Maybe negative new years resolutions might be better

I am quite certain that new year resolutions don’t really work, are more wishful thinking (gyms are full in January and empty in February), except when you are registered for a course, study hard and pass.

New resolutions but old habits. The paradox of new years resolutions is that you get into the new year with new ideals but you are still carrying the old habits.

I have personally never been successful with positive resolutions, but have been with stated negative year-end rules: in 2007 (never be late for meetings, submission for the year 2008 which worked well by injecting redundancies, and seems to have effortless carried over to today) and 2012 (no more neglecting writting and reading, with weak exceptions).

Intuitively this makes sense. Easier to eliminate some bad practice, rather than doing something new. We’ll try in 2014.

Thank You

Thank You
As the year 2013 comes to an end, I would like to express my gratitude to the people who have contributed to my development and growth this year. As an entrepreneur, it was never an easy year both personally and business-wise, certain difficult decisions had to be made, some life changing decisions, some brave decisions and some decisions difficult to implement.

Over 6000 people have visited my blog since August 2013, I really appreciate your visits and humbled by your contributions. I have learned and grown through your inputs. My wish for 2014 is for growth for you in your personal and entrepreneurship endeavours.

Like Seth Godin says: Lets go ahead and make something for the elites. Not the elites of class or wealth, but the elites of curiosity, passion and taste.

Thank you for everything you do. Most important, thanks for living your dreams out loud, bringing generosity, insight and wonder to the work you do.

Thank you, Dankie, Ngiyathokoza, Ke a leboga, Siyabonga, Inkomu, Ndo livhuwa, livhuwa, Enkosi, Ngiyabonga

Why watching and waiting is torture

Quiet Place
In a penalty situation in soccer, the ball takes less than 0.3 seconds to travel from the player who kicks the ball to the goal. There is not enough time for the goalkeeper to watch the ball’s direction. He must take a decision before the ball is kicked. Soccer players who take penalty kicks shoot one third of the time at the middle of the goal, one third of the time at the left, and one third of the time at the right. Surely goalkeepers have spotted this, but what do they do? They dive either to the left or to the right. Rarely do they stay standing in the middle, even though roughly a third of all balls land there. Why on earth would they jeopardise saving these penalties? The simple answer: appearance. It looks more impressive and feels less embarrassing to dive to the wrong side than to freeze on the spot and watch the ball sail past.

This is the action bias: look active, even if it achieve nothing.

This study comes from the Israeli researcher Michael Bar-Eli, who evaluated hundreds of penalty shoot-outs. But not just goalkeepers fall victim to the action bias. Suppose a group of youths exist a nightclub and begins to argue, shouting at each. The situation is close to escalating into an all-out fight. The police is the area monitoring the scene from a distance hold back and intervene only when the first casualty appear.

The action bias exists even in the most educated circles. If a patient’s illness cannot yet be diagnosed with certainty, and doctors must choose between intervening (i.e. prescribing something) or waiting and seeing, they are prone to taking action. Such decisions have nothing to do with profiteering or professional misconduct, but rather with the human tendency to want to do anything but sit and wait n the face of uncertainty.

Traditionally our fore-fathers have always been reacting to any slight movement they encountered. When they saw a shadow appear at the edge of the forest, something that looked like an animal, they did not take time to reflect on what that may be. They hit the road and fast.

Although we now value time to reflect more highly, outright inaction remains a cardinal sin. You get no honour, no medal, no statue with your name on it if you make exactly the right decision by waiting, for the good of the company, the government, even humanity. It is as if waiting is synonymous with incompetence. When a person opts to wait and think things through, or using the phrase “let me sleep on it”, that is a sign of weakness. People want to make urgent decisions, making business decisions as if walking into a clothing store and buying a shirt. If you demonstrate decisiveness and quick judgement, and the situation improves (though perhaps coincidentally), its quite possible your boss, or business partner, will shake your hand. Society still prefers rash action to a sensible wait-and-see strategy.

