Why We Make Mistakes Blog

Another Thing That Doesn't Work

2011-11-09T10:47:00.000-08:00

To the growing list of bright ideas that don’t work we can now add another: a bypass surgery to prevent strokes. Until yesterday, many doctors thought that if they connected an artery in the scalp to a deeper vessel to improve blood flow to the brain, they could help patients with poor circulation avoid strokes.

But no. It turns out that the surgery itself actually caused strokes! According to a $20-million government-funded study published on Tuesday, 14.4 percent of the patients who had the surgery had a stroke within a month of the operation. By comparison, the stroke rate for the group that did not have surgery was only 2 percent.

The evidence was so overwhelming that the study was stopped early. As the New York Times noted, “What had seemed to make sense medically did not work out in fact.”

This is becoming a troubling refrain for medical “cures.” A few weeks ago we got a nearly identical report on the use of brain stents to prevent strokes. (Those who got the device actually had so many more strokes than those assigned to control groups that that study, too, was stopped early.)

And a few weeks before the stent study came out we got a similar report regarding the drug niacin. Doctors had hoped that it would prevent heart attacks by raising the levels of “good” cholesterol in a patient’s blood. But that, too, didn’t pan out. According to that study, niacin provided no benefit over simple statin therapy.

What’s the lesson here? Just because you think a thing should work is no guarantee that it will work. And you never know whether it will work until it has been independently tested.

Left to Our Own Devices...

2011-10-13T11:41:00.000-07:00

In case you missed it, let me direct your attention to a recent page-one story in The Wall Street Journal. The article documents a growing trend among surgeons to implant their own medical devices into the bodies of their patients. As a result, the surgeons stand to profit twice: once from the surgery and again from the sale of the device.

The surgeons, as you might suspect, say the prospect of making money (even lots of money) doesn't influence their medical decisions. A lawyer for one of the surgeons is quoted in the article as saying the surgeon used his own devices because they "were the best on the market for the procedure" and not because he stood to profit from them.

Perhaps. But nearly every piece of research on the subject points the opposite way.

First of all, most of us don't like to admit we're biased. Our colleagues? Oh sure, we're happy to admit they might be influenced by such things as money. But not us. A 2001 study of medical residents, for instance, found that 84 percent thought that their colleagues were influenced by gifts from pharmaceutical companies...but only 16 percent thought that they were similarly influenced.

The interesting thing is that bias is seldom a matter of deliberate choice.It is typically unconscious and unintentional. Research has shown that professionals who sincerely believe that their decisions are “not for sale”(such as physicians) are still biased in the direction of self-interest.

Even those who are purportedly neutral have been shown to be biased. A 2005 study of psychiatric drug trials found that when academic researchers were funded by a drug company, they were nearly five times as likely to report that the treatment was effective.

Likewise, a 2003 study by economists at Carnegie Mellon and Harvard found that independent auditors were significantly more likely to approve questionable accounting practices when those practices were done by the firm paying their bills.

And it doesn’t take much to bias someone’s judgment – even a coffee mug will do. Students at a medical school where gifts such as coffee mugs and pens are permitted from drug companies had a more favorable attitude toward a cholesterol drug than did students at a medical school where such gifts were banned.

So if you're due for surgery any time soon, ask your surgeon about his or her financial interests in the surgery. As the Journal article pointed out, doctors don't always disclose these. One man died shortly after receiving implants from a doctor who stood to profit from them. His widow says she would have liked to have known this before the surgery.

"It might have caused me to ask: Is the surgery really necessary, or is he out to make more money?"

A Rigged System

2011-06-23T12:04:00.000-07:00

If you want to see a good example of how bias warps decision-making, check out this article in The Wall Street Journal, which has been reporting on developments regarding medical device giant Medtronic Inc. (Disclosure: I have friends and family who work for medical device makers.)

According to the Journal, the Senate Finance Committee is investigating whether surgeons who received lots of money from Medtronic for consulting and other work failed to note complications associated with a Medtronic product that has become widely used in spinal surgery.

Medtronic would have us believe the answer is no. It says it provides data about adverse events that occur in clinical trials of its products “irrespective of any financial relationship” between the company and those involved in the studies.

But academic research suggests otherwise. As Princeton professor and Nobel Laureate Daniel Kahneman and colleagues note in a recent article in the Harvard Business Review, “Research has shown that professionals who sincerely believe that their decisions are “not for sale” (such as physicians) are still biased in the direction of their own interests.”

And in the case of Medtronic, those are quite some interests. According to the Journal, Medtronic paid one Wisconsin surgeon involved in one of its trials $19 million from 2003 to 2007. Another doctor involved in a trial received more than $1.5 million between 2001 and 2006.

The Senate committee’s investigation was triggered in part by a forthcoming study in a medical journal. That study shows that numerous complications – including potentially fatal ones -- associated with Medtronic’s Infuse Bone Graft occurred in clinical trials.

But – and this is an important but – those complications went unreported in a dozen research papers about those trials that Medtronic sponsored between 2000 and 2009. (Italic mine.)

Here you have the nub of the problem: industry money typically funds these trials.

As the old adage says, he who pays the piper calls the tune. And if you have any doubts, we got a great lesson during the recent financial crisis. We know now that many of the allegedly objective ratings agencies gave high ratings to mortgage securities that later turned out to be junk. Those rosy ratings, of course, favored the ratings agencies’ clients.

And we have much the same situation with medical trials. They are paid for, in whole or in part, by the companies that make the products being tested. Imagine if we conducted, say, civil trials the same way: the evidence used in court would be paid for by one of the two parties. Which party do you think the evidence would favor?

The answer here is obvious: we need a system where companies do not directly pay for the evidence used to determine whether their products are safe. Anything else is a rigged system.

Darwin Was Right (and the Doctors Were Wrong)

2011-05-27T11:57:00.000-07:00

Among the many astute observations made by Charles Darwin is this gem: “Ignorance more frequently begets confidence than does knowledge.”

For real-world proof of this claim, look no farther than today’s papers. There, on the front page, are the results of a study that undermines the way physicians have treated heart disease.

As the New York Times put it: “The results are part of a string of studies that suggest that what doctors thought they knew about cholesterol may be wrong.”

In short, raising the level of their patients’ HDL, or “good” cholesterol, does not matter. For years, doctors have thought the opposite was true. They assumed (without proof, apparently) that raising the levels of good cholesterol – typically by prescribing niacin – would benefit their patients.

Now, it’s egg-on-the-face time.

“We were stunned, to say the least,” said Dr. William E. Boden, one of the study’s lead investigators.

“It’s a shocker,” Steven Nissen, chief of cardiovascular medicine at the Cleveland Clinic, told The Wall Street Journal. “Most of us in the medical community, if we were going to bet on anything, we would have bet on niacin.”

Q.E.D.

Mis-directions

2011-04-26T09:47:00.000-07:00

In Why We Make Mistakes , I have a little fun pointing out how often people fail to follow the instructions that come with a variety of products, from nail guns to car seats. But if you want an even scarier example, check out today's story in The Wall Street Journal on drug labeling.

Drug labels are notoriously hard to read -- and often confusing for those who do read them. Not surprisingly, as many as three in four Americans say they don't take prescription medicine as directed. And in recent studies, more than half of adults misunderstood one or more common prescription warnings and precautions.

Often, this leads to a trip to the hospital. Nearly 1.9 million people were treated in hospitals for illnesses and injuries from taking medicines -- a 52% increase from 2004 to 2008.

