Tag: Psychology

The Distorting Power of Incentives

“The rabbit runs faster than the fox, because the rabbit is running for his life while the fox is only running for his dinner.”
— R. Dawkins

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Simply put, incentives matter a lot. Incentives are at the root of a lot of situations we face and yet we often fail to account for them. They carry the power to distort our behavior and blind us to reality.

Pebbles of Perception- How a Few Good Choices Make All The Difference

Even accounting for them is often not enough. As Charlie Munger cautions, “I think I’ve been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I’ve underestimated it. Never a year passes that I don’t get some surprise that pushes my limit a little farther.”

In Pebbles of Perception: How a Few Good Choices Make All The Difference, Laurence Endersen writes:

We can only see a situation with true clarity when we take the time to carefully consider the interests at hand. And we understand it even better when we consider how the situation might be different if the underlying interests were different.

But … just as we often fail to understand them, we can also overly focus on them. To the man with a hammer, everything looks like a nail.

Imagine the nature of a football game where the first goal scorer took all the spoils. There would be one hell of a scramble to score the first goal and it might make compelling viewing. The carrot is effective, but it is too pointed. We suddenly focus on the incentive and forget about the second order consequences. What we see is that narrow incentives influence performance, but they may not improve it. Studies of loan officer approvals during the recent US mortgage crisis showed that the loan officers actually believed the cases with the highest commission were more creditworthy. The effect was worse than naked self-interest: the incentive actually blinded their judgement.

Understanding incentives comes through second-and-third-level thinking. Many incentive systems have backfired because people failed to consider other interests and incentives.

An example is monetary rewards offered to help exterminate unwanted animals such as rats and snakes. What authorities failed to foresee was that people would start to breed the rats and snakes. Forcing people to have overly complex passwords can be another perverse incentive. When faced with this complexity we simply write down our passwords somewhere “safe”.

As to good incentives, money is not enough.

Good incentives acknowledge recognition, public perception, and the value of pursuing work that we can be proud of. So yes, if we want to persuade, we should appeal to interests not reason. But when it comes to interests, appeal not just to net worth but also to self-worth.

There are a few things worth keeping in mind.

First, the behavior you see is usually the result of incentives you don’t see. Consider the sharp elbows you see in a typical workplace. Looking at this behavior in isolation it makes little sense. However, odds are, this is rewarded in some way.

Second, we generally get the behavior we reward.

Third, creating effective incentive systems is hard work. We need to consider not only the first level of incentives but also the second and third and how they will impact the system.

Enderson concludes:

Incentives matter greatly – underestimate them at your peril. People will navigate the shortest path to the incentive. The curious among us will pay particular attention to incentives, monetary or otherwise.

Carol Dweck: When a Fixed Mindset is Better than a Growth Mindset

“Inspiration is for amateurs — the rest of us just show up and get to work.”
— Chuck Close

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“So far, the best idea I’ve heard about building grit in kids is something called growth mindset,” writes Angela Duckworth. “It is the belief that the ability to learn is not fixed. That it can change with your effort.” Carol Dweck’s insights about “fixed” vs. “growth” mindsets are the key.

Below find a talk Dweck gave at Google, with some excerpts that I found particularly interesting. She talks about what keeps her up at night, how to encourage children, the role of shame, and whether a fixed mindset can be more beneficial than a growth mindset.

When asked what keeps her up at night in regards to the thought of someone challenging, disproving or using her theories.

Yes. I always had this attitude of challenging my ideas and my theories because if you’re wrong you want to know it as soon as possible. You don’t want to spend your life on it. So… what keeps me up at night in a good way are different areas where it could be applied. So we have a whole program of research on peace in the Middle East where we’re using Mindset principles, I’m not minimizing the hugeness of the problem but we’re using Mindset principles to try to build some greater understanding. So I love to think of ways that we can extend it into areas we never thought of before. I love to think of ways to implement it so that more kids who need this way of thinking can benefit from it. And something that also keeps me up at night is that fear that people are developing what i’m calling a ‘false growth mindset’.It’s this idea ‘if it’s good I have it’. So a lot of people are kind of declaring they have it but they don’t. They think it just means open-minded or being a nice person or maybe they are saying it for fixed mindset reasons, I want you to judge me as being the right kind of person. So developing a growth mindset is really a journey, a lifelong journey of monitoring your trigger points and trying to approach things and a more growth mindset way of taking on the challenges, sticking to them, learning from them. Right now I’m writing something for educators that I’m calling ‘false growth mindset’ to tell them ‘no, you can’t just say it, you have to take a journey’ because we’re doing research now showing that many teachers and parents that say they have a growth mindset are actually responding to kids in ways that are creating fixed mindsets for kids. So that’s kind of the array of things that keep me up at night. But that said, I do sleep pretty well.

