Category Archives: Education

Defining Externalities: Social Entrepreneurship and Externalities, Part 2

In the first post in this series, we looked at the definition of social entrepreneurship. In this post, we’ll look at the definition of externalities. Before we get into the post, I wanted to let you know that when I copied part of the paper into this post, the footnotes reset and started at 1. However, as we know from yesterday’s post the first footnote from Pigou is actually footnote #10.

Defining Externalities

The process for defining externalities is as muddled as the process for defining social entrepreneurship. Since the term ‘externalities’ came first,[1] it might be more accurate to say that the process for defining social entrepreneurship is as muddled as the process for defining externalities. The first appearance of a definition of externalities comes in the early 1900s from Pigou,[2] a British economist, who comes from the field of ‘welfare economics,’ which focused on maximizing the well being of society. The general understanding of externalities hasn’t changed too much since then, leaving us with the following definition: “An externality is a cost or benefit that is experienced by someone who is not a party to the transaction that produced it.”[3]

This definition of externalities leaves us with the possibility for positive (benefit) externalities or negative (cost) externalities. An example of a negative externality could be the pollution to the air (or water) caused by a factory. An example of a positive externality could be the honey caused by the natural process of bees. Those two examples of positive/negative externalities are simple ones, but there are many more. Some cite traffic congestion as a negative externality[4] and some cite immunization as a positive externality.[5] The concept of externalities came out of economic theory and as such, we can highlight (through economic theory) some of the results that come from negative/positive externalities. “Negative externalities cause overproduction of the good in a competitive market, while positive externalities cause underproduction of the good in a competitive market, in both cases leading to a deadweight loss.”[6]

There is another kind of externality: positional externalities. “A positional externality occurs when new purchases alter the relevant context within which an existing positional good is evaluated.”[7] An example of this could be said to be when a job candidate starts to wear really expensive suits. The side effect of this is that other job candidates don’t make as good an impression upon the interviewer. From the perspective of the other candidates, it would be most beneficial to go out and purchase expensive suits, so as to make a favorable impression on the interviewers. “But this outcome may be inefficient, since when all spend more, each candidate’s probability of success remains unchanged.”[8] The last kind of externality of this similar vein (positive, negative, and positional) is a network externality. This is also referred to as a network effect and is most often seen in technology. Think about your cell phone. The value of your cell phone is somewhat dependent upon the number of other people [network] who also have cell phones. There is a further way to distinguish between different kinds of externalities: ‘internal’ and ‘external’ externalities.[9] Internal externalities are those externalities that are external to the contractual relationship, but internal to those parties within the contract. External externalities are those externalities that are external to both the contractual relationship and the parties within the contract.

At this point, we have talked about the various kinds of externalities (positive, negative, positional, network, internal, and external). To solidify the understanding of externalities, I’d like to provide an example of the creation of externalities by externalities:[10]

Jacksonville, Florida requires apartment complexes to provide 1.75 parking spaces per one-bedroom apartment – despite the fact that 16% of Jacksonville’s renter households even own one [sic] car . . . Most American cities require office buildings to provide four parking spaces per 1000 square feet of office space. Because four parking spaces consume about 1200 square feet of space, this means that a commercial landlord must allocate the majority of his land to parking.

Minimum parking requirements reduce population and job density, because land that is used for parking cannot be used for housing or commerce. Residents of low-density areas tend to be highly dependent on automobiles for most daily tasks, because they are less likely to live within walking distance of public transit and other amenities.

Minimum parking requirements indirectly discourage walking, by encouraging landowners to surround their building with parking. Where shops and offices are surrounded by a sea of parking, they are unpleasant places for pedestrians, because pedestrians must waste time walking through parking lots and risk their lives dodging automobiles . . .

By increasing the number of parking lots, minimum parking requirements may increase pollution from stormwater runoff. Rainstorms cause stormwater to fall on parking lots, collect metal, oil and other pollutants lying on the ground, and then run off into nearby waters, thus making those waters dirtier and more dangerous.

As one can see, this never-ending string of externalities seems to keep going. All of this stems from the initial action of a policy seemingly trying to do well by its citizens. Now that we have talked about some of the different kinds of externalities and explored a concrete example of how externalities can quickly multiply, let’s look at some of the proposed solutions to these externalities. But just before we move into the description of some of the solutions to externalities, I thought it a good place to add a note from Coase, who is often part of the conversation of externalities: “The traditional approach [to externalities] has tended to obscure the nature of the choice that has to be made. The question is commonly thought of as one in which A inflicts harm on B and what has to be decided is; how should we restrain A? But this is wrong . . . The real question that has to be decided is: should A be allowed to harm B or should B be allowed to harm A?”[11] Coase is absolutely right in his critique of the framing of the question. Even in today’s discussion (Coase wrote this in the 1960s) about externalities, rarely is the question framed in the way that Coase has suggested.

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Note: when we next pick-up this series, we’ll look at some solutions to externalities.

[1] Pigou, A. C. (1920). The economics of welfare. London: Macmillan and Co.

[2] Ibid.

[4] Bento, A., Kaffine, D., Roth, K., & Zaragoza, M. (2011). The unintended consequences of regulation in the presence of competing externalities: Evidence from the transportation sector. Yale Center for Business and the Environment.

[5] Simpson, B. P. (2007). An economic, political, and philosophical analysis of externalities. Reason Papers, 29(1), 123-140.

[6] Gruber, J. (2010). Public finance and public policy (3rd ed.). New York: Worth Publishers.