One cure for confusion, of course, is simplicity. And one study shows -- what a shock! -- that patients better understood simple, explicit language. For example, "use only on your skin" is better understood than "for external use only."

So before you grab that bottle of pills, take some time to check the label.

A Tip 'o the Hat...

2011-03-15T08:18:00.001-07:00

...goes to Joe Stirt,for passing along this interview of mountaineering legend Ed Viesturs by author Kathryn Schulz. It's well worth the read, especially the part where he describes his biggest mistake. I won't spoil it for you, but Schulz tells him the mistake doesn't sound so bad. "You made it down safely, after all."

"Yeah," says Viesturs, "but a mistake is a mistake even if you get away with it."

I couldn't have put it better.

Missing the Obvious

2011-01-26T09:34:00.000-08:00

I've talked and written about the importance of failing to see the obvious. It's a common source of error -- and one to which we are all prone -- since most of us believe (understandably, but wrongly) that we would notice obvious things. (See my previous posts on inattentional blindness, for example.)

The latest example comes to us from Financial Crisis Inquiry Commission. The FCIC was established to investigate the causes of the financial collapse that wreaked havoc from Wall Street to Main Street. The Commission's final report is due out tomorrow. But a few news outlets, including the New York Times, have gotten an early look. Here's what the Times had to say:

“The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand and manage evolving risks within a system essential to the well-being of the American public. Theirs was a big miss, not a stumble.”

Those words echo the testimony of Jamie Dimon, chairman of JPMorgan Chase & Co., who appeared before the Commission a year ago.

"I’ve already mentioned the biggest mistakes we made," he told the Commission. "In mortgage underwriting, somehow, we just missed that home prices don’t go up forever..."

This admission startled one of the commissioners, who asked Dimon, "Did you do a stress test that showed housing prices falling?"

"No," said Dimon. "I would say that’s probably one of the big misses."

Yes, indeed. Home prices still haven't recovered, as the latest Standard & Poor's/Case-Shiller index makes clear. In many big cities, home prices have sunk to their lowest prices in years.

As the article in the Times goes on to point out, "one striking finding (of the FCIC report) is its portrayal of incompetence."

"It quotes Citigroup executives conceding that they paid little attention to mortgage-related risks. Executives at the American International Group were found to have been blind to its $79 billion exposure to credit-default swaps, a kind of insurance that was sold to investors seeking protection against a drop in the value of securities backed by home loans. At Merrill Lynch, managers were surprised when seemingly secure mortgage investments suddenly suffered huge losses."

One way to prevent errors of this magnitude is to impose constraints that other other countries (notably Canada, which avoided much of the mortgage mess) have adopted.

But with the Dow hovering around 12,000 and bankers strutting again at Davos, this seems unlikely.

Thinking Things Through

2011-01-04T12:01:00.000-08:00

If you want to avoid making big mistakes, it's important to learn to think through a problem. This means learning to think not just about how an idea can succeed, but how it can fail.

Most of us, of course, don't like to do this. When faced with a decision - which job to take, which college to attend, which car to buy -- our search for information is not neutral. We tend to look for information that supports our pre-existing ideas and to discount information that doesn't. Researchers call this "confirmation bias." Often, it leads to bad decisions.

A not-so-obvious example involves the high-tech garbage collection system in the city of Toledo, Ohio. The system was supposed to save the city $3 million a year. Instead, it has left the city with $1.3 million in unanticipated expenses – and a bunch of really honked off residents.

Like a lot of cities these days, Toledo is strapped for cash. So in 2009 its city council voted to spend $22 million (which it had to borrow, by the way) to buy new garbage cans and a fleet of super-duper, driver-operated trucks. The trucks were equipped with pincers that grab the cans, lift them overhead and dump their contents in the truck. The trucks allowed Toledo to eliminate 70 trash-collector jobs and to slash the solid waster division’s budget to $8 million from $11 million. So far, so good.

But then the problems set in. Since the trucks no longer had a pair of human collectors who jump off the back to grab trash bins on either side of the street, drivers had to double back to cover the opposite side of the street. As a result, the trucks use more gas than the city expected, so fuel costs went up.

Not only that, the system proved wildly unpopular with residents. The robo-trucks left trash strewn everywhere, and the new 96 gallon garbage cans were so big that old people complained they were too big to haul.

They flooded city hall with as many as 600 complaints a day. As a result, the city had to hire 8 telephone operators to run a complaint hotline — further eating into savings.

The whole thing has turned into such a nightmare that now the city wants to get out of the trash business entirely and let the county handle it.

Toledo isn't alone. The city of Seattle not so long ago made a similar blunder, squandering $5 million on high-tech public toilets that turned into havens for drug dealers and prostitutes.

Whether it's toilets or trash cans, the problem is the same: nobody thought through the problem before emabrking on the "solution." And the result was a costly error.

Looking on the bright side

2010-09-20T09:31:00.000-07:00

In Why We Make Mistakes, I talk quite a bit about our tendency not only to err, but to err in a particular (and predictable) direction -- and that direction is toward optimism.

Many people see nothing wrong with this. From the time we are children, most of us are told to look on the bright side, to think positively. Which is fine, as far as it goes. But later in life, this trait usually becomes so ingrained that it forms a cognitive bias that can lead to a number of mistakes.

Here are two interesting and seemingly unrelated examples: one involves pensions; the other involves sex. We'll take sex first:

A few weeks ago the New York Times ran a front-page story on a birth control pill named ella (with a lower-case e). Ella is a so-called "morning after" pill, an emergency contraceptive designed to be taken after sex.

If you're a pharmaceutical company, you might think there's a big market for such a drug. After all, unprotected sex happens quite a lot: studies have shown that more than one million women who do not want to get pregnant are estimated to have unprotected sex every night in the United States.

But think again: According to the Times, many women who have unprotected sex tend to look on the bright side -- they think they won't get pregnant.

To quote from the Times: "Studies have found that many women fail to realize they are at risk for an unplanned pregnancy after unprotected sex." Which is is astonishing, given that half of all pregnancies in the United States are unintended.

Nevertheless, sayeth the Times, "they tend not to use the emergency contraceptives even when they receive them free."

In fact, says Dr. James Trussell, director of the Office of Population Research at Princeton, “Emergency contraception has no effect on pregnancy rates or abortion rates. Women just don’t use them enough to make an impact.”

No effect.

So, so much for a pill called ella. Now for pensions. It turns out that pension managers (at least those who manage public pension funds) have a lot in common with the morning-after crowd: They tend to look on the bright side. Which may not be so good if you happen to be relying on them for your pension.

According to The Wall Street Journal, pension managers are clinging to wildly unrealistic estimates of their funds' rate of return. And are those estimates unrealistically low? No, they are unrealistically high. The median expected return for more than 100 U.S. public pension plans surveyed by the National Association of State Retirement Administrators is a whopping 8%. That's the same as it was back in 2001.

For handy comparison purposes, a conservative investment like the 10-year U.S. Treasury note currently yields less than 3%.

If the funds don't earn 8%, of course, that means funding gaps down the road; the pensions won't have as much money as they thought they would have to pay retirees. And that's bad news if you happen to be a retiree.

So there you have it: sex, money and optimism all rolled into one.

Tumor? What tumor?

2010-07-20T11:43:00.000-07:00

Readers of Why We Make Mistakes know that radiologists miss much of what they are supposed to catch. The generally accepted error rate for the radiologic detection of early lung cancer, for instance, is between 20% and 50%; one study at the Mayo Clinic put it as high as 90%. Now comes the New York Times with a front-page story on the high error rate not for lung cancer but for breast cancer.