When asked what you should say to encourage a child when you can’t use words like smart.

The question is if you can’t say smart, what can you say? You can say so many other things. One thing is you can just show interest in the process that the child or other person is engaging in and in our research that’s what we’ve shown is effective, focusing on the process or appreciating the process someone is engaging in or has engaged in so just show interest, ask questions, give encouragement if they’ve been grappling with something and they’ve tried new strategies or stuck to the strategy. One parent said, ‘oh I hate it ’cause I can’t appreciate it when my child does something great.’ I said, ‘well where did you get that from?’ Of course you can appreciate it, then tie it to something they engaged in. ‘Oh, you couldn’t do that yesterday, you made progress, that’s so exciting, oh that’s great you really stuck to it and learned it. Or, you tried all different ways and look that worked.’ So you’re really appreciating some outcome where they are and you’re talking about how they got there. But if you don’t have that information just ask them. Never praise effort that isn’t there.

When asked how she thinks shame plays a part in a fixed versus growth mindset?

Oh, that’s a great question. We have studied that and we have shown that shame is a big factor in a fixed mindset. You don’t want to take on a challenge. It’s humiliating to have a setback within a fixed mindset, it means you’re not the person you want to be and other people aren’t going to look at you in the same way. We’ve studied it in adolescence, adolescents in a fixed mindset feel incredible shame when they are excluded or rejected and that makes them want to lash out violently. And research for many years, many people’s research has shown that shame is not a productive emotion. It makes you want to hide or lash out, both of which are not gonna get you, in the long run, where you want to be. In a growth mindset you can feel very disappointed. You can feel hurt. You can feel guilty. You can feel a lot of things but these are emotions that allow you to go forward and be constructive.

When asked if she sees any context in which a fixed mindset is more beneficial than a growth mindset?

Well, first let me say that a growth mindset doesn’t require you to go around improving everything. You can focus and you can say no I’m not gonna do that, no I’m not gonna do that. But research, not my research but research of others has in fact looked at this question and found two areas so far in which a fixed mindset is better. One is sexual orientation. People who accept that this is who they are and this is who they’re meant to be seem to be better adjusted than people who think ‘I should be changing.’ And the other is aging. So, it’s nice to feel you can stay young through exercise and so forth but people who run around nipping and tucking and the tummy tuck and the this that and the other and it’s kind of a desperate attempt to retain extreme youth that doesn’t seem to be so great either. But when it comes to skill areas it looks like a growth mindset is typically more advantageous.

Dweck’s book, Mindset: The New Psychology of Success, is worth reading in its entirety.

Too Busy to Pay Attention

Alan Lightman, the physicist who brought us The Accidental Universe, has also written several works of fiction, including Einstein’s Dreams, presented as dreams Einstein might have had while working as a patent clerk in Switzerland in 1905. More philosophy than physics, the book is a collection of thought experiments about the concept of time. While each of the hypothetical scenarios is only a few pages long, they all provide food for thought.

What if we knew when our time would end? What if there were no cause and effect to our actions? What if there was no past? No future? If we could freeze a moment in time, what moment would we choose? And, most critically, are we spending our finite allotment of time on this earth wisely?

“You act like mortals in all that you fear, and like immortals in all that you desire.”

— Seneca

In one of Einstein’s dreams, people live forever. In this world, the population is divided into the Nows and the Laters.

The Nows note that with infinite lives, they can do all they can imagine … Each person will be a lawyer, a bricklayer, a writer, an accountant, a painter, a physician, a farmer. The Nows are constantly reading new books, studying new trades, new languages. In order to taste the infinities of life, they begin early and never go slowly…They are the owners of the cafés, the college professors, the doctors and nurses, the politicians, the people who rock their legs constantly whenever they sit down.

The Laters reason that there is no hurry to begin their classes at university, to learn a second language, to read Voltaire or Newton, to seek promotion in their jobs, to fall in love, to raise a family. For all these things, there is an infinite span of time. In endless time, all things can be accomplished. Thus all things can wait. Indeed, hasty actions breed mistakes … The Laters sit in cafés sipping coffee and discussing the possibilities of life.

If you recognized yourself or the people in your life in these descriptions, it’s not surprising. People in this world of infinite time are strikingly familiar to us because we live our lives as if we are going to live forever. We bury our awareness of our mortality beneath our busyness or convince ourselves that there will be time to live the lives we want ‘later’.