In conclusion: in new or uncertain circumstances, we feel compelled to do something, anything. Afterward we feel better, even if we have made things worse by acting too quickly or too often. So, though it might not merit a parade in your honour, if a situation is unclear, hold back until you can assess your options.

‘All of humanity’s problems stem from man’s inability to sit quietly in a room alone,’ wrote Blaise Pascal. At home, in his study.

Why you should set fire to your ships

crossroads
Next to my bed, two dozens books are staked high. I have dipped in and out of all them, but am unable to part with even one. I know that sporadic reading won’t help me achieve any real insights, despite the many hours I put in, and that I should really devote myself to one book at a time. So why am I still juggling all twenty-four? I remember listening to former President Mbeki’s radio interview saying he is reading three books at the same time (not simultaneously, if you know what I mean) . After succumbing to my urge of reading three books at the same time, I realised it is not for me.

I know of a friend a while back who was dating three women. He was in love with all three (so he says) and can imagine starting a family with any of them. However, he simply doesn’t have the heart to choose just one, because then he would be passing up on the other two for good. If he refrains from deciding, all options remain open. The downside is that no real relationship will develop. So why was still juggling three of them, even though he knew he had to choose one?

In the third century B.C., General Xiang Yu sent his army across the Yangtze River to take on the Qin Dynasty. While his troops slept, he ordered all the ships to be set alight. The next day, he told them: ‘You now have a choice: Either you fight to win or you die.’ By removing the option of retreat, he switched their focus to the only thing that mattered: the battle. Spanish conquistador Cortes used the same motivational trick in the sixteenth century. After landing on the east coast of Mexico, he sank his own ship.

Xiang Yu and Cortes are exceptions. We mere mortals do everything we can to keep open the maximum number of options. We grow up being told we should get a good education so that we can have options.

So why is it that when we have so many options we are unable to decide or prolong to decide, why do we act so irrationally? Because the downside to such behaviour is not always apparent. In the financial markets, things are clear: a financial option on a security always costs something. There is no such a thing as a free option, but in most other realms, options seem to be free. This is an illusion, however. They also come at a price, but the price tag is often hidden and intangible: each decision cost mental energy and eats up precious time for thinking and living.

We are obsessed with having as many irons as possible in the fire, ruling nothing out and being open to everything. However, this can easily destroy success. We must learn to close doors.

A business strategy is primarily a statement on what not to engage in. Adopt a life strategy similar to a corporate strategy:

write down what not to pursue in your life.

In others words, make calculated decisions to disregard certain possibilities and when an option shows up, test it against your not-to-pursue list. It will only keep you from trouble but also save you lots of thinking time.

Think hard once and then just consult your list instead of having to make up your mind whenever a new door cracks open. Most doors are not worth going through, even when the handle seems to turn so effortlessly.

If you have nothing to say, say nothing

Silence
When asked why a fifth of Americans were unable to locate their country on a world map, Miss Teen Carolina in the USA, a high school graduate, gave this answer in front of rolling cameras:

‘I personally believe that U.S. Americans are unable to do so because some people out there in our nation don’t have maps, and I believe that our education like such as South Africa and the Iraq everywhere like such as and I believe that they should our education over here in the U.S. should help the U.S., should help South Africa and should help the Iraq and the Asian countries, so we will be able to build up our future.’

(here is the link to the beauty queen answer: http://www.youtube.com/watch?v=lj3iNxZ8Dww)

Catastrophic, you agree. The video went viral. But you don’t spend too much time listening to beauty queens. Ok, how about the following sentence?

‘There is certainly no necessity that this increasingly reflexive transmission of cultural traditions be associated with subject-centred reason and future-oriented historical consciousness. To the extent that we become aware of the intersubjective constitution of freedom, the possessive-individualist illusion of autonomy as self-ownership disintegrates.’

