Linda buys a bat and brand

There’s a quarrel in psychology research over Linda the banker. First some background. Most behavioral psychology is about crafting nearly identical situations with nearly identical composites of people who, despite the near identity, act in different ways.

One example is when employees are prompted with savings cues for their 401k. Imagine that with the annual corporate messaging about insurance, vacation adjustments, and outlook projections was a form that said “Did you know that your 401k contributions from October through December are eligible for a full employer match?” Employees who get the annual message with lines like that, raise their savings rates three percent. Employees who don’t get that message don’t change their rate.

What anyone saves is dependent on their own choices, right? However with the change in one line they aren’t.

Okay, now let’s talk about Linda.

Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in anti-nuclear demonstrations.

Which is more probable?

  • Linda is a bank teller.
  • Linda is a bank teller and is active in the feminist movement.

When this original research was done, most people chose the second option.

And it’s wrong.

This ‘conjunction fallacy’ goes like this: there’s no way that there can be more bank tellers who are active in the feminist movement than there are all bank telllers.

This is mathematical logic. But it’s not how people think. When people hear Linda’s story they take the contextual clues that come along with it. If we could peak inside a participants mind we might see thoughts like this, ‘If you’re telling me all this stuff about Linda then it must be true that she is both a bank teller and active in the feminist movement.’

Any information that people get, people use and numbers are a special kind of information.

Numbers carry an authority.

Home values increased.

Home values increased by 8%.

And numbers lead to fast thinking. 

In his best-selling book, Daniel Kahneman framed this idea in terms of thinking fast or thinking slow. For some things in life, Kahneman wrote, we tend to think fast. Brands are fast thinking.

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There’s no interpretation here.

Numbers are like brands. Though an 8% increase in home values is a complex computation of home sales, realtor surveys, incomes, and so on, we see that and think it’s true without really thinking.

Joining Linda in the pantheon of psychology phrasing is the bat and ball problem. It looks like this:

A bat and a ball together cost $1.10. If the bat costs a dollar more than the ball, how much does the bat cost?

Ok, now try it this way.

Bat + Ball = $1.10, the bat costs a dollar more than the ball.

Or, the same idea in a different way.

A Ferrari and a Ford together cost $190,000. The Ferrari costs $100,000 more than the Ford. How much does the Ford cost?

Each step down slows thinking. People see the bat and ball problem the same way they see brands or 8% increases: fast.

Most of the numbers we encounter in life is like brands, the bat and ball problem or Linda the banker—our default is to move quickly past them. But to get all the details we’ll need to slow down.

Special Numbers for Special People

Brent Beshore says that people are messy. They’re weird too.

Part of the fun of social science research is putting people in situations and seeing what they do. We think people are weird because these experimental conditions have logical rigidity. It’s a world where A < B and B < C and no-way-Jose can C > A.

One way to think about this is the Illusion of Control. One paper is the Irwin and Goodwin, Special Random Numbers.

Here’s an experiment. Ask one group of individuals to choose three numbers for a lottery. Assign another group of individuals three numbers for the same lottery. Then announce to both groups that there was a such-and-such mistake. Note: a such-and-such mistake is a sign that you may be in a social science experiment.

To remedy the mistake, everyone can switch to a new set of numbers. (But wait, there’s more). The kind researchers are offering a new lottery, for those that choose new numbers, with even better odds of winning.

The punchline is that the people who choose their numbers tend to keep their numbers.

If that weren’t enough, people will bet more if they are given random numbers with meaning. “We establish that numbers generated randomly by certain systems (e.g., dates and names) are preferred to gambles of equal expected values and equal (lack of) control.”

The author’s guess, “It is possible that propensity (and associated enjoyment) underlies other types of decisions as well. For instance, very old brand names are preferred by many consumers, and enjoy a price premium. This premium holds even for commodities.”

People like what we like. People like repetition over logic. People are weird.

However, this environment is kinda weird. Normally we choose things for a reason, and if it’s because numbers represent our cat’s birthday then so-be-it.

People are weird, so let’s deal with it. Business owners, investors, and entrepreneurs alike should remember that people are messy and people are weird. We’ll give Irwin and Goodwin the final word: “our results suggest that, in general, trying to educate people away from these types of decisions will be difficult and not easily accomplished via logical arguments aimed at beliefs.”

Instead, try stories. It works for vino don’t you know.