Passion Struck with John R. Miles - Max Bazerman and Don Moore on How to Empower Others to Make Better Choices EP 194

Starting point is 00:00:00 coming up next on the Passion Struct podcast. We talk about organizations as decision factories and as more of the effortful labor gets delegated to automated systems, the decisions of the humans in the loop becomes more and more important. And an organization that's a decision factory where it's outcomes, it's successes, the welfare of the people inside and the people affected by the organization's operations, all of those depend on the effectiveness of the decisions of the people inside. Welcome to PassionStruck. Hi, I'm your host, John Armiles, and on the show, we decipher the secrets, tips, and

Starting point is 00:00:42 guidance of the world's most inspiring people and turn their wisdom into practical advice for you and those around you. Our mission is to help you unlock the power of intentionality so that you can become the best version of yourself. If you're new to the show, I offer advice and answer listener questions on Fridays. We have long form interviews the rest of the week with

Starting point is 00:01:05 guest-ranging from astronauts to authors, CEOs, creators, innovators, scientists, military leaders, visionaries, and athletes. Now, let's go out there and become PassionStruck. Hello everyone and welcome back to episode 194 of PassionStruck. Ranked as one of the top 40 most inspirational podcast of 2022. And thank you for each and every one of you who comes back weekly to listen and learn, how to live better, be better, and impact the world. And if you're new to the show, thank you so much for being here. Or you would like to introduce this to a friend or family member. We now have episode starter packs, both on Spotify and the Passion Struck website.

Starting point is 00:01:44 These are collections of your favorite episodes that we organize into convenient topics. To give any new listener a great way to get acquainted to everything that we do here on the PassionStruck podcast, just go to passionstruck.com slash starter packs to get started. In case she missed my interviews from last week, we had on the one and only Rachel Hollis. We do a deep dive and how her life has changed over the past two and a half years and how her life has become so much better on the other side of hardship. I also interview Douglas Rushkopf, who's a professor at Cooney, an author of over 20 novels, and we discuss his newly released book Survival of the

Starting point is 00:02:22 Richest. My solo episode last week was on the power of perspective in five ways that you can alter yours. Please check them all out and if you love any of those episodes or today's, we would appreciate it so much if you gave us a five star rating in review. They go so far in expanding the reach and the popularity of this podcast. Now let's talk about today's guest. Max H. Bezerman is a Jesse Isidore Strauss, professor of business administration

Starting point is 00:02:50 at the Harvard Business School. Max is the author or co-author of 13 different books, including Complicit Better Not Perfect, Blind Spots and Negotiation Genius. His awards include an honorary document from the University of London, Life Achievement Awards from the Aspen Institute and the International Association for Conflict Resolution. The Distinguished Scholar Award, the Distinguished Educator Award, and the Organizational

Starting point is 00:03:14 Behavior Divisions Life Achievement Award from the Academy of Management. We also have on Don Amore, who's the Associate Dean for Academic Affairs and holds the Lorraine Tyson Mitchell chair in leadership at the Haas School of Business University, California Berkeley. His research interests include overconfidence, including when people think they're better than they actually are, and when people are so sure that they know the truth. the author of most recently the book Decision Leadership, which he co-authored with Max. Other books include Judgment and Managerial Decision Making, also with Max and Perfectly Confident. In today's discussion, Max and Don Share, how their partnership has lasted for over 30 years, and how their first book became the very foundation for their latest book Decision Leadership.

Starting point is 00:04:01 They discuss their enthusiasm for the Better change for good initiative and why they think mega studies are so important for the study of behavioral science. They define a new type of leadership and use the example of Colin Kaepernick, along with others to illustrate what that leadership looks like. They discuss why today's world with automation, AI, robotics and rapid change requires a new leadership approach. We discuss the examples of McKinsey, Airbnb, and rapid change requires a new leadership approach.

Starting point is 00:04:25 We discuss the examples of McKinsey, Airbnb, and Netflix as cautionary tales of scrutinizing advice that we get from consultants and seeking independent feedback by employees, board members, as well as peers. We discuss why Malcolm Gladwell's and Jack Welch's teachings on the power of intuition are fatally flawed and so much more. Thank you for choosing PassionStruck and choosing me to be your host and guide on your journey to creating an intentional life now. Let that journey begin.

Starting point is 00:04:59 We have a treat for you today on the PassionStruck podcast. I am completely humbled and honored to have two of the most esteemed professors in the world on behavioral economics, and I wanted to welcome Don Moore and Max Baserman for the Passion Struct Podcast. Welcome, gentlemen. Thanks, Don, great to be with you. Thanks for asking us to join you. Well, you two have been collaborating for over three decades. How did you form this partnership and make it so lasting? Well, I was sitting in my office at the Kellogg Graduate School of Management.

Starting point is 00:05:34 This young enthusiastic guy showed up knocked on my door, introduced himself. He had some corporate position he wasn't so happy with. And he was interested in learning more about the field of organization and behavior. And he seemed smart. I wasn't clear about his negotiation skills because he basically offered to work for free if necessary to get the job.

Starting point is 00:05:56 Anyhow, we talked and I hired him. We agreed that he would work for free, but by the time he showed up, I was at least paying him some minimal wage as well. So the way I met Don is he knocked on my door as I was sitting in my office at the College Regents School of Management. And one of the more valuable skills I got shortly thereafter was a little negotiation advice.

Starting point is 00:06:19 We all need that. Don and I have been working together kind of often on ever since. So Don worked for me that year as an employee and then entered the doctor program at the Kellogg School. I was his advisor. We wrote a number of papers together. I think after Don graduated, we probably worked less together when I needed a co-author for judgment and managerial decision-making, prior book we wrote,

Starting point is 00:06:45 Don was the natural person to join me in that effort. Well, that's great. And speaking of partnerships, you two are both very involved in the behavioral change for good initiative. That's led by Katie Melkman and Angela Duckworth. Why do you think it's so important to lend your support to this and one impact do you hope the organization will make?

