Nicholas Epley
University of Chicago Booth School of Business
John T. Keller Professor of Behavioral Science at the University of Chicago
Booth School of Business, Dr. Epley has published over 50 scholarly in his
field and written for the New York Times.
He has been named a “professor to watch” by the Financial Times, is the winner of the 2008 Theoretical Innovation
Prize from the Society for Personality and Social Psychology, and was awarded
the 2011 Distinguished Scientific Award for Early Career Contribution to
Psychology from the American Psychological Association. He teaches Managing in
Organizations in the Booth MBA Program in addition to Ph.D. seminars on Social
Psychology and Topics in Behavioral Science.
1. What motivated
you to write your recent book Mindwise?
A couple of things motivated me. The big thing is that I have been doing
research trying to understand how people understand each other for about the
last two decades ever since entering graduate school. I reached a point in my
career when I wondered whether there was something bigger I could do with the
research that we had been conducting, making it of broader interest to a wider range
of people than just the typical academic audience. I thought there was
something bigger I could do with it, so I took on that challenge.
The great thing about being an academic is that you can really do the stuff
that you want to do. If you one day decide that you want to make your research
of broader interest than just to other academics, then you can give that a
shot. That was the motivation. It wasn’t anything more pressing than wanting to
take on another challenge from my perspective and also thinking that our field
of psychology had some research findings that would be helpful to people. Those
two factors together motivated me.
Follow-Up Question: Mindwise seems to have received quite a bit of acclaim.
Were you surprised by this response?
It’s funny that you ask that question. An author’s perspective, discussed
in the book, is very different from an observer’s perspective, as you can
probably imagine. As an observer, you might have noticed that the book has been
praised by some. I have been very happy with that praise. I have received some
nice reviews by serious people who have reviewed it. I have been very happy
with that. Of course, as an author, you are also very sensitive to the
criticism that you receive. There is a little bit of that, too. I will read
through a review that is generally very favorable, but contain one line that is
not, and that is the line that I will remember. My experience of the reaction
to my book has been a bit more humbling than you might imagine.
2. In your book,
you introduce various works on our “sixth sense”—our ability to read people--,
concluding we are not good at it. What do you think the root causes of this
inability are? Why do
you think increased awareness of our errors in judgment
improves our sixth sense?
There are several components to that question. Let me take each one in
turn. First, you mention that I think that we are not very good at this, that I
make that argument in the book. Part of that is right, but the argument is
actually more subtle than that. I would not say that we’re unable to understand
each other. To varying degrees, every one of us on this planet has an ability
that no other species has as far as we know. That is the ability to think about
the minds of others, their intentions, their motives. It is the ability to
communicate ideas to other people, to share our minds with others using very
sophisticated language.
In general, we do this better than any other species on the planet. This is
the reason why we are able to live in these enormous social collectives, where
we cooperate and compete. We work together efficiently and smoothly in really
complicated social settings. At a base level, we are generally pretty good at
this. We are better than zero accuracy. But the main finding of research over
and over is that we are far less than perfect, so there is plenty of room to
improve our social understanding. Other people are the most complicated thing
you will ever encounter in your entire life and you need to understand each
other better.
The other finding that comes out of research over and over again is that
however good we are at understanding each other, predicting what my wife wants
for her birthday, for example, or what’s going on with my kids at school and
how they are feeling today, we are not quite as good as we think we are. I
think the main problem is not incompetence, not the inability to do this. It’s
hubris, a lack of humility, thinking that we understand each other better than
we actually do. What’s the root cause of this hubris? I think there are two
main sources of error. We will focus on the reasons why we are not perfect. One
broad class of errors comes from not engaging this ability when we should. It’s
a little bit like any ability: You use it effectively when you try to use it.
It’s a little like walking around with your eyes closed. You can see the world
with your eyes open, but you can also close your eyes. Then, you do not use
that sense.