This is nothing new.

Over two thousand years ago, Seneca wrote:

What man can you show me who places any value on his time, who reckons the worth of each day, who understands that he is dying daily? For we are mistaken when we look forward to death; the major portion of death has already passed. Whatever years lie behind us are in death’s hands.

Racing from One Commitment to Another

The Now personalities, the perpetually-busy, rushers-through of life, can be spotted in several of Einstein’s Dreams. A dream where “one may choose his motion along the axis of time”, illustrates the consequences of moving too quickly.

The woman catches her breath. She is fifty years old. She lies on her bed, tries to remember her life, stares at a photograph of herself as a child, squatting on the beach with her mother and father.

In another world, time passes more slowly for people in motion, but the faster people travel, the less happy they seem to be.

Because when two people pass on the street, each person perceives the other in motion, just as a man in a train perceives the trees to fly by his window. Consequently, when two people pass on the street, each sees the other’s time flow more slowly. Each sees the other gaining time. This reciprocity is maddening. More maddening still, the faster one travels past a neighbor, the faster the neighbor appears to be traveling.

These words strike a chord in today’s hectic, always-connected, world where we race from one commitment to the next, using our electronic devices along the way to maximize our productivity. But, as Seneca observes in On the Shortness of Life, multitasking only takes us further from our ultimate goal.

…no one pursuit can be successfully followed by a man who is preoccupied with many things…since the mind, when distracted, takes in nothing very deeply, but rejects everything that is, as it were, crammed into it. There is nothing the busy man is less busied with than living: there is nothing that is harder to learn.

We don’t slow down long enough to think. We’re so focused on what’s next that we rarely take the time to ask ourselves whether we’re living the life we want or if we’re even really present in the one we have.

Time Happens

Not everyone in Lightman’s tales is speeding through life. In one world, people get stuck in time.

In another house, a man sits alone at his table, laid out for two. Ten years ago, he sat here across from his father, was unable to say that he loved him…The man begins to eat, cannot eat, weeps uncontrollably. He never said that he loved him.

[…]

The tragedy of this world is that no one is happy, whether stuck in a time of pain or of joy. The tragedy of this world is that everyone is alone. For a life in the past cannot be shared with the present. Each person who gets stuck in time gets stuck alone.

In another of Einstein’s dreams, that will be painfully familiar to some, two couples are having dinner together, their conversation banal and meaningless.

For in this world, time does pass, but little happens. Just as little happens from year to year, little happens from month to month, day to day. If time and the passage of events are the same, then time moves barely at all … If a person holds no ambitions in this world, he suffers unknowingly. If a person holds ambitions, he suffers knowingly, but very slowly.

We can get stuck in the past, unable to let go of regret, or we can get stuck in a rut of routine, too uncertain of what the future might hold to risk chasing our dreams. Like the people in Dr. Seuss’s waiting place, we can end up ‘just waiting’…waiting for life to happen, passing our time in idle pursuits and telling ourselves that we’ll live the life we want when the mortgage is paid off or when the kids are grown or when we retire.

In On the Shortness of Life, Seneca writes:

How late it is to begin to live just when we must cease to live. What foolish forgetfulness of mortality to postpone wholesome plans to the fiftieth and sixtieth year, and to intend to begin life at a point to which few have attained!

Time Moves Faster

Despite the title of his essay, Seneca argues that life is only as short as we choose to make it.

It is not that we have so little time but that we lose so much…the life we receive is not short but we make it so; we are not ill provided but use what we have wastefully.

In Moonwalking with Einstein, Joshua Foer suggests one way we can stretch out time.

Monotony collapses time; novelty unfolds it. You can exercise daily and eat healthy and live a long life, while experiencing a short one. If you spend your life sitting in a cubicle and passing papers, one day is bound to blend unmemorably into the next – and disappear. That’s why it’s important to change routines regularly, and take vacations to exotic locales, and have as many new experiences as possible that can serve to anchor our memories. Creating new memories stretches out psychological time, and lengthens our perception of our lives.

This also helps explain why time seems to move faster as we age. The older we become, the fewer novel experiences we tend to have.

In Lightman’s fictional worlds, the people who find contentment are those who learn to live in the moment. Staying in the present is surprisingly difficult to achieve, but practicing meditation and mindfulness can help us get there more often, and the reward when we do so is well worth the effort.

In the final dream of the book, time is a nightingale, as fleeting and elusive as the present moment.