Starting point is 00:07:06 Because it just has a litany of just incredible scientists and researchers who are part of it. Behavior change for good is putting into practice some of the principles that we advocate so enthusiastically in our book decision leadership. So the initiative takes some of the best tools from behavioral science and offers them

Starting point is 00:07:29 as guidance for how individuals and organizations can do better at achieving their goals, working with the quirks, idiosyncrasies, limitations and strengths of the people in those organizations. The initiative has also been at the forefront of this very welcome development in experimental methodology. There are mega studies where they will enlist a small army of researchers to introduce experimental interventions all in a coordinated fashion on a very large sample size of research participants, allowing the comparison of many different approaches with a statistically powerful analysis that allows them to say really useful things about vaccine uptake and commitment to exercise and other important topics that they've studied. The initiative also has two amazing leaders.

Starting point is 00:08:27 Katie, Milkman and Angela Duckworth, we could add Don into that pile, but these are among the most amazing people I see in the next generation of scholars in the field. They're doing intellectually what we write about in our book decision leadership that we'll be talking about in just a little bit. They're thinking about how do

Starting point is 00:08:45 I not just make a good decision, but how do I create great decisions in hundreds or thousands or millions of other people? And they're harnessing the talents of academics from across the country and the world to develop the answers to the questions which ideas are most effective in the world? So there's lots of good ideas that we've figured out in the lab that are relevant to the world, but knowing which is the best lever for change is a question that the behavioral change for good project is doing kind of a great job figuring out.

Starting point is 00:09:20 So Katie and Angela are terrific people to work with, they're brilliant, they're insightful, but they're also great leaders, and I'm happy to be a follower of theirs. Even though Katie was my advisor, so it's unclear exactly what direction that goes, but I'm happy to be their follower. found it to be so enlightening because oftentimes in academia, as you know, people compete. And I just love the partnerships that are being formed from this because these mega studies have such a larger impact than the individual program would on its own. And for me, I think a lot of people talk about neuroscience as impacting performance. And I truly believe behavioral science can have a much greater impact in a much shorter time. So that's why I'm so enthusiastic about it because I think it can help people around the world to

Starting point is 00:10:14 make changes in their lives that they need to. So I think that's a great lead in to my next question. Many of the original leaders in behavioral economics, Max, I'd include you in that group, Thaylor Sustine, Tversky, relied on laboratory experiments. And today, you have Katie Melkman, who we just talked about. Michael Luca, who Max wrote the book, The Power of Experiments with, we're looking at more real world experiments. So I wanted to ask you, gentlemen, how do you balance laboratory experimentation with real world experimentation? I'll start. So first of all, I love a great lab experiment that develops a new idea that no one has ever thought about before.

Starting point is 00:10:56 So there's nothing that I find more intriguing than a new idea that's tested in a well-controlled environment and highlights some aspect of human behavior that simply nobody has ever thought about before. That's what's the most fun for me. But my most recent years, my students, my doctoral students seem to be leaders of bringing behavioral science into the field and using field experiments to test. So Mike Luke is a more junior colleague of mine at the Harvard Business School. We've talked about Katie. And Angela, Katie was my student, Todd Rogers,

Starting point is 00:11:34 is another star of use of the field experimental world. And I think it's just great for there to be people who are using the best of what we know from the lab and finding out what's most important and how best to implement these ideas to create massive change in the world. I've been involved in some field experiments, but not that many, but I feel very closely connected to the world of field experimentation through all the people around me. I don't see any competition between lab and field. I hope that if a basic social psychologist comes up with a great new idea, I'm rooting for them. And if somebody finds out a better way to implement

Starting point is 00:12:17 a very old idea in the field that can fundamentally improve human behavior, make people happy, make people better educated, make people more secure. That's just terrific as well. And Don, did you want to add anything to that? As Max was talking, I was remembering a quote that applies somewhat to the distinction between field and lab studies, that lab studies allow for a purity and clarity that can deliver strong tests of theory. And field studies are useful for figuring out

Starting point is 00:12:57 how to put those principles into practice, dealing with all the complexity and noise and richness of the world. And Max was in his response to you was stressing the complementarity of those approaches. The quote that I was thinking of was, in theory, there should be no difference between theory and practice, but in practice, there is.

Starting point is 00:13:20 And so there are often challenges that arise from applying some theoretical advance from a lab study in the field. And I have tremendous admiration for researchers willing to do that hard work and figure out how to make those principles useful. So I will agree with Max that they're complementary and also know they're not the same. That is, that they're wonderful challenges associated with putting basic psychological and economic principles to work in field settings that can often shed new light on the theories or the underlying processes. Well, great. Well, thank you guys both for that. And I wanted to start leading into your book, but I was going to do it through this lens.

Starting point is 00:14:08 I remember studying judgment and managerial decision making when I was a young buck in my 20s, attending MBA programs. And I at the time had just left the military not too long before that. I was working for a booze and co at the time. This whole topic that you guys introduced and ethical leadership and how to make these decisions, I found critical at that stage in my life, but it was one of the few textbooks that I actually held on to and it became more and more important

Starting point is 00:14:39 to me as the decades went on, especially when I became the head of data for those companies. And I was immersed in having to make some very difficult decisions and refer to your book very often. So my understanding is you were on your eighth edition, you were thinking about doing the next one when you guys came to the conclusion that your new book decision leadership and powering others to make better choices. And I'll just flash it here if you're on the YouTube. We'll put a larger image of it on there. But was that idea to kind of unleash these principles to a more mass audience?