This is a Top German philosopher and sociologist Jurgen Habermas in Between Facts and Norms. Both of these are manifestations of the same phenomenon, the twaddle tendency. Here, reams of words are used to disguise intellectual laziness, stupidity, or underdeveloped ideas. Sometimes it works, sometimes not. For the beauty queen, the smokescreen strategy failed dismally, for Harbernas, it might be working (or not, it depends on which you are sitting). The more eloquent the haze of words, the more easily we fall for them.

During the funeral of our beloved formed president Nelson Mandela, news broadcasters had a lot of work to do in covering the event. Some channels had the ability to let unfolding events of the funeral tell the story instead of anchors having to talk through each vacant moment. The silence and the sight of the drummers and defence force marching to the marquee followed by the casket of Madiba is enough for viewers emotions to marinate in. No need to talk over such moments.

The twaddle tendency is also rife in sport. Sports anchors push breathless football players to break down the components of the game, when all they want to say is: ‘We lost the game – its really that simple’ the poor player will stutter some words together, sometimes using English which is not their first language. But the presenter has to fill the airtime somehow, and the best way is by asking the player or coach to blabber something about the game.

The twaddle tendency also happens when a political story breaks out and then political analysts have to comment on the story. More often there has not been enough time to analyse the story, then the poor analyst has to give some intelligent analysis and end up blabbering even if anyone would have given the same fresh analysis.

Politicians also fall prey to this twaddle tendency when they discuss different political systems, capitalism, socialism, neo liberal this or conservative liberalism.

The twaddle tendency is also true in commerce on a smaller scale: the worse-off a company financially, the lot of talk by the CEO in an effort to cover-up the hardship of company. Jack Welch (former CEO of General Electric) once said in an interview:

‘You would not believe how difficult it is to be simple and clear. People are afraid that they may be seen as a simpleton. In reality, just the opposite is true.’

In conclusion:

verbal expression is the mirror of the mind. Clear thoughts become clear statements, whereas ambiguous/confused ideas transform into vacant ramblings.

The trouble is that, in many cases, we lack very clear thoughts. The world is complicated, and it takes a great deal of mental effort to understand even a small part of the whole. Until you experience such an epiphany, it is better to take Mark Twain’s advice:

If you have nothing to say, say nothing.’

Simplicity is the zenith of a long, difficult journey, not the starting point.

Build your own castle

dogs
Three scenarios – which would annoy you the most?

A) Your friends salary increases. Yours stays the same

B) Their salaries stay the same. Yours too.

C) Their average salaries are cut. Your is too.

If your answered A, don’t worry, that’s perfectly normal: you are just another victim of the green-eyed monster.

Here is an Orange Free State fairy-tale: a farmer finds a magic lamp. He rubs it, and out of thin air appears a genie, who promises to grant him one wish. The farmer thinks about this for a little while. Finally, he says: ‘My neighbour has a cow and I have none. I hope that his cow drops dead.’

As ridiculous as it sounds, you can probably identify with the farmer. Admit it: a similar thought must have occurred to you at some point in your life. Imagine your colleague scores a big bonus and you get a gift voucher. You feel envy. This creates a chain of irrational behaviour: you refuse to help him any longer, sabotage his plans, perhaps even puncture the tyres of his Porsche. And you secretly rejoice when he breaks his leg at the gym.

Of all the emotions, envy is the most idiotic. Why? Because it is relatively easy to switch off. This is contrast to anger, sadness, or fear.

‘Envy is the most stupid of vices, for there is no single advantage to be gained from it,’ writes Balzac

In short, envy is the most sincere type of flattery; other than that, it’s a waste of time.

Many things spark envy: ownership, status, health, youth, talent, popularity, beauty. It is often confused with jealousy because the physical reactions are identical. The difference: The subject of envy is a thing (status, money, health etc.). The subject of jealousy is the behaviour of a third person. Envy needs two people. Jealousy, on the other hand, requires three: Mpho is jealous of Tshepo because the beautiful girl next doors calls him instead.

