Sometimes an initial decision or event may seem innocuous at first, but it turns out to strongly influence or limit your possible outcomes in the long run. As a small company, you may choose to use a piece of software for project management without giving it much thought. As you grow, though, you’ll have a large group of people using this software, which may eventually turn out to be suboptimal; however, all your data is now stored there, and it would be a huge disruption to switch products.
On a personal level, many people are likely to stay near the town where they went to school once they graduate. This creates a massive long-term impact on their available career and family choices.
The same thing can happen on a larger scale. Similar types of businesses often congregate together—jewelry stores, furniture depots, car dealerships. In these cases, whichever store came first created a path dependence for all to follow.
The song “I Know an Old Lady,” written by Rose Bonne and Alan Mills in 1952, captures the dangers of short-termism and path dependence if left unchecked.
There was an old lady who swallowed a fly;
I don’t know why she swallowed a fly—perhaps she’ll die!
There was an old lady who swallowed a spider;
That wriggled and jiggled and tickled inside her!
She swallowed the spider to catch the fly;
I don’t know why she swallowed a fly—perhaps she’ll die!
. . . There was an old lady who swallowed a cow;
I don’t know how she swallowed a cow!
She swallowed the cow to catch the goat,
She swallowed the goat to catch the dog,
She swallowed the dog to catch the cat,
She swallowed the cat to catch the bird,
She swallowed the bird to catch the spider,
That wriggled and jiggled and tickled inside her!
She swallowed the spider to catch the fly;
I don’t know why she swallowed a fly—perhaps she’ll die!
There was an old lady who swallowed a horse;
. . . She died, of course!
To escape the fate of the old lady or the boiling frog, you need to think about the long-term consequences of short-term decisions. For any decision, ask yourself: What kind of debt am I incurring by doing this? What future paths am I taking away by my actions today?
Another model from economics offers some reprieve from the limitations of path dependence: preserving optionality. The idea is to make choices that preserve future options. Maybe as a business you put some excess profits into a rainy-day fund, or as an employee you dedicate some time to learning new skills that might give you options for future employment. Or, when faced with a decision, maybe you can delay deciding at all (see thinking gray in Chapter 1) and, instead, continue to wait for more information, keeping your options open until you are more certain of a better path to embark upon.
Many college freshmen have some idea of what they want to study, but most are not ready to immediately select their major. When selecting a college, it would be a good idea for a student to choose a school that is strong in several fields of interest, not just the one they think they might pick, which preserves their options until they are really ready to decide.
As with most things, though, preserving options must be done in moderation. Even if you choose a college with many possible majors, at some point you do need to pick one in order to be able to graduate on time. When selecting a graduate school, Lauren chose a program in operations research as a way of preserving optionality, rather than a more narrowly tailored program in biostatistics. However, not having a strong idea of what area she wanted to research for her dissertation ultimately resulted in an extra year of school.
The downside of keeping many options open is that it often requires more resources, increasing costs. Think of going to school while you also have a full-time job, maintaining multiple homes, or exploring several lines of business in one parent company. You need to find the right balance between preserving optionality and path dependence.
One model that can help you figure out how to strike this balance in certain situations is the precautionary principle: when an action could possibly create harm of an unknown magnitude, you should proceed with extreme caution before enacting the policy. It’s like the medical principle of “First, do no harm.”
For example, if there is reason to believe a substance might cause cancer, the precautionary principle advises that it is better to control it tightly now while the scientific community figures out the degree of harm, rather than risk people getting cancer unnecessarily because the substance has not been controlled. In 2012, the European Union adopted the precautionary principle formally with the Treaty on the Functioning of the European Union:
Union policy on the environment shall aim at a high level of protection taking into account the diversity of situations in the various regions of the Union. It shall be based on the precautionary principle and on the principles that preventive action should be taken, that environmental damage should as a priority be rectified at source and that the polluter should pay.
On an individual level, the precautionary principle instructs you to take pause when an action could possibly cause you significant personal harm. That seems obvious, but people engage in risky behavior all the time (e.g., drunk or reckless driving). Beyond physical harm, the same concept applies to other kinds of harm: for example, financial harm (gambling or accepting a bad loan) and emotional harm (infidelity or going too far in an argument).
These mental models are the most useful when thinking about existential risks. After all, in the tale of the boiling frog, the frog dies. Therefore, you want first to assess what substantial harms could arise in the long term, then work backward to assess how your short-term decisions (or lack thereof) might be contributing to long-term negative scenarios (a process that we cover in more depth in Chapter 6). With this knowledge, you can then take the necessary level of precaution, paying down technical debt as needed, happily preventing yourself from becoming the boiling frog.