Information Overload Redux

2010-07-19T10:40:00.001-07:00

We've talked often about the perils of information overload. The biggest of these is that more information usually leads to more confidence in our predictions -- but not necessarily more accuracy. In short, we become overconfident about our abilities to accurately predict whatever it is we think the information will help us predict. And that overconfidence often leads to complacency. (Just go back and look Wall Street's ability to predict the housing crisis.)

For the latest, and perhaps scariest, example of information overload, take a look at the impressive investigative piece by The Washington Post.

Blown Calls

2010-06-03T18:34:00.000-07:00

Poor Jim Joyce.

His blown call cost Detroit Tigers pitcher Armando Galarraga a perfect game -- and has since made him the most infamous umpire in Major League Baseball.

And all because of one bad call. Imagine if Joyce had blown thousands of such calls. He wouldn't be an umpire for long, would he? But he could work for a credit rating agency, where bad calls seem to be the norm.

It turns out that just as the Tigers were getting ready to play, the head of one of the nation's largest credit rating agencies, Moody's, was also warming up for his testimony before the Financial Crisis Inquiry Commission.

The commission, as its name implies, is investigating the causes of the nation's latest round of financial shenanigans. And it is now zeroing in on the companies that rated all those lovely securities that quickly turned into compost.

Phil Angelides, the commission's chairman, wasted no time in putting a bulls eye squarely on the back of Moody's. In his opening statement he said that 89 percent of the securities given a top triple-A rating by Moody's were later downgraded. 89 percent!

"The miss was huge," said Angelides. "Ninety percent downgrade. Even the dumbest kid gets 10% on the exam."

Former employees of Moody's attributed this appalling record to the culture in place at Moody's. "Cooperative analysts got good reviews, promotions, higher pay, bigger bonuses, better grants of stock options and restricted stock," said one former employee.

Uncooperative analysts, on the other hand, were often fired.

At least Joyce had the courage to admit that he made a mistake and to apologize to his victim.

This quality seems in short supply on Wall Street.

The Power of Negative Thinking

2010-05-31T08:53:00.000-07:00

If you want a textbook example of how negative thinking can help prevent errors, look no further than the BP oil spill in the Gulf of Mexico. As an editorial in today's New York Times makes clear, "BP's disjointed response suggested it had given little thought to the possibility of a blowout at 5,000 feet."

And it's not just BP that gave little thought to a blowout. The same could be said of many Wall Street firms. They, too, failed to give serious thought to the possibility of a blowout of the U.S. housing market. In testimony earlier this year, for instance, JP Morgan CEO Jamie Dimon made this admission: “In mortgage underwriting,” he said, “somehow, we just missed that home prices don’t go up forever...”

Nobody likes to think negatively (by which I mean thinking seriously and deeply on the front end of a problem about what can go wrong). We prefer to think there will always be blue sky.

But in any serious endeavor, negative thinking is absolutely necessary. Eisenhower thought so. That's why, when planning the invasion of Normandy, he went so far as to draft a letter taking responsibility for the failure of the D-Day invasion.

More recently, Lloyd Blankfein, the head of Goldman Sachs, testified about the essential importance of negative thinking, which at Goldman takes the form of stress tests.

“...The one thing that we constantly learn from every crisis,” he said. “is the need for more stress tests.”

“What a stress test does is it says, ‘Don’t tell me that this is unlikely. What if it did happen?’

“'But, it’s not going to happen.’”

“'What if it did’”?

What if it did? That's the key question every negative thinker needs to ask -- and it's one that BP clearly avoided.

But there's a natural impediment to negative thinking. Researchers call this impediment a confirmation bias. But The Wall Street Journal, in a recent article, referred to it as the "yes-man in your head." Either way, it amounts to the same thing: when we have a decision to make and set out to gather information, our search isn't neutral. As the Journal piece points out, we are twice as likely to seek information that confirms our original belief as we are to seek information that contradicts it.

In other words, the more we know, the more certain we become that we are right. And we go on believing that -- right up to the blowout.

Future star or future flop?

2010-04-23T09:35:00.000-07:00

Maybe you saw USA Today's front-page piece on University of Florida quarterback Tim Tebow the NFL draft. The headline was, "A shining star, or a flop in the making?"

It's a good question -- and one that is answered in a new paper by Cade Massey of Yale and Richard Thaler of the University of Chicago.

Readers of this blog know how often I harp about overconfidence as a source of error. Massey and Thaler find that NFL teams are way overconfident when it comes to their ability to spot talent in draft picks. Just over half the time, they found, the top picks in the draft turn out to be flops.

As they state: "The more information teams acquire about players, the more overconfident they will feel about their ability to make fine distinctions...these findings stand as a reminder that decision-makers often know less than they think they know. This lesson has been implicated in disaster after disaster, from international affairs to financial markets.”

Amen.

Error by Design

2010-04-08T09:49:00.000-07:00

If you get a chance, check out David Pogue's column in today's New York Times. On one level, it's about wireless routers. But on another, it shows how bad design can induce people to make errors.

It seems that a whopping 25% of wireless routers are returned to the store after purchase. Why? Because they are too complicated to use.

In Why We Make Mistakes I talk a lot about how bad design can cause people to make mistakes they might not otherwise make. Those mistakes, in turn, are then blamed on the people, not the design. (For an example, check out the section on the heparin overdose given to the newborn twins of actor Dennis Quaid and his wife.)

These kinds of mistakes can be avoided by applying well-known design principles. One example is what engineers call a "forcing function." A forcing function, as the name suggests, forces you to do a certain thing in a certain way.

A good example is in your car: to put your car in gear you must first depress the brake. That way, you don't accidentally have your foot on the gas when you drop it into gear and go hurtling into a pedestrian or other car. Good idea, huh?

But the people who make routers haven't caught on -- yet.

The End is Near

2010-04-08T09:31:00.000-07:00

If you like doing stupid things like playing Russian roulette or talking on your cellphone while driving your car, go ahead and do it now. Why? Because soon it will be illegal (at least the cellphone and driving part).

U.S. Transportation Ray LaHood said as much in an interview with The Wall Street Journal.

"The end game is to get cellphones out of (drivers') hands," said LaHood.

DOT is sponsoring pilot programs in Syracuse, New York, and Hartford, Conn., to ticket distracted drivers. In Syracuse, it'll cost you 180 beanos if you are caught talking and driving. In Hartford, it'll be a C note, plus costs. The program's motto: "Phone in One Hand. Ticket in the Other."

DOT's move comes on the heels of mounting evidence that cellphone use while driving results in dangerous distractions for drivers.

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2010-03-31T13:14:00.001-07:00

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The Dirty Truth

2010-02-24T08:59:00.000-08:00

Question: Why do we keep making the same mistake over and over?

Answer: Because we fail to identify the root cause of the mistake to begin with -- a tendency researchers call, "misattribution."

Example: Washing your clothes. Say you get a stain on your shirt. You throw the shirt in the washing machine, add some detergent and 45 minutes later -- Voila! – the stain is still there.

You cuss. You holler. You kick the washing machine. Maybe you blame the detergent. But do you blame yourself? Nooooo. But maybe should.

According to a recent study in The Wall Street Journal, most Americans -- 53% -- don’t use the recommended amount of detergent per wash load. Instead they guess, usually filling the cap up to the top. This is a big mistake.

Why? Because detergent "overpouring" creates a high, foamy tide inside the machine, lifting soil and lint above the water level so it isn't rinsed away. That leaves residue on clothing that fades colors and attracts more dirt.