[7] Frank, R. H. (2003). Are positional externalities different from other externalities? The Brookings Institution.

[8] Ibid.

[9] Buchanan, J. B., & Vanberg, V. J. (1988). The politicization of market failure, Public Choice Society Meetings.

[10] Lewyn, M. (2010). What would Coase do? (About parking regulation). Fordham Environmental Law Review, 22(1), 89-118.

[11] Coase, R. H. (1960). The problem of social cost. The Journal of Law and Economics, 3(1), 1-44.

Defining Social Entrepreneurship: Social Entrepreneurship and Externalities, Part 1

I enjoyed sharing the work that I’d done several years ago curating those quotes from various religious scriptures into a number of posts. As a result, it got me thinking of some of the other papers I’ve wrote and whether they’d be appropriate to share here. Since I just finished an MBA, I’ve gone through quite a number of case studies. Since professors tend to reuse those cases, it seems inappropriate to share the papers I wrote for those cases (as some students might try to pass it off as their own work). With that being said, yesterday’s post about fines vs. fees reminded me of a paper I wrote about a year ago for a class in social entrepreneurship. This paper wasn’t for a case, so I thought I’d share it in a number of installments. In today’s post, I’ll share the executive summary and the first section: defining social entrepreneurship.

Executive Summary

This aim of this paper is to answer two main questions: (1) are externalities essential to the understanding of social entrepreneurship? (2) are the economic theories of externalities used in the professional understanding of social entrepreneurship? To answer these questions, the definitions of social entrepreneurship and externalities are explored, along with the different categories of externalities. There is also a short examination of the different solutions to externalities. Following this, an analysis of the intersection of the two concepts (social entrepreneurship and externalities) is conducted, the results of which return answers of “yes” to both of the main questions of this paper.

Defining Social Entrepreneurship

Before moving into a discussion about social entrepreneurship and externalities, it is important to define these terms. As one delves further into the literature – both academic and popular – it quickly becomes clear that there are myriad understandings that cloud the space around these terms[1] and thusly make the task of definition that much more important. To begin, I will define social entrepreneurship, but before that, it might be more appropriate to start with a definition of entrepreneurship.

Most definitions of social entrepreneurship begin with an attempt to define entrepreneurship and logically so, as ‘social’ acts as a modifying word to entrepreneurship. One definition of what it means to be an entrepreneur that I particularly like, “A person is an entrepreneur from t1 to t2 if and only if that person attempts, from t1 to t2, to make business profits by innovation in the face of risk.”[2] Subsequently, the definition of entrepreneurship follows as, “The process of attempting from t1 to t2, to make business profits by innovation in the face of risk.”[3] While there is disagreement among some about how to define entrepreneurship, this basic understanding will suffice for the purposes of this paper.

Now that we have defined entrepreneurship, ‘business profits by innovation in the face of risk,’ we can move on to define social entrepreneurship. Similar to entrepreneurship (and maybe understandably so), social entrepreneurship lacks a consensual definition among those who study it. The Skoll Centre for Social Entrepreneurship at the University of Oxford defines social entrepreneurship as, “[being] about innovative, market-oriented approaches underpinned by a passion for social equity and environmental sustainability.”[4] Others believe that social entrepreneurship is, “ a process that catalyzes social change and/or addresses important social needs in a way that is not dominated by direct financial benefits for the entrepreneurs.”[5] While those definitions are similar, one could identify differences. The first definition includes an approach and the second definition includes a process. Part of the issue surrounding the definition of social entrepreneurship is that, “it means different things to different people.”[6] I may be a bit biased as I’m currently interning with Ashoka, but I think the person [Bill Drayton, founder and CEO of Ashoka] who ‘created’ the term[7] should have a great deal of say in the definition of said term. As such, Ashoka defines social entrepreneurship in following way:[8]

Social entrepreneurs are individuals with innovative solutions to society’s most pressing social problems. They are ambitious and persistent, tackling major social issues and offering new ideas for wide-scale change.

Rather than leaving societal needs to the government or business sectors, social entrepreneurs find what is not working and solve the problem by changing the system, spreading the solution, and persuading entire societies to take new leaps.

One of the important distinctions regarding Ashoka’s definition of social entrepreneurship is that the idea precedes the doing. That is, the social entrepreneur plans to address the problem (or social ill) before s/he begins the venture. This will be important later on when we talk about externalities. Another important distinction here is the specification of ‘changing the system.’ This is key because one of the more recent academic articles published on the topic of social entrepreneurship isolates four main factors of the definitions of social entrepreneurship, none of which are ‘changing the system’. They include: characteristics of individual social entrepreneurs, their sphere of operation, the processes and resources used by social entrepreneurs, and the mission of the social entrepreneur.[9] Let’s use the definition of social entrepreneurship provided by Ashoka and move on to define the next piece: externalities.

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Note: Check back tomorrow for the next section: defining externalities. Below, you’ll find a list of footnotes from this first section of the paper.

[1] For social entrepreneurship, see: Tan, W., Williams, J., & Tan, T. (2005). Defining the ‘social’ in ‘social entrepreneurship’: Altruism and entrepreneurship. International Entrepreneurship and Management Journal, 1(3), 353-365. For externalities, see: Barnett, A. H., & Yandle, B. (2009). The end of the externality revolution. Social Philosophy and Policy, 26(2), 130-150.

[2] Tan, W., Williams, J., & Tan, T. (2005). Defining the ‘social’ in ‘social entrepreneurship’: Altruism and entrepreneurship. International Entrepreneurship and Management Journal, 1(3), 353-365.

