Tag Archive for: recency effect

The Madness of People – Our Irrational Selves

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“I can calculate the motion of the heavenly bodies, but not the madness of people.” 
– Sir Isaac Newton

I came across this quote while reading Robert Greene’s latest book, The Laws of Human Nature. Greene has authored many books including The 48 Laws of Power and The 33 Strategies of War. All are excellent reads because they’re well written and Greene weaves history and interesting stories throughout to illustrate his points.

The quote from Isaac Newton came after Greene shared the story of the South Sea Company. In the early 1700s the South Sea Company was supposed to open trade in South America for England. Suffice it to say, their approach was similar to Bernie Madoff’s Ponzi scheme when it came to raising funds. It swept up people across England as they invested in what looked to be a sure-fire get rich quick opportunity. Even the brilliant, rational thinker Isaac Newton fell prey to the madness.

How did that happen? How did it happen again with Bernie Madoff? Why will it happen again? Three big reasons – recency bias, consensus and scarcity.

Recency bias

This is the distorted thinking where we give more weight to recent events than they deserve and we prioritize the present ahead of the future. Over the course of evolution giving immediate, focused attention to whatever was in front of us served humans well. That’s so because most dangers and opportunities were in the moment and needed to be acted upon right away to ensure survival.

Survival isn’t always at stake nowadays but our minds still focus far more on the present than the future. This is why so much importance is put on quarterly earnings by Wall Street. This pressure causes many companies to take actions to satisfy “the street” and investors in the short term but often at the expense of better long-term approaches.

In the case of the South Sea Company it was hard for people to resist investing when they kept seeing the stock price rise and people getting rich…even though the company never actually began trading in South America. Sounds a little like the dot com bust doesn’t it?

Consensus

We’re social animals so it’s natural for us to follow the crowd. This too served humans well when it came to survival. There’s safety in numbers and being part of the group felt more comfortable and safer than going it alone.

We don’t face the same kinds of physical dangers today that our ancestors faced so being part of the crowd shouldn’t be as important. But it is. Studies show exclusion from groups registers in the brain in the same region where physical pain is detected. In other words, there’s very little difference between physical pain and the pain we feel when we’re ostracized from groups.

We still see this mentality today with “hot stocks.” There are always those stocks that everyone seems to flock to which causes more people to flock to them. As this happens stock prices rise even if nothing tangible has been created yet. Sound a little like bitcoin?

Scarcity

The fear of missing out (FOMO) is a powerful motivator to act. Humans are wired to be more sensitive to loss than gain. In Robert Cialdini’s book Influence Science and Practice he quotes social scientists Martie Haselton and Daniel Nettle:

“One prominent theory accounts for the primacy of loss over gain in evolutionary terms. If one has enough to survive, an increase in resources will be helpful but a decrease in those same resources could be fatal. Consequently, it would be adaptive to be especially sensitive to the possibility of loss.”

As people learned about the fantastic gains investors were making with the South Sea Company they couldn’t bear the thought of missing out on their chance to change their lot in life. Many dumped their life savings into the company in hopes of becoming fabulously wealthy.

It still happens today. Bernie Madoff’s stellar investment returns were an example. Smart, wealthy individuals and people with very intelligent investment advisors got sucked in. If those people and someone as rational and smart as Sir Isaac Newton can make the same mistake don’t fool yourself thinking you’re above it.

Conclusion

The wiring of your brain generally serves you well. However, we live in an unprecedented time of change and the pace of change is accelerating rapidly. Your brain on the other hand evolves very slowly and sometimes relying on old mental shortcuts can work against you instead of for you.

Next time something is consuming you, where you sense the pull of the crowd and feel like you’ll miss out if you don’t act quickly, take that as a cue to hit the pause button. If you’ll take time to slow down, consider why you’re feeling the way you are and take a long view, that might be enough for you to make a better, more rational decision. Sir Isaac Newton might not have done it but now you know a little more about the madness of human behavior than he did.

 

Brian Ahearn, CMCT®, is the Chief Influence Officer at Influence PEOPLE, LLC. An international speaker and trainer, he’s one of only 20 people in the world personally trained by Robert Cialdini. Brian’s LinkedIn Learning courses, Persuasive Selling  and  Persuasive Coaching have been viewed by nearly 65,000 people! His latest course, Creating a Coaching Culture, will be online in the second quarter. Have you watched them yet? Click a link to see what you’ve been missing.

You’re Sure You’re Right? Really Sure?

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No doubt you’ve heard Donald Trump is running for president. It seems as if The Donald has said he might run each of the last four presidential races but he surprisingly took that step this time. The bigger news story came with his remarks about illegal aliens, especially people coming from the Mexican-American border, and the fallout with several organizations he did business with.