It’s also bad for your washing machine. Inside the machine, detergent buildup encourages odor and bacteria growth, and leads in time to wear and tear that will require professional attention.

So why do we do this? Because we don’t read the instructions. And why don’t we read the instructions? Because we think we know better. Most of us, the article reports, have done so many loads of laundry in our lives that we consider ourselves to be laundry experts. And experts don’t need no stinking instructions.

So there you have it: Ignorance and overconfidence all wrapped into one.

Class dismissed.

Foul? What foul?

2010-02-01T09:27:00.000-08:00

For another example of how deeply-ingrained biases can affect our judgment -- even when we try to be objective -- check out this recent study on fouls during soccer games. (And thanks to my old soccer teammate Robbie Woodward for sending it along.)

Researchers at Rotterdam School of Management, Erasmus University, researched all recorded fouls in three major soccer competitions over seven years. They discovered an ambiguous foul is more likely to be attributed to the taller of two players.

Similar studies of over the years have found that the judgment of referees can be biased by other factors, too -- such as the color of a hockey team's jersey (teams with black jerseys accrue more fouls) or even the racial makeup of officiating crew in the National Basketball Association.

But we go on pretending the biases don't exist.

DWD (Driving While Distracted)

2010-01-26T08:27:00.000-08:00

Readers of this blog have heard us carp for some time about the dangers of distracted driving. Now, the federal government is doing something to stop this nuttiness. Effective immediately, drivers of commercial trucks and buses will no longer be allowed to text while driving. Under federal guidelines that U.S. Transportation Department announced today, drivers of big rigs and buses may be subject to civil or criminal penalties of up to $2,750.

Now, if the feds would apply a similar rule to the rest of the drivers on the road, we'd all be much safer.

Hack Me

2010-01-22T09:36:00.000-08:00

Readers of Why We Make Mistakes already know why we pick computer passwords that are easily remembered -- and easily hacked (see pages 33-34). But if you have forgotten why or need more proof, check out the New York Times article on commonly-used passwords. Security researchers discovered a list of 32 million passwords that had been stolen from a website. And the number one password was...123456.(Number two was: 12345.)

Full-Body Scanners and Error Rates

2010-01-11T09:07:00.000-08:00

Ah, full-body scanners. They're supposed to make us safer. But will they?

My hunch is: not much. My guess is based not on the scanners themselves (which are intrusive and come with real risks, like additional radiation deaths), but on the people who do the scanning.

Undercover tests conducted at major airports show that the "miss rates" for baggage inspectors using conventional technology is between 60% and 75%. That's a lot.

Has the Transportation Security Administration (or anyone else) assured us that full-body scans will result in lower error rates? If so, I've seen no such assurance.

Ultimately, all scans must be interpreted by the people behind the scanners. And that's where the problem comes in. As work by researchers like Jeremy Wolfe has demonstrated, human beings have real-world limits on their ability to detect objects, especially ones that they rarely see, such as bombs and guns. That's why the current miss rate is so high -- and why it is unlikely to improve with full-body scanners.

Upwardly Mobile

2009-12-07T07:37:00.000-08:00

As readers of Why We Make Mistakes know, multi-tasking is usually a bad idea. It's an especially bad idea when you are behind the wheel of a car. Talking on a cell phone or texting while you are driving dramatically increases your chances of an accident. But we do it anyway because, among other reasons, we are overconfident about our abilities to multi-task.

For some interesting history about how we got to this point, see the page-one story by Matt Richtel in today's New York Times. As the article notes:

"Long before cellphones became common, industry pioneers were aware of the risks of multitasking behind the wheel. Their hunches have been validated by many scientific studies showing the dangers of talking while driving and, more recently, of texting.

"Despite the mounting evidence, the industry built itself into a $150 billion business in the United States largely by winning over a crucial customer: the driver."

Asleep at the Wheel -- Again

2009-10-23T11:09:00.000-07:00

We've written before about the problem of pilots falling asleep midflight.

Now, it seems that this has happened again.

Northwest Airlines Flight 188, en route to Minneapolis, overshot the airport -- way overshot the airport. The pilots didn't turn around until they were over Eau Claire, Wis., 150 miles away.

The pilots, who have not been identified, reportedly told the Federal Bureau of Investigation and the airport police that “they were in a heated discussion over airline policy and they lost situational awareness.”

Right.

The plane, an Airbus A320, which carried two pilots and three flight attendants as well as 144 passengers, was cruising at 37,000 feet when the crew stopped responding to air traffic controllers and airline dispatchers. According to the Wall Street Journal, the radio silence continued for 78 minutes.

According to the same article, "pilot fatigue has long been regarded as one of the most serious safety issues confronting commercial aviation."

The question is: When is the FAA going to wake up?

Information Overload

2009-10-21T13:41:00.000-07:00

More than 35 years ago, in a now-classic piece of research, Paul Slovic reported on the ability of handicappers to predict the outcome of horse races. At first, Slovic let the handicappers use any five pieces of information they wanted -- the jockey’s weight, for instance, or the horse’s previous race performance. Then he let them use 10 pieces of information. Then 20, and, finally, 40.

Slovic was studying the stress caused by information overload. What he found was fascinating: with more information, the accuracy of the predictions did not improve -- it was no better with 40 pieces of information than it was with 5.

But the confidence in those predictions did improve. This increased substantially, from less than 20% with 5 pieces of information to more than 30% with 40 pieces of information.

I thought about Slovic's findings as I read about the Galleon Group, the hedge fund whose rotund leader, Raj Rajaratnam, was arrested earlier this week on insider trading charges.

The pressure at Galleon was intense. According to published reports, analysts there were browbeaten to come up with new information on companies whose stock the fund was interested in.

But that information, at least in some cases, didn't seem to help -- and may even have hurt. As Alex Berenson reported in today's New York Times, Mr. Rajaratnam "lost millions of dollars from what prosecutors characterize as insider trading."

In one case alone, involving the chip maker Advanced Micro Devices, Galleon reportedly lost $30 million.

What is interesting here is not that some of Galleon's trades went bad; one would expect that. What is interesting is that Galleon apparently didn't learn what Slovic did: More information doesn't necessarily lead to better decisions. But it can lead to costly ones.

Results Not Typical

2009-10-06T10:04:00.000-07:00

In Why We Make Mistakes, I write about what some people call "bikini power." This is the power of weight-loss ads featuring women in bikinis to convince us that we, too, can look socko in a swimsuit -- even if the odds are against it.

I cite the case of NutriSystem, the diet company based in Horsham, Penn., whose ads frequently feature the bikini-clad. Its securities filings, though, give a different image of their customers: most are "serial dieters" who have repeatedly tried and failed to keep weight off. On average, they are female, 44 years old, and weigh 210 pounds. Most start out wanting to lose 60 pounds but end up losing only about 20. Typically, after 10 or 11 weeks, they give up and drop out of the company's program.

For decades, the Federal Trade Commission has allowed diet companies to use ads like NutriSystem's so long as the ads feature a tiny, three-word disclaimer: "Results not typical."

Well, that is about to change. New FTC guidelines, last revised in 1980, require weight-loss companies and others to state just how "not typical" their results are.

Under the revised guidelines, advertisements that feature a consumer and convey the consumer's experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect.

In contrast to the 1980 version of the guidelines – which allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer such as “results not typical” – the revised guides no longer contain this safe harbor.

But the guidelines, so far as I can tell, say nothing about banning the use of bikinis....

