Jumping to conclusions, Malcom Gladwell edition

By Felix Salmon
July 24, 2012
Too Big To Fail, Moe Tkacik picked up on one particular anecdote: that Joe Gregory, who "loved being the in-house philosopher-king" at Lehman Brothers, was prone to handing out copies of Malcom Gladwell's Blink to employees, and "had even hired the author to lecture employees on trusting their instincts when making difficult decisions".

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Back in 2009, when Andrew Ross Sorkin wrote Too Big To Fail, Moe Tkacik picked up on one particular anecdote: that Joe Gregory, who “loved being the in-house philosopher-king” at Lehman Brothers, was prone to handing out copies of Malcom Gladwell’s Blink to employees, and “had even hired the author to lecture employees on trusting their instincts when making difficult decisions”. Then Joe Weisenthal, reading Tkacik’s post, immediately reblogged it under the very TBI headline “GUILTY: Malcolm Gladwell Caused Lehman To Fail”.

Now, in a classic case of history repeating itself, we find a new book — this time Frank Partnoy’s Waitreprising the same Gladwell-Lehman story.* Indeed, it’s in some ways the whole reason that Wait was written. Here’s Partnoy talking to Smithsonian’s Megan Gambino:

What made you want to take a closer look at the timing of decisions?

I interviewed a number of former senior executives at Lehman Brothers and discovered a remarkable story. Lehman Brothers had arranged for a decision-making class in the fall of 2005 for its senior executives. It brought four dozen executives to the Palace Hotel on Madison Avenue and brought in leading decision researchers, including Max Bazerman from Harvard and Mahzarin Banaji, a well-known psychologist. For the capstone lecture, they brought in Malcolm Gladwell, who had just published Blink, a book that speaks to the benefits of making instantaneous decisions and that Gladwell sums up as “a book about those first two seconds.” Lehman’s president Joe Gregory embraced this notion of going with your gut and deciding quickly, and he passed copies of Blink out on the trading floor.

The executives took this class and then hurriedly marched back to their headquarters and proceeded to make the worst snap decisions in the history of financial markets. I wanted to explore what was wrong with that lesson and to create something that would be the course that Wall Street should have taken and hopefully will take.

This time, it was Andrew Sullivan filling the role formerly played by Joe Weisenthal. His headline in The Daily Beast: “Did Malcolm Gladwell Cause The Recession?”

After seeing this all play out twice, I thought it was maybe time to ask Malcom Gladwell whether he caused Lehman to fail. Alternatively, did he merely cause the greatest recession in living memory? He replied:

First, Blink was not a book about the benefits of making instantaneous decisions. It was a book examining the power of instantaneous decisions–and a good half of the book (the last half) is devoted to all the ways that snap judgements can go awry. (The last two chapters, for example, are about how gut reactions caused the Diallo shooting and how gut reactions resulted in women being discriminated against in orchestras). The talk I gave to Lehman was along those lines: it was a talk, arising out of the book, about the “fragility” of gut decisions–and about how if they are to be useful they have to be defended against bias and corruption. Of the many journalists who have reported on that talk, you are the first to actually ask me what I spoke about. The others, I suppose, just made an instantaneous decision about what I must have said.

Put aside the lesson about media memes, and what you have here is a classic case of arrogance trumping knowledge. Check out the wonderful Wikipedia list of cognitive biases, and you’ll find dozens of reasons why it’s quite possibly a very bad idea to trust your gut. But people like Joe Gregory, no matter how much they know about such things, and no matter how astutely they can recognize them in others, still insist that they are very good at overcoming such biases themselves.

In reality, of course, they’re not. If you make decisions quickly, you will make bad decisions a lot of the time, no matter how many times you read Gladwell’s book. Grown-ups think about important decisions, and take time over them. That’s certainly the lesson of Portnoy’s book. But, it turns out, that’s exactly what Gladwell told Lehman, too.

Update: Portnoy emails to clarify that the Gladwell-Lehman story is not actually in Wait, although he was indeed inspired by it. He also writes:

Your last paragraph is dead on.  I’ve always described WAIT as a “friendly amendment” to BLINK, though I guess it’s inevitable that some people will misread (or not read) my book in the same way some misread Gladwell’s.