Paradoxically, with envy we direct resentments towards those who are most similar to us in age, career and residence. We don’t envy businesspeople from the century before last. We don’t begrudge plants or animals. We don’t envy millionaires on the other side of the world, we envy just those on the other side of town. As a new writer, I don’t envy musicians, managers or dentists, but other writers. As a CEO you envy other, bigger CEOs. As a supermodel you envy more successful supermodels.

Aristotle knew this: ‘Potter envy potters.’

This brings us to a classic practical error: Let’s say your financial success allows you to move from one of Johannesburg’s middle-class neighbourhood to the glitzy leafy suburbs of Sandton. In the first weeks, you enjoy being in the centre of everything and how impressed your friends are with your new house and address. But soon you realise that the houses of completely different proportions surround you. You have traded in your old peer group for one that is much richer. Things start to bother you that haven’t bothered you before. Envy and status anxiety are the consequences. Christopher Wallace (best known as Notorious B.I.G) raps about more money more problems.

How do you curb envy? First, stop comparing yourself to others. Second, find your ‘circle of competence’ and fill it on your own. Create a niche where you are the best. It doesn’t matter how small your area of mastery is. The main thing is that you are king of the castle.

In today’s world, envy is no longer vital. If my neighbour buy himself a Porsche, it doesn’t mean that he has taken anything from me.

When I find my friend suffering pangs of attack of envy, I hasten to reminds him: ‘It’s OK to be envious, but only of the person you aspire to become.’

Build your own castle.

If all you have is a hammer, everything looks like a nail (Part 2)

Hammer
A man takes out a business loan, starts a company, and goes bankrupt shortly afterward. He falls into a depression and commits suicide.

What do you make of this story?
As a business analyst, you want to understand why the business idea did not work: was he a bad leader? Was the strategy wrong, the market too small or the competition too large?
As a marketer, you imagine the marketing and sales campaigns were poorly organised, or that he failed to reach his target audience.
If you are a financial expert, you ask whether the loan was the right financial instruments with the right interest rates.
As a local journalist, you realise the potential of the story, how lucky that he killed himself!
As a writer, you think about how the incident could develop into a kind of Greek tradegy and maybe a bestseller thriller you can write.
As a banker, you believe an error took place in the loan department.
As a socialist, you blame the failure of capitalism.
As a religious conservative, you see in this a punishment from God.
As a psychiatrist, you recognise low serotonin levels.

Which is the ‘correct’ viewpoint? None of them.

‘If your only tool is a hammer, all your problems will be nails,’ said Mark Twain

A quote that sums up the deformation professionnelle. Charlie Munger, Warren Buffett’s business partner, named the effect the man with the hammer tendency after Twain: ‘But that’s a perfectly disastrous way to operate in the world. So you have to have to multiple models. And the models have to come from multiple disciplines, because all the wisdom of the world is not to be found in one little academic department.

Here are a few examples of deformation professionnelle: doctors want to solve almost every medical problem with a scalpel, even if their patients could be treated with less invasive methods. Armies think military solutions first. Engineers, structural. Trend gurus see trends in everything (incidentally, this is one of the most idiotic ways to view the world). In short: if you ask someone the crux of a particular problem, they usually link in to their own area of expertise.

Even in his own jurisdiction, the man with the hammer tends to overuse it. Literary reviewers are trained to detect author’s references, symbols and hidden messages. Business journalist tends to sniff the most trivial utterings of central banks governors and somehow discover hints of fiscal policy change by suspiciously reviewing her tone or body language before she responds to questions.

In conclusion:

If you take your problem to an expert, don’t expect the overall best solution. Expect an approach that can be solved with the expert’s toolkit.

The brains is not a central computer (CPU). Rather, it is a Swiss Army knife with many specialised tools. Unfortunately, our ‘pocketknives’ are incomplete. Given our life experiences and our professional expertise, we already possess a few blades. But to better equip ourselves, we must try to add two or three additional tools to our repertoire, mental models that are far afield from our areas of expertise. For example, over the past few years, I have begun to take a biological view of the world and have won a new understanding of complex systems. Locate your shortcomings and find suitable knowledge and methodologies to balance them.