[3] Ibid.

[5] Mair, J., & Marti, I. (2004). Social entrepreneurship: A source of explanation, prediction, and delight. Journal of World Business, 41(1), 36-44.

[6] Dees, J. G. (1998). The meaning of ‘social entrepreneurship.’ Stanford University: Center for Social Innovation. See: http://www.caseatduke.org/documents/dees_sedef.pdf

[9] Dacin, M. T., & Dacin, P. A. (2011). Social entrepreneurship: A critique and future directions. Organization Science, 22(5), 1203-1213.

 

Chapter 2 – Fines vs. Fees: What Money Can[‘t] Buy, Part 2

In the first post in this series, I chewed on the material from chapter 1 of Professor Michael Sandel‘s book, What Money Can’t Buy. The first chapter was all about jumping the line (or budding, as I remember it from my elementary school days). In Chapter 2, the theme was incentives.

I had finished reading chapter 2 a little while ago, but I’d been busy recounting the bits from that paper over the last several days, so I’d sidelined a post about chapter 2. Now that I’ve finished the paper (A Collection of Scriptures for Guidance), I thought I’d chew on the material from chapter 2.

As I said, the title of chapter 2 was incentives. There were a few things that I wanted to highlight (though, I thought the whole chapter was fascinating). In particular what stood out to me were three things: incentives (and the perverting of incentives), fines vs. fees, and paying kids to read. Let’s start with the last one, which will link to the first one.

Nowadays, some parents pay their kids to read. In fact, some schools encourage the idea of rewarding children for reading. At first, this seems like a great use of the free market, right? Incentivizing the reading of books to get kids to read more books. Except, what if part of the pleasure of reading is the pure desire to read? By paying kids to read, it robs them of that intrinsic motivation. In fact, by paying kids to read, it could de-incentivize them from reading when there is no reward involved (perverting the incentives).

In thinking about this example, it made me contemplate just how hard it can be for lawmakers (i.e. Congresspeople, Members of Parliament, etc.) to write legislation that will properly incentivize the citizens to act in a way that is best for themselves (and the town/city/county/country, etc.). Paying kids to read seems like an easy way to get kids to read, but when one plays out the incentive and considers the unintended consequences, one can see how this perverts the intent of getting kids to read.

The next piece I wanted to talk about was fines vs. fees. This part was really interesting to contemplate. From the book:

What is the difference between a fine and a fee? It’s worth pondering the distinction. Fines register moral disapproval, whereas fees are simply prices that imply no moral judgment. When we impose a fine for littering, we’re saying that littering is wrong… It reflects a bad attitude that we as society want to discourage. Suppose the fine is $100 [for littering] and a wealthy hiker decides it’s worth the convenience of not having to carry his empties out of the park. He treats the fine as a fee and tosses his beer cans into the Grand Canyon. Even though he pays up, we consider that he’s done something wrong. By treating the Grand Canyon as a dumpster, he has failed to appreciate it in an appropriate way.

Sandel goes on to talk about how this fines vs. fees attitude can also be applied to disabled parking spaces, speeding, the subway/metro, renting videos, and many others. I found this discussion especially interesting because of the moral-ness to it. When one is creating fines, one is (whether one means to or not) using morals. We don’t think it’s morally right to litter and that’s why there’s a fine for littering. Paying to park your car in a garage is a fee.

There’s one more passage that I think was really important to remember from this chapter:

But why does this mean that moral philosophy must enter the picture? For the following reason:

Where markets erode nonmarket norms, the economist (or someone) has to decide whether this represents a loss worth caring about… The answer will vary from case to case. But the question carries us beyond predicting whether a financial incentive will work. It requires that we make a moral assessment: What is the moral importance of the attitudes and norms that money may erode or crowd out?

If you liked this post, you might like one of the other posts in this series:

Ways For Avoiding Cognitive Biases: List of Biases in Judgment and Decision-Making, Part 16

It’s Monday, so that means it’s time for another cognitive bias. However, I’ve finished the list of cognitive biases that I wanted to highlight. Of course, there are many more biases that could be discussed, but I thought those 14 were some of the more important cognitive biases. With today’s post, I thought I would review all of the ways for avoiding the biases, categorized by bias. So, I’ll list each bias and recount the ways that I suggested for avoiding the bias.

This is going to be a jam-packed post (with over 3000 words!) I highly recommend bookmarking this post and coming back to it as a reference. Alrighty, with that being said, let’s start with the sunk cost fallacy.

Ways for Avoiding the Sunk Cost Fallacy

So, now that we’ve looked at the sunk cost fallacy, how can we avoid it? Well, the first step in avoiding the sunk cost fallacy is recognizing it. Hopefully, the above examples have given you an idea of how this bias can arise. There are a two other ways I want to highlight that you can use to avoid this trap.

1) What am I assuming?

The crux of the sunk cost fallacy is based on an assumption. That is, you’re assuming that because you’ve already spent money on X, that you should keep spending money on X. If you look at what it is that you’re assuming about a situation, you just might find that you’re about to step into the sunk cost trap.

2) Are there alternatives?

Related to the above example is alternatives. You’re not bound to a decision because you’ve made a similar decision in the past. Just because you bought the ticket to go to the movie, if another activity presents itself as more enticing, you’re allowed to choose that one instead. In fact, if when you sit down to watch the movie, it’s bad, you’re allowed to get up and walk out. Don’t fall into the sunk cost trap thinking that you have to stay because you paid for it. There are any number of things you could be doing: going for a walk, calling an old friend, etc.

