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to use. Welcome to the

0:31

New Books Network. Welcome to

0:34

the New Books Network. I'm your

0:36

host, Megan Cochran. Today I

0:38

welcome Don Moore and Max

0:41

Baserman to discuss their book,

0:43

Decision Leadership, empowering others

0:45

to make better choices. This is the

0:48

second book that they have co-authored

0:50

together. The first was in 2013,

0:52

called Judgment in Managerial Decision Making.

0:54

Don Moore is a professor at the

0:56

Haas School of Business at UC

0:58

Berkeley, where he is the Lorraine

1:00

Tyson Mitchell Chair in Leadership and

1:03

Communication. His research centers on leadership,

1:05

negotiation, overconfidence, that's my favorite thing,

1:07

and decision making. Max Bezerman is

1:09

a professor of business administration at

1:11

the Harvard Business School, as well

1:14

as an author and researcher and

1:16

researcher and researcher. His work focuses

1:18

on negotiation, behavioral economics, and ethics.

1:21

Before we get into the book, I want

1:23

to note for listeners that the

1:25

decision leadership book was originally

1:27

published in 2022 and released as

1:29

a hardcover, and it's being re-released

1:31

in April as a paperback. So

1:33

we could quibble a little bit about

1:35

the definition of new, but to me this

1:38

is an important and in some ways even

1:40

urgent topic, and the book has not been

1:42

discussed yet on the new book's network. So

1:44

I'm going to call it. new to us.

1:47

What I found particularly engaging

1:49

and important about the book is

1:51

that it shifts the criteria for

1:53

good decision, for good leadership, from

1:56

just making good decisions to helping

1:58

others make good decisions. Could you,

2:00

let's start with there, can

2:02

you explain why this is

2:05

so important and what does

2:07

it mean to make a

2:09

good decision? Wow, thanks, thanks

2:11

for inviting us on and

2:13

it is a delight to

2:16

be with you and to

2:18

talk about this book that

2:20

we had so much fun

2:22

writing and that conveys so

2:24

many messages that we feel

2:26

deeply about. It's important because

2:29

what makes leaders effective is

2:31

their ability to empower those

2:33

around them to act effectively,

2:35

choose wisely, and behave consistent

2:37

with their own values in

2:40

order to achieve success the

2:42

way that they define it.

2:44

Our book encourages people at

2:46

all levels of hierarchy and

2:48

in every walk of life

2:51

to think about the ways

2:53

in which they exert influence

2:55

on those around them, the

2:57

ways in which they can

2:59

structure the situation, making it

3:01

easy for others to choose

3:04

wisely and to be more

3:06

effective in their choices and

3:08

behaviors. I would say if

3:10

we, you know, go back

3:12

many decades and we thought

3:15

about it. typical organization. We

3:17

thought of an organization that

3:19

was had people physically doing

3:21

things. That's rarely the case.

3:23

Now most leaders are guiding

3:25

a large number of people

3:28

who are making lots of

3:30

decisions every day and we

3:32

see our leaders as having

3:34

responsibility for a decision factory

3:36

and we think that just

3:39

so much they can do

3:41

so much they can do.

3:43

to help people make wise

3:45

decisions. So let's go into

3:47

that a little bit. So

3:49

as a culture, and I'm

3:52

broadly talking here about Western

3:54

business culture, and I have

3:56

the original sin of an

3:58

NBA myself, so I put

4:00

myself in this in this

4:03

group too, we tend to

4:05

gravitate towards care as man.

4:07

persuasive and inspiring leaders. You

4:09

argue instead here for leaders

4:11

who build systems and processes,

4:14

and you particularly use this

4:16

term decision architecture, that guides

4:18

decisions more naturally and holistically.

4:20

Can you describe what you

4:22

mean by that approach? Sure.

4:24

We contrast that approach with

4:27

the more traditional view of

4:29

charismatic and persuasive leadership, as

4:31

you mentioned, Megan, where a

4:33

leader's job is to change

4:35

hearts and minds. That sounds

4:38

like hard work and evidence

4:40

suggests it is limited in

4:42

its transformative ability. By contrast,

4:44

changing people's behavior by structuring

4:46

their decisions, making defaults sensible,

4:48

and nudging people toward making

4:51

decisions that are in their

4:53

interest, and in the interest

4:55

of the system or the

4:57

people around them. that can

4:59

more powerfully influence behavior by

5:02

changing the situation rather than

5:04

trying to change the minds

5:06

of the people who are

5:08

making those decisions. So it

5:10

winds up a lighter touch

5:12

form of leadership in which

5:15

leaders are thinking about the

5:17

systems in which other people

5:19

operate, designing the default, designing...