It takes about a year to internalise the most important ideas of a new field, and its worth it: your pocketknife will be bigger and more versatile, and your thoughts sharper.

Refer to part 1:

https://rochemamabolo.wordpress.com/2013/08/24/when-all-you-have-is-a-hammer-every-problem-seems-like-a-nail/?preview=true&preview_id=222&preview_nonce=1cc4597376&post_format=standard

How to profit from the implausible

Black Swan
“All swans are white.” (Swans are water-birds whose close relatives includes the geese and ducks). For centuries, this statement was watertight. Every snowy specimen corroborated this. A swan in a different colour? Unthinkable. That was until the year 1697, when a guy by the name of Willem de Vlamignh saw a black swan for the first time during an expedition to Australia. Since then, black swans have become symbols of the improbable.

You invest money in the stock exchange. Year in, year out, the JSE industrial index rises and falls a little, you are fine, everything is okay. Gradually, you grow accustomed to this gentle up and down. Then, suddenly, the recession of 2008 comes around and then stock market tumbles 22%. With no warning. This event is a Black Swan, as described by Nassim Taleb in his book with the same title.

A Black Swan is an unthinkable event that massively affects your life, your career, your company, your county. There are positive and negative Black Swans. The release of Nelson Mandela from prison is a Black Swan, the collapse of the Soviet Union, the internet browser, the smart phone, the Arab Spring or another encounter that upturns your life completely, all are Black Swans.

Like him or dislike him but former U.S secretary of defence Donald Rumsfeld, put a press conference in 2002, he expressed a philosophical thought with exceptional clarity when he offered this observation:

there are things we know (‘known facts’), there are things we do not know (‘known unknowns’) and there are things that we do not know that we do not know (‘unknown unknowns’).

How big is the universe? Does Iran have nuclear weapons? Does the Internet make us smarter or dumber? These are ‘known unknowns’. With enough effort, we can hope to answer these one day. Unlike the ‘unknown unknowns’. No one foresaw Facebook mania ten years ago, or the iPad. These are Black Swans.

Why am I talking about Black Swans, why are Black Swans important? Because, as absurd as it may sound, they are mushrooming more and more frequently and they tend to become more important. Though we can continue to plan for the future, Black Swans often destroy our best-laid plans. Back in the Stone Age, we hardly ever encountered anything truly extraordinary. The springbok (buck/deer) we chased was sometimes a bit faster or slower, sometimes a little bit fatter or thinner. Everything revolved around a stable mean.

Today is different. We are now living in an entrepreneurship revolution. It is as if we are at the same time when the Industrial revolution took over and the world as we know it for the past 100 years. Today in the entrepreneurial revolution, with one breakthrough, you can increase your income by a factor of 10,000. Just ask Larry Page, Usain Bolt, Adrian Gore, Mark Zuickerberg, or J.K Rowling. Such fortunes did not exist previously, peaks of this size were rare. Only in the most recent of human history has this been possible.

So, what can be done? Put yourself in situations where you can catch a ride on a positive Black Swan (as unlikely as that is). Seth Godin in his book: The Icarus Deception: How High Can You Fly, talks about becoming an artist, inventor or entrepreneur with a scalable product. If you sell time (e.g. as in employee, dentist or journalist), you are waiting in vain for such a break, unless if you can create art within your trade. But even if you feel compelled to continue as such, avoid surroundings where negative Black Swans thrive. This means: stay out of debt, invest your savings as conservatively as possible and get used to a modest standard of living, no matter whether your big breakthrough comes or not.

If you are entrepreneurial inclined, there has never been a better time to achieve what you want to achieve. Be a positive Black Swan and a game changer.

Its not what you say, but how you say it…

Fear-of-Public-Speaking-image

Consider these two statements:

‘Hey, dont you see the rubbish bin is full!’