Ways for Avoiding Loss Aversion

As with the sunk cost fallacy, one of the most important ways to avoid loss aversion is to recognize it. That is, to know that humans have a tendency for loss aversion is an important first step in not falling into the trap of loss aversion.

1) What’s the big picture?

In our example of golf, that might mean knowing where you are in relation to the other players your competing with in the tournament (rather than where your ball is relation to the hole and what specific stroke you’re about to hit). In business, one might examine a decision about one business unit in relation to the entire company (rather than looking myopically at the one business unit).

2) Am I afraid of losing something?

This may seem like an obvious solution, but it’s pretty important. If before making a decision you can think to yourself (or have your team ask itself), “am I afraid to lose something here?” You might find that you are and it could serve to help you or your company avoid falling into the trap of loss aversion.

3) Do you really expect to never lose anything — ever?

Loss is inevitable. Sometimes, you won’t make that par putt (or that birdie putt). Sometimes, when you negotiate a deal, you won’t get the best deal. Sometimes, the decision to sell that business unit might result in losses somewhere else. If you can come to grips with the fact that every decision you make won’t be perfectand that sometimes you will lose, you may begin to shift your expectations about loss.

Ways for Avoiding the Endowment Effect

1) Am I emotional?

A seemingly obvious way to avoid the endowment effect is assessing whether our emotions are involved. Don’t get me wrong, emotions are a good thing, but they are a surefire way to overvaluing things that you own. That is, if you find yourself overly connected to something, your emotions might be getting in the way.

2) Independent Evaluation

This dovetails nicely with the idea of being unemotional. To guard against succumbing to the endowment effect, be sure to have an independent appraisal of whatever it is that you’re looking to sell of yours. While you’ll still have the final say on what you sell and how much you sell it for, having a second pair of eyes look at your side of the “deal” might help you determine if you’re judgment’s clouded.

3) Empathy

I wasn’t going to include this initially, but after reading the research, it certainly fits. Before I go on, I should say that folks might be confused in that I just suggested asking whether one is emotional and now I’m saying to practice empathy? For those wondering, being emotional is not the same thing as being empathetic. Back to empathy and the endowment effect. In situations where we’re selling something, researchers found there to be an empathy deficit when the endowment effect was present. So, to counter this, you should try to empathize with whom you’re negotiating.

Ways for Avoiding the Planning Fallacy

With the first three biases I talked about, awareness was a key step in overcoming the bias. While you could make that argument for the planning fallacy, one of the hallmarks of [the fallacy] is that people know they’ve erred in the past and stillmake the mistake of underestimating. So, we’ll need to move beyond awareness to help us defend against this bias.

1) Data is your friend

No, I don’t mean Data from Star Trek (though Data would probably be quite helpful in planning), but now that I think about it, Data (the character) might be a good way to position this ‘way for avoiding the planning fallacy.’ For those of you not familiar, Data is a human-like android. In thinking about this way for avoiding the planning fallacy, think about how Data might estimate the length of time it would take to complete a project. It would be very precise and data-driven. Data would likely look at past projects and how long it took for those to be finished to decide the length of time needed for this new project. To put it more broadly, if you have statistics on past projects (that were similar) absolutely use them in estimating the completion time of the new project.

2) Get a second opinion

When we think about the project completion time of one project in relation to another project, we often think about the nuances that make this project different from that project — and by extension — why this project won’t take as long as that project. Planning fallacy. If you can, ask someone who has experience in project completion in the area for which you’re estimating. When you ask this person, be sure not to tell them all the “various ways why this project is different,” because it probably isn’t and it’s only going to cloud the predictive ability of the person you’re asking. You’re probably going to hear an estimate that’s larger than you thought, but I bet you that it’s probably a lot closer to the real project completion time than the estimate you made based on thinking about the ways that this project was going to be different than all the other projects like it.

Ways for Avoiding the Framing Effect

1) Reframe the question

It may seem obvious, but you’d be surprised how many people don’t consider “reframing” the frame with which they are looking at a situation. For instance, in the example from earlier, instead of looking at it as a choice between Program A and Program B, someone could reframe Program A so that it looks like Program C and do the same with Program B, so that it looks like Program D. As a result, one would then be getting a “fuller” picture of their choice.

2) Empathy — assume someone else’s perspective

Many choices implicate another in a situation. As a result, it might be worth it to put yourself in the shoes of that other person to see how they would view a given situation. This is similar to the reframe, but is more specific in that it might serve to help the person remove themselves a little bit from the decision. That is, when we’re faced with a choice, our personal biases can have a big impact on the decision we make. When we imagine how someone else might make this decision, we’re less likely to succumb to our personal biases.

3) Parse the question

Some questions present us with a dichotomous choice: are apples good or bad? Should we exercise in the morning or the evening? Are gap years helpful or harmful? When faced with a question like this, I would highly recommendparsing the question. That is, are we sure that apples can only be good or bad? Are we sure that exercising in the morning or the evening are our only options? Often times, answers to questions aren’t simply this or that. In fact, more times than not, there is a great deal of grey area. Unfortunately, when the question is framed in such a way, it makes it very difficult to see the possibility of the grey area.

Ways for Avoiding the Confirmation Bias

As with other cognitive biases, being aware that there is such a thing as the confirmation bias is really important. It can be hard to change something if you don’t know that there’s something to be changed.

