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50 Shades of Stanford: David Downs on lies, bias and bullwhips

We’ve had a series of classes on neuro-science and a new(ish) area of study called ‘neuro-economics’, looking at how the human brain makes decisions, processes information and is ultimately biased. To prove it in a simple way, do a few exercises – first, write down the last 3 digits of your phone number on a piece of paper, then put a ‘1’ in front of it. (eg, mine would be 1967)

Now, take a look at this picture below – which of the tables, A or B is more square?

Now, write down on same the bit of paper what year you think the Taj Mahal was completed. No Googling.

So looking back at those tables – unless you measured, you are likely to have written ‘B’ as the answer – but you’d be wrong. Both tables are exactly the same size. If you don’t believe me, measure them, or watch this.

And the Taj Mahal?  It’s highly likely you wrote down a year that is close to (within maybe 100) of the 1-plus your phone number. 

The table thing is a simple optical illusion (albeit a fun one), but the Taj Mahal thing is much more insidious – it’s a demonstration of an effect called ‘anchoring’. When you wrote down 1 in front of your phone number, your mind automatically read that as a date. Then when you were asked the question about the Taj, you subconsciously started from that ‘anchor’ date, and likely didn’t move too far. 

It’s spooky, but one simple demonstration of the types of biases and unconscious decisions you make all the time. There has been a lot of work in this area over the last 5 to 10 years, and the science is starting to become well understood – unequivocally, humans are subject to a large number of unconscious biases and errors. We are poor at estimation, terrible at statistics, and constantly looking to ‘logically’ justify the subconscious decisions we have already made.

Key takeaway from the professors – take more time in important decision making, realise you are probably biased and get external advice if need be. They recommend Stanford professors but then they are probably a little biased…

In another class, the professor brought a whip today. No, it wasn’t some sort of ‘50 shades of Stanford’, but a visual demonstration of a supply chain phenomenon called ‘the Bullwhip effect’. It’s about how errors multiply along a supply chain, but more interestingly it involved people plucked ‘randomly’ from the class trying to crack the whip in front of the whole team. Guess who got picked again? Not sure what I am doing wrong here, but the good news is that no-one lost an eye.

In other news, it was great to see a large group of NZ businesses here last week for a five day course – the Primary Sector learning how to keep going up the value chain. Highlight of having them here was the haka we all did for the international audience at our Friday night party (which the Kiwis crashed). It went down really well, and I’ve been fielding lots of requests to teach people ‘that war dance you did’. Our culture is such a unique value proposition for New Zealand internationally; we need to leverage it more.

Exercise Update – last four days, five hours. This blog is working, I nearly slept in the morning but then my numbers would have been pretty poor. Damn you public humiliation!

Weight update – +1.1kg since arriving. I think the scales are broken.

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