Our sense about the minds of others works the same. We do not always turn
it on when we should. The consequences of that are a little bit like when you
close your eyes. You can’t really see what is in front of you. If you don’t
engage with the mind of the other person, you can’t see it at all. You might
sometimes conclude they do not have one. That is, you think of them as
mindless. That creates a phenomenon we refer to as dehumanization. You are not engaged with the mind of the other
person.
The other class of errors comes from the mistakes we make when we are
actually trying to engage the mind of another person. Right now, for instance,
I’m experiencing one of the central challenges that we all face as we behave
like mind readers. I’m trying to communicate with you in an interview where I
cannot see you. You’re not right here in front of me. You are on the other side
of the planet! I know nothing about what you were doing earlier today. I know
very little about your background. I’m trying to communicate something
complicated to a mind that is fairly different from my own. That’s a challenge
for us because one of the ways we understand other people is by using our own
mind as a guide.
I am telling you about this book, which I know inside and out. I spent four
years on every detail, thinking about the book, writing it and editing it
before it was published. I know it every which way. That would lead me to
conclude that the book is clearer to you than it actually is. Because it’s
clear to me, I am likely to assume that it is clear to you. That represents the
first challenge that we have in thinking about the minds of others. It’s called
egocentrism, the assumption that
people think the way we do.
The second challenge is that once we know more about someone, we apply
stereotypes. I’m talking to you from Chicago. I’m American. You are talking to
me from Tokyo, and you’re Japanese. There are stereotypes about what American
and Japanese people are like that filter into our judgments of each other in
ways that are not entirely inaccurate. For instance, when you learn something
about another’s political beliefs, when you learn they are a liberal or
conservative, that gives you some accuracy that is above chance levels [in
reading their minds].
But the problem with these stereotypes is that they tend to focus on differences
between groups rather than similarities. The stereotypes you have about an
American are about qualities and attributes that make Americans different from
other people, not what makes them the same. That can lead us to exaggerate
differences between a group when, in fact, there are many similarities. We all
love our kids. We all enjoy great food and interesting experiences. We all like
to learn new things and have some sense of autonomy in our lives. There is a
lot more similarity that comes from being a human being, but stereotypes tend
to focus on differences, overlooking these similarities. Sometimes this tendency
can lead us to imagine that differences between people are greater than they
actually are.
In mindreading, for instance, there are very strong beliefs about the differences
between men and women: Women are more socially sensitive than men. They are
better able to understand others’ emotions and more sensitive to social cues. They
are better able to keep track of what they want or think they need. There is
some truth to this stereotype, but not a lot. The effect sizes are relatively
small. They correspond to a correlation of about 0.2 as compared to no
correlation at all, which would be 0. But if you ask people to predict the size
of the effect of gender, they do not predict a difference of 0.2 but of about
0.8. That is, they exaggerate the differences between men and women hugely. You
will find very popular books, international best sellers like Men are from Mars, Women are from Venus,
which suggest that men and women are very different. In fact, those stereotypes
tend to exaggerate the differences between the minds of men and women.
That last challenge in understanding the mind of another person is that
once we know even more about a person, we can see their behavior over time the
way I am around my graduate students. If you and I spend some time together, I
come to know all about you. I see your behavior. Then, I use your behavior as a
guide to what your thoughts are. The problem is that behavior can be misleading
as well because we tend to take behavior at face value. We tend to overlook the
context in which the behavior occurred, making it appear very different.
For instance, if you are trying to understand what I’m like as a person, how
sociable, extraverted or outgoing, you might use my behavior in this interview
as a guide. I’m pretty talkative, pretty chatty. I ramble on and on. The truth
is that I am actually quite shy most of the time. You have me in a situation
where my job is to talk because I am being interviewed by you. You ask me
questions, and I respond. The problem with behavior is that it can be somewhat
misleading because behavior is complicated to interpret. My behavior now is a
function both of the kind of person I am as well as the context that I am in. Our
understanding of each other tends to overlook the context, focusing too much on
the behavior we observe. This tendency can lead to some mistakes.
To summarize, I think there are two main challenges that make it difficult
to read others’ minds. One is that we don’t always turn on this ability to
understand the minds of others when we should. Then, the processes we go
through to understand each other can lead to systematic mistakes stemming from
egocentrism, stereotyping, and relying too much on the person’s observable
behavior.