TOO MUCH OF A GOOD THING
On the side of an ancient Greek temple, home to the Oracle of Delphi, was inscribed the precept Nothing in excess. Our modern equivalent is too much of a good thing. It’s natural to want more of something good, but too much of it can be bad. One slice of cookie dough cheesecake from The Cheesecake Factory is amazing; downing a whole cheesecake will probably cause you some problems, though.
The same goes for information. Complaints from people overwhelmed by too much information are not new. Roman writer Marcus Seneca said, “The abundance of books is a distraction”—in the first century A.D.! Today, researching almost anything online can make your head spin, from the mundane, such as wading through all the Amazon products and reviews for coffeemakers, to the life-changing, such as comparing colleges or choosing a new city to move to. There is just so much data and advice on almost any subject, it can easily be overwhelming.
Of course, you need some information to make good decisions, but too much information leads to information overload, which complicates a decision-making process. The excess information can overload the processing capacity of the system, be it a single person, group, or even computer, causing decision making to take too long.
There is a name for this unintended consequence: analysis paralysis, where your decision making suffers from paralysis because you are over-analyzing the large amount of information available. This is why you can spend too much time trying to make that coffeemaker decision or choosing where to go out to dinner when faced with an endless list of choices from Yelp. More seriously, people often stay in a job they don’t like because they are unsure of what to do next given all the possibilities.
The model perfect is the enemy of good drives home this point—if you wait for the perfect decision, or perfect anything, really, you may be waiting a long time indeed. And by not making a choice, you are actually making a choice: you are choosing the status quo, which could be
considerably worse than one of the other choices you could already have made.
There is a natural conflict between the desire to make decisions quickly and the feeling that you need to accumulate more information to be sure you are making the right choice. You can deal with this conflict by categorizing decisions as either reversible decisions or irreversible decisions. Irreversible decisions are hard if not impossible to unwind. And they tend to be really important. Think of selling your business or having a kid. This model holds that these decisions require a different decision-making process than their reversible counterparts, which should be treated much more fluidly. In a letter to shareholders, Amazon CEO Jeff Bezos stressed the importance of this model:
Some decisions are consequential and irreversible or nearly irreversible—one-way doors—and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. If you walk through and don’t like what you see on the other side, you can’t get back to where you were before. . . . But most decisions aren’t like that—they are changeable, reversible—they’re two-way doors. If you’ve made a suboptimal [reversible] decision, you don’t have to live with the consequences for that long. You can reopen the door and go back through. . . .
As organizations get larger, there seems to be a tendency to use the heavy-weight [irreversible] decision-making process on most decisions, including many [reversible] decisions. The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention.
Another way to help combat analysis paralysis is to limit choice, because the more choices you have, the harder it is to choose between them. In the early 1950s, psychologists William Hick and Ray Hyman separately conducted a number of experiments to try to quantify the mathematical relationship between the number of choices given and how long it takes to decide. They found that a greater number of choices increased the decision time logarithmically, in a formulation now known as Hick’s law.
Hick’s law is regularly cited as an important factor in user-experience designs, such as in the design of restaurant menus, website navigation, and forms (offline or online). For instance, on a menu, having a vegetarian section allows vegetarians to efficiently narrow the sections of the menu they should read through. Being able to determine quickly whether there are enough vegetarian options on a menu might be a big factor in whether a family with a vegetarian would choose to eat at your restaurant.
In your own life, you can use Hick’s law to remember that decision time is going to increase with the number of choices, and so if you want people to make quick decisions, reduce the number of choices. One way to do this is to give yourself or others a multi-step decision with fewer choices at each step, such as asking what type of restaurant to go to (Italian, Mexican, etc.), and then offering another set of choices within the chosen category.
In addition to increased decision-making time, there is evidence that a wealth of options can create anxiety in certain contexts. This anxiety is known as the paradox of choice, named after a 2004 book of the same name by American psychologist Barry Schwartz.
Schwartz explains that an overabundance of choice, the fear of making a suboptimal decision, and the potential for lingering regret following missed opportunities can leave people unhappy. In the context of seeking romantic relationships, people are often reminded that there are “plenty of fish in the sea.” With so many fish, this can leave you to question how you will know when you have found “the one.” Similarly, you might be left questioning whether a past partner was “the one that got away.” This anxiety also arises with smaller-scale decisions, such as when you have young kids and you find yourself finally with an opportunity to go out for the night: Do you go out with friends or with just your partner? Do you go to a nice restaurant or the movies? If the movies, which one? The more choices, the more chance you have for regret later.
