologies attack the weighing. If we believe our product is better, we price higher, if more economical, lower. However, contemporary ones aim for disrupting or leveraging the benchmark.

It’s very difficult for us to objectively determine value. For instance, in classical economics value in terms of supply and demand sets prices.  In truth, price influences value. Not only does price influence tasters of wine, but that influence shows up in their brain scans. Price influences the most discerning assessors of value. In violins, experts often deem higher priced ones possessing better sound even though blind tests show differently,  “Fiddling with the Mind” (The Economist, January 7, 2012 edition).

Dan Ariely, George Loewenstein and Drazen Prelec, in their paper “Tom Sawyer and the Myth of Fundamental Value,” show how malleable value can be when we disrupt our pricing benchmarks. For example, if we sell people something for $6 and then return the next time to charge them $8, fewer will buy than if we had sold it to them for $10 first and $8 second.

“Clawback” (New Yorker, August 26, 2013 edition), James Surowiecki, illustrates how transferrable benchmarks can be. Even though lobsters’ market costs are extremely low, restaurants don’t pass these on because lobster benchmarks the value of other entrées. A lower cost lobster entrée suddenly decreases the value of other entrées by making them appear more expensive.

Pricing’s secret is admittedly involved, but it expands our opportunities. But, the real question is, “When’s your wine taste test?”

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Personality Behind Words 08 YellowIncreasingly, we are seeing the connection between all that we do and our personalities. Why is this  “groundbreaking?” For centuries now, we’ve assumed people are products of their decisions. Educate people with good logic and good decisions will follow. Historically, we’ve expressed this as free will. It then invaded economics with the rational actor decision-making model. The problem is that it doesn’t work.

Inside us is software called “personality.” It’s almost as difficult to violate as it is for computers to violate their software. It can predict human decision making almost as well as it can for computers. Just as behavioral economics is overrunning classical economics, it’s doing so in business and politics.

Admittedly, the accuracy with people is significantly less than with computers but it’s enough to assess people from their Twitter streams (“No Hiding Place” [The Economist, May 25, 2013 edition]). It’s also enough for Google to invest in Obama’s data mining operations (Google’s Eric Schmidt Invests in Obama’s Big Data Brains [Bloomberg Businessweek – May 30, 2013] by Joshua Green).

This wouldn’t occur if exquisite, rational, debate-styled arguments worked. These take no more hold on people than seeds in rocky soil . . . unless we present it in an emotional, relational manner similar to advertising, marketing and merchandising.

Today, it’s about finding people inclined to buy and vote a certain way and then “encouraging” them to do so. Plant the right seeds in the right soil and farm them. Just as we can predict what might grow on a particular farm, we can predict what thoughts will grow in personalities. This extends beyond purchasing and voting. Twitter feeds help you find relationally compatible kindred spirits for all purposes.

What kind of personality is in your Twitter stream? Just look in the mirror.

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This entry is part 2 of 6 in the series Feelings, Emotions, Intuition - Difference

BreadIn a previous post, I outlined the differences among feelings, emotions and intuition. Using a food analogy, feelings are ingredients, emotions are foods and intuition is the message the meal gives us. This post dives deeper into the difference between feelings and emotions.

As the food analogy implies, many feelings can comprise an emotion. Beyond this, the primary difference between the two is the “call to action” emotions prompt in us. After all, the word emotion breaks into e-motion, meaning, “to bring out motion.”

In this sense, feelings are nouns and emotions are verbs, feelings are a state of being and emotions a state of motion. For instance, the emotion driving us to help someone can contain many feelings such as empathy, happiness, guilt, sadness and pity. In fact, all these feelings might play in some form or another:

  • Empathy can encourage us to change the feeling of others so we can share it.
  • Happiness can encourage us to spread it directly or indirectly.
  • Guilt can encourage us to “return a favor.”
  • Sadness can encourage us to correct the problem.
  • Pity can encourage us to help those who can’t help themselves.

While each of these feelings can stand alone as an emotion, in virtually all cases emotions are an integration of many feelings. We just won’t realize it. Moreover, when others ask, “Why did you do that?” we will tend to find a rationale that fits but won’t necessarily represent our feelings. Some feelings will be very conscious but others won’t be.