On those occasions when a nightingale is caught, the catchers delight in the moment now frozen. They savor the precise placement of family and friends, the facial expressions, the trapped happiness over a prize or a birth or romance, the captured smell of cinnamon or white double violets. The catchers delight in the moment so frozen but soon discover that the nightingale expires, its clear, flutelike song diminishes to silence, the trapped moment grows withered and without life.

Einstein’s Dreams and Seneca’s essay On the Shortness of Life are both very quick reads. Reflecting on what they have to say is time well spent.

Friedrich Nietzsche: On Love And Hate

“We must learn to love, learn to be kind, and this from earliest youth … Likewise, hatred must be learned and nurtured, if one wishes to become a proficient hater.”

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German philosopher and writer Friedrich Nietzsche (1844-1900) is one of humanity’s most influential and enduring minds. He was particularly good at the aphorism and the brief collection published in Aphorisms on Love and Hate highlights some of his most profound thoughts on the subject.

Commenting on psychological observation, in his typically beautiful prose, he wrote that it would be better to have a blind faith in humanity than a curious one.

[M]editating on things human, all too human (or, as the learned phrase goes, ‘psychological observation’) is one of the means by which man can ease life’s burden; that by exercising this art, one can secure presence of mind in difficult situations and entertainment amid boring surroundings; indeed, that from the thorniest and unhappiest phases of one’s own life one can pluck maxims and feel a bit better thereby: this was believed, known – in earlier centuries. Why has it been forgotten in this century, when many signs point, in Germany at least, if not throughout Europe, to the dearth of psychological observation? Not particularly in novels, short stories, and philosophical meditations, for these are the work of exceptional men; but more in the judging of public events and personalities; most of all we lack the art of psychological dissection and calculation in all classes of society, where one hears a lot of talk about men, but none at all about man. Why do people let the richest and most harmless source of entertainment get away from them?

[…]

Indeed, a certain blind faith in the goodness of human nature, an inculcated aversion to dissecting human behavior, a kind of shame with respect to the naked soul, may really be more desirable for a man’s overall happiness than the trait of psychological sharpsightedness, which is helpful in isolated instances. And perhaps the belief in goodness, in virtuous men and actions, in an abundance of impersonal goodwill in the world has made men better, in that it has made them less distrustful. If one imitates Plutarch’s heroes with enthusiasm and feels an aversion toward tracing skeptically the motives for their actions, then the welfare of human society has benefited (even if the truth of human society has not). … La Rochefoucauld and those other French masters of soul searching (whose company a German, the author of Psychological Observations, has recently joined) are like accurately aimed arrows, which hit the mark again and again, the black mark of man’s nature. Their skill inspires amazement, but the spectator who is guided not by the scientific spirit, but by the humane spirit, will eventually curse an art which seems to implant in the souls of men a predilection for belittling and doubt.

If we’ve offended someone we need only offer compensation:

If we have injured someone, giving him the opportunity to make a joke about us is often enough to provide him personal satisfaction, or even win his goodwill.

On why we attack others, Nietzsche points out that it’s not always to hurt them:

We attack not only to hurt another person, to conquer him, but also, perhaps, simply to become aware of our own strength.

On morality and the ordering of good he writes:

The accepted hierarchy of the good, based on how a low, higher, or a most high egoism desires that thing or the other, decides today about morality or immorality. To prefer a low good (sensual pleasure, for example) to one esteemed higher (health, for example) is taken for immoral, likewise to prefer comfort to freedom. The hierarchy of the good, however, is not fixed and identical at all times. If someone prefers revenge to justice, he is moral by the standard of an earlier culture, yet by the standard of the present culture he is immoral. ‘Immoral’ then indicates that someone has not felt, or not felt strongly enough, the higher, finer, more spiritual motives which the new culture of the time has brought with it. It indicates a backward nature, but only in degree. The hierarchy itself is not established or changed from the point of view of morality; nevertheless an action is judged moral or immoral according to the prevailing determination.

On offending and being offended he offers:

It is much more agreeable to offend and later ask forgiveness than to be offended and grand forgiveness. The one who does the former demonstrates his power and then his goodness. The other, if he does not want to be though inhuman, must forgive; because of this coercion, pleasure in the other’s humiliation is slight.

Nietzsche offers an interesting perspective on seeing things that are out of place in today’s world — they are leftovers of a previous age.

We must think of men who are cruel today as stages of earlier cultures, which have been left over; in their case, the mountain range of humanity shows openly its deeper formations, which otherwise lie hidden. They are backward men whose brains, because of various possible accidents of heredity, have not yet developed much delicacy or versatility. They show us what we all were, and frighten us. But they themselves are as little responsible as a piece of granite for being granite.