3. In Japan and
other countries where high-context languages are common, individuals are even
less inclined to clearly speak their minds. Furthermore, power distance seems
to be much
greater. What suggestions would you make for increasing direct,
transparent communications
in such organizations? What recommendations can you
make for Westerners who must work
with Asians?
One thought that I have is that there are Japanese institutions that are
exceptionally well known for facilitating open and honest communication with
employees. For instance, I see the Skype image of you I have on my screen right
now has the Toyota insignia behind it. Toyota has seven pillars in their
management philosophy. One of them is this notion of kaizen, constant improvement. Toyota is a very interesting example.
When they first came to the U.S., that is, first began moving their
manufacturing to the U.S., their first plant was the N.U.M.M.I. joint venture
with General Motors in Freemont, California at a plant that GM had closed two
years prior. It had been the worst plant at GM at a time when GM was a
disaster. They were really making bad cars. They had a large share of the
American market, but they were essentially making junk, and everyone knew it. But
the plant in Fremont was the worst in their entire line of vehicles. So GM shut
it down.
Toyota wanted to come in and build a manufacturing base here in the United
States. In exchange, GM thought they would get some technological innovations
from Toyota. So they decided to re-open this plant in Fremont. The U.S. labor
union—the UAW (United Auto-Workers) union leader Bruce Lee demanded that this
new venture called N.U.M.M.I. (New United Motor Manufacturing Incorporated)
hire back all of the executives from the General Motors plant. Toyota did not
want to do that. GM did not want to it, but they had to. And they ended up hiring back basically all of
the workers that they had laid off—around 90% of them. These were all the same
workers who had been at the worst plant General Motors had in its line.
Toyota Management, though, was based on a different philosophy from the
American one. Toyota management fundamentally believed that people want to do a
good job. They take pride in their work. They want to have some sense of
respect about what they do. They want to have some sense of autonomy, some
sense that their work matters. They wanted to have a sense of the sort that the
nurse I spoke to on the train this morning was lacking in her job. GM
management had a very different philosophy about what their employees were like
that they had acquired over the years. That belief was that their employees
were idiots who were just there for a pay check. Toyota management had this
philosophy that people want to do a good job and that they would tell you how
to do a better job if only you would listen to them.
Here was a case where the management had this philosophy that made them
very open to feedback from their employees, a philosophy that runs contrary to
the cultural stereotype that you just described though it may be true in lots
of other social settings in both the U.S. and Japan. Here in GM was a plant
that wanted to hear nothing from their employees. Management did not care at
all what their employees thought about their jobs. Management just thought of
employees as cogs in a machine. “Just sit down there in the assembly line, and
do your job!”
Toyota management came in and said, “We care about what our employees think
and believe, and we’re going to tell them we think they know how to do their
jobs better. And we are going to give them the ability to tell us how to create
a better plant.” Management communicated this belief to their employees.
Management went down to the factory floor, something GM employees said they had
never, ever seen. Toyota management was there all of the time. Toyota also
installed a device, the Andon cord, which has since become famous. It’s a cord
that employees could pull to stop the line. The cord did not stop the line on
the first pull, but on the second. Employees pulled this cord when they noticed
something that could be improved, something that could become a problem. This
environment, this world that Toyota had created for the employees, was driven
by management’s belief in kaizen, and
the recognition that their employees are human beings who care about doing a
good job. Employees will tell you how to do their job better if you just enable
them to tell you.
The success of this JV is rather astonishing. Within a year of reopening
this plant, which had been the worst in the line producing more defects than
any other; with ridiculous absenteeism rates, drugs, sex, everything you could
imagine that could reduce productivity, became the best plant in the GM line.
Working with the very same management under a different philosophy and environment,
they now had the fewest defects and very low absenteeism. Employees took great
pride in their work. Industry analysts calculated that the old factory line would
have to be manned by 50% more employees to produce the same kind of output
being produced at the NUMMI plant, and that output would be full of defects.