Again, the food analogy has been helpful to people. Beyond that if we remember emotions comprise feelings and represent a state of motion, we’ll be able to distinguish them from feelings in a way that will help us understand and appreciate ourselves better.

 

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Faith MoneyWhen I read articles like “Toss a Coin” (The Economist, January 12, 2013 edition), I’m reminded that our economy relies on faith. After all, as the article indicates, the U.S. Treasury prints money to satisfy its debts.

Of course, it prints purposefully to avoid the extremes of inflation and contraction. If the Treasury did not print money, our economy would slowly stop as our population expanded. It’s analogous to adding more oil to an ever-growing car engine so it won’t lock up.

However, the money is simply paper. Nothing tangible supports it. For instance, we can’t exchange dollars for gold. Only the U.S. Government supports it (“This note is legal tender for all debts, public and private”), and our faith supports the government. Since this seems so certain, it’s tough to see this as faith until we experience its loss.

For me, this occurred in the last two weeks of 1989 when visiting Poland for familial reasons. The Communists were transferring power to a democratic government on New Year’s Day. In those two weeks, the Polish zloty went from 3,000/U.S. dollar to 10,000. Knowing we were Americans, cab drivers began demanding payment in U.S. dollars; faith had vanished.

The importance of this prompts the question: How can we apply rationale to something rooted in faith? Do we rationalize religion? This is why neoclassical economics faces the challenge from behavioral economics. It incorporates emotions of which faith is a form. It means business is uniquely human not objective. It’s faith in each other with the U.S. Government (“We the People”) merely a conduit for that faith. Consequently, this dual anchor of people and faith makes business . . . well . . . personal.

What happens when we lose faith in each other?

 

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Definitions = Castle

Stories form boxes outside of which we try to think.

Stories galvanize people, helping them to learn, to coalesce around ideas. If we look at this galvanization as solidification, we can also see how stories could thwart change and innovation.

In a book review titled “Dead Certain” [The New Yorker, November 29, 2010 edition], I came across this passage by George Packer quoting Dan McAdams, a psychology professor at Northwestern University:

Psychological research shows that powerful narratives in people’s lives make it nearly impossible, in many cases, to consider ideas, opinions, possibilities, and facts that run counter to the story

Now, let’s expand this thought. Stories have many aspects and many forms: allegories, rationales, themes, descriptions, characterizations, histories, records, chronicles, accounts, testimonies, anecdotes, biographies, depictions, portraits, assumptions and statements. All can create vivid pictures of events, ideas, plans and strategies.

These pictures define facts, accepted truths, and work the same as definitions. Stories become the box outside of which we are trying to think. They come to define the culture, traditions, practices and expectations of our businesses.

For instance, a business whose history, pride and success come from a particular market will find difficulty deemphasizing it as it diminishes. It will also find it hard to seize opportunities that it has traditionally scoffed.

Business plans are other examples of stories’ influence. Plans are not only stories themselves, but they contain smaller stories such as rationales, accounts, descriptions and assumptions. For instance, the main assumption driving plans and strategies is that last year is a great baseline for projecting this year, that this year won’t be vastly different from last year.

Therefore, when we seek to change, to innovate, we will likely need to question the validity of existing stories no matter how factual and truthful they seem. They are likely prisons inhibiting us from considering what is outside their walls.

 

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OZA No 292 (Emotion & Intuition as Foundation for All Decisions)One of the more contrarian perspectives that has helped me appreciate people’s decisions is that emotions and its interpretive big sister, intuition, form their foundation. Even a logical decision comes about because of a person’s emotional preference for logic.

While this does not mean logic, reason and rationales are not involved; it does mean they take a secondary, dependent role similar to the way the frame of a house is dependent upon the foundation. In our decision-making, it means we select the rationale (frame) to fit our emotional preferences (foundation), which we more commonly experience as rationalizing.