Starting point is 00:15:19 So, I would say that we wanted to write a different book than Judgment and Manager or decision making. So we certainly considered sort of writing the ninth edition of our Judgment book, but there were so many things that were changing. We wrote the Judgment book before Failer and Sunstein wrote Nudge, before Coniman wrote Thinking Fast and Slow.

Starting point is 00:15:44 So we were basically the best seller in a very small market. So it had textbook use. It also had a fair amount of crossover into the trade world, particularly in the Wall Street arena. And we're perfectly happy with that, but over time the price of textbooks had skyrocketed, meaning that we're going to reach fewer people as a textbook. But more importantly, the field had shifted. And the field had shifted dramatically with Taylor and Sunstein's book, Nudge, which focused not on how to de-buy us yourself, but how to lead others to make better decisions by how you create the choice architecture. And our book really moves broader than that to think about how a leader should think about

Starting point is 00:16:38 how to harness what we know from the decision-making literature that was forward to the judgment book and be able to trade an environment that makes the people around them, not just people that are technically being nudged, but how do you make lots of people who are your constituents, including your subordinates, here is the people on the other side of the negotiation table. How do you lead other people to make wiser decisions? And as we took on this more social task, I would say we found ourselves writing a very, very different book. So not only is it a trade book rather than a textbook, but it's a leadership book that uses decision-making, whereas the judgment book was really a decision-making book. It had the word manager in it, but it was primarily a decision-making book. This book is primarily a leadership book that harnesses the power of the decision literature and to suggest that what leaders can most strongly influence are the quality of the decisions that those around them make. So I think many people who read both and we hope there will be a lot of them, but many people who we both will see things that are familiar.

Starting point is 00:17:44 But many people who we both will see things that are familiar. But I think the overarching messages are very, very different. We think that new book is the right book for this particular period of time. Okay, well, I just want to make sure we get this point out there. You alluded to it, but one of the core tenets of your book is to define leadership in a new way. And what you're really trying to point out to is leader's success depends not only on their ability to make good decisions, but almost more importantly on their ability to help others make wise decisions. And I wanted to ask this question with this as a backdrop.

Starting point is 00:18:21 We have more changes now impacting the world than maybe we've ever had with the rise of the fourth industrial revolution and this widespread use of AI, automation, data, robotics, which is going to completely shift the jobs of hundreds of millions of people. So why is it so critical for listeners of this podcast to understand this new way of leadership and how it's gonna impact their careers? Yeah, so thanks for that, John. In the book, we talk about organizations as decision factories.

Starting point is 00:18:56 And as more of the effortful labor gets delegated to automated systems, the decisions of the humans in the loop becomes more and more important. In an organization that's a decision factory where its outcomes, its successes, the welfare of the people inside and the people affected by the organization's operations, all of those depend on the effectiveness of the decisions of the people inside. And so our book focuses on what leaders can do to enhance the effectiveness of those decisions, to empower people to behave in ways more consistent with their own ethical values,

Starting point is 00:19:37 where they're considering the broader impacts of their choices and the choices of those around them as far as the impacts beyond the small set of insiders to the larger world, the natural environment and future generations. What we get in life is driven first and foremost by the quality of our decisions and that holds true for especially for leaders who are in a position to influence the quality of the decisions of those around them. So I'm struck John by the fact that people listening to this podcast

Starting point is 00:20:13 are doing so online almost by definition and so much of what we do happens online and anybody who creates a new organization that operates from early online creates a platform. And when they create a platform, whether they think about it or not, they're creating a decision architecture that's going to potentially influence all the people who eventually end up on that platform. So they are creating the decision architecture. They are leading by what they do in terms of the structure of that, by the design of that platform. As you mentioned my work with Mike Luca and we wrote this book, The Power of Experiments, and Don and I certainly built off of that, were big fans of the use of experiments in our book decision leadership. But one one story that really belongs to Mike Luca, even though it's in a book that has my name on it. And Don and I refer to it as

Starting point is 00:21:14 a story about Airbnb. And the founders of Airbnb created a platform that wanted to create more connectivity between guests and hosts. So they featured people's photos because people like to know who the person they're interacting with is in a photo is what means of doing it. But what the leaders didn't think about is how people might use that information in unfortunate ways. And sort of years after the platforms created a group of Harvard researchers, including Microka and Ben Adelman and Dan Sversky, come along

Starting point is 00:21:52 and they find out that a small but significant portion of hosts are pretty racist and don't take black guess. And all of a sudden, the leaders of Airbnb become aware of the fact that sort of a choice that they made for perfectly how to set up the cafeteria to lead people to healthier choices or whether they want to sort of be more responsive on the DEI front. How we set up our organizations, including platforms, is going to have a dramatic effect on the decisions of others and we want people thinking about the decisions of others as they go about making those design decisions. I mean, every platform designer worries about this in some form or other. You can set up your website to make it easy for customers to find what they're looking for and to buy your products, or you can, through bad design, make that very difficult for customers, where they're confused, uncertain how to proceed

Starting point is 00:23:06 with the transaction and they'll just wind up drifting away and leaving your website without actually successfully consummating the transaction. That's a trivial example, but it has analogies to many more consequential decisions including those that Max highlights. And I love trivial decisions because I think that we want leaders to think about the millions of trivial decisions that they're affecting because cumulatively they matter a great deal. They sure do. I did want to ask a follow-on question to Airbnb because it's a company that I have studied a lot and I think that their leadership team, although they have made some mistakes, learns from their mistakes and applies new ways of working. And one of the things that I liked

Starting point is 00:23:51 in the book is that you highlight that they're doing things differently today to inform their decisions. And I was hoping you might be able to talk about that. Sure. I've never met the founders of Airbnb. I do know Professor Melissa Thomas Hunt, who's now a professor of University of Virginia, but worked in DEI at Airbnb for a while. And when I teach Mike Lucas, Airbnb material, I often have Professor Thomas Hunt as a guest to talk for the last 15 minutes.