1) Seek out contradictory ideas and opinions

This is something that I’ve written about before. If at all possible, you’ve got to be sure that you’re getting information that is counter to your beliefs from somewhere. If not, there’s little chance for growth and expansion. This can be difficult for some, so I’ve outlined ways to do this on the post I referenced above.

2) Seek out people with contradictory ideas and opinions

I answered a question on Quora last November where I placed these two ways for avoiding the confirmation bias one and two. Some folks might find it a little more difficult to seek out people with opposing views and that’s why I suggest starting with seeking out contradictory views in print (or some other form of media) to begin. However, in my experience, speaking with someone who has opposing views to mine (assuming that they are also altruistic in their endeavor to seek out opposing views) can be quite enriching. A real-life person can usually put up a better defense when your “confirmation bias” is activated. Similarly, you can do the same for them.

3) What do you really know?

My last suggestion for avoiding the confirmation bias is to always be questioning what it is that you know. This can sound tedious, but if you get into the habit of questioning “how” you know something or “why” you know something, you’d be surprised how ‘thin’ the argument is for something that you know. For instance, let’s say that you have a racial stereotype that ethnicity “x” is bad at driving. When you’re on the highway, you notice that someone from ethnicity “x” cuts you off. Instead of going into a tizzy about ethnicity “x,” you might stop and remember that, in fact, of all the times that you’ve been cut off, ethnicity “x” is the ethnicity that cuts you off the least. This is a curt example, but I think you get the idea. Just to emphasize my point: I would argue that questioning your deeply held beliefs would be a good way of countering the confirmation bias.

Ways for Avoiding the Gambler’s Fallacy

1) Independent Events vs. Dependent Events

The biggest way to avoid the gambler’s fallacy is to understand the difference between an independent event and a dependent event. In the classic example, the odds of a coin landing on heads or tails is — negligibly – 50/50 (I say negligibly because there are those who contend that the “heads side” weighs more and thus gives it a slight advantage). An example of a dependent event would be picking cards from a deck. There are 52 cards in a deck and if you pick one card without replacing it, your odds of picking one of the other 51 cards increases (ever so slightly).

Ways for Avoiding the Fundamental Attribution Error

1a) Empathy

As with many of the other biases, empathy is one of the quickest ways to thwart its power of you. If I put myself in the shoes of another, I’m more likely to understand that there might be more going on in the situation than I can see from my perspective. For instance, if we look at the red light example from above, by empathizing with the driver who runs the red light, I have a much higher chance of understanding that there running the red light is not a demonstration of their disregard for the world around them, but maybe that there’s something urgent to be taken care of.

1b) “Why Would a Rational Person Behave This Way?”

The above sentence is essentially a way to create a sense of empathy, but in case empathy is an ambiguous term, I’ve marked this ‘way’ 1b. Asking yourself this question will make it easier to consider the other factors at contributing to a situation.

Ways for Avoiding the Overconfidence Effect

1) Know what you know (and don’t know)

The fastest way to slip into the trap of the overconfidence effect is to start making “confident” predictions about things that you don’t know about. Guessing the number of paper clips in a bottle is something that most of us have little to no expertise in. So, list a large confidence interval. If you have no experience in managing a project, it might be in your best interest not to make a prediction about how long it will take to complete the project (planning fallacy).

2) Is this person really an expert?

Sometimes, you’ll hear someone displaying a level of confidence in a given situation that makes you think they know what they’re talking about. As a result, it might bias you into believing what they are saying. It’s important to know if this person is an expert in this field, or if maybe they’re succumbing to the overconfidence effect.

Ways for Avoiding the Halo Effect

1) Different strengths for different tasks

One of the easiest ways to avoid falling into the trap of the halo effect is to notice that there are different skills/strengths required for different tasks. As such, just because someone is good at climbing mountains doesn’t mean that they would make a good politician. The strengths/skills required for those two tasks are different. Put another way, think about the strengths/skills required for a particular tasks before evaluating whether someone would be good at that task.

2) Notice other strengths (or weaknesses)

It’s been said that, “nobody’s perfect.” When someone is good at one thing, there’s a good chance that they won’t be good at something else. Noticing that this person isn’t good at someone else may help to quell the urge to assume that this person is good at everything.

Ways for Avoiding the Primacy/Recency Effect(s)

How you avoid these two biases really depends on the context of the decision you’re making. For instance, if you want people to remember something, you probably don’t want to give them a long list (thereby invoking the possibility of one of these two biases to happen). There are some general ways to mitigate these baises, though.

1) Keep a record (write down the data)

One of the simplest ways that either of these biases can have an impact on a decision is when there isn’t a record of data. If you’re just making a decision based on what you remember, there will be an unnecessary weighting for the beginning or the end. As a result, keeping a record of the choices can make it easier to evaluate all choices objectively.

2) Standardized data

As I mentioned earlier in this post, it’s important that the data by which you’re evaluating a choice be standardized. As we looked at in number one, keeping data isn’t always enough. it’s important that the data be uniform across choices, so an evaluation can be made. In this way, it’s easier to look at earlier choices and later choices equally whereas if this weren’t instituted, there might be a slight bias towards the beginning or the end. This tip would work for situations similar to making a purchase (and gathering data), interviewing candidates, or something that can be analogized to either of these two.

Ways for Avoiding Functional Fixedness

1) Practice, practice, practice

Probably the easiest and most effective way of overcoming functional fixedness is to practice. What does that mean? Well, take a box of miscellaneous things and see if you can design something fun/creative. The emphasis should be on using those things in a way that they weren’t designed. For instance, if you’re using a toolbox, you might think about how you can use something like wrenches to act as “legs” of a table or as a conductive agent for an electrical circuit.