Or

‘It would be really great if you could empty the rubbish bin, honey’

C’est le ton qui fait la musique: its not what you say, but how you say it. If a message is communicated in different ways, it will also be received in different ways. In psychologists’ jargon, this technique is called framing.

We react differently to identical situations, depending on how they are presented. In the 1980s Kahneman conducted as survey in which he put forward two options for an epidemic-control strategy. The lives of 600 people were at stake, they told participants to the survey:

– Option A: Saves 200 lives
– Option B: Offers 33% chance that all 600 people will survive and a 66% chance that no one will survive.

Although options A and B were the same (with 200 survivors expected in both options since 33% of 600 gives you 200), the majority of respondents chose A – remembering the adage: a bird in hand in better than two in the bush. It became really interesting when the same options were reframed.

– Option A: Kills 400 people
– Option B: Offers a 33% chance that no one will die, and a 66% chance that all 600 will die.

This time, very few of respondents chose A and the majority picked B. The researchers observed a complete U-turn from almost all involved. Depending on the phrasing, survive or die, the respondents made completely different decision.

Have you ever looked more closely at the prospectus for financial products, generally the brochure illustrates the product’s performance in recent years, going back just far enough for the nicest possible upward curve to emerge. This is framing.

Consider used cars. If a car has low mileage and good tyres, the salesperson will focus on those things and overlook the state of the engine, the brakes or the interior. Thus, the mileage and tyres becomes the main selling points. and frame out decision to buy. Such oversight is only natural, though, since it is difficult to take in all possible pros and cons. Interestingly, had other frames been used to tout the car we might have decided very differently.

Authors are conscious framers too. A crime novel would be rather dull, from page one, the murder were shown as it happened, stab by stab, as it were. Even though we eventually discover the motives and murder weapons, the novelist’s framing injects thrills and suspense into the story.

In conclusion:

realise that whatever you communicate contains some element of framing, and that every fact, even if you hear it from a trusted friend or read it in a reputable newspaper, is subject to this effect, too. Even this blog post.

You like me, you really really like me

roche
Mpho (a friend) has just bought two bottles of expensive whiskey. He rarely drinks whiskey, but the sales assistant was so nice, not fake or pushy, just really likeable, so he bought two bottles. Did he buy the expensive whiskey because he wanted to or because the sales lady liked him, really really liked him.

This reminds me of when I was at university, there was this beautiful lady who worked at Pie City restaurant. She had that flattering smile that I would buy lunch there all the time thinking that she liked me, that she really really liked me. Only when my university friends and I realised that she smiled like that to any customer, male or female, we were disappointed because we felt that somehow that smile was only reserved to us individually. We always had lunch at Pie City because we thought the sales lady secretly liked us individually. The liking bias was at play.

Ike Moila is considered one of the most successful car salesman in the country. His tip for success: ‘There’s nothing more effective in selling anything than getting the customer to believe, really believe, that you like him and care about him.’ Moila doesn’t just talk the talk: his secret weapon is sending a card to his customers each month. Just one sentence salutes them: ‘I like you.’

The liking bias is strikingly simple to understand and yet we continually fall prey to it. It means this: the more we like someone, the more inclined we are to buy from or help that person. Still, the question remains: what does ‘likeable’ even mean? According to research, we see people as pleasant if:

A) They are outwardly attractive

B) They are similar to us in terms of origin, personality or interests

C) They liked us.

Consequently, advertising is full of attractive people. Ugly people seem unfriendly and don’t even make it into the background (see A). In addition to engaging super-attractive types, advertising also employs ‘people like you and me (see B), those who are similar in appearance, accent or background. In short, the more similar the better.Finally, its not unusual for advertisers to pay us compliments: how many times have you bought something ‘because you are worth it?’ Here factor C comes into play; we find people appealing if they like us. Compliments work wonders, even if they ring hollow as a drum.

