Author: ken

Seeing and Not Seeing

Many simple mistakes are obvious once you see them — and almost impossible to detect before you do.  Writing in The New York Times recently, Joseph Hallinan noted our tendency to infer what we see rather than actually look closely.

He gave some stunning examples of how errors have persisted because we “recognize” what should be there and move on.  One of his best examples is a wrong note in the score of a Brahms sonata that countless musicians never noticed because, for years, they silently “corrected” it in performance.  A naïve piano student kept getting it “wrong” until he looked and saw that she was actually playing what was on the page.

It’s the same problem all of us run up against when we try to proof-read a text, especially if we were the ones who wrote it.  We see what we know the text means, rather than what is actually printed on the page.  It is hard to make the text sufficiently different from what we assume it is, “strange” enough so that it can be really seen.

Author of a fascinating book, Why We Make Mistakes, Hallinan applies the principle to the financial crisis – but with mixed results. “Not only did hedge-fund managers, bankers and others misread the danger involved in many of their investments, but they misread them in the same way.”  He concluded that they became so familiar with what they were looking at that they no longer saw the danger.  They “knew” too well what was there.  (See, “The Young and the Perceptive.”)

His general idea is absolutely correct.  We can look at bank statements and bills again and again without being able to see what’s wrong.  The mind is just too efficient to bother with “unnecessary” checks.

But it is also true that we tend to see what we want to see.  The hedge-fund managers wanted to believe that the complex derivatives they were buying and selling so aggressively were without risk.  Moreover, the fact that they were all doing it – and all believing they were without risk – contributed to making the risk invisible.

There is no single, fool-proof solution to the problem of mistakes.  Hallinan suggest, somewhat facetiously: “It may be too much to suggest that we let adolescents run Wall Street (assuming, of course, that this isn’t already the case).”  But the real reason adolescents detect mistakes adults have missed for years is that they don’t know any better.  They are trying to learn, like the conscientious piano student who kept playing the “wrong” note in the score because she was trying to get it “right.”  Soon they will learn the “right” way, along with the rest of us, and they won’t be able to help us see the difference.

In trying to avoid mistakes, we have to struggle constantly to be alert to what is actually before our eyes as well as what we are tempted to believe.  And we have to be mindful of the pressure to join the crowd.  There is no easy way.

 

 

 

Keeping It in Perspective

The earthquake and Tsunami in Japan may not have as much of an economic impact on the world as we feared.  “Globally, Japan will likely be a growth hiccup,” says The Wall Street Journal.  On the other hand, many of us are reacting on a more personal level, reeling from the sense of unpredictable disaster, brought home to us by thousands of photos and videos.

As we import from Japan far more that we export, the tragedy is likely to affect supplies of consumer goods, shortages that could eventually be more than made up for from other sources.  It is hard on them — very, very hard economically as well as personally.  “But absent a nuclear disaster, it shouldn’t be reason for investors to panic,” concludes the Journal.  (See, “Markets Misjudge Japan Risk.”)

Yet investors are showing great anxiety and insecurity.  “Investor confidence” is plummeting in markets around the world.

That’s because we are all more human than otherwise.  We see our own fate in that of others, and it is difficult to keep that human capacity in bounds.  It’s to our credit as a species that we react that way, and that as a result of that empathy we will send humanitarian aid to Japan.  And yet we need to be mindful of where the real risks are – and where they aren’t.

Professional traders on Wall Street will profit from the emotional over-reaction of most investors who tremble in the face of human disaster.  And they will probably end up profiting at the expense of the rest of us who identify too closely and react too quickly.

 

 

 

The Surprising Benefits of Continuing to Work

More and more evidence suggests that retirement is not good for you.  It’s not just that we can’t afford it, as pensions and other benefits are cut.  It’s bad for your health.

Slate recently reported on The Longevity Project, a major study that followed participants over eight decades:  “an analysis of the activities and accomplishments of study participants . . . was dramatic. ‘[T]he continually productive men and women lived much longer than their more laid-back comrades. … It was not the happiest or the most relaxed older participants who lived the longest. It was those who were most engaged in pursuing their goals.’” (See, “Don’t Stop Working.”)

This is not completely surprising.  In a world in which work has become our supreme value, being without work marginalizes you and deprives you of the experiences that make you relevant to others – and to yourself.  Work keeps you on your toes, and stretches you to accomplish goals that matter.

This is not to suggest that you stay on at your old job.  Even if you could keep it for as long as you want, it may well be better to try other things that stretch you in new directions.  A new job can help you develop interests and skills neglected earlier in life.  But it’s important to keep busy.

The authors of the study, psychology professors Howard S. Friedman and Leslie R. Martin, found some other interesting results.  The “best childhood personality predictor of longevity was conscientiousness—the qualities of a prudent, persistent, well-organized person.”  Being happy-go-lucky doesn’t keep you alive.  Moreover, they found, “a dark underside to optimism. When everything is going great, the optimist soars. But when facing life’s difficulties, the optimist can feel defeated by the magnitude of the struggle that’s required.”