Starting point is 00:24:20 And she does a great job of highlighting the changes that are made. And I think it's an interesting story because from what I can tell from a distance, the founders seem like pretty good guys who didn't think enough about these issues in advance. And I think it highlights the fact, sort of, do you want to be the leaders who sort of anticipate and test for potential problems on your site. Or do you want to just put something up and wait for Harvard researchers to come along and say, your site is leading people to be racist? I asked a pretty obvious question there and I'm just highlighting that very good people

Starting point is 00:24:59 can in fact make decisions that lead to unfortunate outcomes. And we hope that our book gets leaders thinking more about the decisions of others on the front end so that that's not necessary. But I can curl with you, John. I think that Airbnb has made a large number of changes that make the world a better place. And I also want to highlight that while there was a problem on their site, I think that the sharing economy

Starting point is 00:25:24 is phenomenally positive. There are also many problems at Uber, but I think that Uber created a positive change in terms of the transportation system, even though I don't like a lot of the processes that they use in order to get there. So I think Airbnb is a net good in the world, but I think that they made some mistakes that could have been avoided by leaders who use the concepts that we hope we provide in our book. Well, I'm not sure if you guys are familiar with this story, but I happened to hear Brian on another podcast.

Starting point is 00:25:59 He doesn't do very many, but it was right after COVID and during COVID, they took a huge hit, obviously. But he was so concerned with the host that he ended up taking $500 million that they had in cash and paying the host so that they would stay loyal to the brand. But he did this at the same time that he was trying to raise $3 billion from investors to keep the company afloat. And it ended up working because he ended up getting both, but it was a really risky decision to make. So I hope he used decision intelligence to help gauge him in that instead of intuition, which is something that we're going to get into.

Starting point is 00:26:42 Done in chapter three, you introduced the investigator in chief, and I wanted to ask you, why does self-focus make people too eager to enter easy contests and too reluctant to enter difficult competitions? Yeah, this is an insight that comes out of research on overconfidence and underconfidence. When we're focused on ourselves, it's too easy to

Starting point is 00:27:07 appreciate the situational constraints and opportunities that affect us without realizing how they'll affect others. A simple example from my classes at the university include when I make my exams easier, maybe by making them open book or giving everybody more time, even in classes where everybody knows the exam will be graded on a forced curve. Everybody gets excited. They're all happy that the exam is going to be easier and their expectations for getting a good grade increase. Of course, average grades on a percentile scale will not go up when everybody gets more answers right on the exam. It's easier for everybody and that doesn't mean you're better relative to others. The problem on the downside is when an exam gets harder, then everybody becomes

Starting point is 00:28:01 less optimistic about their performance relative to others. Of course, on average, that won't change. Individuals may benefit or be hurt disproportionately by any such change, but on average, of course, it can't influence grades. But the analogy in life here is when there's a hard task, it is common for people to feel on average that they're below average, and there's an easy task it's common for people to believe that they're better than others in error. That arises naturally from self-focus. Your ability to think through how those situations affect others will enhance your ability to appreciate its actual effect on your relative performance.

Starting point is 00:28:44 There are all sorts of examples we can talk about. There are easy industries where lots of people think they know what it takes to succeed, restaurants, retail, clothing retail, liquor stores, hobby shops. These sorts of industries see perennially high rates of entry, intense competition, and high rates of failure. There are other industries where people have the sense that it is much harder. Those industries see lower rates of entry and higher rates of profitability.

Starting point is 00:29:11 New jobs, challenging new jobs, it is common for the new hires to suffer from the imposter syndrome, to fear they're not good enough. And that can often arise from under placement, where it's hard for everybody. And the struggles of the others, the other new hires are not visible to you. You don't see their self doubts. All the material that Don's talking about and the chapter you're talking about is based very much on Don's research, but as Don was kind of summarizing this for our book. My city, Cambridge, Massachusetts, had a boom in bicycle use. So the city itself was creating bicycle lanes and it was clear that bicycle use would

Starting point is 00:29:53 increase dramatically. And what's intriguing about that is that most of the new bicycle rental companies where you could just sort of easily went a bike for whatever limited period of time you wanted from Iraq. Most of them went out of business with the market was booming. Why did they do so poorly? And the answer is because it was an easy business to enter. And there are so many new by companies that there was that there weren't enough writers to allow these companies, even the majority of these companies to succeed. So we have a dramatically different kind of set of competitors today than we had just a few years ago because I think that the bicycle entrance didn't think about the competition in the way that Don's subscribing. Yeah, I think you could say the same thing about Bird and its epic rise and its epic fail as

Starting point is 00:30:46 a way to describe that as well. I do want to comment that I was never the fan of the open book test. To me, you spend so much time searching for the answers, I'd rather just go in there prepared and take the test and do the best I can. And you're a lot of- I wasn't many of my students. But I've never been particularly wild about tests to begin with, that's probably

Starting point is 00:31:09 because I wasn't ever a very good student. I'm there with you. Well, Max, I'm gonna address this to you. I wanted to ask this actually earlier, but I still wanna get it in. You guys start out the book by giving some modern day examples of leaders who emulate this new type of leadership

Starting point is 00:31:29 that you're discussing in the book. And you talk about some who are in the business world, some in academia, but you then also introduce the ex San Francisco 49ers quarterback, Colin Capernack. Why did you think it was so important to use his example to illustrate this leadership? It wasn't so important, it was just a really interesting example of what the book is all about. The book is about how leaders can influence the decisions of others in a wide variety of ways, Okay? And that includes both to make