2) Observant learning — Find examples

Another good way of overcoming functional fixedness is to look at other examples of people who have overcome functional fixedness. When I was giving a presentation on functional fixedness to a group (of college students) about a year ago, I showed the video below. About halfway through the video, one of them remarked: “So, basically, it’s how to be a college student 101.”

Ways for Avoiding the Status Quo Bias

1) Independent Evaluation

It really can be as easy as this. Have someone (or do it yourself) do a cost-benefit analysis on the situation/decision. In this way, you’ll be able to see the pros/cons of your decision in a new light. Of course, you may still succumb to the status quo bias, but you might be less likely to do so.

2) Role Reversal

While the independent evaluation makes “good sense” in trying to avoid this bias, doing some sort of role reversal will probably be the most effective. That is, look at the decision/situation from the other perspective. If it’s a negotiation, imagine that you’re in your negotiating partner’s shoes and you’re actually doing the trade from that side. Evaluate the deal. This may help to shake loose the status quo bias.

Ways for Avoiding the Hindsight Bias

1) Write it down!

This might be a bit tedious, but it’s a surefire way to guard against the hindsight bias. I’ve read a few articles about folks who’ve documented every prediction that they’ve ever made. While this had more to do with their profession (forecasting, stocks, etc.) it might be something you want to consider.

2) “I knew it all along!”

Have you ever found yourself saying, “I knew it all along,” or “I’m was sure it was going to happen?” These are good indicators that you’re probably operating under the hindsight bias. When you catch yourself saying these phrases, stop and think about what has happened in the situation. Chances are that you’ve “short-circuited” and you’re not thinking about what’s happened to cause that situation.

Is Sunshine Really the Best Disinfectant: Edward Snowden, PRISM, and the NSA

In keeping with the theme from yesterday’s post about Edward Snowden and the leaks about PRISM and the NSA, I thought I’d share something that I was reminded of when I was watching some of the coverage of it earlier this week. Before doing that though, if you haven’t, and regardless of your position on whether he should or shouldn’t have done this, I would urge you to read the article and watch the clip about him in The Guardian.

A couple of days ago I happened to catch a segment of Morning Joe where one of the journalists who broke the story about the NSA, Glenn Greenwald, was on. The clip is about 20 minutes and there’s an interesting exchange between one of the hosts and Greenwald. The part I’d like to highlight today happens towards the end of the segment. I think it was Willie Geist who asked the question and included the phrase, “Sunshine is the best disinfectant,” in reference to getting the information about these programs out in the open. This reminded me of a paper I wrote for a Public Administration class and I thought it might be useful if I detailed some of the research I used for that paper.

The idea that “sunshine is the best disinfectant” with regard to public administration stems from the idea of government reform. In a 2006 paper in Public Administration Review, Paul C. Light defined four tides of government reform:

All government reform is not created equal. Some reforms seek greater efficiency through the application of scientific principles to organization and management, whereas others seek increased economy through attacks on fraud, waste, and abuse. Some seek improved performance through a focus on outcomes and employee engagement, whereas others seek increased fairness through transparency in government and access to information. Although these four approaches are not inherently contradictory — and can even be found side by side in omnibus statutes such as the 1978 Civil Service Reform Act — they emerge from very different readings of government motivations.

These approaches also offer an ideology for every political taste: scientific management for those who prefer tight chains of command and strong presidential leadership; the war on waste for those who favor coordinated retrenchment and what one inspector general once described as “ the visible odium of deterrence ” ( Light 1993 ); a watchful eye for those who believe that sunshine is the best disinfectant for misbehavior; and liberation management for those who hope to free agencies and their employees from the oppressive rules and oversight embedded in the three other philosophies. [Emphasis Added]

My point in sharing this article wasn’t to say that the idea that sunshine is the best disinfectant is good or bad, but merely to put it in context with some other ways of reforming government. You can decide for yourself which you prefer. In fact, there’s a handy table for differentiating the four:

The Four Tides of Reform

And one more interesting table that shows you how government reform in the US has changed since 1945:

Patterns in Reform Philosophy

Chapter 1 – When is it OK to Jump the Line: What Money Can[‘t] Buy, Part 1

I recently read a post from somewhere (I want to say that it was Farnam Street or Barking Up The Wrong Tree, but I’m not sure), that talked about “how” to read. That is, the essential point was that most of us don’t remember most of the things that we read. Instead, we read them and forget about them. To rectify this, the research shows that we need to engage with each chapter to really register the material with our memory. So, I thought what better way to experiment with this than to start a new series!

One of the books that I’ve started reading: What Money Can’t Buy. I already wrote something a few weeks ago about a passage from the introduction. Let’s call that the prelude or maybe the foreword? Today, however, I’m going to share thoughts on Chapter 1. In the coming weeks/(months?) I’ll share thoughts on the remaining chapters when I finish reading them.

The first chapter was all about jumping the queue. When is it fair to jump the line? Is budding never fair? There were some intriguing examples put forth about some people who purchase the services of people who are ‘handicapped’ to be their tour guide when they go to amusement parks, so that they can head straight to the front of the line. Is that ethical?

What about those towns/counties/states that allow cars to purchase stickers that permit them to drive in the carpool lane even though they’re driving solo? Is that ethical? How about doctors that sell their services to the highest bidder?