So called multilevel marketing (selling through personal networks) works solely because of the liking bias. Though there are excellent plastic containers in the supermarket for a quarter of the price, Tupperware generates an annual turnover of billion Rands. Why? The friends who hold the Tupperware parties meet the (B) and (C) conditions.

Aid and charity agencies employ the liking bias to great effect. Their campaigns use beaming children or women almost exclusively. Never will you see a stone-faced, wounded guerrilla fighter staring at you from SPCA billboards, even though the guerrilla also needs your support.

The most popular/rated soepie in Africa is renowned for having a cast of beautiful and look-able actors. When a certain less beautiful actor makes it as one of the leading actors, it sets tongues wagging in disbelief, some viewers even claiming that the standards of the soepie are declining. Even when the storyline is dodge with this beautiful cast, people still like and watch it. The liking bias is at play.

TV news networks are now employing supermodels as their news-anchors with the hope that viewers will forgive the technical glitches and lack of professional journalism that comes with the news presentation. The liking bias is at play.

Politicians, too, are maestros of the liking bias. Depending on the make-up and interests of an audience, they emphasise different topics, how often have we seen a politician who try to act and behave like people they are trying to attract to vote for her, they even try to look like them by wearing similar clothes as them. They even say things like they grew up poor or underprivileged so that the people can relate to them, some even try to dance like them. They emphasise different topics, such as residential area, social background or economic issues. And they flatter us: Each potential voter is made to feel like an indispensable member of the team: ‘Your vote counts!’ Of course your vote counts, but only by the tiniest of fractions, bordering on the irrelevant.

People do business with people they like

A friend who deals in oil and oil pumps told me how he once closed an eight-figure deal for a pipeline in Russia. ‘Bribery’ I inquired. He shook his head. ‘We were chatting, and suddenly we got on to a topic of Formula 1 motorsport-racing. It turned out that both us, the buyer and me, were die-hard McLaren fans. From that moment on, he like me; I was a friend. So the deal was sealed. Amiability works better than bribery.’

So, if you are a saleperson, make buyers think you like them, even if this means outright flattery. And if you are a customer, always judge a product independent of who is selling it. Banish the salespeople from your mind, or rather, pretend you don’t like them.

Leave your supermodel friends at home

Girlfriends-cast
A friend in trying to convince me to be a trader in the stock/securities exchange says to me he made R35,000 profit and that its a good return.

If you make R35,000 profit over a period of a six months, that’s a good return, but if you made a profit over a period of 5 years, well maybe that profit is not a good return.

In his book Influence, Robert Cialdini tells the story of two Brothers, Sid and Harry, who ran a clothing store in 1930s America.

Sid was in charge of sales and Harry led the tailoring department. Whenever Sid noticed that the customers who stood before the mirror really liked their suits, he became a little hard of hearing. He would call his brother: ‘Harry, how much for this suit?’ Harry would look up from his cutting table and shout back” ‘For that beautiful cotton suit, $42.’ (This was a completely inflated price at that time.)

Sid would pretend he had not understood: ‘How much?’ Harry would yell again: ‘Forty two dollars!’ Sid would then turn to his customer and report: ‘He says $22.’ At this point, the customer would have quickly put the money on the table and hastened from the store with the suit before poor Sid noticed the ‘mistake’.

Maybe you know the following experiment from your schooldays: take two buckets. Fill the first with lukewarm water and the second with ice water. Dip your right hand into the ice water for one minute. Then put both hands into the lukewarm water. What do you notice? The lukewarm water feels as it should to the left hand but extremely hot to the right hand.

These three stories epitomise the contrast effect: we judge something to be beautiful, expensive or large if we have something ugly, cheap or small in front of us. We have difficulty with absolute judgements.

The contrast effect is a common misconception: You order leather seats for your new car because compared to the R600,000 price tag on the car, R30,000 seems small loose change. All industries that offer upgrade option exploit this illusion.