Trump’s remarks were incendiary and not worth repeating but now with the death of a San Francisco woman at the hands of an undocumented immigrant who had been deported five times, Trump’s views have people talking even more. No doubt many people will take the killing as “proof” of Trump’s claims but is that viewpoint accurate?

There are two psychological concepts at work right now between Trump and this murder story: confirmation bias and the recency bias. Confirmation bias occurs when someone seeks information that only confirms what he or she already believes to be true. Recency effect bias occurs when our attention is drawn to something – like recent news stories – and we give more weight to that information than it deserves.

For example – the chance of being killed by a shark are incredibly small compared to the odds of dying in an automobile accident. However, with the recent shark attacks dominating the news (recency effect bias) many more people will stay away from the ocean than will stay away from cars. Each time another shark encounter is mentioned in the news people say, “I told you so” (confirmation bias).

The same phenomenon is taking place with Trump’s comments and illegal aliens. The comments are mentioned multiple times each day (recency effect bias) and the San Francisco killing is proof (confirmation bias) for many people that Trump is right. The danger is giving undeserved credibility to Trump’s racially insensitive remarks, which only perpetuates the problem of racial tension in our country.

We are all subject to the effects of confirmation bias and recency bias but unfortunately too often we’re unaware of it. He is another example – global warming / climate change. For the majority of people their experience dictates their view on the issue. A couple of very cold winters make many say, “Global warming is a farce. We’re experiencing record colds here!” On the other hand, people in parts of the country experiencing drought or unusually hot temperatures will take that as “proof” that global warming exists. In neither case can you prove or disprove the issue based on your limited experience. Each instance only confirms the bias many people already have on the issue.

So you’re thinking, “What does this have to do with me?” or “Why is this of any importance?”

If you happen to go before a jury wouldn’t you hope the people making a decision in your case would not be swayed by evidence solely because it confirmed what they already believed? Sure you would.

Would you want people making public policy decisions on something as important as global warming based on how hot their summer was or how cold their winter was? Of course not!

Making the best decisions possible entails understanding how our minds work. Sometimes the shortcuts we rely on don’t always lead to the right conclusions because more critical thinking is necessary. It’s hard work but when the stakes are high it’s a worthwhile investment of time and energy.

Lance Armstrong, a Modern Day Robin Hood? Hell No!

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So last week, Lance Armstrong confessed to Oprah Winfrey that he did in fact use banned substances during his career. While this might be a surprise and disappointment to the general public, it wasn’t a shock to anyone inside the sport of cycling nor was it to most athletes. Whenever we see superhuman performances like winning the Tour de France seven times, Flo Jo smashing the 100-meter dash record by a half second, or Roger Clemons pitching at a Hall of Fame level well into his 40s, we should be very leery.

As I listened to Mike and Mike on ESPN radio driving to work they brought up the point that some people have equated Lance Armstrong to a modern day Robin Hood because he helped so many, despite breaking the rules. I say, “Hell no, he isn’t a modern day Robin Hood!”
First, Robin Hood was a fictional character. We see many fictional charters we wouldn’t tolerate in real life. Arnold Schwarzenegger plays some pretty cool action heroes in his movies but would we really tolerate such characters in the real world? Of course not, and it showed when his funny quips, best left for the movies or Saturday Night Live, got him in trouble on a number of occasions while governor of California. Remember the “girlie man” quote he made about budget opponents?
Robin Hood’s motive was all about helping the poor because they were oppressed by the local government and a corrupt sheriff. If you’ve followed Lance Armstrong over the years then you know Lance’s motive was Lance, pure and simple. With his notoriety he was able to help people but it was still about Lance, from the starting line to the finish line.
I heard one commentator say Lance knew he had to do this (confess), that he had no choice. He went on to say he also realizes it’s the right thing to apologize to those people whose lives he ruined. Did you notice it was about Lance first and the people he hurt second? If the right thing had been his motive then perhaps in the absence of the overwhelming evidence he would have approached those same people and apologized for what he’d done, then confessed to the world.
People have said, “But look at all the good he did.” Can’t the same be said for Joe Paterno when it comes to Penn State and their student athletes? Joe Pa had a very positive impact on both but this line of thinking is “the ends justifies the means.” In other words, it doesn’t matter what you do as long as you can point to how you helped others. Bernie Madoff donated millions to various organizations over the years and they benefited tremendously but did that make it right in terms of how he obtained his wealth? Ask the investors who paid his tab.
If there’s a silver lining for Lance Armstrong it’s twofold. First, he has advocates who will never leave him no matter what. Those people who benefitted from the LIVESTRONG foundation are among those. And don’t forget the millions he inspired to work hard at whatever their chosen profession or sport. When it came to inspiration he was like a real-life Rocky.
The second silver lining is the forgiveness of the American people based on the recency effect. Here’s a list of people who played their cards right and, while perhaps not attaining the same level of popularity and income they had prior to their scandals they’re still doing pretty well:
  • Tiger Woods is still the crowd favorite at PGA events.
  • Martha Stewart remains an icon for most homemakers.
  • Pete Rose might just make it into the Hall of Fame during his lifetime because of the legions of fans who believe it’s the right thing to do.