The first chapter was a good introduction to differences between markets and queues. I don’t know that I have anything profound to say about the first chapter, but some examples sure made me think about what I thought was right and wrong and what other people might think is right and wrong. It reminded me of Kohlberg’s stages of moral development. I wondered how people who were at different stages might react differently to the perceived injustices.

If I had to summarize chapter 1, it’d be that some “goods” are better suited for markets and others are better suited for queues. Though, I don’t know that it’s easy to tell the difference. That seems to depend on the person and the person’s philosophical bent. I presume that in future chapters, Sandel might help guide us to a solution.

The Best Kept Secret When Traveling — Tours!

It’s been a few days since my last post. Unfortunately, I’ve been a bit under the weather, so I’ve heeded my advice — rest. I think I’m through the worst of it, though, so I wanted to give you a small — but important! — piece of advice before we get too far into “summer traveling season.”

For the average westerner my age, I’ve been many places. I was born and raised in the Toronto area and spent a lot of time traveling within Southwestern Ontario because I played baseball for a traveling team. I moved to Michigan for my bachelor’s degree and while there, I visited the Upper Peninsula, plenty of other towns in Michigan, traveled to South Carolina for an Alternative Break, traveled to Costa Rica as part of a class, and then to the Dominican Republic for pseudo-Alternative Break.

After this, I moved to California (driving across the country) to start graduate school in psychology. I stopped short of the PhD I’d intended to complete and ended up traveling to New Zealand for a few months. Upon returning, I lived in British Columbia before moving to Hawaii. After Hawaii, I moved to the DC area (where I currently am). As part of school trip, I spent some time in Europe. I haven’t named all the little side trips, but suffice to say, like I said, for the average person from North America, I’ve been many places.

While I’ve been many places, I don’t know that I’d say I’ve “seen” them the way that I’ve now seen Washington, DC. I’ve lived in the DC area for almost two years. I didn’t take the opportunity to see the Lincoln Memorial until I’d been living here for over a year. Of course, I’d been into DC several times, but never went to see the Memorial. Recently though, I saw DC in a new light. Why? How? I took the chance to go on a tour!

I’ve been part of tour groups before, but something about this one felt different. Maybe it’s because it was something I chose and not something that was simply part of the experience. Maybe it was because the material was the US National Monuments and there’s certainly an air of mystique to them. I can’t put my finger on the whole reason, but I can tell you that most of the reason was probably because of the tour guide.

If you are ever in DC, I can’t recommend enough taking the time to go on a tour with Tim and the Walk of the Town. If you check TripAdvisor, you’ll note that of all of the activities in Washington, DC, his tour is ranked 1st. And, if you click-through to see his ratings, you’ll see that he’s received 595 Excellents out of a possible 609. That’s incredible! I can tell you that it is certainly deserved. I first went on the Saturday Night Tour and loved it so much that I came back a few days later for the Waterfront Walk. We learned about so much! I’d probably have to do the tours a couple of times to really have taken in all of the information that he offers. I don’t think I’ve yet mentioned this, but this may be important for some — one of the best parts about the Walk of the Town is that it’s free.

A brief aside: In the coming weeks, I intend to do a few posts on some of the things I learned while on these tours and I’m really looking forward to it. For instance, even though I just finished an MBA at George Mason University, I had no idea that — essentially — George Mason is the grandfather of the Declaration of Independence!

As I said, if you’re ever in DC, I can’t recommend enough the Walk of the Town. And you can be sure that the next time I find myself in a new city, I’ll be sure to find out who the best tour guide is, so I can learn about that place.

What Money Can[‘t] Buy – Everything and Nothing

Now that the semester has concluded, I can get to some of the reading that I have put off for some time. One of the books I’ve been excited to read for a while, but wanted to wait until I had time to chew over the issues discussed is a book by Professor Michael Sandel: What Money Can’t Buy. I’ve previously talked about how much I enjoyed Prof. Sandel’s online course “Justice.” This is part of the reason I was excited to read his latest book. I just picked it up from the library yesterday and have already zoomed through the introduction. Here’s an excerpt that I thought was particularly on point for the subject:

If the only advantage of affluence were the ability to buy yachts, sports cars, and fancy vacations, inequalities of income and wealth would not matter very much. But as money comes to buy more and more — political influence, good medical care, a home in a safe neighborhood rather than a crime-ridden one, access to elite schools rather than failing ones — the distribution of income and wealth looms larger and larger. Where all good things are bought and sold, having money makes all the difference in the world. (p. 8).

There are certainly going to be other passages that I’ll want to talk about, so look for other posts on this book in the coming weeks/months.

Tying Up Loose Ends: Food for Thought and Brief Hiatus

Since moving to the new domain (www.JeremiahStanghini.com), this has been the longest time between posts. The last post I wrote was on April 5th. The hiatus from posting will continue for a little while after this post because I’m working on the last requirements for finishing my MBA. There are about 3 weeks left until the end of exam period, so I’ve got a few papers/presentations to finish and a lot of grading of papers/exams.

Whenever I open my computer I see the list of posts that I’ve been meaning to write. In an effort to “clear out some mental space,” I thought I’d do what I’ve done a couple of times in the past and flush out my list of posts to write. In this way, the list will be fresh for when I come back (save for the few cognitive biases that I still want to write about). So, without further adieu, here are some of the things that I had planned on expanding upon. I hope you enjoy!

Cars and Transportation — It’d be really cool if they could *feasibly* develop a car that could transform. A car that could be a single-passenger when commuting, but it could expand/transform into 2, 3, or 4 seats when it necessary.