Without the contrast effect, the discount business would be completely untenable. A product that has been reduced from R1000 to R700 seems better value than a product that has always cost R700. The starting price should play no role.

When we encounter contrasts, we react like birds to a gunshot: we jump up and get moving. Our weak spot: we don’t notice small, gradual changes.

A magician can make your watch vanish because, when he presses hard on one part of your body, you don’t notice the lighter touch on your wrist as he relieves you of your Rolex.

Similarly, we fail to notice how our money disappears. It constantly loses its value, but we do not notice because inflation happens over time. If it were imposed on us in the form of a brutal tax (and basically that’s what it is), we would be outraged.

The contrast effect can ruin you whole life: a charming woman marries a fairly average man. But because her parents were awful people, the ordinary man appears to be a prince.

One final thought: bombarded by advertisements featuring supermodels, we now perceive beautiful people as only moderately attractive.

If you are seeking a partner, never go out in the company of your supermodel friends. People will find you less attractive than you really are. Go alone or better yet, take your ugly friends.

Why “No Pain, No Gain” Should Set Alarm Bells Ringing

No Pain No Gain
A few years ago, I was on vacation in Nelspruit (Mpumalanga province, South Africa) and fell sick. The symptoms were new to me, and the pain was growing by the day. Eventually I decided to seek help at a local medical centre. A young doctor began to inspect me, poking and prodding my stomach, gripping my shoulders and knees and then poking each vertebra. I began to suspect that he had no idea what my problem was, but I was not really sure so I simply endured the strange examination. To signal its end, he pulled out his notebook and said: ‘Antibiotics. Take one tablet three times a day. It will get worse before it gets better.’ Glad that I now had a treatment, I dragged myself back to my lodge with the prescription in hand.

The pain grew worse and worse, just as the doctor had predicted. The doctor must have known what was wrong with me after all. But, when the pain had not subsided after three days, I called him. “Increase the dose to five times a day. It is going to hurt for a while more.’ he said. After two more days of agony, I finally decided to see another doctor in town. This doctor diagnosed appendicitis and operated on me immediately. ‘Why did you wait so long? he asked me after the surgery.

I replied: ‘It all happened exactly as the doctor said, so I trusted him.’

‘Ah, you fell victim to the It-Will-Get-Worse-Before-It-Gets-Better fallacy. That young doctor had no idea. Probably just the same type of stand-in you find in all the tourist places in high season.’

Let’s take another example: A CEO is at his wits’ end. Sales are in the toilet, the salespeople are unmotivated, and the marketing campaign has sunk without a trace. In his desperation, he hires a consultant. For R3000 a day, this man analyses the company and comes back with his findings: ‘Your sales department has no vision, and your brand is not positioned clearly. It is a trick situation. I can fix it for you, but not overnight. The measures will require sensitivity, and most likely, sales will fall further before things improve.’ The CEO hires the consultant. A year later, sales fall, and the same thing happens the next year. Again and again, the consultant stresses that the company’s progress corresponds closely to his prediction. As sales continue their downward slippery slope as he predicted in the third year, the CEO fires the consultant.

A mere smokescreen, the It-Will-Get-Worse-Before-It-Get-Better is fallacy. If the problem continues to worsen, the prediction is confirmed. If the situation improves unexpectactly, the costumer is happy and the expert can attribute it to his prowess. Either way he wins.

Suppose you are president of a country, and have no idea how to run it. What do you do? You predict ‘difficult years’ ahead, ask your advisors to come up with a complicated long term plan, ask your citizens to ‘tighten their belts’, and the promise to improve the situation in the long term, only after two terms you leave the office and the situation has not turned for the better.

If someone says It Will Get Worse Before It Gets Better, you should hear alarm bells ringing. But beware: situations do exist where things first dip and then improve. For example, a career change requires time and often incorporates loss of pay. The reorganisation of a business also takes time. But in all these cases, we can see relatively quickly if the measures are working. The milestones are clear and verifiable. Look at these rather than to the fallacy.