Affordable Housing Institute : US

“Nothing either good or bad, but thinking makes it so,” says melancholy Hamlet, counting himself a king of infinite space and that, in a nutshell, is the trap of overconfidence. 

 

Unzip your mind, and the rest will follow

 

1. I think, therefore I win

 

Or so says the logorrheic Malcolm Gladwell, in yet another of his probably-unsound-but-vibrantly-intriguing monologs, as captured in The New Yorker:

 

The hair has a purpose, doesn’t it?

 

As novices, we don’t trust our judgment. Then we have some success, and begin to feel a little surer of ourselves. Finally, we get to the top of our game and succumb to the trap of thinking that there’s nothing we can’t master. As we get older and more experienced, we overestimate the accuracy of our judgments, especially when the task before us is difficult and when we’re involved with something of great personal importance.

 

Is it more confidence in our own accuracy, or just faster pattern recognition and decreased patience with those slower?  As I quoted James Blish in my Ultimate Future City post sequence:

 

The older a man became, the more quickly he saw answers to tough questions because the more experience he had to bring to bear on them; and the less likely he was to tolerate slow thinking among his associates.  If he were sane, his answers were generally right answers – if he were insane, they were not; but what mattered was the speed of the thinking itself.  In the end, both the sane and the insane became equally dictatorial, less and less ready to explain why they picked on answer over another.  319

 

Gladwell’s perspective is similar:

 

The British were overconfident at Gallipoli not because Gallipoli didn’t matter but, paradoxically, because it did; it was a high-stakes contest, of daunting complexity, and it is often in those circumstances that overconfidence takes root.

 

Dire straits to supporting Russia

 

Like many Gladwellisms, this one’s a sweeping oversimplification into a single provoking and debatable point.  Gallipoli happened for the same reason the First World War romanticized fighter pilots – with the whole European theater of war a single five-hundred-mile trench of useless stalemated slaughter, naturally any edge initiative assumed inflated importance, as if dog-earing a single page corner could close the book on conflict.

 

Knights of the air, romanticized in both sets of trenches

 

This is what social scientists mean when they say that human overconfidence can be an adaptive trait. “In conflicts involving mutual assessment, an exaggerated assessment of the probability of winning increases the probability of winning,” Richard Wrangham, a biological anthropologist at Harvard, writes. “Selection therefore favors this form of overconfidence.” Winners know how to bluff.

 

Or is it that winners take more risks?  Aren’t most people excessively risk-averse, particularly as we age?

 

And who bluffs the best?  The person who, instead of pretending to be stronger than he is, actually believes himself to be stronger than he is.  According to Wrangham, self-deception reduces the chances of “behavioral leakage”; that is, of “inadvertently revealing the truth through an inappropriate behavior.”

 

It’s not a bluff if you believe it.  The best salesman is one utterly convinced of the worth of what he is selling.

 

This much is in keeping with what some psychologists have been telling us for years—that it can be useful to be especially optimistic about how attractive our spouse is, or how marketable our new idea is. In the words of the social psychologist Roy Baumeister, humans have an “optimal margin of illusion.”

 

Don’t bother me with details, I’ll face my illusions

 

In bridge, there is such a thing as expertise unencumbered by bias.  [Wrong! See below. – Ed.]  That’s because, as the psychologist Gideon Keren points out, bridge involves “related items with continuous feedback.”

 

Repeated trials sharpen judgment.

 

It has rules and boundaries and situations that repeat themselves and clear patterns that develop—and when a player makes a mistake of overconfidence he or she learns of the consequences of that mistake almost immediately. In other words, it’s a game.

 

Evidently Mr. Gladwell has never witnessed a bridge argument, where a husband-wife couple, happily married for forty years or more, intelligently berates each other over team failures occasioned by cooperative lapses.  The better the players, the more vicious the post-mortem.

 

It’s simple, you’re both idiots, all right?

 

[In stretching to make reality of his metaphor, Mr. Gladwell overshoots, for bridge is actually a terrible metaphor for 'expertise unencumbered by bias' because it is a game of partial information and player cooperation/ communication.  The better metaphor, with which Mr. Gladwell may be less familiar, is chess, which is a game of perfect information between two players.]

 

But running an investment bank is not, in this sense, a game: it is not a closed world with a limited set of possibilities. It is an open world where one day a calamity can happen that no one had dreamed could happen, and where you can make a mistake of overconfidence and not personally feel the consequences for years and years—if at all.

