‘I approached this problem rationally. Since volume by definition implies space occupied, I reasoned that space occupied within a liquid allowed for the measurement of the volume of that liquid both before and after the immersion of a solid. It follows that the difference between the two, which I shall call “displacement”, must precisely equal the volume of the solid immersed. Thereafter, the only requirement was the choice of a vessel of the requisite size and of a shape that was readily susceptible to conventional linear measurement.’
Bullmore’s point, of course, is that this type of account is useful to validate an idea or discovery, but as an explanation of how the idea came about in the first place, it’s quite false. He further contends that our tendency to attribute our successes to a planned and scientific approach and to play down the part of accidental and unplanned factors in our success is misleading and possibly even limits our scope for innovative work.
It is time to ask another stupid question: What is reason actually for? This may seem absurd, but in evolutionary terms it is far from trivial. After all, as far as we know, every other organism on the planet survives perfectly well without such a capacity. It is true that reason seems to have given us remarkable advantages over other animals – and it is unlikely that we could have produced many of our technological and cultural successes without it. But, in evolutionary terms, these must be a by-product, because evolution does not do long-term planning.*
Hence we must look for some other reason why we have such advantages, and we must also ask whether reason is designed to help us make most decisions or whether it evolved for some other purpose. It’s true that we consciously believe our actions are guided by reason, but this does not mean that they are – it may simply be evolutionarily advantageous for us to believe this.
One astonishing possible explanation for the function of reason only emerged about ten years ago: the argumentative hypothesis* suggests reason arose in the human brain not to inform our actions and beliefs, but to explain and defend them to others. In other words, it is an adaptation necessitated by our being a highly social species. We may use reason to detect lying in others, to resolve disputes, to attempt to influence other people or to explain our actions in retrospect, but it seems not to play the decisive role in individual decision-making.
In my view, this theory has much to commend it. For one thing, it explains why individuals use reason so sparingly, selectively and above all self-servingly. It explains why we are good at contriving reasons for positions we already hold, or for decisions we have already made. And it explains confirmation bias, which leads people to seek out and absorb only that information which supports an existing belief. It also explains ‘adaptive preference formation’, where we change our perception of reality in order to depict ourselves in a better light. In this model, reason is not as Descartes thought, the brain’s science and research and development function – it is the brain’s legal and PR department.
Understanding this theory seems important, first of all because it might help us see what human reason can and can’t do well.* It might also help us understand how the misuse or overuse of reason can backfire. Collective, self-serving argument can work well when people are in possession of all the pertinent facts, which is why it works well in the physical sciences, when all the pertinent variables are known, and can be numerically expressed. However, in the social sciences this simply does not apply – it is impossible to quantify many of the important psychological factors which people care about, and there are no SI units for what really matters.
In the physical sciences, cause and effect map neatly; in behavioural sciences it is far more complex.
Cause, context, meaning, emotion, effect.
1.18: The Overuse of Reason
One explanation for why apparently logical arguments may be ineffectual at changing people’s minds, and why they should be treated with suspicion, is that it is simply too easy to generate them in the real world. As with ‘GPS logic’ it is possible to construct a plausible reason for any course of action, by cherry-picking the data you choose to include in your model and ignoring inconvenient facts. As I said earlier, the people who lost the Brexit referendum in the UK, and the Democrats who lost to Donald Trump in the US, both feel that their respective campaigns had the better arguments, but you would have to be a very committed Remainer or Democrat not to notice that the field in which they were prepared to argue in both cases was spectacularly narrow.
The more data you have, the easier it is to find support for some spurious, self-serving narrative. The profusion of data in future will not settle arguments: it will make them worse.
1.19: An Automatic Door Does Not Replace a Doorman: Why Efficiency Doesn’t Always Pay
Business, technology and, to a great extent, government have spent the last several decades engaged in an unrelenting quest for measurable gains in efficiency. However, what they have never asked, is whether people like efficiency as much as economic theory believes they do. The ‘doorman fallacy’, as I call it, is what happens when your strategy becomes synonymous with cost-saving and efficiency; first you define a hotel doorman’s role as ‘opening the door’, then you replace his role with an automatic door-opening mechanism.
The problem arises because opening the door is only the notional role of a doorman; his other, less definable sources of value lie in a multiplicity of other functions, in addition to door-opening: taxi-hailing, security, vagrant discouragement, customer recognition, as well as in signalling the status of the hotel. The doorman may actually increase what you can charge for a night’s stay in your hotel.
When every function of a business is looked at from the same narrow economic standpoint, the same game is applied endlessly. Define something narrowly, automate or streamline it – or remove it entirely – then regard the savings as profit. Is this, too, explained by argumentative thinking, where we would rather win an argument than be right?
I rang a company’s call centre the other day, and the experience was exemplary: helpful, knowledgeable and charming. The firm was a client of ours, so I asked them what they did to make their telephone operators so good. The response was unexpected: ‘To be perfectly honest, we probably overpay them.’