Buy High, Sell Low

2009-09-19T08:14:00.001-07:00

If you want a good example of how overconfidence leads to mistakes (and very expensive ones at that), check out Floyd Norris's column in today's New York Times. Usually, we see overconfidence at work in individual errors; here, we see it at work on the corporate level.

Norris's column focuses on the allure created when publicly traded companies buy back their own stock (parenthetical comments below are my own):

"One reason investors have viewed buybacks as a positive was that they indicated corporate management and boards were confident (there's that word!) that their share prices were low and that the company would not need the cash for a possible downturn in business.

"Unfortunately," Norris concludes, "there is little evidence that is the case."

Records show that companies typically buy their own stock at the top of the market -- a colossal waste of money. He cites the case of American International Group. In 2007 it spent $6 billion buying back its own stock. In the first quarter of 2008, it spent another $1 billion. And then? Ka-boom. The bottom fell out of the market. Today, AIG would be broke without a massive federal bailout.

And AIG is no exception. Home Depot did the same thing. In the third quarter of 2007, Norris reports, it bought $10 billion of its own stock at an average price of $37 a share. By early this year, the price had fallen to $18. You talk about do-it-yourself investing!

Yessir, Home Depot: You can do it. We can help. Next time, just hang onto the cash.

Swiss Cheese and Medical Errors

2009-09-08T10:13:00.000-07:00

There's no real reason to single out medical errors from all the other types of errors in the world, except for one: they kill a lot of people. According to a leading study on the matter, about 98,000 patients in the U.S. die each year from medical mistakes.

This doesn't cause much of a public outcry, though, because most medical mistakes are buried with the patient. On the rare occasion when an error is revealed, blame is usually attached to an individual doctor or nurse (or both).

But if you want to understand why this approach to blaming individuals doesn't stop future errors from happening over and over again, read Josie's Story, which is reviewed here. The book is written by Sorrel King, whose 18-month old daughter, Josie, died from complications from treatment in 2001 at the world-famous Johns Hopkins Medical Center.

From the review:

"As Ms. King notes, the problem is often not a single doctor or nurse or misplaced decimal point on a medication vial but rather faulty systems and communication breakdowns."

Exactly. Most mistakes can be best understood by what experts on human error call the "Swiss cheese effect." Basically, errors are like the holes in slices Swiss cheese; for an error to happen, all the holes in various slices of the cheese have to line up. When they do, an error gets through.

Anyone truly interested in reducing errors in any workplace -- whether it's an operating room or a factory floor -- should take note.

D.W.T.

2009-08-26T13:18:00.001-07:00

One of the most common sources of human error is multi-tasking, especially when performed behind the wheel of a car.

D.W.T. or Driving While Texting, is a supremely bad idea; it's been implicated in the crash of a train in Los Angeles and a trolley in Boston.

It is also becoming illegal. In Utah, for instance, texting and emailing while driving are now punishable by a $750 fine and 90 days in jail.

The state has put out a video, which you can see here. There's also a similar, though very graphic, video appearing now in the U.K.

As the Wall Street Journal points out, companies are scrambling to come up with new texting-safety apps that block texts or minimize the distraction they cause.

But you don't need any of these; you could just hang up the phone and drive.

The Same Mistake, Again and Again

2009-08-18T11:58:00.000-07:00

We've talked before about why we so often seem to make the same mistake again and again. Now comes another factor: stress.

In a recent study in the journal Science, Nuno Sousa and his colleagues describe what happens to chronically stressed rates.

As Natalie Angier of the New York Times put it, "the rodents were cognitively predisposed to keep doing the same things over and over, to run laps in the same dead-end rat race..."

Sound familiar?

Why It's Dumb to Text and Drive

2009-07-27T16:20:00.000-07:00

We've written before about the folly of texting. (See our May 26 blog here.) Now comes even more proof. A new study by the Virginia Tech Transportation Institute finds that texting while driving doesn't merely double or triple the risk of a crash; it increases the risk 23 times.

Compared with other sources of driver distraction, “texting is in its own universe of risk,” said Rich Hanowski, who oversaw the study at the institute, which is affiliated with Virginia Tech.

For The Non-Believers Among Us

2009-07-18T11:57:00.001-07:00

Readers of this blog know that we've been harping for some time on the perils of multi-tasking, especially multi-tasking behind the wheel. If you still think you can text and drive at the same time, maybe this piece in the New York Times will make you think otherwise. There's also an interesting follow-up, which you can find here.

Of Course We Gave Them a Good Rating...

2009-07-15T09:25:00.000-07:00

The nation's biggest public pension fund has now filed suit in California over $1 billion in losses it claims were caused by "wildly inaccurate" credit ratings.

The California pension fund, known as Calpers, says that highly complicated structured investment products that had been given a AAA rating are now worthless.

Calpers contends that in giving these securities their highest credit rating, the three top ratings agencies -- Moody's Investors Service, Standard & Poor's and Fitch -- "made negligent misrepresentation" to the fund.

Moreover, Calpers, in its suit, cites conflicts of interest by the agencies that rated these securities. Not only were they paid by the companies issuing the securities, it says; but they went one step further: All three agencies received lucrative fees for helping to structure the deals -- and then issued ratings on the deals they helped create.

Nice work if you can get it, right?

We'll see what the agencies have to say for themselves (the New York Times said that they either did not respond to request for comment or said they could not comment).

But in the meantime, the folks at Calpers -- and the credit rating agencies -- should bone up on how conflicts, even small ones, bias the judgment of people we rely on for financial advice. To do that, read one of George Loewenstein's papers here.

The Importance of Being Tall

2009-07-13T09:16:00.000-07:00

Here's another of life's fun facts that you can't do anything about: Tall people make more money.

The latest study, in Australia, found that being 6-feet tall raises annual income nearly $1,000 compared to men two inches shorter.

Why?

"Taller people are perceived to be more intelligent and powerful," according to the study, published recently in the Economic Record.

If that is so, then chalk it up to another of implicit associations we make in life. Associations are basically mental shortcuts, (or prejudices, if you like)that help us hack through life's jungle of information. For instance, if we are told a wine is from North Dakota (instead of California) we turn up our noses. If a pain pill is red or black (colors we associate with power) we rate it as being more effective than one colored white.

And now we learn that if someone is tall, we apparently associate their height with brains and brawn.

"Our estimates suggest that if the average man of about 178 centimeters [5 feet 10 inches] gains an additional five centimeters [2 inches] in height, he would be able to earn an extra $950 per year - which is approximately equal to the wage gain from one extra year of labor market experience," said study co-author Andrew Leigh, an economist at the Australian National University.

Associations, of course, can lead us into all sorts of erroneous judgments. A white pain, for instance, pill can be just as effective as a black one. And a tall man can be as dumb as a short one. (Though I must admit, I've never had a good wine from North Dakota.)

But before the tallest among you (at least the tallest Americans among you) start counting your blessings, consider this: For more than two centuries, until World War II, Americans had been the tallest people in the world. But in the 1950s, Americans' heights stabilized. In most of Europe, though, heights have rapidly increased.

What McNamara Learned

2009-07-07T11:11:00.001-07:00

Anyone interested in the study of human error can benefit from reading the powerfully written obituary of Robert McNamara that appears in today’s New York Times.

McNamara was a former secretary of defense and the primary architect of the Vietnam War. President Kennedy once called him the smartest man he ever met. Yet McNamara came to consider the Vietnam War as a colossal mistake – confessing in a 1995 memoir that it was “wrong, terribly wrong.”