On the concept of good and evil, he notes a sober point with respect to why a bad man cannot grow out of good soil.

The concept of good and evil has a double prehistory: namely, first of all, in the soul of the ruling clans and castes. The man who has the power to requite goodness with goodness, evil with evil, and really does practice requital by being grateful and vengeful, is called ‘good’. The man who is unpowerful and cannot requite is taken for bad. As a good man, one belongs to the ‘good’, a community that has a communal feeling, because all the individuals are entwined together by their feeling for requital. As a bad man, one belongs to the ‘bad’, to a mass of abject, powerless men who have no communal feeling. The good men are a caste; the bad men are a multitude, like particles of dust. Good and bad are for a time equivalent to noble and base, master and slave. Conversely, one does not regard the enemy as evil: he can requite. In Homer, both the Trojan and the Greek are good. Not the man who inflicts harm on us, but the man who is contemptible, is bad. In the community of the good, goodness is hereditary; it is impossible for a bad man to grow out of such good soil. Should one of the good men nevertheless do something unworthy of good men, one resorts to excuses; one blames God, for example, saying that he struck the good man with blindness and madness.

Then, in the souls of oppressed, powerless men, every other man is taken for hostile, inconsiderate, exploitative, cruel, sly, whether he be noble or base.

Commenting on our economy of kindness he writes:

Kindness and love, the most curative herbs and agents in human intercourse, are such precious finds that one would hope these balsamlike remedies would be used as economically as possible; but this is impossible. Only the boldest Utopians would dream of the economy of kindness.

On the contribution of goodwill to culture, Nietzsche writes:

Among the small but endlessly abundant and therefore very effective things that science ought to heed more than the great, rare things, is goodwill. I mean those expressions of a friendly disposition in interactions, that smile of the eye, those handclasps, that ease which usually envelops nearly all human actions. Every teacher, every official brings this ingredient to what he considers his duty. It is the continual manifestation of our humanity, its rays of light, so to speak, in which everything grows. Especially within the narrowest circle, in the family, life sprouts and blossoms only by this goodwill. Good nature, friendliness, and courtesy of the heart are ever-flowing tributaries of the selfless drive and have made much greater contributions to culture than those much more famous expressions of this drive, called pity, charity, and self-sacrifice. But we tend to underestimate them, and in fact there really is not much about them that is selfless. The sum of these small doses is nevertheless mighty; its cumulative force is among the strongest of forces.

Similarly, there is much more happiness to be found in the world than dim eyes can see, if one calculates correctly and does not forget all those moments of ease which are so plentiful in every day of every human life, even the most oppressed.

On his poetic exploration of pity, he offers:

In the most noteworthy passage of his self-portrait (first published in 1658), La Rochefoucauld certainly hits the mark when he warns all reasonable men against pity, when he advises them to leave it to those common people who need passions (because they are not directed by reason) to bring them to the point of helping the sufferer and intervening energetically in a misfortune. For pity, in his (and Plato’s) judgment, weakens the soul. Of course one ought to express pity, but one ought to guard against having it; for unfortunate people are so stupid that they count the expression of pity as the greatest good on earth.

Perhaps one can warn even more strongly against having pity for the unfortunate if one does not think of their need for pity as stupidity and intellectual deficiency, a kind of mental disorder resulting from their misfortune (this is how La Rochefoucauld seems to regard it), but rather as something quite different and more dubious. Observe how children weep and cry, so that they will be pitied, how they wait for the moment when their condition will be noticed. Or live among the ill and depressed, and question whether their eloquent laments and whimpering, the spectacle of their misfortune, is not basically aimed at hurting those present. The pity that the spectators then express consoles the weak and suffering, inasmuch as they see that, despite all their weakness, they still have at least one power: the power to hurt. When expressions of pity make the unfortunate man aware of this feeling of superiority, he gets a kind of pleasure from it; his self-image revives; he is still important enough to inflict pain on the world. Thus the thirst for pity is a thirst for self-enjoyment, and at the expense of one’s fellow men. It reveals man in the complete inconsideration of his most intimate dear self, but not precisely in his ‘stupidity,’ as La Rochefoucauld thinks.

In social dialogue, three-quarters of all questions and answers are framed in order to hurt the participants a little bit; this is why many men thirst after society so much: it gives them a feeling of their strength. In these countless, but very small doses, malevolence takes effect as one of life’s powerful stimulants, just as goodwill, dispensed in the same way throughout the human world, is the perennially ready cure.