Comments
16 comments so far

1. Yes this causal claim is patently ridiculous.
2. However, I am not at all convinced that decisions at the CEO level were much more thoroughly vetted than the anecdote suggests, so
3. Slow news day?

Posted by Foppe | Report as abusive

Q.v. Daniel Kahneman, Thinking Fast and Slow.

QED.

Posted by EpicureanDeal | Report as abusive

When Lehman execs answered the question, “Is it wise for any investment bank to be levered at over 30 to 1?”, I bet the 2 second answer of those who had lived through a couple market cycles would have been “no.” A bunch of complicated quantitative analysis of correlations between assets, VaR, etc. convinced them otherwise, however.

Posted by realist50 | Report as abusive

Perhaps the recession was caused by people misunderstanding Gladwell, then.

Posted by dWj | Report as abusive

IMO this piece demonstrates why FS is the best in the business.

On the point of it, acting on impulsive thoughts – what a ridiculous thing to advocate. Rather than casting Gladwell as the causative factor, seems he is better thought of as a ‘canary in the coal mine’. That LB’s top rabbis were foolish enough to seek operational counsel from people who have never run businesses or had any executive experience is IMO the fact that both condemns and has predictive value.

Posted by MrRFox | Report as abusive

hrrrrm. The book was called “Blink”, not “Think”, and “the power of instantaneous decisions” isn’t *very* different from “the benefits of instantaneous decisions”. TBH, the fact that Gladwell sees a difference between those two obviously synonymous phrases, and sees “the power of” as a meaningful construction which allows him all the marketing benefit of “the benefits of” with none of the reputational risk, is a bit of a microcosm of what’s wrong with Gladwell.

There is also potentially a bit of wishful thinking here. I dare say that if I’d given a lecture to a group of people, and then they went off and did something disastrously stupid, I would probably, when asked five years later, recall myself as more or less having told them not to do that stupid thing. I would suggest that Malcolm Gladwell could write a book about “The Power Of Selectively Rewriting History Into Convenient Anecdotes”, but that’s kind of a subtext in all of them.

Posted by dsquared | Report as abusive

Nice slip Felix–from Partnoy to Portnoy (and his famous complaint) in two sentences: “Now, in a classic case of history repeating itself, we find a new book — this time Frank Partnoy’s Wait — reprising the same Gladwell-Lehman story. Indeed, it’s in some ways the whole reason that Wait was written. Here’s Portnoy talking to Smithsonian’s Megan Gambino…”

Posted by JustJustin | Report as abusive

“it turns out, that’s exactly what Gladwell told Lehman”

You mean, it turns out that post hoc that’s exactly how Gladwell claims he should have been interpreted. Brilliant idea. Why not just assume that whatever Dick Fuld claims about they way he ran Lehman must be the absolute literal unvarnished truth?

Posted by Greycap | Report as abusive

Actually dsquared, I think you are making my point for me, aren’t you? People drew conclusions about my speech to Lehman without having any idea about what I said to Lehman. And now you are drawing conclusions about Blink, based, apparently, on its title and subtitle without having any idea what the book actually says. If you want a copy, by the way, I’d be delighted to send you one.

The other interesting point here is that Joe Gregory also invited Mahzarin Banaji to the conference. Banaji, whose work features prominently in Blink, is someone who has spent her career examining the mistakes and biases inherent in snap judgments. If Gregory was so smitten by his gut instinct, why did he invite so many people who weren’t smitten by gut instincts? The conference’s approach to snap judgements was a good deal more nuanced that people who weren’t there seemed to think it was.

Posted by malcolmgladwell | Report as abusive

What difference does it make what specifically Gladwell did or didn’t say to LB’s crew? He’s an entertainer masquerading in his act as someone who knows something about business/finance. Going to him for any kind of management counsel is like going to Hugh Laurie (Dr. House) for medial advice.

Is it Gladwell’s fault that allegedly intelligent people listen to him (and pay him) as though he actually knew what he was talking about?

Posted by MrRFox | Report as abusive

Anyone who read Gladwell’s book would understand that it was NOT advocating gut decisions. It analysed how they went right (using an art expert who saw and ancient Greek statue and, against all other expert opinions, knew it was a fake because it was “just not right”; and the Amadou Diallo case, where everything an innocent man did convinced the cops that he was a vicious rapist carrying a gun.