Increasingly though, as technology and research methodologies advance, science supports this. For instance, the article, “Captain Kirk’s Revenge” (The Economist, December 23, 2006 edition), discusses a person who lost his emotional functions in his brain could not make decisions even though the rational portions were in tack. However, those who lost their rational functions could still do so if their emotional ones remained.

This is understandable when we consider people need motivation to make decisions and motivation is emotional. Rationales alone won’t motivate unless they stimulate our emotions. That is why the root word of emotions is “motion.” It’s active, whereas logic, reason and rationale are inert.

We further see the progress in this perspective with the research of Roderick Gilkey, Ricardo Caceda, and Clinton Kilts. In their article, “When Emotional Reasoning Trumps IQ” (Harvard Business Review, September 2010 edition), they found that the best strategic thinkers showed “significantly less neural activity in the prefrontal cortex [rational functional area of brain] than in the areas associated with ‘gut’ responses, empathy, and emotional intelligence.”

Since we are often experiencing these emotions on an unconscious level, we could feel completely rational. Consequently, all our decisions are emotional ones. We just might not believe it.

 

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This entry is part 15 of 15 in the series Creative Innovation

Creative Bulb“Once he gets an idea in his head, there’s no changing it!” As common as this comment is, it’s true for us all to some degree. It’s formally called anchoring. Such ideas can alter our thinking and feeling processes and undermine our creative efforts. In fact, anchoring is so strong that it can influence our decisions even if we know the information is wrong.

Words alone are often anchors (money vs. time; thinking vs. feeling) and set moods. When they form ideas, they are even more powerful. Now, according to Paul Leonardi’s article, “Early Prototypes Can Hurt a Team’s Creativity” (Harvard Business Review, December 2011 edition), prototypes can serve as anchors too:

. . . when people see a detailed prototype, something odd happens: They concentrate on the prototype’s form and function, forgetting to attend to any remaining ambiguities about the problem the product is meant to solve or the obstacles in the way. Instead of clarifying the path ahead, the prototype puts a halt to useful brainstorming.

Now, often we delude ourselves by exploring other options, but we sabotage them by emphasizing evidence and arguments that support the initial idea and discounting those that don’t. In short, we formulate a rationale making the initial idea best.

We can observe the effects of anchoring in our everyday conversations. The person who first expresses himself often sets the direction of the conversation because conversations often build from the most recent comments. Focus groups have to guard against alphas, people who dominate conversations, or their findings become skewed.

The physicality of prototypes (also diagrams, blueprints, plans, etc.) can do more damage to the creative process than discussed ideas. So, the next time you see or think something, ask, “Is this preventing us from seeing other options or revisiting the problem?”

 

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Seeking Whales

Allison Bond’s article, “Haunting Scenes” (Scientific American Mind, November/December 2011 edition), discusses the research of Phillip Isola (Massachusetts Institute of Technology) as to what makes a memorable photograph. While Isola generalizes it as “’related to strangeness, funniness or interestingness,’” specifics exist:

  • People – unknown people work too
  • Movement – the implication of it such as people running, waves crashing, birds flying
  • Human-scale objects – chairs, cars, tools, toys

Photographs with these elements tend to be far more memorable rather than those with beautiful landscapes and environs. In short, we are not likely to remember pictures simply because they are beautiful. Moreover, these findings are consistent with evolutionary theory that:

. . . our brain is wired to notice movement, other people and objects we can interact with . . . because these things would have been the most important features of the landscape we evolved in.

Just as important is that these properties are “largely constant from one person to the next.” This means a memorable photograph isn’t as subjective as we once thought. The general parameters of memorableness are coded in us. Said another way, we do not consciously, completely control our preferences. They are to an extent predictable regardless of who we are.

Thus, in our decision making and problem solving we are living to a degree under the illusion of freely deciding. In reality, unconscious forces are influencing our thoughts, and what seem legitimate reasons for decisions are nothing more than rationalizations of wants. In short, rationalizations are masquerading as reasons.

Of course, we aren’t totally at the mercy of these influences as long as we make ourselves aware of them and believe they influence us. However, many times, while we acknowledge these forces, we often believe they influence everyone else but us.

 

Related posts:

 

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