So what does all of this have to do with a blog on persuasion? Here are a couple of closing thoughts.

Aristotle said, “Character may almost be called the most effective means of persuasion.” Each of these people influenced legions of us to do things because of who we thought they were. Had we known the truth many of us might have made different choices on what to do with our time, money, effort, and adoration.
When I write about persuasion my bent is ethical persuasion because none of us wants to be manipulated nor do we want to be known as manipulators.  If something is the right thing to do then we shouldn’t have to resort to manipulation to get people to do what we want.
Let me leave you with this; Frank Sinatra sang, “I did it my way” and there’s a part of the “pull yourself up by the bootstraps” American mentality that loves this.  That is, until we find out someone’s “way” is to cheat and manipulate, because in the end the ends DOESN’T justify the means. If you want to look yourself in the mirror and feel good about who you are, do the right thing.
Brian, CMCT®
influencepeople 
Helping You Learn to Hear “Yes”.

Reputation and the Recency Effect

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Last November I wrote a post called “Say it ain’t so, Joe” as the Jerry Sandusky case of sexually abusing young boys at Penn State University came to the attention of the American public. That horrible tragedy has made front page news again in the wake of the Freeh Report which stated there was a failure of leadership at Penn State University. The report also alleges legendary coach Joe Paterno (Joe Pa) knew about Jerry Sandusky’s behavior as far back as 1998.

This has led questions about what Joe Paterno’s legacy will be. Aside from having more wins than any other major college football coach in history, until the scandal broke, Joe Pa, as he was affectionately called by the faithful, was held up as example of a football coach who ran a clean program, helped boys become men, had real “student athletes,” and gave back to the community in countless ways during his 61 years at Penn State.
This post isn’t about convincing you one way or another how you should feel about Joe Paterno. Rather, it’s about understanding what impacts your thoughts about him as well as other people and situations you might find yourself reflecting on.
In psychology there’s something known as the “recency effect” which is also called “recency bias.” In a nutshell, we give more weight to information we recall most easily and quite often what we remember most is what we experienced last.
We see this all the time. In boxing it’s known as “stealing the round” when a boxer is getting beaten for the better part of the three-minute round but puts on a flurry of activity toward the end to win the round.
In the news we see it with different stories, like suddenly believing air travel is unsafe because of a few recent stories on airline disasters. Mad cow disease and the bird flu are another example. Both are extremely isolated events yet we tend to believe they happen far more than they actually do because of the coverage they get and how easily we recall the stories. In actuality, you have much more likelihood of death or injury from driving to work or other daily activities than you do from airplane accidents or the latest flu outbreak.
How about this – have you ever gone somewhere, had a really good time but the whole experience was marred by a bad ending? Maybe it was a great vacation that ended with flight delays or a round of golf that ended with a bad hole or two. If the flight delays were at the beginning of the trip most people would rate the trip higher than if they come at the end. And most golfers would prefer a round that starts poor and ends well rather than starts well and ends poor … even if the score for both rounds is identical.
The recency effect works both ways, good and bad. Take Tiger Woods, for example. While he lost millions in advertising revenue he appears to be accepted by the public every bit as much as he was before. At least that seems to be the case when you see golf fans responding to him when he’s in contention and winning tournaments.
On the flip side, whole careers are washed away when a great player makes a mistake. Just ask Bill Buckner or Jackie Smith. Buckner mishandled an easy ground ball in game 6 of the 1986 World Series against the New York Mets which allowed the Mets to win the game and eventually the series.  Smith dropped a pass in the end zone in Super Bowl XIII that could have possibly been the difference between winning and losing the game for the Dallas Cowboys.
Should potential Hall of Fame careers be weighed most heavily on how they end? Should someone’s misdeeds be relegated to the background just because they’re doing well in the moment? Should the good works of individuals be discarded because of scandal at the end?
The answers to those questions are for each of us to decide personally.  Collectively, our answers will determine how society remembers someone’s career or legacy. My goal is to help you see more clearly, and to recognize how your thinking is impacted by what you’ve recently experienced.  If you understand that you can review situations differently than you might currently. You might come up with the same conclusion but just like having more data to make decisions is usually good, so it is when it comes to understanding how your brain works with the recency effect.

Brian, CMCT
influencepeople 
Helping You Learn to Hear “Yes”.