It’s instructive to compare McNamara’s view of the Vietnam War with George Bush’s view of the war in Iraq.

The roots of both wars share a striking similarity: an overconfidence in the precision of intelligence. In the case of Vietnam, Congress authorized war after President Johnson contended that American warships had been attacked by North Vietnamese patrol boats in the Gulf of Tonkin in 1964. But, as a 2005 report by National Security Agency showed, the attacked never happened. Instead, American ships had been firing at radar shadows on a dark night. At the time, however, the agency’s experts in signals intelligence told McNamara that the evidence of the attack was iron-clad.

That phrase bears an eerie similarity to a more recent expression of war-time certainty. Remember when George Bush asked then-CIA director George Tenet how confident he was that Saddam Hussein possessed weapons of mass destruction?

“Don’t worry,” Tenet reportedly replied. “It’s a slam-dunk.”

Slam-dunk. Iron-clad. In both case men were certain, and in both cases men were wrong. What’s informative is how McNamara and Bush responded to being wrong. McNamara spent the rest of his life analyzing (and agonizing over) where and why he erred. Bush hasn’t.

McNamara’s conclusions were distilled in Errol Morris’s 2003 documentary, “The Fog of War: Eleven Lessons from the Life of Robert S. McNamara.” The greatest of those lessons, McNamara said, was to know one’s enemy. “We must try to put ourselves inside their skin and look at us through their eyes,” he said.

When McNamara did that, he explained in an oral history, he concluded that we failed to grasp the nature of the threat of communism. “What went wrong was a basic misunderstanding or misevaluation of the threat to our security represented by the North Vietnamese,” he said. “I am certain we exaggerated the threat.”

That line caught my eye because just last week, the Times ran a story saying, essentially, that we had repeated that error in Iraq. In a series of interrogations before his execution, Saddam Hussein told an F.B.I. agent that on the eve of the 2003 American invasion, Iraq was trapped between United Nations orders to demonstrate that it had disarmed and a fear that appearing too weak would invite attack from its powerful neighbor and foe, Iran.

In fact, Saddam so feared Iran that he told the F.B.I. that if United Nations sanctions against his country had been lifted, Iraq would have sought a security agreement with the United States to protect it from Iran. (Italics mine.)

“We did not appreciate how large the threat of Iran loomed in his thinking,” said Charles A. Duelfer, a veteran intelligence official who led the hunt for unconventional weapons in Iraq in 2004. He called the United States’ understanding of Iraq in 2003 “cartoonish.”

The interviews, noted the article, “underscore once again both Mr. Hussein’s striking miscalculation of the risks he faced and the United States’ mistaken estimate of the threat Iraq really posed.”

In his oral history at Berkeley, McNamara predicted as much. “We didn’t understand the Chinese; we didn’t understand the Vietnamese, particularly the North Vietnamese. So the first lesson is to know you opponents.

“I want to suggest to you that we don’t know our potential opponents today.”

One man learned from history; the other has not.

The gift that keeps on taking....

2009-06-30T09:51:00.001-07:00

We've written before about why gift cards are a big mistake (See our Jan. 6 post). Now comes even more evidence.

Today's Wall Street Journal reports that state governments are trying to grab those gift cards that are lying unused in your wallet, dresser drawer or purse.

Why? Big money, of course. Each year, Americans spend about $65 billion on gift cards -- but don't redeem $6.8 billion. In the past, that's meant free money for the big retailers that issue these cards. Home Depot Inc., for instance, reported $37 million in revenue from unredeemed gift cards in 2009. And last year, American Eagle Outfitters Inc. collected more than $12 million.

Now, cash-strapped states want in on the action. They want to consider unredeemed gift cards as "abandoned property" -- like that old safe-deposit box that Uncle Elmer had forgotten about. And, as abandoned property, the gift cards are no longer yours. Which is just one more reason gift cards are a bad idea.

Why we nod off on Fridays

2009-06-22T11:20:00.000-07:00

Notice anything odd about the jury verdict below?

"We, the Jury, find the Defendant Guilty of the offense of POSSESSION OF CRACK COCAINE.
"We, the jury, further find that the amount of crack cocaine WAS in the amount exceeding ten one hundred (100) grams as charged in the indictment."

Neither, apparently, did the jurors. But the defendant did. And if you read closely, you'll notice what he noticed: that the word "ten" in the second sentence is extraneous.

It may seem like a small error, but it was big enough that an Ohio appeals court ruled the defendant's prison sentence should be cut to just one year instead of 10.

The case nicely illustrates how easily we overlook things, relying instead on context to guide our understanding of what we read or see.

"Overlooking" mistakes are so common that researchers have given them their own designation: they are called “proofreader’s errors.” These humdrum errors reveal some interesting quirks about the way human perception works. One is that perception is economical; we notice some things and not others. And what we notice, to a degree, depends on who or what we are. If you're a dentist, you probably notice someone's teeth; if you're a manicurist, you notice hands.

In any event, our attention is not always equally distributed. When reading, for instance, we tend to pay a lot of attention to the beginnings words -- an area that we expect to be rich in cues about what may follow -- and less attention later on. Investors, interestingly, appear to do the same thing: they pay more attention to financial news released at the beginning of a week, but tend to nod off on Fridays.

No See 'Ums

2009-06-16T09:59:00.000-07:00

A new report by the World Health Organization says that traffic accidents worldwide kill an estimated 1.27 million people a year -- and that nearly half of these are pedestrians, cyclists and motorcyclists.

There's a good explanation for this: drivers often don't see them. That's because it is possible to look right at something and still not see all there is to see. This type of accident is so common, in fact, that traffic researchers have a phrase for it: a "looked-but-didn't-see" accident.

For a fantastic illustration of this phenomenon, check out a series of ads by Transport for London. It is using the ads to help make drivers aware of just how hard it can be to see things (like bicyclists) that you aren't looking for. Go ahead and take the test in the ads and see how well you do.

For more information on the phenomeneon, check out the visual cognition lab of Professor Dan Simons. It's great.

The Heart of the Matter

2009-06-15T10:59:00.000-07:00

A new study from Britain shows that more than half of the people surveyed could not accurately locate on a diagram the position of the human heart.

The study, published in the journal BMC Family Practice, showed there has been little improvement in anatomical knowledge since a similar study was performed in the 1970s.

This should come as no surprise, at least to readers of this blog. Overconfidence is a prime (though often well-camouflaged) culprit behind many of our mistakes. We often overestimate the precision of what we (and others) know. And this overestimation can lead to problems, especially when it comes to our health. One study conducted in the U.S. in 2007, for instance, found that doctors overestimate patient literacy, and that the lack of patient knowledge leads to poorer care.

Who -- me, biased? For a lousy $3 million?

2009-06-08T09:44:00.000-07:00

In a closely watched case that illuminates a common (and powerful) bias in human decision-making, the U.S. Supreme Court ruled today that the Constitution can require a state court judge to step aside when he is faced with a case involving a major campaign donor.

The case involves Brent D. Benjamin, now the chief justice of West Virginia's Supreme Court, and the Massey Energy Co., his major campaign contributor.

West Virginia, like most states, allows judges to be elected (instead of being appointed). And Massey's chairman, Don Blankenship, had spent $3 million in the 2004 election attacking an incumbent for the court. The incumbent lost and Benjamin won, which turned out to be a good thing for Massey: Benjamin twice joined 3-2 majorities to throw out a $50 million verdict against Massey, which was involved in a long-running dispute with another coal company.