One difficulty here, of course, is that it’s not always easy to find work.  Today, particularly, paid employment is in short supply.  And there is considerable competition for the part-time work that is more suitable to the aging.  But if we take into consideration the benefits of work in keeping us healthy, the amount of pay we receive can be less significant.  Volunteer jobs can look more and more attractive.  Community activity can serve many purposes, not just helping others.  Even hobbies offer several extra benefits, especially if they involve working with others.

We decline as we age.  There is no help for that.  But it can be useful to remember that, “as Friedman says, ‘fun can be overrated’ and stress can be unfairly maligned.”  Pessimism and conscientiousness, it turns out, have their own rewards.

 

 

 

The Wisdom of Crowds Revisited

Nature is full of examples of animals that pool their wisdom in the service of survival.  Man too has that potential, but it is lost in the confusion and noise of individual conflict.

“Lesser creatures” moving about in a crowd seem to make “wise decisions,” according to Iain Couzin of Princeton University, “even when most of the members of those groups are ignorant of what is going on.”  Schools of fish, for example, or herds of animals have the uncanny knack of responding to faint signals of danger and coordinating their behavior.  His research suggests that a few “leaders” pick up the information and others simply follow. (See, The Economist, “Follow My Leader.”)

The evolutionary advantage of such spontaneous, unconscious responsiveness is obvious.  In the struggle for survival, it allows them to move as one and to move fast.

Our human brains, too, are extraordinarily sensitive, picking up far more information that we can ever use – including key information about threats and opportunities.  And we act on that information, often without ever being aware that we’re doing it.  Moreover, our collective judgments can be extraordinarily accurate.  As James Surowiecki noted in The Wisdom of Crowds, if we average out our individual guesses about the number of pennies in a jar, for example, the result will be uncannily accurate.

So, like other members of the animal kingdom, we too are wired for survival.  Why, then, don’t we do a better job of working together to utilize that wisdom?

The reason is that we are preoccupied with our relations with each other.  Constantly jockeying among ourselves, we search for a competitive advantage, or we look for ways to fit in and belong.  Either we want to win or we want to be accepted.  Each choice puts our individual interests ahead of the community.  We don’t easily trust that we could work together and also remain ourselves.

With the pennies in the jar, for example, if we stand around and talk it over, we will either start competing to win the prize for the best guess or we will try to figure out what others are thinking and join the consensus.  When we are together, it’s very hard to simply exercise our own judgments — or to follow leaders, even when it would be to our advantage.

That’s also in our wiring – and it has to do with another form of security we seek, the emotional security of belonging.   We worry about external dangers, like the fish, but we also worry about our place in the crowd.  We could do a better job of reconciling these two sets of worries.  But as a culture, by and large, we have chosen competition over cooperation.  Cooperation is good if it’s in a team competing with another team, but that’s about it.

On the other hand, we have an evolutionary advantage not given to schools or fish and herds of animals:  conscious awareness.  That gives us the opportunity to reflect on the choices we are about to make and to reconcile conflicting sets of information.

We need to rely on our unconscious impulses because, by and large, it makes us smarter and quicker.  But there are times – particularly when we are jostling with each other — that we need to step back and think about our choices.  That’s where we can easily let ourselves down, and surrender our competitive advantage as a species.

 

 

Is It a Contradiction in Terms?

There is no shortage of white-collar crime in business and in government.  The press is full of it.  But there is little reference to white-collar “criminals.”  Is that a term reserved for the poor?

Just last week, the SEC accused Rajat Gupta, a senior executive at McKinsey & Company and a former director of Goldman Sachs, of providing inside information to a hedge fund.  The New York Times noted that the U.S. attorney in the case, “has secured guilty pleas from 29 people for insider trading and charged 17 others. They include high-profile traders, midlevel executives and relatively minor players. (See, “From the Top.”)  That’s a lot, and strongly suggests how many more must have gone undetected.

To be sure, Mr. Gupta has not been tried and convicted, but there is a long list of executives, traders and politicians who have actually gone to jail.  It’s easy to understand the temptation they must feel to profit from their positions, and even the sense of privilege and immunity that may have caused them to believe they’ll never get caught.  But even when they do get caught, we seem to collude sparing them the humiliation of calling them “criminals.”  They are getting special treatment in our language.

They are accused of “wrong-doing” or “abusing trust” and “breaking laws.”  They are even accused of “criminal behavior.”  But that’s as far we go.

Last week, Madoff asked on the cover of Newsweek,  “Am I a Sociopath?”   In a real scoop, Steve Fishman managed to get to interview Bernie Madoff in jail for his account of his 65 billion dollar Ponzi scheme.  Madoff lamely asserts that he is not a “bad person,” strongly denying that he was a “sociopath,” someone without moral scruples or conscience.  And he quoted the therapist he was seeing in jail to support his claim.

As a psychologist and psychoanalyst, I would agree.  He seems to have felt tormented while engaged in his fraud, and he seems to feel remorse now.  For what it’s worth, my own diagnosis is “narcissism,” an inability to tolerate the guilt and shame of exposing his wrong doing and destroying the idealized image he had cultivated for so many years.

But personally I think any psychiatric diagnosis misses the point.  He did not commit a disorder.  He is not to be blamed for his emotional dysfunction.

How about calling him a “criminal?”