5:21

the options from which people

5:23

choose rather than preaching to

5:26

them or telling them what

5:28

to do? All of what

5:30

God just said I would

5:32

say is what we encourage

5:34

doing it based on evidence

5:36

that's supported by research. I

5:39

think that the the the

5:41

structure of leadership that we're

5:43

outlining we think has a

5:45

much stronger empirical base than

5:47

many others. And I want

5:50

to come back... a little

5:52

bit later to this idea

5:54

of the power of the

5:56

situation. So I want to

5:58

put that a little bit

6:01

on ice for one minute

6:03

and we'll come back. I

6:05

love that there was a

6:07

chapter, a whole chapter called

6:09

guts versus brains and I'd

6:11

love it if you could

6:14

give us a little bit

6:16

of what you mean by

6:18

that. Sure, in that chapter

6:20

we are critical of theories

6:22

of leadership that posit some

6:25

sort of inherent ability that

6:27

some people are born with

6:29

that gives them leadership good

6:31

leadership instincts and the ability

6:33

to rely on their intuitions

6:35

to guide them to make

6:38

the right call in every

6:40

instance. We think it's dangerous

6:42

that people as they rise

6:44

in a hierarchy are inclined

6:46

to attribute to their own

6:49

brilliance and good intuitions, their

6:51

successes. I got here because

6:53

I'm so wonderful and my

6:55

gut always leads me in

6:57

the right direction. Nope. All

6:59

of us in leadership positions

7:02

ought to acknowledge the role

7:04

of happenstance and good fortune

7:06

in helping us get where

7:08

we are and be on

7:10

guard against our own propensity

7:13

to let our successes contribute

7:15

to our overconfident. reliance on

7:17

our own intuitive judgments. Instead,

7:19

as we rise in the

7:21

hierarchy, it becomes more and

7:23

more important for us to

7:26

open our minds to criticism,

7:28

open our hearts to hearing

7:30

the perspectives of those who

7:32

disagree with us, and considering

7:34

the possibility that we aren't

7:37

doing it right, that we

7:39

deserve to be corrected, and

7:41

that we deserve input from

7:43

others. So what that means

7:45

is that instead of relying...

7:48

on our gut intuitions that

7:50

instead we're thinking rigorously about

7:52

our decisions, relying as Max

7:54

said on the best evidence

7:56

available, when we don't have

7:58

that evidence already conducting experiments

8:01

or gathering evidence that helps

8:03

us make better evidence-based decisions,

8:05

and trying to get the

8:07

best of what our brains,

8:09

sometimes in dialogue with our

8:12

hearts, can tell us about

8:14

what we ought to do.

8:16

In that factor that you

8:18

mentioned, Megan, goes against the

8:20

grain of multiple best-selling books

8:22

where the authors want to

8:25

tell managers, you have great

8:27

intuition, trust it. And we

8:29

argue, we hope persuasively, that

8:31

the advice to trust your

8:33

gut is not very well

8:36

supported. And when we say

8:38

that, it's not that... Megan,

8:40

when I tell you your

8:42

intuition is limited, we're not

8:44

telling you that your inferior

8:46

in comparison to some external

8:49

benchmark. What we're saying is

8:51

that if we can help

8:53

you think systematically, on average,

8:55

you will make far, far

8:57

better decisions than if you

9:00

go with your intuitive response

9:02

to the situation. And unfortunately,

9:04

the authors who want to...

9:06

We believe falsely convey that

9:08

you can trust your God.

9:11

Have a large number of

9:13

managers out there who are

9:15

very happy to hear that

9:17

message. And what we need

9:19

to convey to them is,

9:21

again, we're not telling you

9:24

a bad intuition. We're just

9:26

telling you that your intuition

9:28

isn't as good as your

9:30

systematic thinking capabilities. Yes. All

9:32

of our intuition is imperfect

9:35

and having a sense of

9:37

where it's likely to lead

9:39

you astray is very helpful

9:41

for overriding those biased impulses

9:43

and doing better. should say,

9:45

I used to work, you

9:48

had examples I loved in

9:50

this section of the book.

9:52

There were some examples of

9:54

Jack Welch, which I was

9:56

giggling about, and then also

9:59

some examples for Netflix. I

10:01

happened to work at Netflix,

10:03

and we used to place

10:05

bets, not necessarily cash bets,

10:07

but sort of big cash

10:09

bets, on how we thought

10:12

the experiments would turn out.