Starting point is 00:32:05 why is your decisions but more ethical decisions. Kaepernick made a very brave decision. He's obviously a smart guy. I'm sure that he was aware that he was taking some enormous risks in terms of his football career, engaging in a highly uncertain action in terms of what would happen to him. But in the process, he really created a fundamentally different environment. And as we saw, a variety of tragedies

Starting point is 00:32:31 happened in terms of the murder of a number of black Americans and the public became more outraged. I think Colin Kaepernick became a role model for not accepting police brutality in ways that were enormously influential. Colin Capronic, through what looks like a very simple action, something very symbolic, influence the actual decisions of millions of people and the attitudes of millions of people. So we're interested in how parents influence the decisions of their children, how teachers influence the decisions

Starting point is 00:33:08 of their students. We're interested in how companies that create opportunities on the internet create their platform and influence the decisions of the people who use that platform. And we're also interested in the way public individuals influence the attitude and behaviors of citizens more broadly, and calling Capernick falls squarely in our view of what decision leadership is all about.

Starting point is 00:33:32 In chapter one, where we talk about Capernick, we talk about four different people, and none of them are kind of your traditional Jack Welch-type leaders. They're all very different characters where we're trying to broaden the idea and have everybody see their own leadership potential as well as the actions of the leaders that surround them. I'm going to jump on this because in the book you talk about Jack Welch, Malcolm Gladwell, and I have to bring up Tim Cook and the same breath because they've all publicly spoken about the importance of trusting intuition when making decisions.

Starting point is 00:34:11 But in chapter 2, you guys tackle guts versus brains and contradict their findings. What did your research find is the problem with following intuition as a guide for decision-making? Oh, goodness. The entire research literature and judgment and decision making highlights the shortcomings of intuition. But before I rag on intuition, let me just note it's essential input into decision making. The unconscious mind from which intuitive judgments emerge

Starting point is 00:34:40 is a powerful parallel processor that provides all sorts of useful information and inputs into our decisions. But it is imperfect and vulnerable to predictable errors. So there are plenty of judgments that feel right because they appeal to some of our intuitive biases, but that are also predictably wrong. I mean, one really obvious one is the availability heuristic as a simple tool for assessing likelihood that leads us to exaggerate the probability

Starting point is 00:35:15 of salient or recent events, where risks with low probabilities that are emotionally salient or evocative take an excessively prominent role in our fears and lead us to engage in dysfunctional adaptations where, for instance, fears about the risks of terrorism grossly outweigh their actual risk and lead us to engage in all sorts of dysfunctional behavior where Americans will do more to reduce the minuscule risk of terrorism than they will to reduce their substantial risk of diabetes or heart

Starting point is 00:35:53 attack. So there are lots of feelings that emerge from intuitive processes that feel right but are predictably wrong that can be corrected by more deliberative cognitive processes. Now those deliberative processes are costly. They take energy because the conscious mind is an effortful serial processor. By accommodating quantitative analysis and thoughtful reflection, it can correct for some of the predictable errors that our intuitions lead us to make. And is therefore useful both because it is accurate and also because it is auditable. That is you can check the inputs to a decision and quantify their useful roles in guiding your choices. So we acknowledge that not every decision will be amenable to thoughtful reflection and quantitative analysis.

Starting point is 00:36:52 When I'm in the grocery store in the cereal aisle, I don't perform a full multi-attribute utility analysis of every possible cereal before making my choice. I just grab the one that I know my kids will eat. But when the stakes are high and there is time to reflect, it is worth investing the energy to do a more conscious reflective deliberate analysis of the expected values involved in order to help you make the best decision possible. Just a couple of additions.

Starting point is 00:37:24 I certainly agree with everything John just said. John, when we want you to question your intuition and move toward deliberation, the message isn't that we think John Miles has lousy intuition. The message is that we don't think John Miles intuition is as good as John Miles' deliberative self. If you can think about it for a bit, if you could

Starting point is 00:37:46 do some cost-benefit analysis, if you could talk to a smart friend, if you could crowdsource by talking to five people and getting their independent views, if you could count to 10 before you respond to that email that really annoyed you before you hit sent. Okay, these are all steps that make you deliberative and we think that across just a vast array of different real-world domains, there's lots of evidence that deliberation outperforms intuition for the important stuff. Well, I think it's a great topic that I'm sure people would debate on both sides, but you're right. I think the logic, if you look at it, shows exactly what you're saying. I've always found, if you can't measure it, then how do you determine over time if the

Starting point is 00:38:38 performance is really tied to that decision or not? I think it's one of the most important things I learned on big four consulting and strategy consulting is measurement is empowerment. But to risk of being argumentative here, we're all entitled to our own opinions, but we're not entitled to our own facts. And the evidence across so many studies

Starting point is 00:39:02 suggests deliberation outperforms intuition. When Gladwell often represents the fact that he provides a balance treatment to system one and system two or intuition and deliberation, he doesn't mention the fact that he needs to get to his fifth chapter before he talks about and of the advantages of deliberation. All we want to do is take a look at what the research

Starting point is 00:39:26 evidence tells us. And we think that any leader who looks at the evidence will realize that for the important stuff, they want to find a way to deliberate there often than they currently do. And I'll just add to that. Since you noted some of the business leaders, including Jack Welch and Tim Cook,

Starting point is 00:39:45 have praised the value of intuition in their decision-making, while their testimony is interesting, it is also problematic, given the risk of someone who winds up successful like them. Misattributing the relative influence of talent versus luck in their success. And there is often a temptation for leaders who have achieved great success to attribute too much to their unique abilities and to the power of intuition in guiding decisions on

Starting point is 00:40:19 which they happen to get lucky or happen to be in the right place at the right time. That is not to say that their perspective is worthless, just it may be colored by the unique fortune that has guided their careers. And instead, I would say we ought to look to the evidence, more systematic evidence as Max highlights strongly underscores the quality of deliberative decision-making. Well, I'm going to take this another step. I interviewed Susan Cain a few months ago in her book, Quiet.

