The other day while I was watching TV there was this news story about how lot of people were duped by a financial institution which had collected lot of money from various investors by promising exuberantly high returns. After paying the promised high returns for a few years the said institution suddenly folded up disappearing with the money of all investors. What is surprising is that I have been hearing about similar such Ponzi schemes and how investors get fooled with such promises. What is even more interesting is that all such earlier instances where such cases have come up these cases have been widely covered by the media but why is it that people still get fooled by such schemes as and when they come up. It also did come up till the time the institutions and their owners went under many of them were very prominently know as very well to do citizens and very often the media had also covered various articles featuring the rapid growth and success of these individuals.
On further going through what came as interesting is that this is a common phenomenon across the entire human race across all countries and sectors. Before getting into why this happens lets understand few other concepts which will get a better understanding on this human behavior pattern.
Very often when we take decisions our understanding of the situation is clouded by what we call as sets of delusions. Also, most of us compare delusions to illusions and feel both are one and the same which is not really the case. Though I never really played basketball much we used have this interschool basketball match which would be hosted in our school, and I always used to admire people who would fly up in the air and deposit the ball in the basket. If you are watching a professional league like the NBA and watch someone like Michael Jordan in any of the videos, we always feel he just stays in the air for a second before depositing the ball in the basket. This feeling of Michael Jordan being motionless in the air is what we would call as illusion. We can see the same in all sports but took the example of basketball and Michael Jordan since its easier for anyone to notice the same.
But if we after watching any of the famed sportsmen decide to wear the same sports shoes and jacket and feel we can really shoot the way Michael Jordan did or bat the way a Virat Kohli does or keep bowling mail biting Yorkers like Jaspreet Bumrah, does it’s just a delusion which will never happen because its fundamentally flawed. The examples of all the financial schemes that I talked about in the beginning are also the same as they are bound to fail as there is a fundamental mistake in the way these schemes are being operated and hence fall into the same category as delusion.
We are all living in the period of information overload. All information that we get can broadly be divided into two types
1.Reports
2.. Stories
Reports are basically about providing us with all relevant facts as they are without bringing in any interpretation of the data based on the reporter’s life experiences. Stories on the other hand are a way in which people use their life experiences and earlier learnings to make sense of some information that is available to them. We all love listening to stories which are reported mainly because they help provide us with a satisfying explanation to various events. Stories will never be totally dependent on the facts of the matter. Stories also conclude with a neat ending with a clear resolution and hence there are no threads left hanging. Since there were no hanging threads the readers feel more comfortable with stories than with reports which are only based on facts.
Many of the information overload that gets fed to us today is stories which are so well dressed up that they not only don’t appear as a story but are also very often presented in the form of science with the authority that science gives but like I explained earlier do not satisfy the logic and regur of science.
While doing job interviews particularly for junior positions have you found your opinion on a lot of parameters that are to be measured being influenced by the college where he studied or by the way the person looks or the way the person speaks. Do we very often feel that the same answers provided by a candidate from a prestigious school with average work experience are better than another candidate from an average college with better work experience.
During the First World war an American physiologist named Edward Thorndike was conducting research into the ways that superiors rate their sub ordinates. In one such study he asked army officers to rate their soldiers on a variety of features like intelligence, physique, leadership, character, work ethic and so on. When the results were tabulated what was interesting was that soldiers who had better physique and posture were rated high on almost every parameter even on totally nonrelated questions like do they polish their shoes well or do they do well in games.
The general observation was that people generally tend to make inferences about specific traits based on general impression. People generally find it difficult to measure several features independently and hence blend their opinion of everything from a common impression. It is also a way that the mind uses to create and maintain a coherent and consistent picture to reduce cognitive dissonance.
Thorndike called this as the Halo Effect…
Am recollecting an interesting experience I had more than a decade ago when we were doing an exercise to understand customer experience as part of a project to increase customer delight. Since the service that we had launched was quite new in the market and customers weren’t familiar with some of the features and options there would consumer calls which would come in for those reasons also. Sometimes the executive handling these calls would be able to resolve the issues then and there or if the problem were more complex would need to arrange a call back or send a representative to get the problem fixed. When customers whose problems were solved in the first call itself were contacted for their ratings on the various parameters, they gave a very high rating on almost all parameters including the no of rings in which the call was answered.
When the customers who required call back or a separate visit by the representative were contacted a higher percentage of them felt their calls weren’t answered within 3 rings and so on. While checking the data from the call center it was evident that since it was an automated call center all the calls were picked up after the same number of rings. The ratings varied on the other parameters also in the same pattern. Didn’t realize it then but was seeing the Halo effect playing out.
There is this widely documented case of George W bush which also illustrates the effects of Halo effect. Immediately after the Sept 11th twin tower explosions when American Citizens closed ranks the ratings of then President George Bush on all parameters including handling of the economy went up. Around 2005 when the Iraqi war was getting prolonged more than expected all the ratings went down irrespective of the fact that the war had absolutely nothing to do with these parameters. Each of the measured parameters moved in parallel indicating that they weren’t based on individual efforts but based on a Halo.
Though we aren’t aware such halo effects effect our day-to-day decision making whether it is related to our personal or professional decisions. Delusion and stories also unknowingly effect the way we make decisions. To understand more about the different types of Halos and some well documented business halos which will enable us to build awareness to such effects do subscribe to my new LinkedIn newsletter Rejo’s Biz Bytes and visit my website www.rejofrancis.com