The call centre was 20 miles from a large city; local staff, rather than travelling for an hour each day to find reasonably paid work, stayed for decades and became highly proficient. Training and recruitment costs were negligible, and customer satisfaction was astoundingly high. The staff weren’t regarded as a ‘cost’ – they were a significant reason for the company’s success.
However, modern capitalism dictates that it will only be a matter of time before some beady-eyed consultants pitch up at a board meeting with a PowerPoint presentation entitled ‘Rightsizing Customer Service Costs Through Offshoring and Resource Management’, or something similar. Within months, either the entire operation will be moved abroad, or the once-happy call centre staff will be forced on to zero-hour contracts. Soon nobody will phone to place orders because they won’t be able to understand a word they are saying, but that won’t matter when the company presents its quarterly earnings to analysts and one chart contains the bullet point: ‘Labour cost reduction through call centre relocation/downsizing’.
Today, the principal activity of any publicly held company is rarely the creation of products to satisfy a market need. Management attention is instead largely directed towards the invention of plausible-sounding efficiency narratives to satisfy financial analysts, many of whom know nothing about the businesses they claim to analyse, beyond what they can read on a spreadsheet. There is no need to prove that your cost-saving works empirically, as long as it is consistent with standard economic theory. It is a simple principle of business that, however badly your decision turns out, you will never be fired for following economics, even though its predictive value lies somewhere between water divining and palmistry.
Take something called ‘quad-play’. Economic orthodoxy these days
demands that all mobile phone networks must also offer broadband, landlines and pay TV, that all those offering pay TV must likewise offer broadband, mobile telephony and landlines, and so on. The ‘economic’* rationale for this is that, by offering all four together, you can enjoy back-office efficiency, economies of scale and price leadership; in economic models, it follows that whoever is the cheapest supplier of all four services will dominate the market. In the real world, however, quad-play is about as popular as a shit sandwich. The human brain has been calibrated by evolution not to pursue economic optimisation and risk systemic disaster. Quad-play places four eggs in one basket, which makes us feel vulnerable: refuse to pay that £250 data-roaming charge from your jaunt to Tenerife and one company can cut off your mobile, television, broadband and landline. And besides, the last thing anyone wants is an aggregated monthly reminder of what all the costs adds up to.*
Has business abandoned its traditional and socially useful role, where competing businesses tested divergent theories of how best to satisfy customer needs, with the market passing judgement on their efforts? It sometimes seems to have been reduced to a kind of monotheistic religion of efficiency where, provided you can recite the approved managerial mantras about economies of scale and cost savings to your financial overlords, no further questions will be asked.
Years ago, I had breakfast with the chief executive of one of Britain’s largest companies, who arrived fresh from a grilling by City analysts. To those of you unfamiliar with modern business, the reason they were unhappy with him might seem strange; his company sold a product that was both the most expensive product on the market and also had the highest market share. What could possibly be wrong with that? You might have expected the analysts to thank him, but instead they claimed there was no way that the most expensive product in a category could also be the market leader and proposed that he must either drop the price of the product or accept that its market share was going to fall. I checked today, and seven years later, the product is still priced at a premium, and it has an even higher market share now than it did back then.
So much for economic orthodoxy – in fact, it is not uncommon for premium-priced products to have a high market share, as any of those financial analysts might have realised had they reached into their pockets to find an iPhone* or the key to an Audi. But to them it was more important that the company should act in a way that was consonant with economic theory than that it should succeed in supplying a large number of people with a superior product.
A year ago my own employer, with no consultation at all, moved every worldwide employee – over 70,000 people in total – to a new email platform, in the space of a single weekend. Many users felt it was palpably worse than the one that preceded it, but ‘at least now it could be managed centrally’. What terrified me was that no tests were performed to see what effect the new platform might have on productivity. Our 70,000 people might each spend three or more hours every day involved with email, messaging or calendaring tasks, and so a platform that was only 5 per cent slower would result in a spectacular loss of productive time.
But no tests were performed, because the purpose of the activity, rather than to improve productivity, was to be able to tell a plausible story to analysts that we were making ‘IT savings through back-office consolidation’. In the event, the platform has improved since we adopted it, but the fact that a cost-saving decision could be made without any consideration of the hidden risks to efficiency was nonetheless alarming. Why are large commercial organisations adopting this ideological approach to business? That was supposed to be the weakness of communism.
It is a never-mentioned, slightly embarrassing but nevertheless essential facet of free market capitalism that it does not care about reasons – in fact it will often reward lucky idiots. You can be a certifiable lunatic with an IQ of 80, but if you stumble blindly on an underserved market niche at the right moment, you will be handsomely rewarded. Equally you can have all the MBAs money can buy and, if you launch your genius idea a year too late (or too early), you will fail.