Starting point is 00:40:51 She tackled the topic that you did, which is group wisdom. And I found in my own career that the person who had the loudest voice when we were making group deliberations and not always the best ideas was the one who often came ahead in those meetings. And in your book, you introduced something called Select Crowd Strategy, which I had never heard of before. And I was hoping you guys could talk about group decision-making and because to me, especially being an introvert,

Starting point is 00:41:20 was some of the worst meetings I went into because I never expressed my points in a way that were genuine to me, but how could you use the select crowd strategy to make better decisions? I'll get us started and then time can add on. So first of all, I want to recognize that much of the material you're talking about is based on the work Richard Lyich and Caxole at Duke. I'm sure that many people in your audience are aware of the literature and crowdsourcing, that if you take the mean of a crowd, they seem to make really good decisions much of the time.

Starting point is 00:41:55 And what Lerich and Soul provide is evidence that you can probably do pretty well at getting the wisdom of a very large crowd by simply capping into a small crowd, perhaps five people around you who know a lot and getting all five of their independent opinions, okay, and perhaps averaging those five to get an estimate of a quantity that you're trying to estimate. But as I was talking, I tried to underline the word independent. The critical aspect, if you wanna use sort of collective information, is to have people form independent assessments.

Starting point is 00:42:37 And that way you get the benefit of their unique insights. So let me give you an example. So I was working on a consulting project with Danny Coniman at a very big insurance company and one of the tasks that an insurance company has to do is estimate how much our claim is worth. Coniman's recent book, Noise, he highlights the variation among experienced executives is shockingly enormous and the executives aren't aware of that. So they expect there to be a 10% difference on average between different executives,

Starting point is 00:43:09 and there's a 50% difference between different executives. And Connovington and his colleagues document this and the book noise kind of very nicely. When we were in this insurance company, what we noticed was when they wanted to find out what the group thought, they would have one executive present the details of the claim and then offer their opinion and then ask the other people, what are the rest of you think?

Starting point is 00:43:36 What you got was an enormous anchoring effect. People used that person's number and adjusted and made interesting comments. But that format dramatically hid the fact that had the executive simply provided the details of the claim without their own assessment and had everybody write down what their estimate would be, the range would have been dramatically larger. You probably want to learn something from those who have very low numbers and very high numbers. But when you start with the person who spent the most amount of time on the claim giving their number, now all of a sudden what we do is we create some notion of groupthink where everybody rallies around that idea and very critical ideas which might be very useful or suppressed. But Larry can sole provide to us is the idea that if you want to get different opinions, the critical issue is to give these other experts the information that they need, but

Starting point is 00:44:37 then have them assess that information independently to come up with their own recommendations. And then perhaps you might want to bring everybody together, share the information, talk about it, learn from the outliers, and perhaps go through another round or two of that. So what I think Larry can soul provide us with is kind of a mechanism for thinking about how do we go about getting the power of the collective, even when we don't have time

Starting point is 00:45:04 to get 10,000 opinions to a problem, maybe five is good enough, but how we do that ends up being critically important. A couple thoughts in response. The scenario max outlines in which the person who's thought the most about it speaks first and influences everybody's judgments who then get anchored on their opinion or their number, that's okay if that person is actually the best and their estimate is closest to the truth. But the evidence shows quite persuasively that as a rule, we suck at identifying the one expert who's going to be most accurate. And we can do better by selecting a group of relative experts and averaging across their independent

Starting point is 00:45:48 judgments uncontaminated by communication with one another. I would also just point out here, conflict between the recommendation we're making, that leaders be open to input from a set of others, leaders be open to input from a set of others and the sense that many leaders have, that their credibility rests on their ability to be decisive and offer the answer. And we would highlight the enormous benefit to leaders having the wisdom and courage to seek better answers than their brains alone offer. That can mean seeking the input of a set of others who are also well informed or seeking correction from the world

Starting point is 00:46:34 by running experiments to collect data to inform the problem at hand. The problem need not be a quantity. The question could be the board deciding on who would be the best new CEO for the organization. Our argument is simply if you want people sort of engaged and if you want the benefit of the collective, what you want to do is get information to the hands of everybody and have them thinking about the problem independently before you go about sort of having the group discussion. Because you can't eliminate noise, but you can average across people to reduce its impact on the final

Starting point is 00:47:10 judgment. Well, Don, I think you brought up a key point as you were discussing that from my experience working a big company. And that is if you want to assemble this group, have them not interact with each other. So you truly get independent feedback that, as you said, is not tainted. So I think that was a really good point. One of my favorite chapters in the whole book was chapter four, and you guys discuss the need to calibrate your confidence, which I think is a great lesson for any leader. So one of the things that I found interesting in here was that you used the story of the 737 Max and Boeing to illustrate this point. So I wanted you guys to kind of discuss that example, but in a way that answers this question, how do you express confidence while also being honest and what happens when speed to market is the key performance metric?