But will there be many people honest enough to admit that it is a pleasure to inflict pain? That not infrequently one amuses himself (and well) by offending other men (at least in his thoughts) and by shooting pellets of petty malice at them? Most people are too dishonest, and a few men are too good, to know anything about this source of shame.

Finally on what we can promise, Nietzsche stirs our thoughts with this beautiful passage:

One can promise actions, but not feelings, for the latter are involuntary. He who promises to love forever or hate forever or be forever faithful to someone is promising something that is not in his power. He can, however, promise those actions that are usually the consequence of love, hatred, or faithfulness, but that can also spring from other motives: for there are several paths and motives to an action. A promise to love someone forever, then, means, ‘As long as I love you I will render unto you the actions of love; if I no longer love you, you will continue to receive the same actions from me, if for other motives.’ Thus the illusion remains in the minds of one’s fellow men that the love is unchanged and still the same.

One is promising that the semblance of love will endure, then, when without self-deception one vows everlasting love.

Aphorisms on Love and Hate will stir your mind and awaken your soul.

Joseph Tussman: Getting the World to Do the Work for You

“What the pupil must learn, if he learns anything at all, is that the world will do most of the work for you, provided you cooperate with it by identifying how it really works and aligning with those realities. If we do not let the world teach us, it teaches us a lesson.”

— Joseph Tussman

Nothing better sums up the ethos of Farnam Street than the quote above by Joseph Tussman.

How’s that for a guiding principle?

Tussman was a philosophy professor at Cal Berkley and an educational reformer. We got this beautiful quote from a friend of ours in California. Isn’t it brilliant?

The world will do a lot of the work for us if we only align with how it works and stop fighting it. Most of the time we want the world to work differently so we work against it. What Tussman really does is identify a leverage point.

Leverage amplifies an input to provide a greater output. There are leverage points in all systems. To know the leverage point is to know where to apply your effort. Focusing on the leverage point will yield non-linear results. Doesn’t that sound like something we want to look for?

Working hard and being busy is not enough. Most people are taking two steps forward and one step back. They’re busy, but they haven’t moved anywhere.

We need to work smarter not harder.

What Tussman has done is identify a leverage point in life. One that will increase what you can accomplish (through tailwinds) and reduced friction. When we work smart rather than hard, we apply energy in the same direction.

The person who needs a new mental tool and doesn’t have it is already paying for it. This is how we should be thinking about the acquisition of worldly wisdom. We’re like plumbers who show up with a lot of wrenches but no blowtorches, and our results largely reflect that. We get the job half done in twice the time.

A better approach is the one Tussman suggests. Learn from the world. The best way to identify how the world works is to find the general principles that line up with historically significant sample sizes — those that apply, in the words of Peter Kaufman, “across the geological time scale of human, organic, and inorganic history.”

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Still Curious? Pair with Andy Benoit’s wisdom and make some time to think about them.

Maria Konnikova on How we Get Conned

There’s a scene in the classic Paul Newman film The Sting, where Johnny Hooker (played by a young Robert Redford) tries to get Henry Gondorf (played by Newman) to finally tell him when they’re going to pull the big con. His response tells the tale:

You gotta keep his con even after you take his money. He can’t know you took him.

It’s this same subject that our friend Maria Konnikova — whom we interviewed a few years ago upon the release of her book Mastermind: How to Think like Sherlock Holmes — has mined with her new book The Confidence Game: Why We Fall For it…Every Time.

It’s a good question: Why do we fall for it every time? Confidence games (cons for short) are a wonderful arena to study the Psychology of Human Misjudgment.

In fact, you could call a good con artist — you have to love the term artist here — a master of human psychology. They are, after all, in the game of manipulating people into parting with their money. They are so good, a successful con is a lot like a magic trick:

When we step into a magic show, we come in actively wanting to be fooled. We want deception to cover our eyes and make our world a tiny bit more fantastical, more awesome than it was before. And the magician, in many ways, uses the exact same approaches as the confidence man—only without the destruction of the con’s end game. “Magic is a kind of a conscious, willing con,” Michael Shermer, a science historian and writer who has devoted many decades to debunking claims about the supernatural and the pseudoscientific, told me one December afternoon. “You’re not being foolish to fall for it. If you don’t fall for it, the magician is doing something wrong.”

