How to plant an Idea?
Why are humans judged on moments, when humanity is built in millenniums.
Why it’s so easy to change people’s minds?
How long does it take to change one’s views?
“Those who can make you believe absurdities, can make you commit atrocities”. Words of Wisdom from Voltaire the French Enlightenment writer, historian, and philosopher, who opposed the Catholic Church and advocated freedom of religion, freedom of expression, and separation of church and state, in 17th & 18th Century AD.
What holds true then, holds good today as well.
The human mind always seeks comfort, seeks the known, seeks contentment and pleasure and tilts, agrees and complies with what is easily available, what is easily relatable and what is recent.
Let’s enumerate using a few examples to substantiate this concept.
Imagine Mr. X is running an organization, an institution, or a vertical in a large business. One of Mr. X’s critical team members or subordinates decide to move on and pursue other interests in life, rather than serving at Mr. X’s firm, company or institution.
Mr. X requests CVs from interested people, using his personal connections, giving mandate to hire for the position using headhunters and placing an advertisement on placement and social media portals. Several CVs flood Mr. X’s inbox, and he ends up shortlisting people who have done similar kind of job(s), have performed similar kinds of duties, and have undertaken similar tasks in recent times than in the past.
Mr. X conducts the interviews and focuses (spending 80% of the time and conversation) on the last assignment the interviewee has been assigned by his firm. The interviewee brags about the super performance he or she has delivered or delivering in his or her job and how he or she is an asset to the firm — which the interviewee wishes to leave and join Mr. X’s organization at top buck. Mr. X is all geared up to absorb this person in his team and then during a HR round, the HR professional realizes that in previous roles with other companies, the person was strictly average and at times the person has not even delivered the basic goals, leave apart over-achievement.
Will Mr. X still go ahead and hire the person? Isn’t the story of Mr X akin to the story of our lives?
The interviewee’s recent good performance may be on account of multiple factors — including the market upcycle, underlying economic growth, demand supply mismatch for the product or any other factor, but the human brain believes and relies on what is recent and what is available with ease, which is the recent good performance.
The character of a human, organization, or a country is built through years, whilst evaluation invariably happens with regards to, what is recent and what is contemporary.
This phenomenon is not only applicable to businesses, but it’s applicable to life and investing, as they all are analogous and follow parallel patterns.
Before we move ahead, let’s talk about the origin of (this) heuristics.
In the late 1960s and early 70s, Daniel Kahneman and Amos Tversky, leading economists and psychologists conducted an experiment. They interviewed and asked a set of people who had proficiency in English, to answer a simple question: “If a random word is taken from an English text, is it more likely that the word starts with K, or that K is the third letter?”
In other words, they were asking which has more words in the English language– words starting with the letter K, or words having Letter K as the 3rd letter in any word of the English Language.
Majority of the participants in the study came up with the answer as words starting with the letter K, as it’s easy to recall words starting with ‘K’, like — Kangaroo, Kick, Kiss, Keep, Key, etc.
However, to recall a word with ‘K’ as the third letter is more difficult and takes more time, effort and energy to recollect. Examples of such words are Fake, Acknowledge, Baked, etc.
Although words with ‘K’ as the third letter are three times more than words starting with ‘K’ in the English language. This phenomenon is known as Availability heuristic, or Availability bias.
Availability bias is a mental shortcut that relies on immediate precedent, or on short term memory that is used by a person’s brain while evaluating a specific topic, concept, method, or more importantly, while making a decision.
The Availability bias operates on a premise that if something can be recalled or reminisced quickly, it must have happened multiple times, and thus it has to be important, or at least more important than alternative solutions which can’t be recalled readily.
Usually, our brain believes that what is easier comes to one’s mind, is truer; or if it’s more frequent in the recent past, then it must be more accurate and precise.
Thus human decision making is hugely influenced by Availability bias — Information which is available rather than relevant.
Another interesting example of Availability bias is finding good things about one’s relationship a person is in, or good things about one’s partner. If one is asked to pen down only three things which one likes about one’s partner or one’s relationship, it’s easy to answer and put the same down on paper.
However, if one is asked to jot down 10 things which one likes, or is happy about one’s partner or relationship, one will find it difficult to go beyond four! Fifth to tenth will generally be made up, or the mind will have rare examples of the same. Hence, that journey becomes cumbersome.
Our brain then forces us to believe that the relationship or the partner’s quality which one thought to be spectacular and phenomenal is not so great after all. It’s interesting that the quality of relationship amongst two people is largely dependent on one or two big things, and till those remain intact, happiness prevails in the relationship. But when the number of qualities one needs to substantiate increases, which our mind finds it difficult to comprehend, the satisfaction quotient also decreases.
What it also means is, as one feels whilst penning down the thoughts or qualities which are mostly based on short-term, or immediate memory, believes to be reality.
This is one of the reasons why year-end appraisals raise so much dissatisfaction amongst employees who have been toiling through the year.
To avoid being a victim of Availability heuristics is to look at the hard data or written notes or facts, rather than generalizing the situation.
When one makes notes, or when one pens down feelings, or when one writes down as against only speaking, one can’t be verbose, or be bombastic, or exaggerate (in relative terms).
Marketers, politicians, advertisements, and billboards, plant the idea exactly this way — by displaying a huge poster or billboard on the highway, writing a few big words which catch the attention of a person’s mind, and the same gets absorbed in a nanosecond and taken as real. The same or similar effect can be gained by reiterating the same thing several times (in short repetition), to make the mind believe that’s the truth.
This happens while investing as well. Imagine a business or a firm listed on the bourses, stock exchanges, delivering consistent revenue growth; profit growth as well as ‘return on equity’ (Or return on capital employed, as the case may be), quarter after quarter and year after year.
Suddenly an external event happens, beyond the control of the firm, unprecedented, and the firm re-evaluates its strategy to move forward from strength to strength in a calibrated manner. However, due to an uncertain, unclear, incalculable situation, the firm slows down and assesses the situation to make its next big move. However, investors and analysts have already dumped the stock to dogs.
A recent example of Availability bias being people talking about Jackson Hole, and interpreting it as some kind of phenomenon, whilst it’s a luxury resort where policy makers meet.
It’s quite fascinating that some people don’t change their jobs, or professions for a decade, and some for life, whilst the businesses which are created to run for centuries and listed on the stock exchanges are dumped or dropped within days, or weeks or months by investment managers, investors, or fund management analysts.
Surely, some money is made in buying and selling stocks quickly and hence all brokerage firms as well as its senior partners are rich and drive swanky cars (pun intended). However, in this process a common investor loses out by listening, imbibing and sticking to near-term analysis of media, stocks market experts or influencers, or so called gurus of business.
Whether it’s life, living or investing, look for patterns, patterns that can only be observed if one has relevant and longer term data (written, documented and concrete), and both need patience and eye for details and to observe.
With patience and observance, every problem can be deciphered and solved — whether it’s about succeeding in business, relationships, or life.
