Taming Your Inner Homer Simpson

My Kellogg students will remember that I asked them to rate their intelligence vis-a-vis the average member of the class. I routinely had 75 percent of all student who rate themselves above average. That is 25% too many. A colleague of mine warned me that 90% academics feel undervalued by their institution. But until now I read Dahlia Lithwick review of Richard Thaler's and new book Nudge: Improving Decisions About Health, Wealth, and Happiness I did not know that 94 percent of professors at large universities to believe themselves better than the "average professor." Read Lithwick excellent review of the book.

The Latest Reasoning about our Irrational Ways

Elizabeth Kolbert reviews in the New Yorker the latest on findings on how people behave in irrational ways when making economic decisions. Read her Reviews of two new books.
“Predictably Irrational: The Hidden Forces That Shape Our Decisions” (Harper; $25.95); by Ariely, Dan;
“Nudge: Improving Decisions About Health, Wealth, and Happiness” (Yale; $25); by Thaler, Richard H.

Irrational fear: No good at risk

The Economists reviews of "Risk: The Science and Politics of Fear" by Dan Gardner
THE official death toll from the September 11th terrorist attacks in 2001 was 2,974. But in 2002 America's death toll on the roads grew by more than 1,500—casualties of the terrorism-inspired exodus from safe aeroplanes to dangerous motor cars. A swan washes up on a British shore, dead from bird flu, and the press panics, while the 3,000 people who die every year on the country's roads (13 times the number of people who have ever died from bird flu) go largely unremarked. Human beings are notoriously bad at dealing with risk. Two new books explore why, and investigate the effects that misunderstanding risks can have on public policy. The first, an excellent work by a Canadian writer, Dan Gardner, is a broad meditation on the nature of risk, beginning with a psychological explanation for why people find it so difficult to cope. Mr Gardner analyses everything from the media's predilection for irrational scare stories to the cynical use of fear by politicians pushing a particular agenda.

Introducing the Meeting Meter™

What CEOs are Reading

The common perception is that CEOs are reading the latest popular management books to help them with their difficult job. An article in the New York Times suggests otherwise. I am not sure if the CEOs that Harriet Rubin portrays in here article are representative of all CEOs and I think the title of the article "C.E.O. Libraries Reveal Keys to Success" is an overstatement, but any manager should read what she has to say.

Harriet Rubin: Michael Moritz, the venture capitalist who built a personal $1.5 billion fortune discovering the likes of Google, YouTube, Yahoo and PayPal, and taking them public, may seem preternaturally in tune with new media. But it is the imprint of old media — books by the thousands sprawling through his Bay Area house — that occupies his mind. “My wife calls me the Imelda Marcos of books,” Mr. Moritz said in an interview. “As soon as a book enters our home it is guaranteed a permanent place in our lives. Because I have never been able to part with even one, they have gradually accumulated like sediment.” Serious leaders who are serious readers build personal libraries dedicated to how to think, not how to compete. Ken Lopez, a bookseller in Hadley, Mass., says it is impossible to put together a serious library on almost any subject for less than several hundred thousand dollars. Perhaps that is why — more than their sex lives or bank accounts — chief executives keep their libraries private.

New School of Strategy & Entrepreneurship launched in Sydney

The Global Climate Crisis

The website for An Inconvenient Truth provides the basics facts about the science of climate change. Watch the trailer for film.

Give the DVD to your friends this holiday season.

Commissioned by the British government, the economist Stern published on October 30th his study evaluating the economic consequences of global warming. He writes: "The scientific evidence is now overwhelming: climate change presents very serious global risks, and it demands an urgent global response (p. i) ...There is still time to avoid the worst impacts of climate change if strong collective action starts now." (p. xxvii) You can download a summary of his review here. If you don't have time to read the 27 page summary of the 600 page report, here is a short review of its conclusions in the New Yorker.

Reflections On “The Long Tail” - Give me Good Data!

A few days ago, I came across a very positive review of The Long Tail, a new book by Wired Maganize writer Chris Anderson. The book's main thesis is that "the future of commerce and culture isn't in hits, the high-volume head of a traditional demand curve, but in what used to be regarded as misses - the endlessly long tail of that same curve." The books purports to show that the 80/20 rule (most sales derive from a few products) does not apply any more with internet retailing because internet retaling can stock many more items. This morning Lee Gomez in his Wall Street Journal column trashed Anderson's analysis, claiming that Anderson's data was flawed. (You can read the Gomez colum "Long Tail' May Not Wag the Web Just Yet" on WSJ.com or through your library's article database.) Anderson in turn claims that Gomez did not get the data right and wrote a facinating rebutall on his website. What this exchange underlines is that getting good data and working meticulously to draw the correct conclusion often is worth a "fortune" for managers. More broadly, before you adopt a new fashionable business idea, ask yourself what data supports that the idea in fact is going to work. With more data you might have realized that the idea hurts as often as it helps.