Starting point is 00:48:06 Yeah, Boeing is both a wonderful and terrible example where their history of success delivering on big, hairy, audacious goals made them an example of a company where leaders' confidence was seen to translate into the organization's success. In chapter four, we consider the potential downside of reckless overconfidence, where, for instance, in Boeing's development of the process of development, bringing the plane to market too early, failing to educate pilots about some of its unique features, and failing to prepare them in case of malfunction. So of course, then there is this problem

Starting point is 00:48:55 that led to the crash of a couple 737s and grounding the entire fleet at enormous cost to Boeing and its customers, doing incredible damage to the company's reputation and its long-term business interests. That is an obvious and salient example of what the cost of overconfidence can be. So simply believing that you can do it, setting big-hury audacious goals, stretch goals, and imagining that just setting the goal is enough to maximize the probability of success. And the logical conclusion of that incomplete thinking is, well, you should set infinitely

Starting point is 00:49:35 ambitious goals, that you can deliver an infinite number of airplanes instantaneously. No, you can't and there is some point at which setting it to ambitious a goal promotes cutting corners on ethical behavior, misrepresentation, and the sorts of dangerous choices that we saw people inside Boeing make and an attempt to satisfy the goals that the organization, the excessively ambitious goals that the organization gave them. Well, one of the things I find interesting about that whole discussion is Boeing itself was always known for quality first. And when they acquired MacDonald Douglas, and then many of the executives from MacDonald Douglas started to permeate through the organization

Starting point is 00:50:23 and eventually became the CEO, the whole culture of the whole company changed from quality first to speed first. And at that point, they were getting overtaken by Airbus in many ways and you're right. They shortcutted so many things, the most important was admitting that this new air sensor had a dramatic impact and then not training any of the pilots on it because it didn't want to have to put all the pilots of the 737 back through training, which they knew would be a huge impairment for people buying the planes.

Starting point is 00:50:55 So I think it's a really interesting cautionary tale. And you have another one in here that is very personal to me. And that is you discuss the strategy firm, McKenzie. And I had the unique experience of working alongside McKenzie at various clients and then having them be a service provider to me. In a couple cases forced upon me by private equity boards to do independent analysis.

Starting point is 00:51:24 And I think this whole chapter, because you also bring up the Netflix example in it, is a really important one for readers to digest, because oftentimes, like in the case of Enron, and in some of the other examples that you highlight, strategy firms give their opinion. But what I find is that the quality of the results that you get is as good as the team that is hired to be on site who doesn't know your business nor your industry oftentimes nearly as well as you do. So I thought this cautionary tale of scrutinizing advice

Starting point is 00:52:02 from consultants was an important one. And I just wanted you guys to talk about it a little bit more. I'll offer a few comments. So, Trissol, I work critical McKinsey here, and I've been critical of McKinsey and other writing. I want to recognize that I think that they do a really good job of finding the very smartest people coming out of our MBA programs and other places. I think that there's a lot of talent within McKinsey. On the other hand, I think that consulting firms focus on their reputation, they focus on the sale, they don't always stick around for implementation.

Starting point is 00:52:43 Their clients aren't very good at holding them accountable for their recommendations. And increasingly, we see McKinsey's hand and too many ethically problematic situations. So that cuts across kind of lots of all of the major insurance companies who are consulted by McKinsey on how to become more profitable, by using less high integrity systems for paying claims. We see McKinsey's hand in the Purdue

Starting point is 00:53:13 pharmaceutical story and we can go on and on with sort of situations where McKinsey is there to get advice or there to collect their fee, but they're not there to be how to countable for the actual implementation of the actions that they recommend. I think society should do a better job of holding a variety of service providers accountable. So it's not just consultants, we can also think about sort of the auditors at NRAN and the auditors at lotsRAWN and the auditors at lots of the disasters that we've seen happen in corporations where auditors just aren't doing their jobs. They're rehired by their clients that they want to sell consulting services to their clients and they're not meeting their societal requirement to be independent. I think one of the biggest frauds that we see out there

Starting point is 00:54:07 is the final four accounting firms claiming that they provide independent auditing. Any psychologist can provide lots of reason to understand that what they're providing is not an independent audit because they're biased and the results they wanna see and a very systematic and predictable way. and the results that they want to see in a very systematic and predictable way. Well, I'll just touch on that

Starting point is 00:54:27 because when I was at Arthur Anderson in the Houston office, as that was transpiring, we must have had 2,400 employees at that time and I would guess that between 60 to 70% of them were working on N-RON. It was such a large client for us. We had tax consultants on there. We were doing evaluations for them.

Starting point is 00:54:50 Tons of work on N-RON online. Other consulting practices. But I think one of the biggest downfalls to Arthur Anderson compared to some of the other big four from my experience was they were the only firm where the engagement partner could overrule the quality partner in their decision. And having known both partners who were involved, the quality control partner was raising up alarm bells everywhere within side of Anderson saying we need to stop this, we need to put an end to it,

Starting point is 00:55:26 but the engagement partner was able to overrule him, and there were so much economic consequences to us, giving them the truth that you can't do what you're doing, that I agree with you in that case. In that year, Arthur Anderson was collecting $25 million in auditing fees and another 27 million in consulting fees and to think that Arthur Anderson would even be psychologically capable

Starting point is 00:55:53 of being independent in their judgment is completely unrealistic. And this is the topic that Don and I have written about in multiple locations. What's conspicuous in the Anderson example is the way that the organization allowed itself to succumb to these conflicts of interest, right? So early in its history, it made its reputation

Starting point is 00:56:14 based on the ethical reputation of Arthur Anderson himself and that reputation carried the firm a very long time but it mined that reputation carried the firm a very long time, but it mined that reputation, allowing itself to accept fees even when they came with ethical entanglements that would ultimately bring the firm down. I agree with all the points that you're making.