10:14

And there was an interesting

10:16

part of this that dovetails

10:18

with the stories that you

10:20

tell in the book, which

10:23

is that part of that

10:25

process was for us to

10:27

get more confident, meaning know

10:29

when we were, when we,

10:31

our instincts were right and

10:33

also know when our instincts

10:36

were wrong, but also what

10:38

it did was make us

10:40

feel more in touch with

10:42

the risks of those experiments.

10:44

And so that wasn't the

10:47

example that you chose from

10:49

Netflix, but I thought it...

10:51

It's sort of fit in

10:53

with what you're saying, which

10:55

is it's not that you're

10:58

training yourself to trust your

11:00

gut every time. It's that

11:02

you're learning about when you

11:04

were right and when you

11:06

were wrong. And the fact

11:08

that there's uncertainty out there.

11:11

Correct. And it just isn't

11:13

reasonable for you to get

11:15

all of your predictions right

11:17

in understanding that we're making

11:19

decisions under uncertainty. I think

11:22

it's critical to... developing more

11:24

systematic ways to make more

11:26

good decisions over time. Yeah,

11:28

we had a little trope,

11:30

which I don't know if

11:32

they still do, but it

11:35

was like, if you're if

11:37

you're always right, then your

11:39

tests aren't good. You're just

11:41

testing the wrong thing. Uh-huh.

11:43

I'm a big fan of

11:46

keeping track and keeping score,

11:48

inviting people to be specific

11:50

about their predictions and forecasts

11:52

of how experiments will come

11:54

out. how products will perform

11:56

on the market, what the

11:59

economy is going to do

12:01

in the future, how employees

12:03

will perform once hired, and

12:05

writing down these predictions and

12:07

checking back later. to see

12:10

how the outcomes compare with

12:12

people's forecasts and that leaders

12:14

can help the people who

12:16

work with them better calibrate

12:18

their confidence judgments by helping

12:20

keep track and keep score.

12:23

So let's talk about one

12:25

of the other things that

12:27

you brought up in the

12:29

book, which is for the

12:31

leader of an organization to

12:34

be the investigator in chief.

12:36

What does that mean? look

12:38

to actively search for information

12:40

in places where it might

12:42

turn up. contrary evidence or

12:45

uncomfortable evidence that suggests that

12:47

all is not well or

12:49

that the organization might need

12:51

to rethink its approach. We

12:53

note the temptation for so

12:55

many leaders to turn a

12:58

blind eye to bad news

13:00

and unpleasant facts and that

13:02

ethical leadership demands a willingness

13:04

to investigate those trouble spots.

13:06

and understand the actual consequences

13:09

that their decisions are having.

13:11

So a couple bad kids

13:13

ago, I wrote a book

13:15

called Predictable Surprises with Michael

13:17

Watkins. And part of the

13:19

notion there is a lot

13:22

of the biggest disasters we

13:24

could think of. Leaders had

13:26

lots of hints available, but

13:28

they failed to investigate. And

13:30

there were people around them

13:33

who had the information that

13:35

could have changed. the destiny

13:37

of their company or society

13:39

in the case of 9-11.

13:41

And when leaders fail to

13:43

investigate, they put their organization

13:46

and society at risk. We

13:48

saw an example of that,

13:50

a particularly egregious example in

13:52

the case of the Israeli

13:54

Palestinian recent attacks there where

13:57

there was data there and

13:59

it wasn't investigated and that's

14:01

been coming out. recently, so

14:03

very timely application of that.

14:05

And certainly we play that

14:07

history and do better than

14:10

what happened. Exactly. I found

14:12

the chapter about calibrating confidence

14:14

to be particularly applicable. So

14:16

talk about little about the

14:18

risks of being under or

14:21

overconfident and how you can

14:23

sort of calibrate to find

14:25

the right balance there. So

14:27

I'm going to turn it

14:29

over to have done to

14:32

answer. I like the Dons,

14:34

the author of a book

14:36

called Perfectly Confident, and this

14:38

is truly is, I guess,

14:40

lots of expertise, but this

14:42

is his most, most deep

14:45

expertise is on the topic

14:47

of how to be well

14:49

calibrated. So I'm going to

14:51

just advertise for Don, shut

14:53

up. Thanks for seeing me

14:56

up, Max. Overconfidence and underconfidence

14:58

are both errors. With possibly

15:00

asymmetric consequences, overconfidence leads to

15:02

errors of commission, where we're

15:04

too bullish or optimistic about

15:06

our chances, and we enter

15:09

competitions that we will lose,

15:11

we invest in projects that

15:13

will fail, we say dumb

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American Express. And those are

16:34

often more salient. It's easy

16:36

to point to high profile

16:38

errors that overconfident leaders have

16:40

made, leading their organizations to

16:42

disaster everything from ill-conceived product

16:45

launches and acquisitions to poorly

16:47

designed products and tone deaf

16:49

initiatives. On the flip side,

16:51

underconfidence is also a mistake.