I think there is a valuable lesson here. Regardless of the place they
happen to be, management around the world can facilitate open dialogue. As a manager
or leader, if you recognize your employees are human beings, they are trying to
do the best jobs they can, they probably know more about their job than you do
as a leader or manager, and if you maintain a sense of humility—the belief
there are some things you don’t know—that becomes the starting part for
creating a space where employees can tell you what they think. Wherever you are
on the planet, if you keep this Toyota example in mind, you will know what you
have to do to enable employees to speak their minds.
On the employee side, this is more of a challenge. Here, you are trying to influence
someone over whom you really do not have any formal influence. So you need to
find opportunities for open dialogue wherever you can. I don’t have any
insights into where your readers will find those openings. But individuals
probably can see times when they can bring up something they would want to talk
about. They need to think about where these opportunities are and how to use
them. The advice that I would give for using those opportunities to foster open
dialogue are twofold. One is to recognize that you are probably talking about
some issue that’s not a reality. If you are unsatisfied in your job, or you
think that you are underpaid, what you are talking about is a matter of
perceptions, which can differ between employees and employers. So you need to approach
the process with a humble attitude.
The other thing that helps in difficult conversations is to focus on the
future more so than on the present. Let’s say you are having trouble with your
spouse right now, and you are trying to figure out how to have that
conversation. That’s a difficult conversation to have. It’s difficult to
express your mind, and it’s difficult to get your partner to express his or her
mind in this context because you get defensiveness. The standard approach is to
talk about what’s happening in the relationship right now or focus on what has
happened in the relationship in the past. Doing that is a way to make people
really defensive.
A way to take some of the edge of that defensiveness is not to talk about the
past or present, but rather to open the dialogue by talking about the future. You
can go to your spouse and say, “Look. I have committed to being with you for
the rest of my life. That means I want us to have the best marriage that we
possibly can for the next twenty, thirty, or forty years until death do us
part. I want to help us have that kind of marriage going forward. I am not worried
about where things are right now. I want us to think about how we can develop
the best marriage possible over the next five to ten years.” Because you both
want that, I think starting out that way, trying to focus on things down the
road, might help you to talk about difficult things in the present.
You can do this in your firm, too. You can tell your boss, “Look. I want to
be in this job for the long haul. I think this is a great place for me to work.
I would like to be able to excel in my job over the years, and I really want to
figure out how to best do that. I’m worried that I may not be doing that to my
maximum ability right now. Here’s where I am right now. Here is where I would
like for both of us to be two years down the road. Can you and I come up with a
development plan for getting there? Opening the conversation by focusing on the
future can open dialogue because people do not get defensive about the future.
It hasn’t happened yet. It’s easy to align perspectives about the future. Both
you and your boss want you to succeed over the next two years. You are on the
same page.
4. In your New York
Times article, you refer to framing effects to explain how a greater
percentage
of a tax refund is typically spent when described as a tax bonus rather than a
rebate.
In what situations in companies are framing effects likely? Can you
give a few concrete
examples?
Let me give an example of a framing effect from our
research that is close to your (upcoming) question on the recent increase in
the Japanese consumption tax. That was some research that we did a few years
ago, where we were looking at how people handle or spend money when it’s described
in different ways. This may seem like an odd place to go to study this kind of
behavior, because money, after all, is money. But it turns out that people don’t
treat all money as the same interestingly. Framing is simply a difference that
you get in behavior or in how people treat or evaluate some stimulus or object
depending on how it’s described. A credit-card tax and a credit-card surcharge
might be the same thing, but tax and surcharge sound different. The
government can give money back to citizens at the end of the year in ways
intended to stimulate the economy. That is what our government was trying to do
a few years ago. They can give that money out in a few different ways. They can
describe it, for instance, as a tax
rebate. That is, they are giving taxes you have already paid back to you. Or
they could describe the money as a bonus.
Both of these things are objectively true. Neither of
these descriptions is truer than the other. The government is giving you money
back. That’s a bonus. They are taking
it out of tax paid so it could be called a refund.