Political Ideology — What if a given political ideology’s thoughts/plans don’t work unless they can be fully implemented? And because there’s a split in Parliament/Congress, it’s worse. But what if when either party had total control, it’d be worse than this middle-ground between the two ideas?

LeBron James vs. Michael Jordan — A few weeks before the conversation about LeBron vs. Jordan started, I’d had it on my to do list to write about it. I was a bit peeved when the conversation started (without me), but there were some interesting (and some not) things written about it. I think it’s extremely difficult to compare players across decades. It’s akin to comparing players across sports! I remember a few years ago when there was talk that Alex Rodriguez would be the greatest baseball player ever. I think it’s safe to say that conversation has died down a little.

Fear of Public Speaking — I was thinking back to one of the first times I had to stand up in front of a group of people and give a speech. I don’t even remember what I spoke about — but I do remember one of the speeches from my classmates who did quite well (it was about the NBA dunk contest). As I watch some folks present in front of rooms, I can empathize with their nervousness. Heck, even I still get a bit nervous sometimes. One thing I’ve learned — it’s really about repetition. The more times I’ve spoke in front of groups of people, the less nervous I get the next time I go up there. (On a slightly related note: I’d say another key factor in minimizing fear of public speaking is the extent to which you’re prepared to speak on the topic. Read: know your stuff!)

Focus on Labor — I’ve never been the CEO or a highly placed Vice President of a company, but from an outsider’s perspective, I always have a hard time understanding the lack of focus on the labor force. At times, it really looks like labor is the key to success. If the labor force is well taken care of, production and profits tend to do well. It reminds me of that post I did about sustainability and pitchers. The relation here is that when management takes care of the labor force, it is with an eye towards long-term sustainability.

Life, Liberty, and Property? — Why is property so valued? What about nomads or North Americans who show us that land isn’t to be owned? What about animals? They don’t seem to own land.

Star Trek: Inheritance — This is an episode from the final season of Star Trek: The Next Generation. The gist of is that Data has to decide whether or not he’s going to tell his mother that she is an android (when she believes she’s a human). In thinking about this episode, I wondered about the ethics of telling someone they aren’t who they think they are. What about an adopted child?

Social Entrepreneurship — George Mason University‘s Center For Social Entrepreneurship has a massive open online course (MOOC) in social entrepreneurship. If you wanna learn about social entrepreneurship, this is a great place to start!

“I AM” — I saw the movie I AM quite some time ago and there were some cool things that stood out to me. I’ll be brief:

  • The HeartMath Institute — check them out! They’re doing some fascinating work.
  • Animals are more likely to cooperate than we may have first thought. There was a reference to a journal article about how a herd of deer decided to go in a given direction after hydrating at a water hole.
  • Rumi poetry is medicine for the soul.
  • I am continually amazed at the kinds of things that are correlated with Random Number Generators.
  • Did you know that the word “Love” appears 95 times in Darwin’s “The Descent of Man?”
  • A great quote that Desmond Tutu read: “God looked at me and said, all I have is you.”

And so that clears off most of my list. Look for a new post sometime in the next month, but probably not for the next 3 weeks. Happy end of April and early May!

It is Important to Speak, but not More Important than it is to Listen

A couple of days ago I wrote a post about leadership and followership, the overwhelming majority of literature dedicated to leadership, and the dearth of literature dedicated to followership. When writing that post, it reminded me of the same relationship between speaking and listening. That is, how much literature do we see dedicated to speaking or communicating and how much do we see dedicated to listening?

Don’t get me wrong, I think that communication is an essential part of the human experience, but dont we think that learning to listen should be equally (if not more?) important than speaking. We can make the same comparison we did with leadership: how much time do we spend speaking in relation to how much time we spend listening? We spend far more of our time listening. So, shouldn’t it follow that we need to learn how to be excellent listeners?

Of course, if we don’t know how to speak (at all) then the listening is futile, but I suspect that if the majority of people were excellent listeners, we might be able to aid the speaker in communicating their point. Just as I made the case with followers who can make a leader better, I think that listeners can make a speaker better, too.

~

A slight tangent: how many courses are there in communication? There are probably quite a few more than there are in listening. In fact, there’s even an entire academic discipline dedicated to communication. Is there one for listening? Some may argue that clinical/counseling psychology might be how listening creeps its way into an academic discipline, but that’s only one piece of the training for clinical/counseling psychologists. It’s important to note that psychologists who don’t go the route of counseling won’t get this kind of training, so it’s necessary to specify clinical/counseling.

I like to think I’m a pretty good listener (and have been given affirmative feedback), but I don’t doubt that I would benefit from the insights of academic research on listening. In fact, I bet we all could benefit from academic research on listening. Until then, we’ll have to rely on the wisdom of quotes:

“Wise men speak because they have something to say; fools because they have to say something.” – Plato

“When people talk, listen completely. Most people never listen.” – Ernest Hemingway

“If A equals success, then the formula is A equals X plus Y and Z, with X being work, Y play, and Z keeping your mouth shut.” – Albert Einstein

“Everything has been said before, but since nobody listens we have to keep going back and beginning all over again.” – Andre Gide

“Most people do not listen with the intent to understand; they listen with the intent to reply.” – Stephen Covey

“We have two ears and only one tongue in order that we may hear more and speak less.” – Diogenes Laërtius

And one last one that I really like:

“You cannot truly listen to anyone and do anything else at the same time.” – M. Scott Peck