While we, the authors, are reasonably happy people, we have experienced the anxiety surrounding the paradox of choice with our own life choices. We were lucky to have sold a startup company at a young age, leaving us with essentially unlimited career options. At the time of the sale, Lauren had just accepted a position at GlaxoSmithKline and was content with continuing down that path. However, over time she wondered whether this was the right path and found herself constantly reading job postings. She also spent a lot of time thinking about going back to school in a different field, fulfilling a different childhood dream, such as becoming an architect or designing prosthetics.
Gabriel was left with an entirely open-ended future and took some time off. But soon he started asking, What next? Should I start another for-profit company? Should Lauren and I start a nonprofit together? Write a book? The choices were and are endless. Don’t get us wrong—we aren’t complaining. We are just acknowledging that we personally sympathize with this model.
Hick’s law and the paradox of choice explain downsides of having many choices. There is also a model that explains the downside of making many decisions in a limited period: decision fatigue. As you make more and more decisions, you get fatigued, leading to a worsening of decision quality. After taking a mental break, you effectively reset and start making higher-quality decisions again.
The 2011 study “Extraneous Factors in Judicial Decisions” describes the impact of decision fatigue on parole boards deciding whether to grant freedom to prisoners: “We find that the percentage of favorable rulings drops gradually from [about] 65% to nearly zero within each decision session and returns abruptly to [about] 65% after a break. Our findings suggest that judicial rulings can be swayed by extraneous variables that should have no bearing on legal decisions.”
Some extremely productive people, including Steve Jobs and Barack Obama, have tried to combat decision fatigue by reducing the number of everyday decisions, such as what to eat or wear, so that they can reserve their decision-making faculties for more important decisions. Barack Obama chose to wear only blue or gray suits and said of this choice, “I’m trying to pare down decisions. I don’t want to make decisions about what I’m eating or wearing. Because I have too many other decisions to make.” Gabriel also tends to do this to some extent, usually wearing one of seven identical pairs of dark gray jeans and often eating the same lunch for weeks on end. He swears that it really does make things easier and saves time!
If you want more variety in your life, one suggestion is to front-load the decisions on your outfits and meals for the week to Sunday. Making these decisions on a usually lower-stress day can free up your decision-making capacity for the workweek. Meal planning and even some meal prep on the weekend can help keep you from making unhealthy choices when you are overwhelmed later in the week.
In this chapter we’ve covered an array of unintended consequences, from market failure to perverse incentives, from too much focus on the short term to too much of a good thing. Most generally, consider heeding Murphy’s law: Anything that can go wrong, will go wrong. It’s named after aerospace engineer Edward Murphy, from his remarks after his measurement devices failed to perform as expected. It was intended as a defensive suggestion, to remind you to be prepared and to have a plan for when things go wrong.
It is unfortunately impossible to account for all possible unintended consequences. However, the mental models in this chapter can help you identify and avoid negative unintended consequences in a large array of situations. Look around—when you see unintended consequences in a situation, be it personal, professional, or in the wider world, one of these models is usually lurking behind. Next time, see if you can identify the underlying mental model behind the situation, and also try to think ahead about how it might apply to your own plans under consideration.
KEY TAKEAWAYS
In any situation where you can spot spillover effects (like a polluting factory), look for an externality (like bad health effects) lurking nearby. Fixing it will require intervention either by fiat (like government regulation) or by setti
ng up a marketplace system according to the Coase theorem (like cap and trade).
Public goods (like education) are particularly susceptible to the tragedy of the commons (like poor schools) via the free rider problem (like not paying taxes).
Beware of situations with asymmetric information, as they can lead to principal-agent problems.
Be careful when basing rewards on measurable incentives, because you are likely to cause unintended and undesirable behavior (Goodhart’s law).
Short-termism can easily lead to the accumulation of technical debt and create disadvantageous path dependence; to counteract it, think about preserving optionality and keep in mind the precautionary principle.
Internalize the distinction between irreversible and reversible decisions, and don’t let yourself succumb to analysis paralysis for the latter.
Heed Murphy’s law!
3
Spend Your Time Wisely
POLARIS IS THE BRIGHTEST STAR in the Little Dipper, a constellation also known as Ursa Minor, or Little Bear. You can easily find Polaris in the night sky because it is the last star in the handle of the Little Dipper, and the two outermost stars on the ladle of the Big Dipper point directly to it.
Finding Polaris
Since at least as far back as the Middle Ages, Polaris has played a critical role in navigation. Given its unique location, almost directly above the North Pole, Polaris appears nearly fixed in the night sky, despite the Earth’s rotation. You can know roughly what direction you’re headed in just by looking up at it. If you want to head north, simply orient yourself toward Polaris.
Super Thinking Page 8