Writing for the majority of the U.S. Supreme Court, Justice Anthony M. Kennedy noted that no “quid pro quo”had been established between Mr. Blankenship’s campaign contributions (which dwarfed those of other donors in the judicial elections), and Justice Benjamin’s stance in the lawsuit. But there was, he noted, “a serious, objective risk of actual bias.”

This squares with a raft of recent research on bias and gift-giving. As we've pointed out before, even a small gift like a coffee mug can bias the judgment of the person who receives it. The same is obviously true for a $3 million campaign contribution. No explicit quid-pro-quos are necessary; that's because the bias is implicit -- and inherent.

In fact, when judging the conduct of others it can be incredibly hard to be impartial -- even when we are trained to be unbiased. For an illustration of just how hard, see Justin Wolfers's eye-opening look (with Joseph Price) at biased officiating by NBA referees.

The Folly of Texting

2009-05-26T14:16:00.000-07:00

There have been a number of stories in the press lately on the follies of texting while doing almost anything else. One of the more recent involved a Boston trolley crash that injured 20 people. The 24-year-old trolley operator acknowledged he was texting his girlfriend at the time of the crash.

Now comes a story in today's New York Times. It reports that American teenagers sent and received an average if 2,272 text messages per month in the fourth quarter of 2008. This worries psychologists and physicians, who say obsessive texting is leading to anxiety, distraction in school and sleep deprivation. All of which is a grand way to make more errors.

Really, No Gift Is Too Small...

2009-05-19T09:35:00.001-07:00

..At least not when it comes to currying favor among doctors.

A recent article in the Archives of Internal Medicine shows that even small gifts like a coffee mug or pen inscribed with a drug's name can influence the opinion of doctors.

The study shows that students from a medical school where such gifts are allowed had a more favorable attitude toward a cholesterol-lowering drug than did students from a school where such gifts were banned.

(The schools were the University of Pennsylvania, which bans most gifts, samples and meals from drug companies, and the University of Miami, which allows them. The drugs were Lipitor and Zocor.)

The study is important because many doctors (like many of us) believe our judgment can't be bought -- at least not so cheaply.

Asleep at the Wheel

2009-05-14T08:53:00.000-07:00

Pilot fatigue now appears to have been a factor in the crash of Continental Connection Flight 3407, which went down Feb. 12 in Clarence Center, NY, killing 49 people on the plane and one man in a house hit by the plane.

Investigators have determined that the plane’s pilot, Marvin Renslow, slept in the Newark Airport crew lounge – against the policy of the flight’s operator, Colgan Air.

The plane’s co-pilot, First Officer Rebecca Shaw, commuted through the night for Seattle, catching rides on connecting Fed Ex flights to get to Newark, where Flight 3407 originated.

The lack of sleep is a well-documented cause of human error. Even moderate sleep deprivation, for instance, can cause brain impairment equivalent to driving drunk. And with increasing fatigue, as with increasing intoxication, people demonstrate a greater willingness to take risks – which is probably not what you want when those people are flying an airplane or wielding a scalpel or doing any of 1,000 other jobs. Yet this is exactly what happens.

Between 2003 and 2007, for instance, there were at least half a dozen cases in which pilots in the U.S. fell asleep – mid-flight! In one case, the pilot and the co-pilot fell asleep while descending toward Dulles International Airport near Washington D.C. In another, Frontier Airlines acknowledged that two if its pilots fell asleep on a 2004 red-eye flight from Baltimore to Denver. Fortunately, one of the pilots woke up after “frantic calls” from a controller.

There are staggering numbers of sleep-deprived people out there (you may even be one of them). At last count, 42 million prescriptions for sleeping pills were filled in the U.S.; that’s about one for every seven Americans, a number that has increased 60% increase over the last five years.

People are so sedated that the federal government has begun to warn of a new peril: sleep-driving, which occurs when people drive while under the influence of sleeping pill. They also sleep-eat; people have reported ingesting buttered cigarettes or waking up gasping for breath with a mouth full of peanut butter, a particular sleep-eating favorite.

Life Isn't One Thing After the Other...

2009-05-11T11:00:00.000-07:00

It is, as I believe Gertrude Stein once said, the same damn thing over and over again.

This is true of mistakes as well. It’s not so much the new mistake that bothers us. What drives us crazy is that we make the same mistake over and over again.

Why? The answer has to do with feedback.

What’s feedback? Basically, it’s a signal. Feedback sends back to the user (that's us) information about what action has been done and what result has been accomplished.

Feedback is a well-known concept in the science of information and control theory; it’s why phones have dial tones and make those little beeps when you push the buttons – the feedback lets us know whether we’ve done something correctly.

But in real life, feedback isn’t always as clear as a dial tone. Often, we distort feedback because we don’t like the signal we get. Instead, we tell ourselves little white lies.

A good example involves failing to lose weight. Say the first of the year rolls around and you resolve, once again, to get in shape. So you join a gym and pay up for an annual membership. But (and research has shown this) you will probably end up going to the gym only about half as often as you expect you’ll go.

Result: at the end of the year you still won’t be in shape – and you will have overpaid for you gym membership. So you will have made two mistakes instead of one.

Why?

Maybe you can’t bear to admit to yourself the truth: that you really are the undisciplined, lazy, slob your third-ex-boyfriend-in-a-year said you were. Because if he was right about that, then maybe he was right about all those other things he said. And if he was right about all those things then that means even more years in therapy. And you just finished paying off the therapist’s bills – which is why you had the money to join the gym in the first place.

So what do you do? You alter the feedback. You tell yourself a little white lie: “I didn’t go to the gym because I had to finish those projects at work.” Or, “I didn’t go because I had to take care of the kids.”

In any event, you tell yourself something more palatable. But when New Year’s rolls around next year, you set yourself up for the same mistake -- because you haven’t been honest about the cause in the first place.

My Way

2009-04-16T10:54:00.000-07:00

A poll published Thursday in Britain ranked the most popular songs played at funeral services.

Any guess what No. 1 was?

Yep: “My Way,” by Frank Sinatra.

In one sense, this is no surprise. We all like to do things our way. That’s why we hate reading (not to mention following) instructions: we’d much rather wing it. But this often leads to mistakes, not to mention frustration.

A few years ago, for instance, Subaru of America began to notice a rise in consumer complaints about the quality of its cars. When company executives looked into the situation, though, they found that the problem wasn’t with the cars; it was with the owners. They didn’t understand how the car worked…because they hadn’t read the manual! In fact, 1 out of 5 calls to Subaru’s call center involved a question answered in the owner’s manual.

The Subaru example isn’t unusual. Despite decades of public service advertisements stressing the importance of car seats (they can cut the risk of a child’s death from an auto accident by 71%), most car seats are still installed incorrectly. One recent federal study pegged the rate of “critical misuse” at 73% -- or nearly three out of every four.

Why would parents habitually make such a mistake?

“They can’t follow all the instructions,” says Larry Decina, the lead investigator on the car seat study. “Go to your car’s owner’s manual tonight. Look how many pages it is for car seat instructions…It’s like 17 pages. You think people are reading that? Maybe mommy looks at it. You think daddy does?”

No. He just does things his way.

The Power of Regret

2009-03-06T10:25:00.000-08:00

If you saw Paul Krugman's column today, he took the Obama administration to task for its inaction on dealing with “zombie” banks – those so badly wounded they resemble the walking dead.

The penchant for inaction is not surprising. If we are going to err at something, we would rather err by failing to act. That’s because we tend to view inaction as a passive act – we didn’t do anything. And since we didn’t do anything, we feel less responsible for the consequences that follow.