Starting point is 00:56:39 And ironically, I was one of the 30% who never worked on Enron because someone had to serve us. We were blaming you, John. But I sure lived with it. We want to be clear that we actually don't want to blame most of the people who are working on the Enron case for Arthur Anderson. Most of these people are professionals trying to do their job. It's simply an empirical fact that when human beings want to see the date in a particular way,

Starting point is 00:57:12 they're not capable of being objective. So John, we only met about an hour ago and we don't know very much about your family. If you have a child, we'll go with your eldest child and I asked you how smart is your child, we don't expect you to be capable of an objective answer, okay? We understand that human beings see the world the way they wanna see that, and we simply wanna sort of realize that

Starting point is 00:57:38 in professional context, and the biggest problem that I have, and I think we have with the final four accounting firms, is their use to the word independent when in fact that's not what they're providing. I would say amen. And note that the problem we identify that Max and I have written so much about with practices at Arthur Anderson, focus on the organizational structures in which smart, ethical and conscientious people find themselves compromising and engaging in behavior that many of them had the good sense to be uneasy with. But it was a system in which they were operating. And our book is a plea to leaders to understand those systems and build better systems that allow the people inside their organization to function at their highest level and consistent with their own and the organization's ethical compass. 20 to 30 minutes because I think this slippery slope is something that impacts so many leaders at various levels.

Starting point is 00:58:48 We're seeing a huge drop in employee engagement levels. Some surveys are saying across the world's billion workers, knowledge workers that somewhere between 75% to 85% are disengaged. And it's not just in the US, it's wide scale. And kind of where I wanted to go with this question is how is decision leadership impacting this employee engagement? And in your opinions, what needs to change

Starting point is 00:59:20 and what changes to companies need to start making? I think that leaders need to do a better job of understanding why, why are people becoming disengaged? And I think that the answer is going to sort of differ across people. The fact that COVID has led to fundamentally different work relationships may have an influence. It for other people, there may be an issue of

Starting point is 00:59:47 employees are seeing better options outside than inside. So the mind is elsewhere. So what a leader sees as a disengaged employee is in fact, a very engaged employee that just happened to be engaged and looking for another job because the market has allowed them to do so. I think that there's not a singular driver of the disengaging employee. I think that there's lots of drivers

Starting point is 01:00:12 and I think the leader needs to do more diagnostic work to understand their employees before they figure out how they want to intervene. Making sense of a problem like this requires leaders to engage in study experimentation data collection. You're asking us fundamental psychological question that probably has diverse causes across organizations and across people and not every employee needs the same sort of connection affirmation

Starting point is 01:00:39 engagement. So understanding your people collecting data, asking them what it is that they need will be helpful for managers who want to increase engagement. So understanding your people, collecting data, asking them what it is that they need will be helpful for managers who want to increase engagement. Well, company you actually profile in the book, Humu might be at the core of figuring out the root cause here through what they're doing across their different client base. So it would be interesting to see what Jessica and her team do in the future in that area. I always like to ask authors if there was one takeaway that they would like to see the reader get from their book, what would it be? And in the last chapter, you guys kind of bring it all together, but I'll ask each one of you that question. I would encourage every leader to consider the possibility that they might be wrong.

Starting point is 01:01:24 As we advance in our careers, we get affirmation from those around us that it's too easy to allow to go to our heads. Instead, we need to correct our vulnerability to overconfidence by opening ourselves to the possibility that we might be wrong, by opening ourselves to advice, critical input from others. In fact, seeking that input out, you mentioned Netflix. One of the organizational practices that Reed Hastings implemented at Netflix after its near death experience with Quixter was farming for dissent. Any big decision requires managers at Netflix to actually collect disagreeing opinions. Every leader should have the courage to do that within their organizations. Ask yourself why you might be wrong.

Starting point is 01:02:10 It's the best antidote to overconfidence. And I'll add sort of the social idea of leaders realizing that they have more power to improve their organization and the world by thinking about the decisions of other people that they can influence, then they can through their own decisions. What's unique about leaders is leaders aren't just responsible for making good decisions like doctors and lawyers. They're responsible for leaving other people to make wise decisions, and I encourage all leaders to take on that responsibility.

Starting point is 01:02:46 Today launched an episode with Jean All-Wang. Not sure if you know who she is, but she's Richard Branson's right-hand person who runs their philanthropic arm called Virgin Unite. A mid-level leader, or even a senior leader, there's value that you can take from it. So thank you so both very, very much. Thank you. Thanks, John. I thoroughly enjoyed that interview with Max Bezerman and Don Moore, and I wanted to thank Max, Don, and the Better Change for Good Initiative for having them as guests on the show. Links to all things, Max and Don, will be in the show notes at passionstruck.com. Please use our website links if you buy any of the books from the featured guests on the show. All those proceeds go to supporting this show and making it free for our listeners. Avertiser deals and discount codes are all in one convenient place at passionstruck.com slash deals.

Starting point is 01:03:33 I'm at John Armiles, both on Instagram and Twitter, and you can also find me on LinkedIn. And if you want to know how I book guests like Max and Don, it's because of my network. Go out there and build yours now before you need it. You're about to hear a preview of the PassionStruct podcast interview I did with Dr. Jesse Wisdom, who is co-founder and head of People Science at Homo, a behavioral change platform that nudges people towards better ways of working. I've seen this in many places where they have great ideals, right? They put together a cultural framework or a transformation initiative

Starting point is 01:04:05 or they work really hard on figuring out what are the values of this company and how do we want people to behave? And ultimately where it usually falls apart is in actually getting people throughout the organization to change their behaviors in ways that are conducive to that. The fee for the show is that you share it

Starting point is 01:04:22 with family and friends when you find something that's useful. If you know someone who needs some guidance on leadership and new forms of decision leadership, please share this episode with them. The greatest compliment that you can give us is when you share this show with those that you care about. In the meantime, do your best to apply what you hear on the show so that you can live what you listen.

Starting point is 01:04:42 And until next time, live life passion struck.

Passion Struck with John R. Miles - Max Bazerman and Don Moore on How to Empower Others to Make Better Choices EP 194

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