Both are money, and a dollar is a dollar, just the way a yen is a yen, and a
euro a euro. The money is the same no matter how you describe it. But changing
the name changes how people think about it. What we found in our experiments is
that people were much more likely to spend the money when we referred to it as
a bonus rather than a rebate. The reason is that when I give
you a rebate, the way that you
understand that or interpret or construe that money is as money that you are
getting back.
It’s as if I walked up to you on the street, tapped
you on the shoulder, and said, “Here’s money I found on the street. It looks as
if you dropped it out of your wallet.” I could also walk up to you and say, “Here’s
some money. I just found it on the street, and I thought you might like to have
it.” In both cases you are richer by the amount of money I gave you, but in one
case, you probably don’t feel like you’re richer. I just returned money that
you already had. You do not have any additional money in your bank account than
you did in some objective sense.
In the other case, when I give you money that
described as a bonus, it feels like
you somehow received money that you did not have before. Again, you are richer
by the same amount in both cases. But psychologically, it feels different. If
you have extra money, you are more likely to spend it than if you don’t feel
like you have extra money. In our experiments, we found that when we described the
money as a bonus, participants were
much more likely to spend it than when we described that money as a rebate. In fact, they were eight times
more likely to spend it. These framing effects were some of the largest I have
ever seen. People saved the rebate,
but they spent the bonus money.
That’s an example of a framing effect. Framing effects
can come up almost anywhere. You can talk about the number of lives that a
policy will save as opposed to the number of lives that would be lost without
it. In terms of calories, a big deal in the United States, where people want to
eat healthier, you can describe the meat that you eat as 80% lean versus 20%
fat. Both of those descriptions are the same, but you will eat the meat
described as 80% lean, and not the meat described as 20% fat. You are
describing the exact same objective reality, but the descriptions conjure very
different images. Framing effects like these are greatest when there is some
uncertainty or ambiguity in the stimulus that you are evaluating. Is this meat
that you are eating healthy? Well, we can’t be too sure. It depends on how you
describe it. If you describe it as 80% lean, it sounds healthier than when you
describe it as 20% fat.
If something is very concrete, it’s very clear what
the truth of the matter is. In these cases, framing effects do not appear very
much. But you find that there are situations where there is some ambiguity.
Those cases are actually very common. You can see how common it is in our
studies when we take money, which is arguably the most objective thing of all
that you could evaluate. A dollar is a dollar, a yen a yen, a euro a euro. They
are all the same. They are objective values. The way I describe the money is
not going to effect the amount that you have: If I give you $50 or fifty yen or
whatever you can tell me how much it is. But the decision about whether you are
going to spend that money is ambiguous. That is where you will see framing
effects.
5. As you may know,
the Japanese government recently raised the consumption (sales) tax from
5% to
8% after many years at the former level, with planned increases in the near
future. If you
were a consultant for the government, how would you suggest they
refer to the tax or explain it
in order to achieve their ultimately goal of
stimulating the economy overall?
Referring to the consumption tax, are you wondering how you can change
people’s feelings about it? Is that kind of the idea?
Follow-Up Question: Is there a way of applying your research on framing
effects to help the Japanese government better sell the tax to the Japanese
people, making it possible for the former to achieve their conflicting goals of
increasing state revenue while simultaneously stimulating the economy?
Most of my advice will be very context sensitive, so your wisdom will be
important here. If I were a policy maker, what I would consider doing is based
on our research in the U.S. These were government programs. Both in 2001 and
again in 2006, the Bush Administration gave rebates to U.S. citizens, hoping
they would spend that money, thereby stimulating the economy. The programs were
intended as an economic stimulus package. They were based on the simple
philosophy that people will spend money if they have it. The government is
giving people money to spend. The problem was that they described the program
to people as a tax rebate. That term
did not give anyone the sense that they had more money. It was like getting
money back. The program was not presented to U.S. citizens in a way that enticed
them to spend with patriotic abandon. In fact, people saved this money. Depending
on which rebates you look at and how you interpret the figures, people saved
about 80% of the money at a time when the savings rate was actually negative. On
average, people where spending more money than they were earning at the time.