This tendency was illustrated in a series of experiments conducted by NYU professor Justin Kruger and his colleagues. They looked at the test-taking practices of more than 1,600 college students. Not surprisingly, they found what others have found: students who changed their answers usually improved their score. In fact, changes from wrong to right outnumbered changes from right to wrong by margin of 2-to-1.

But more important is what the students revealed in follow-up interviews. The prospect of changing a right answer to a wrong one filled them with much more regret than the prospect of failing to change a wrong answer to a right one. In short, doing nothing was less regrettable than doing something -- even though, in both cases, they’d end up with the wrong answer.

Kruger also found that regret altered the students’ memories. When asked how often they had switched their answer and got it wrong, they overestimated. When asked how often they stuck with their first answer and got the problem wrong, they underestimated. Bottom line: the students remembered that sticking with the first answer as being a better strategy than it actually was.

“The paradox is even though the actual outcome of your answer-changing suggests that you should be doing more of it,” he said, “your memories of it suggest the very opposite.”

That’s the power of regret -- which, if Krugman is right, is an emotion we'll be feeling more of.

Only $500k?

2009-02-04T11:31:00.000-08:00

That’s the cap on compensation that the Obama administration wants to impose on top executives whose companies get big bailouts from the government. No doubt, some will say this is a mistake – that these companies won’t be able to attract and retain talented workers without paying the enormous bonuses of the past.

Quite a few studies in recent years have analyzed the way financial incentives affect human behavior, at least the kinds of human behavior that can be observed in a lab. The most common result from these experiments is that incentives do not affect average performance. There are, of course, exceptions. On mundane tasks, like filing or other clerical work, money does make a difference. Money will also induce people to endure pain. In one experiment, for instance, students were asked to keep their hands submerged in a tank of ice water for as long as possible. Those who got paid kept their hands submerged nearly 3 times longer, on average, than those who weren’t.

But most of us aren’t interested in enduring more pain -- or more mundane tasks. Neither are economists. On the kinds of sophisticated tasks that economists are most interested in, like trading in markets or choosing among gambles, the overwhelming finding is that increased incentives do not change average behavior substantively. Generally, what incentives do is prolong deliberation or attention to a problem. People who are offered them will work harder on a given problem, (in one experiment, their pupils actually grew larger) though they will not necessarily work any smarter. Typically, they will pound away at whatever the prevailing strategy is rather than coming up with a new one -- and a new one is clearly what we need.

You Can Say That Again (But It Won't Be Verbatim)

2009-01-21T09:43:00.000-08:00

One of the few comedic moments from yesterday's inaugural was watching Barack Obama and Chief Justice John Roberts muff the words to presidential oath of office.

Remembering something verbatim, it turns out, is very hard to do - even if it’s something you’ve recited often and think you know by heart. Take The Star-Spangled Banner, for instance. Like the oath of office, it's short -- just 81 words (the oath has 35 words). But how many of them do you know?

Years ago, a group of undergraduates was asked just this question. They remembered, on average, just 32 words of our National Anthem. Even professional singers muff the words to the Anthem.

Why do we remember so few? In part, because our memory is economical; it weeds out all sorts of things it thinks are unimportant and leaves us with the gist of the experience but not the entire experience.

This was demonstrated decades ago by the renowned Cambridge psychologist Sir Frederic Bartlett. Bartlett asked people to read a short story and then try to recall as much of it as they could. But when his subjects attempted to recall the story, it underwent significant changes. First, it was invariably shortened, usually by half. Second, details were cut, changed or even made up. Third, the language was altered in subtle but significant ways. Odd words were turned into more conventional ones, and the tone generally became more conversational.

In short, they remembered a boiled-down version, not a verbatim one.

Little Things Mean a Lot

2009-01-15T14:00:00.000-08:00

If you want to make fewer mistakes, don’t sweat the big stuff. Instead, focus on the little things.

One example: checklists. You probably make one of these every time you go to the grocery store – and for good reason: they work. You write down “loaf of bread” and you don’t forget to buy a loaf of bread.

Now there’s startling new evidence that the same approach that works for you in the grocery store works for doctors in the operating room. An article in the New England Journal of Medicine shows that basic checklists cut the rate of surgical deaths in half. Half!

The checklist had 19 items, some so basic as asking the patient his name so you can make sure you have the right patient. It was tested in 2007-2008 in eight hospitals in eight cities around the world, from Seattle to London to Manila.

Before the checklist was introduced, 1.5% of patients in a comparison group died within 30 days of surgery at the eight hospitals; afterward, the rate dropped to 0.8% -- a 47% decrease.

That’s the power of little things.

Got a gift card for Christmas? Too bad.

2009-01-06T11:06:00.000-08:00

Gift cards are the No. 1 gift choice these days: two-thirds of Americans say they plan to buy one. But nobody uses them (well, almost nobody). On average, we each have between three and four gift cards lying unused in wallets, purses and dresser drawers. And these add up: each year, Americans lose about $8 billion through unredeemed gift cards.

That's bad for us -- but great for the companies that issue them. Not long ago, Limited Brands, parent company of the Victoria's Secret chain of lingerie stores, reported a quarterly pretax gain on unused gift cards of $47.8 million, or 8 cents a share (talk about a panty raid!). And they're not alone. Big retailers like Target, Best Buy and Home Depot also make a killing on the cards. One mall owner even allegedly charged fees on unused gift cards, so that by the time shoppers got around to using the card, it was worth less than they expected.

Here's where the mistake comes in: when it comes to predicting future behavior, we think we (and others) will act more virtuously than we end up acting. This behavior is so predictable that researchers have a name for it: projection bias.

There's lots of research demonstrating this, as well as much real-world experience (Busted New Year's resolutions, anyone?). One long-term study tracked high school students who smoked cigarettes. Only 15% of light smokers (less than one cigarette per day) thought they would still be smoking in five years -- but, five years later, 43% of them still were. Researchers have found similar results when it comes to the food we eat and the movies we watch: in the future we think we'll eat healthier food and watch high-brow movies. But today we end up eating junk food and watching trashy movies.

MISTAKE DU JOUR

2008-12-14T15:51:00.000-08:00

Dec. 16 – Bernie Madoff With A Lot of Money – But How?

That’s the question on Wall Street these days as investors (not to mention federal prosecutors) try to figure out how so many supposedly smart people were duped out of so many billions of dollars.

One clue comes from William Goetzmann, a finance professor at Yale whose work was recently highlighted in The Wall Street Journal. Goetzmann found that hedge funds disclosing legal or regulatory problems and conflicts of interest ended up with lower future performance. But – and this is an important but – the disclosure of these risks had no impact on how much money flowed into the hedge funds. No impact! In other words, investors were getting useful information – they just weren’t paying attention to it.

Why would people make such a mistake? In part, because we don’t know how much to discount for conflicts of interest.

“Suppose you are a casual investor and you find out that IBM is getting consulting services from its auditor,” says George Loewenstein, a professor at Carnegie Mellon University in Pittsburgh who has studied conflicts of interest. “Or suppose your doctor recommends an X-ray, and then says he has an interest in the X-ray facility. In neither of those cases would you have a clue what to do. Would you not go get the X-ray? Is IBM worth half as much? 10 percent less? 5% less?”

Usually, he says, people don’t know what to do with the information.

“So what they do is ignore it.”

Which, as it often turns out, is a mistake.

For more on Loewenstein’s research, look here.