The Essential Drucker: The Best of Sixty Years of Peter Drucker’s Essential Writings on Management

Even the Best Cannot Predict the Future

It is very useful to recognize that the social world is too complex to predict well what will succeed and what will fail. Those who think they know with great certainty what will succeed run the danger of overinvesting in their pet scenarios. What is the lesson? Just like with stocks, we should always have a portfolio of beliefs about the future, reducing the risk of getting stuck with the wrong scenarios.

Who Says Elephants Can’t Dance: Inside IBM’s Historic Turnaround

In the early 1990s, IBM was in danger of going bankrupt. Loius Gerstner was called in to turn the company around. Anyone who is trying to change a formerly successful orgazation will benefit from reading Gerstner's thoughts on change management. Beware: the book starts out slow, turning off many readers. But after the first 20 pages, Gerstner's training as an organizational consultant provides him the analytic language to lay out what are the key challenges in changing large organizations. Because he was an outsider at IBM, he has no reservations to analyze how IBM got itself into a near death experience. I highly recommend this book.

The Freedom Tower Case: Why is group decision making not better individual decisions

Individual human beings have limited skills, knowledge, and expertise can get carried away by emotions when making decisions. One would think that involving multiple people in a decision could overcome the limitations of individual decision making but social psycholgoists have long known that groups have their own limitations. The New York Times published a pertinent article on how a comittee came up with the redesigned Freedom Tower that architectual critics find dissappointing given the grandeur of the originial proposal.

Five Tips for Strategies for Organizational Change courtesy of Motorola’s New CEO

Commanding Heights: The Battle for the World Economy

Rarely have I seen such a powerful documentary about how ideas shape the world. The film traces the ideas that shaped macro-economic policy making over the course of the 20th century. The film will be eye-opening for people who know very little how economic policy powerfully effects the welfare of societies all over the world. Even if you are a scholar familiar with the history of the 20 century, you will enjoy this fantastic piece of work. One word of clarification. Sophisticated scholars who believe in "free" markets believe in a need for laws. (The film originally aired on PBS and is now available on DVD.)

What Companies do to Make Life Easier for Their Employees

The WSJ in today's report on leadership published an interesting article on what kind of perks companies provide to boost the morale of people and to make work life easier. "Fun perks didn't end with the dot-com bust. They just changed," reports Jennifer Saranow.

Read the full article on WSJ.com.

Four More Years of Happiness

Harvard pychology professor Daniel Gilbert predicts that most democrats will not be depressed during the next four years of George Bush. Here is the rationale that he offers in today's New York Times: Research suggests that human beings have a remarkable ability to manufacture happiness. For example, when people in experiments are randomly awarded one of two equally valuable prizes, they quickly come to believe that the prize they won was more valuable than the prize they lost. They are often so surprised by their apparent good fortune that they refuse to believe the prize was awarded randomly, and they are generally unwilling to swap their prizes even when the experimenter offers to sweeten the deal with a little extra cash.

Malcom Gladwell’s Book “Blink” is out!

In my introductory management class I discuss the how cognitive heuristics (rules of thump) help us navigate our complex daily lives and make decisions before it is too late. Malcom Glawell new book describes this quick decision-making capability with many examples. I will review the book during the next couple of months, but in the meantime you can read excerpts from the book on Gladwell's website. David Brooks has written a very thoughtful review of the book in the New York Times that you can read here.

Gladwell and Surowiecki Debate How Good Decisions are made

Galdwell and Surowiecki have a new books coming out concerned with good decision making. I am presently reading Surowieki's The Wisdom of Crowds and have Blink on my reading list. You can read a debate they both had about their books in Slate

Experience Gestalt Pictures

My former student John Tsau forwarded me some other examples of pictures that can be seen in different ways. What we can see is to a large extent conditioned what we expect to see in the world in the first place...

The Tipping Point

Defining that precise moment when a trend becomes a trend, Malcolm Gladwell probes the surface of everyday occurrences to reveal some surprising dynamics behind explosive social changes. He examines the power of word-of-mouth and explores how very small changes can directly affect popularity. Perceptive and imaginative, The Tipping Point is a groundbreaking book destined to overturn conventional thinking in business, sociological, and policy-making arenas.

Overall judgement: This is a superb book and should be read by every student of the social world.