Shermer, the founder of the Skeptics Society and Skeptic magazine, has thought extensively about how the desire to embrace magic so often translates into susceptibility to its less savory forms. “Take the Penn and Teller cup and balls. I can explain it to you and it still would work. It’s not just knowing the secret; it’s not a trick. It’s the whole skill and art of presentation. There’s a whole narrative—and that’s why it’s effective.” At their root, magic tricks and confidence games share the same fundamental principle: a manipulation of our beliefs. Magic operates at the most basic level of visual perception, manipulating how we see—and don’t see—and experience reality. It changes for an instant what we think possible, quite literally taking advantage of our eyes’ and brains’ foibles to create an alternative version of the world. The con does the same thing, but can go much deeper. Tricks like three-card monte are identical to a magician’s routine—except the intent is more nefarious.

Psychology and show magic have more in common than you’d think: As Shermer says, there are many magic tricks that you can explain ahead of time and they will still work, and still baffle. But…wait…how?

The link between everyday psychological manipulation and show magic is so close that the magician Harry Houdini spent a good portion of his later life trying to sniff out cons in the form of mediums, mystics, and sooth-sayers. Even he couldn’t totally shake free of the illusions:

Mysticism, [Houdini] argued, was a game as powerful as it was dangerous. “It is perfectly rational to suppose that I may be deceived once or twice by a new illusion,” he wrote, “but if my mind, which has been so keenly trained for years to invent mysterious effects, can be deceived, how much more susceptible must the ordinary observer be?

Such is the power of the illusion. The same, of course, goes for the mental tricks in our psychological make-up. A great example is the gambling casino: Leaving out the increasingly rare exceptions, who ever walks in thinking they have a mathematical edge over the house? Who would be surprised to find out the casino is deliberately manipulating them into losing money with social proof, deprival super-reaction, commitment bias, over-confidence bias, and other tricks? Most intelligent folks aren’t shocked or surprised by the concept of a house edge. And yet casinos continue to do healthy business. We participate in the magic trick. In a perverse sense, we allow ourselves to be conned.

In some ways, confidence artists like Demara have it easy. We’ve done most of the work for them; we want to believe in what they’re telling us. Their genius lies in figuring out what, precisely, it is we want, and how they can present themselves as the perfect vehicle for delivering on that desire.

The Beginning of a Con: The “Put-Up” & The “Mark”

Who makes a good mark for a con artist? Essentially, it could be anyone. Context trumps character. Konnikova wisely retracts from trying to pinpoint exactly who is easiest to con: The truth is, in the right time and place, we can all get hit by a good enough con man. In fact, con artists themselves often make great marks. This is probably linked, in part, to over-confidence. (In fact, you might call conning a con man an…Over-confidence game?)

The con artist starts by getting to know us at a deep level. Konnikova argues that con artists combine excellent judgment of character with a honed ability to show the mark exactly what he wants to see. An experienced con artist has been drowned in positive and negative feedback on what works and does not. Through practice evolution, he’s learned what works. That’s why we end up letting him in, even if we’re on guard:

A con artist looks at everyone at that fine level. When it comes to the put-up, accuracy matters—and con men don’t just want to know how someone looks to them. They want to correctly reflect how they want to be seen.

What’s more, confidence artists can use what they’re learning as they go in order to get us to give up even more. We are more trusting of people who seem more familiar and more similar to us, and we open up to them in ways we don’t to strangers. It makes a certain sense: those like us and those we know or recognize are unlikely to want to hurt us. And they’re more likely to understand us.

There are a few things at play here. The con is triggering a bias from liking/loving, which we all have in us. By getting us committed and then drawing us in slowly, they also trigger commitment bias — in fact, Konnikova explains that the term Confidence Game itself comes from a basic trust exercise: Get into a conversation with a mark, commit them to saying that they trust you, then ask them if they’ll let you hold their wallet as a show of that trust. Robert Cialdini — the psychology professor who wrote the wonderfully useful book Influence — would certainly not be surprised to see that this little con worked pretty frequently. (Maria smartly points out the connection between con artists and Cialdini’s work in the book.)

The “Play,” the “Rope,” the “Tale,” and the “Convincer”

Once the con artist decides that we’re a mark, the fun begins.

After the mark is chosen, it is time to set the actual con in motion: the play, the moment when you first hook a victim and begin to gain her trust. And that is accomplished, first and foremost, through emotion. Once our emotions have been captured, once the con artist has cased us closely enough to identify what it is we want, feeling, at least in the moment, takes over from thinking.

[…]

What visceral states do is create an intense attentional focus. We tune out everything else and tune in to the in-the-moment emotional cues. It’s similar to the feeling of overwhelming hunger or thirst—or the need to go to the bathroom—when you suddenly find yourself unable to think about anything else. In those moments, you’re less likely to deliberate, more likely to just say yes to something without fully internalizing it, and generally more prone to lapses that are outside the focus of your immediate attention.