If I had been a policy maker at that time, I would have thought about
different ways of distributing that money that would encourage more consumption.
The government could have appealed to Americans’ patriotism. They could have
had “Economic Upturn Weekends,” where you encourage people to bring in their
tax bonus checks to stimulate the American economy. You could easily have
gotten marketers on this case. They think about these types of issues all the
time. Marketers could have made it possible for policy makers to present their
programs in a way that would encourage some degree of nationalism, some sense
that the money they are giving the people is intended for spending. “Make
America better by spending this money in a particular way.”
This question about the consumption tax is in Japan is really a question
for people familiar with the context to think through. Can we describe this
consumption tax in a way that will appeal to Japanese consumers’ pride and
encourage them to stimulate the economy? “This tax it not meant to hurt you. It
is meant to help all of us.” I certainly would not call it a consumption tax. I might call it, the “Rising
Japan Plan.” Even the simple description “Stimulus Plan” might be sufficient.
6. You have
co-authored several studies on anthropomorphism. Can you explain the meaning of
this word using some concrete examples?
Anthropomorphism is simply attributing human-like characteristics to non-human agents. Most
often, what that means psychologically is attributing a human-like mind to one
of these agents. If you ask people on the street the defining feature of humans
—what makes them different from chimpanzees or dogs, from cats or trees—people
will not likely tell you, “Two arms, “ or “Two legs.” They will not mention
parts of the body. Instead, they will tell you things about the human mind. We
can think. We are better able to feel. We have more sophisticated tastes and
preferences. We can reason. This thinking goes back to Jeremy Bentham and Emmanuel
Kant, philosophers who made the very same kinds of arguments.
When we study anthropomorphism,
the way we define it is as attributing a human-like mind to a non-human agent.
For instance, thinking that your car is able to think. That it’s intelligent,
that it can sense what is occurring around it. These are all instances of anthropomorphism. We have done some
recently-published research funded by General Motors here in the U.S. Adam
Waytz , Joy Heafner and I completed the research together. We looked at the
consequences of anthropomorphizing these autonomous vehicles for people’s trust
in them. This is a challenging case for engineers to handle. You have a car
that drives itself, but you have to get willing users behind the wheel. That’s
a real challenge, not an engineering challenge, but a psychological one. You
have to get people to trust this thing.
We conducted some experiments where we had some people behind the wheel. These
were not real autonomous vehicles. They were simulators. But they were real
enough that when we get people in the simulator to have an accident, they can
be very traumatized. The simulator was a very real, immersive device. In the
experiment, we put people in three different conditions. In one condition, they
drove the autonomous vehicle as they would a regular car. They controlled the
steering and breaking and the like. In another condition, they drove the
autonomous vehicle. They would turn on the features, and the car would drive
itself.
In the third condition, the anthropomorphic one, we added some features
that we thought would enable drivers to anthropomorphize the vehicle. That is,
we added features that would make them believe it was thoughtful and
intelligent, and able to do things with a plan. Planning is a mental capacity,
something that our minds do. We felt the features would lead participants to
believe that the autonomous vehicle could control its behavior. We gave the car
a name like Iris. We gave it a human voice that could talk to the driver. This
enabled real interaction. In other experiments, we find that a person’s voice
is really essential in recognizing that the person has a mind. If I can hear
you speaking, even if it’s the exact same content, I judge you to be more thoughtful,
more reasonable, more rational than if I had just read the content of your
voice. The voice is the essential feature. The car talks to you in a real human
voice with intonation and pitch variance. These factors are critical to
communicating the presence of mind.
We found when we give a car a voice, a real voice, as opposed to a flat,
computerized one, people trust that vehicle more. They feel safer. They’re more
relaxed while driving it, particularly when they are involved in a stressful
event like an accident.