Posted by B-Rob | Report as abusive

Malcolm Gladwell is a real person, researcher, author and yes, something of a self-promoter – but well worth reading. He’s not a fictional TV character, so why demean him with that comparison?

“Outliers” was much more than a long answer to the old “how do I get to Carnegie Hall” question. It made me as a parent try to open my eyes to new opportunities hidden close to home, and to install the desire to increase expertise and to practice skills.

On topic – “Blink” was an insight into the merits and pitfalls of snap judgments. The author’s discovery of his own biases was gripping – we all need to grapple with such lurking preconceptions that play into our instant perceptions of others, as well as habits that can influence us over the course of what seem like more deliberate decisions. I don’t recall now if he discussed the OODA loop ideas of Boyd but he showed in one sense how people in adrenaline-packed situations can spiral themselves out of their own observe-orient-act-do loops (fighter pilots or ‘fast companies’ try to keep the initiative staying inside the other guy’s OODA loop) and then make critical mistakes.

The financial chicanery that led up to the meltdown came at many levels from real estate speculation to the ‘too big to fail’ banks, but the common thread seems to be serial rationalizations justifying bad or unethical decisions, by people who needed their eyes opened to an honest look at what they were doing, and the real effects.

This aspect of the ethical lapse in high finance seems more like the slower, decision-playing-out-over time (as opposed to snap judgment) factors of cultural / habitual bias also discussed in “Blink”, like some of the airliner incidents. If it truly does reflect such ‘workplace culture’ biases operating over more deliberate decisions, it’s a troublesome industry trend.

Posted by Decatur | Report as abusive

make that last post read ‘observe-orient-decide-act’, for the OODA acronym

Posted by Decatur | Report as abusive

“Is it Gladwell’s fault that allegedly intelligent people listen to him (and pay him) as though he actually knew what he was talking about?”

Yes it is if he misrepresents himself as someone who knows what he is talking about. the fact that one is able to find a sucker doesn’t absolve one of running a con.

Posted by chris9059 | Report as abusive

[And now you are drawing conclusions about Blink, based, apparently, on its title and subtitle without having any idea what the book actually says]

I have actually read your book, and frankly resent your insinuation that I haven’t. So thanks for the offer but I already have too many airport hardcovers clogging up my shelves. And none of the points I made depend on anything in your book. They were:

1. That “the power of instantaneous decisions” is synonymous with “the benefits of instantaneous decisions” and that claiming otherwise is a ludicrous attempt to have one’s cake and eat it.

This is plainly true to any native English speaker.

2. That you might be remembering things a bit selectively with respect to how much sage advice you gave Lehmans and how they might be around today if they had only listened to you.

Fair enough I don’t have much evidence for this (other than that it’s a completely natural human thing to do, and your version really does sound too good to be true) but this event postdated “Blink” and therefore can’t possibly be in the book.

3. That you polish anecdotes in order to make them illustrate your pop-science points. Since you have built an incredibly successful career out of doing this and are a millionaire because of it, I am guessing it’s not the bit you were objecting to.

In general I am quite pleased with the phrase “a microcosm of what’s wrong with Gladwell”. IMO, what’s wrong with your books is that they always promise big conclusions and then try to take everything back in a footnote. This way of presenting things (the BIG IDEA on the cover and intro copy, the caveats buried in chapter 10) means that the point is bound to be misunderstood, and the thesis is bound to be massively oversold. And here you are, on an occasion where it looks like one of your big theses has been massively oversold and then misunderstood, trying to take everything back in a footnote.

When I write research, I am obliged, by professional standards and by the Global Research Settlement 2000, to put any significant caveats right next to the statements they qualify, and to write “in my opinion” in any sentence that I can’t back up with audited facts. This means my prose is horrible compared to yours, but it does mean I can’t go out with “BUY” on the cover and then put “of course the company might blow up in a storm of frauds” on page 22.

Posted by dsquared | Report as abusive

I’m expecting to see a ‘Counterparties’ entry like this –

“Malcom Gladwell makes the (rookie) mistake of showing-up in a Felix Salmon thread – Reuters”

Posted by MrRFox | Report as abusive
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