 

Mr. Gladwell’s overshoot has also missed the essential difference between games like bridge and life.  In bridge, feedback is instantaneous and directly impacted by one’s actions; in life games, feedback is subject to lengthy phase delay and the cause-effect links can be obscured. 

 

Perhaps this is part of why we play games: there is something intoxicating about pure expertise, and the real mastery we can attain around a card table or behind the wheel of a racecar emboldens us when we move into the more complex realms.

 

It’s even more primal.  People love to win.  Games manufacture opportunities to win while minimizing the real cost of losing.

 

“I’m good at that. I must be good at this, too,” we tell ourselves, forgetting that in wars and on Wall Street there is no such thing as absolute expertise, that every step taken toward mastery brings with it an increased risk of mastery’s curse.

 

Here is Gladwell’s real point:

 

Clear enough for you?

 

[Bear Stearns CEO Jimmy] Cayne must have come back from the Spingold bridge tournament [a multi-day national championship team event, in which Cayne's team placed high – Ed.] fortified in his belief in his own infallibility. And the striking thing about his conversations with Cohan is that nothing that had happened since seemed to have shaken that belief.

 

By now Cayne’s absence from the trading floor while Bear burned has been bludgeoned insensible, for it appeals to our sense of nemesis, the titan brought low through the Achilles heel of his own arrogance.  I doubt bridge made him overconfident; if anything, quite the reverse.  In bridge, as in bond trading, ability wins … but only in the long run.  Cards or luck also have a say.

 

Bear’s real lesson is this: diversify your risk profile.  If you want long run advantages to work for you, make sure you survive until the long run.

 

Awaken the giant and you may get divorced?

 

I think, therefore I win.

 

2. A noble ideal done badly is a bad idea

 

From a Next Billion conversation with Mo Ibrahim comes this multifaceted nugget (which I’ve reordered for clarity and numbered for reference):

 

Thinking about the viable business: Mo Ibrahim

 

[1] Creating jobs and looking after the community are important.  A business cannot thrive in a community that is failing. 

 

[2] The sole purpose of business is to generate value generally, not just the kind that is social in nature.  As long as the company is ethical, there is social value.

 

[3] Social value should not be invoked as an excuse to do lousy, unsuccessful business.  Mixing the two is a recipe for disaster. 

 

What a tangle of intriguing ideas!  The key is Point 3, that altruism is no excuse for incompetence, and that exempting special enterprises from business discipline does them a disservice.  As the risk of indulging in Ibrahim-esque definitions – framing an issue so that the answer is self-evident, even tautological – I agree with what I believe to be Mr. Ibrahim’s dual-edged point:

 

Arguments cut two ways

 

1. Profit is social value.  All businesses that provide customer value also generate social benefit as a byproduct.  Even if they give no thought whatsoever to corporate social responsibility, their success strengthens and improves the community in which they operate.

2. Altruism is no free pass.  Avowedly social enterprises can claim no refuge in good intentions if their outputs are miserable (his point 3).

 

Now, if that’s what Mr. Ibrahim was seeking to say, then I wholly agree, and his perspective encapsulates views I’ve long held. 

 

Is that what he’s saying?

 

Contrariwise …

 

3. Slums, and You Are There

 

Via Bob Dubinsky of the worthwhile International Housing Coalition comes The Places We Live, a Web site you should visit immediately:

 

I want to make you aware of an exciting website noted below. www.theplaceswelive.com.  The web address takes you to an Aperture Foundation presentation about what slums are like around the world. The interactive site allows you to hear from slum dwellers what is like to live in slums and you can pan around the interior of slum houses to get a sense of how people live. It is really worth some of your time.

 

This beautiful and interesting presentation will be installed in the Building Museum in Washington DC by the end of August. It will be sponsored by the Cities Alliance and USAID as a complementary exhibit to World Habitat Day on October 5.

 

Anyone in Washington DC should visit the Building Museum, which previously hosted a history of American affordable housing, and which is a delightful historical structure in its own right:

 

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A seriously cool space in Washington, DC

 

The Building Museum exhibit graphically makes the case for the work of the IHC. It should help people better understand the importance of investing more foreign aid in urban development and slum improvement. The next few months will be critical in making the case to Congress and the Administration to give more attention to urban development and slum issues. The IHC will continue to play an active role in focusing attention on these issues. We also hope to be involved in the World Habitat Day celebrations.

 

AHI’s worked with the IHC on several small initiatives; we anticipate doing something with them for World habitat. 

 

Meanwhile, you can buy the book here.  Both the book and the Web site are highly recommended.

 

Kibera, where AHI works, from The Places We Live

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