As far as the context of a good con, emotion rules the day. People in financial straits, or who find themselves in stressful or unusual situations are the easiest to con. This is probably because these situations trigger what Danny Kahneman would call System 1 thinking: Fast, snap judgments, often very bad ones. Influenced by stress, we’re not slowing down and thinking things through. In fact, many people won’t even admit to be conned after the fact because they feel so ashamed of their lack of judgment in the critical moments. (Cult conversions use some of the same tactics.)

Now begins the “Tale”

A successful story does two things well. It relies on the narrative itself rather than any overt arguments or logical appeals to make the case on its own, and it makes us identify with its characters. We’re not expecting to be persuaded or asked to do something. We’re expecting to experience something inherently pleasant, that is, an interesting tale. And even if we’re not relating to the story as such, the mere process of absorbing it can create a bond between us and the teller—a bond the teller can then exploit.

It’s always harder to argue with a story, be it sad or joyful. I can dismiss your hard logic, but not how you feel. Give me a list of reasons, and I can argue with it. Give me a good story, and I can no longer quite put my finger on what, if anything, should raise my alarm bells. After all, nothing alarming is ever said explicitly, only implied.

This is, of course, the con artist preying on our inherent bias for narrative. It’s how we sense-make, but as Cialdini knows so well, it can be used for nefarious purposes to cause a click, whirr automatic reaction where our brain doesn’t realize it’s being tricked. Continuing the fallacy, the con artist reinforces the narrative we’ve been building in our head:

One of the key elements of the convincer, the next stage of the confidence game, is that it is, well, convincing: the convincer makes it seem like you’re winning and everything is going according to plan. You’re getting money on your investment. Your wrinkles are disappearing and your weight, dropping. That doctor really seems to know what he’s doing. That wine really is exceptional, and that painting, exquisite. You sure know how to find the elusive deal. The horse you bet on, both literal and figurative, is coming in a winner.

 The “Breakdown,” and the “Send”

And now comes the break-down. We start to lose. How far can the grifter push us before we balk? How much of a beating can we take? Things don’t completely fall apart yet—that would lose us entirely, and the game would end prematurely — but cracks begin to show. We lose some money. Something doesn’t go according to plan. One fact seems to be off. A figure is incorrectly labeled. A wine bottle is “faulty.” The crucial question: do we notice, or do we double down? High off the optimism of the convincer, certain that good fortune is ours, we often take the second route. When we should be cutting our losses, we instead recommit—and that is entirely what the breakdown is meant to accomplish.

A host of biases are being triggered at this point, turning our brains into mush. We’re starting to lose a little, but we feel if we hang in long enough, we can probably at least come out even, or ahead. (Deprival super-reaction tendency, so common at the roulette table, and sunk-cost fallacies.) We’ve already put our trust in this nice fellow, so any new problems can probably be rationalized as something we “knew could happen all along,” so no reason to worry. (Commitment & consistency, hindsight bias.) And of course, this is where the con artist really has us. It’s called The Send.

The send is that part of the con where the victim is recommitted, that is, asked to invest increasingly greater time and resources into the con artist’s scheme—and in the touch, the con finally comes to its fruition and the mark is completely, irrevocably fleeced.

The End of the Line

Of course, all things eventually come to an end.

The blow-off is often the final step of the con, the grifter’s smooth disappearance after the game has played out. Sometimes, though, the mark may not be so complacent. If that happens, there’s always one more step that can be taken: the fix, when a grifter puts off the involvement of law enforcement to prevent marks from making their complaints official.

Like the scene in The Sting, the ideal con ends without trouble for the con-man: Ideally, the mark won’t even know it was a con. But if they do, Konnikova makes an interesting point that the blow-off and the fix often end up being unnecessary, for reputational reasons. This self-preservation mechanism is one reason so many frauds never come to light, why there are few prosecutions in relation to the amount of fraud really going on:

The blow-off is the easiest part of the game, and the fix hardly ever employed. The Drake fraud persisted for decades—centuries, in fact—because people were too sheepish about coming forward after all that time. Our friend Fred Demara was, time and time again, not actually prosecuted for his transgressions. People didn’t even want to be associated with him, let alone show who they were publically by suing him. The navy had only one thing to say: go quietly—leave, don’t make a scene, and never come back.

Besides the reputational issue, there are clearly elements of Pavlovian mere association at play. Who wants to be reminded of their own stupidity? Much easier to sweep it away as soon as possible, never to be reminded again.

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Confidence Game is an enjoyable read with tales of cons and con artists throughout history – a good reminder of our own fallibility in the face of a good huckster and the power of human misjudgment.