Rotten economy? Not if you’re in the business of radically overhauling American government. Between the Obama Administration and Congress, the assembly line for Big Ideas is running triple shifts, cranking out stimulus plans, bank-rescue plans, foreclosure-prevention plans, health-care-reform plans, alternative-energy plans, auto-industry-reorganization plans, climate-protection plans, Afghanistan-war plans, Pentagon-spending plans — and that’s just the first 100 days.
Lathing the parts for all these new plans and welding them together is a bleary-eyed workforce of card-carrying Smart People. They come from the best universities and think tanks. One Cabinet member, Secretary of Energy Steven Chu, has a Nobel Prize in physics.
But the thing to remember about smart people is how dumb they can be. Thousands, maybe millions, of IQ points went into creating a market for magical mortgage bonds that could only go up in value. Whoops!
The sages of the U.S. Supreme Court have, over the years, determined that segregating the races is a way of treating them equally and that forced sterilization to improve the gene pool is a swell idea. Generations of doctors bought into Freud’s theories of mental illness. Eminent military historian John Keegan traces the catastrophic stupidity of World War I to the fact that European nations began training their smartest officers to make strategic plans. Eventually, they made such fine, lean plans that, like concentrated ozone, they exploded on contact.
“After researching more than 750 major business failures in great depth, we came to the conclusion that humans are wired for poor decision-making,” says Chunka Mui, a co-author of Billion-Dollar Lessons. “Ego, sunk costs, emotions, self-interest, etc., lead to blind spots. The not-so-intelligent have the same issues, it’s just that the stakes are lower.”
Mui’s excavations of ruined business plans led him to conclude that a wise organization vigorously questions its own clever ideas; dissent is encouraged, and skepticism is built in. As luck would have it, that’s precisely the kind of operation the Founders created with their slow-moving clockwork of checks and balances. But in times like these — periods of crisis and one-party rule — skepticism and dissent can seem unpatriotic, and the flawed ideas of smart people can easily get out of hand.
Examples from Socrates to Sherlock Holmes teach us from an early age that smart people master their emotions and suffer no blind spots. Classic economic theory extends this fallacy, says Duke University’s Dan Ariely, by maintaining that people and institutions rationally “weigh the costs and benefits of every decision in order to optimize the outcome.”
Increasingly, however, science is showing that human beings, regardless of their intelligence, are prone to misconstrue and misperceive. We contradict ourselves. We tend to focus on facts that match our expectations and underrate possibilities that might derail our intentions. We’re sentimental. We’re biased. We’re influenced by others. And intelligence offers no immunity to these baked-in flaws.
Perhaps the most influential work in this field was done by Daniel Kahneman and the late Amos Tversky in the 1970s and ’80s. The partners developed a number of experiments that proved even smart people will arrive at wrong answers to fairly simple questions, depending on how information is presented to them. In one example, they told test subjects about a woman named Linda, who “is 31 years old, single, outspoken, and very bright.” They added that Linda “majored in philosophy,” “was deeply concerned with issues of discrimination” and “participated in anti-nuclear demonstrations.”
Which was more likely, they asked — that “Linda is a bank teller” or that “Linda is a bank teller and is active in the feminist movement.” Overwhelmingly, subjects chose the second answer, even though simple logic shows that each additional fact makes the answer less likely to be true.
In another of their experiments, the scientists showed how the framing of a question can produce irrational answers. They imagined an outbreak of disease that could kill 600 people. Subjects could choose a response that would save 200 lives or a program with a one-third chance of saving everyone and a two-thirds chance of saving no one. Overwhelmingly, subjects chose the 200 sure things. Then the same people were given the same choice but this time framed in terms of 400 certain deaths. Most respondents changed their answers, even though the basic facts were identical.
In short, decisions aren’t based on brains alone. They are determined, as Kahneman and Tversky put it, “partly by the formulation of the problem and partly by the norms, habits, and personal characteristics of the decision maker.”
As President Obama deploys his many czars and task forces, he should remember that no amount of IQ can cure the human condition. Like Republicans, Democrats are prone to overemphasize their favorite facts and theories, to gloss over contradictory data, to skew their analysis to match their values. That doesn’t make them dumb people or bad people. It just makes them people.
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