In this experiment, everyone got into an accident at the end. To ensure
that everyone had the same accident, we had to manufacture it. We had to make
sure they had been hit by another vehicle. The accident was another driver’s
fault. Subjecting all participants to the same accident ensured experimental
control. We asked the people how much they blamed the car, the engineers who
designed the car. We found that when people anthropomorphize the vehicle, when
they regarded it as more thoughtful and intelligent, better able to sense what
was around it and plan, they also tended to blame the car the least. If your
car is thoughtful, if it can think and feel, if it gets into an accident caused
by another person, it’s clearly the other’s fault, not yours. We found that when
we anthropomorphed the car, people treated it as more human. They regarded it
as more intelligent.
We think that is one of many kinds of implications of anthropomorphizing
technology. The late Clifford Nass, formerly a researcher in computer science
at Stanford, studied this phenomenon for many years. He wrote a great book
titled The Man Who Talked to His Laptop.
I recommend that your audience take a look at the book if they are really
interested in the topic. He described a lot of interesting, related
consequences of anthropomorphism. I think it important for engineers to
recognize that when people are interacting with their technology, they are
interacting with it based on some model they have about how the interaction
should occur. One of the easiest models to adopt or use is a human-like one. We
spend lots of time interacting with other people. If you anthropomorphize
technology, then you get the same types of consequences that you have when you see
people interact. Engineers certainly need to keep this fact in mind.
7. According to a
web article I recently read, you were an offensive lineman on your college
football team (and suffered a broken nose during your first game). Reflecting
on your
experience as an athlete, can you think of how your Mindwise theories
might apply in other
arenas like competitive sports, especially ones such as tennis,
boxing and others where
individuals compete one to one?
Sports are a great example of why mind reading is essential for success in
competition. On the football field when I was playing, if I knew what my other
players were planning to do, and if I knew what the opposing team was planning
to do perfectly, we would have won every game. Certainly, there is a skill
component. Even if I know what you plan to do, if I do not have the talent to anticipate
your actions and counter them, I am not going to win. If I were playing
basketball against one of the greatest players in the world, I would still lose
even if I knew exactly what he is going to do. But in most sports, skill is
actually relatively well managed.
The competitive advantage derives from other attributes, like the ability
to anticipate what a player is going to do before he or she does it. That’s a
case where the importance of being able to understand the other side’s mind is
clear and obvious. I think lots of sports teams spend time trying to figure
that out. “Can I read my opponent better?” This skill is less obvious in
sports. People think less about it in other domains with very much the same
attributes as competitive sports. Negotiations, where you are really trying to
maximize value not only for your side, but also for the other side as well, are
a good example. Mind reading is every bit as essential in these domains as in
sports.
Follow-Up Question: Due to the influence of behavioral economics, do you
think more MBA students in the United States take psychological aspects of
business more seriously rather than focusing exclusively on number crunching?
The field of psychology is going through a really interesting period right
now. Behavioral economics is not really about economics but about psychology
applied to economics. Either economists are trying to incorporate psychology
into their work, or psychologists are interested in economic problems. It’s a
really interesting interdisciplinary effort. Here in the U.S., more and more
MBA classes on behavioral economics are being offered. There are some widely
read books on the topic, too. Daniel Kahneman’s book, Thinking Fast, and Slow, for example, is doing exceptionally well. My
colleague Rick Thaler’s book Nudge
with Cass Sunstein is also popular.
Behavior economics is having some real impact on people’s lives. Particularly
in the U.K., where these ideas have been adopted most extensively, government
interventions are being made. In the United States, I think students are
beginning to take behavioral economics more seriously because they are likely
to be seeing the impact it is having on the world more clearly. The proof is
still in the pudding for us, though. We still need to do more work in the field
to show the real impact of this approach to understanding people. I think that
this is less of a problem in the interpersonal world. Psychology has always
been front and center when thinking about leadership and management issues in
the corporate world, too. But in the realm of public policy, psychology is just
coming to the fore, so I can’t tell you how much impact it is going to have or
how much MBA students are going to appreciate it in the long run. That story is
still unfolding.
This is my recent Kindle book with colleague Dr. Yuzo Sugimoto. It presents real English dialogues introducing American culture with supplemental usage problems for standardized test preparation.