To people who see intelligence as the highest virtue, this all seems hopelessly unmeritocratic, but that’s what makes markets so brilliant: they are happy to reward and fund the necessary, regardless of the quality of reasoning. Perhaps people don’t ‘deserve’ to be rewarded for being lucky, but a system that did not ensure the survival of lucky accidents would lose most of its value. Evolutionary progress, after all, is the product of lucky accidents. Similarly, a system of business that kept empty restaurants, say, open through subsidy, simply because there seemed to be some good reasons for their continued existence, would not lead to happy outcomes.
The theory is that free markets are principally about maximising efficiency, but in truth, free markets are not efficient at all. Admiring capitalism for its efficiency is like admiring Bob Dylan for his singing voice: it is to hold a healthy opinion for an entirely ridiculous reason. The market mechanism is loosely efficient, but the idea that efficiency is its main virtue is surely wrong, because competition is highly inefficient. Where I live, I can buy groceries from about eight different places; I’m sure it would be much more ‘efficient’ if Waitrose, M&S, Lidl and the rest were merged into one huge ‘Great Grocery Hall of The People’.*
The missing metric here is semi-random variation. Truly free markets trade efficiency for market-tested innovation that is heavily reliant on luck. The reason this inefficient process is necessary is because most of the achievements of consumer capitalism were never planned and are explicable only in retrospect, if at all. For instance, very few companies ever tested the effects of offshoring their call centre operations to countries with low labour costs – it simply became the fashionable thing to do, such was the level of enthusiasm for cost-reduction.
The following is a perfect illustration of the tendency of modern business to pretend that economics is true, even when it isn’t. London’s West End theatres often send out emails to people who have attended their productions in the past, to encourage them to book tickets, and it was the job of an acquaintance of mine who worked as a marketing executive for a theatre company to send out these emails. Over time, she learned something that defied conventional economic rules; it seemed that if you sent out an email promoting a play or musical, you sold fewer tickets if you included an offer for reduced-price tickets with the email. Conversely, offering tickets at the full price seemed to increase demand.
According to economic theory, this makes no sense at all, but in the real world it is perfectly plausible. After all, any theatre selling tickets at a discount clearly has plenty to spare, and from this it might be reasonable to infer that the entertainment on offer isn’t all that good. No one wants to spend £100–£200 on tickets, a meal, car-parking and babysitting, only to find that you would have had more fun watching television at home; in avoiding discounted theatre tickets, people are not being silly – they are showing a high degree of second-order social intelligence.
Despite my friend’s discovery, her colleagues continued to demand that she discount tickets. She patiently explained to them that any discount would reduce the demand, so that they would end up selling fewer tickets at a lower price, but they would insist that she included a discount anyway. They persisted in acting this way because, even though it was empirically the wrong thing to do, in economic terms it sounded logical. If 30 per cent of the seats failed to sell at a discounted price, it was assumed that they would not have sold at a higher price. If, by contrast, she hadn’t offered a discount and 20 per cent of the seats had not sold, she could have been blamed. People’s motivations are not always well-aligned with the interests of a business: the best decision to make is to pursue rational self-justification, not profit. No one was ever fired for pretending economics was true.
At the beginning of this book I looked at a charity appeal where the rational, logical improvements failed and the irrational, or psycho-logical ones succeeded. How many more solutions might we discover
if we stop trying to solve everything to the satisfaction of our pre-frontal cortex, while ignoring the rest of our brains? That is what the next section hopes to uncover.
Part 2: An Alchemist’s Tale (Or Why Magic Really Still Exists)
2.1: The Great Upside of Abandoning Logic – You Get Magic
In the late Middle Ages, science took a wrong turn and came to the wrongheaded conclusion that alchemy didn’t work. People had struggled for years to turn base metals into gold; when they found they couldn’t do this in the way they expected, they gave up.
Later on, Newton really didn’t help the cause by filling our heads with thermodynamics and the conservation of energy – where science hopelessly misled us was that it imbued in all of us the idea that you can’t create something out of nothing. It taught us that you can’t create a valuable metal out of a cheap one, or that you can’t create energy in one place or form without destroying it somewhere else. While all this is perfectly true in the narrow sphere of physics, it is hopelessly wrong when it comes to the very different business of psychology.
In psychology these laws do not apply: one plus one can equal three.
Later on, economists got their own version of the same depressing idea that nothing can be created or destroyed. ‘There’s no such thing as a free lunch,’ they said. The sad consequence is that no one believes in magic any more. Yet magic does still exist – it is found in the fields of psychology, biology and the science of perception, rather than in physics and chemistry. And it can be created.
The advertising agency J. Walter Thompson used to set a test for aspiring copywriters. One of the questions was simple: ‘Here are two identical 25-cent coins. Sell me the one on the right.’ One successful candidate understood the idea of alchemy. ‘I’ll take the right-hand coin and dip it in Marilyn Monroe’s bag.* Then I’ll sell you a genuine 25-cent coin as owned by Marilyn Monroe.’*
Alchemy Page 11