16:54

Underconfidence is more likely to

16:56

lead to errors of omission

16:58

where you decline opportunities that

17:00

would have led to success.

17:03

The imposter syndrome is relevant

17:05

here, circumstances in which we

17:07

think we're not good enough,

17:09

and so we decline opportunities

17:12

that would work out or

17:14

where we would have been

17:16

successful. And both are errors,

17:18

both overconfidence and underconfidence and

17:21

In my book, I enthusiastically

17:23

endorse the strategy of aiming

17:25

to be well calibrated. Believe

17:27

the truth. And then that

17:29

raises the thorny and complicated

17:32

question of, well, what's the

17:34

truth when we're talking about

17:36

a forecast of an uncertain

17:38

future? And I argue emphatically

17:41

for thinking wisely about probabilities

17:43

and expected value that It

17:45

can be perfectly rational and

17:47

well calibrated to take a

17:50

big risk. on a low

17:52

probability but high payoff project,

17:54

where you recognize there's only

17:56

a tiny chance that this

17:59

is actually going to work.

18:01

But if it does, it

18:03

would be amazing. That can

18:05

still be perfectly sensible. And

18:08

there are such risks in

18:10

life. On the other hand,

18:12

being realistic about the upsides

18:14

and downsides of the risks

18:16

that we're taking, when the

18:19

downside includes tragedies that put

18:21

people's lives at risk or...

18:23

put society at risk, then

18:25

more caution is warranted and

18:28

thinking carefully about even low

18:30

probability risks is absolutely necessary.

18:32

I want to come back

18:34

to this idea of a

18:37

decision-making architecture and you bring

18:39

in many different aspects of

18:41

decision science and behavioral economics,

18:43

which I thought were amazing

18:46

and very good, it was

18:48

sort of a very good

18:50

way of getting getting grounded

18:52

in some of those concepts.

18:55

I'd love to go through

18:57

a few of them and

18:59

just talk about how you,

19:01

you know, what is the

19:03

element and then how do

19:06

you, how they can be

19:08

used. So I'd love to

19:10

start with nudges. I think

19:12

people roughly know what a

19:15

nudge is. I mean, if

19:17

you live in New York

19:19

City, everybody knows that a

19:21

nudge is, but if you,

19:24

you know, most people know

19:26

what it is, but what

19:28

does it mean in this

19:30

is in science and behavioral

19:33

economics, and how can the

19:35

leaders use these to create

19:37

that architecture that you're talking

19:39

about? You want to take

19:42

this field? that used to

19:44

be part of psychology and

19:46

seemed to move into the

19:48

world of behavioral economics, where

19:50

we did a phenomenal job

19:53

of understanding the systematic and

19:55

predictable biases that humans make.

19:57

This is particularly important, very

19:59

relevant in our book. And

20:02

it's important that not just

20:04

that people make mistakes, but

20:06

that they're predictable and systematic,

20:08

which means we can predict

20:11

them, we can coach people

20:13

to do better, we can anticipate

20:15

them. And a long time, Dick

20:17

Taylor and Cass Sunstein, who laid

20:20

a book called Nudge, which

20:22

is an important kind of

20:24

next generation book in terms

20:27

of saying, if we know

20:29

how people make systematic and

20:32

predictable errors. We can design

20:34

the environment to increase select

20:37

because they will make both

20:39

better decisions, more ethical decisions,

20:41

decisions that are better for

20:44

the overall environment. So we

20:46

have just lots of examples

20:48

in terms of changing the

20:51

default. So one of their

20:53

classic examples has to do

20:55

with the fact that prior

20:58

to their work, lots of

21:00

people who were offered very

21:02

attractive matching plans on their

21:05

retirement program at work simply

21:07

didn't sign up. And Phelan Sain

21:09

asked us, well, if you're a

21:11

really good organization and you want

21:13

to help your employees, instead of

21:16

making them sign up, why don't

21:18

you just put them in the system

21:20

and allow them to sign

21:22

out? And we find that

21:24

we can get dramatic improvements

21:27

in retirement savings rates. by

21:29

changing what the default looks

21:31

like. So the field kind

21:33

of shifted from simply identifying

21:36

what are the cognitive

21:39

patterns that are interesting

21:41

to describe to saying how

21:43

do we change behavior by

21:46

using this. social science of

21:48

how we make decisions to

21:50

design environments that we can

21:52

predict people are likely to

21:54

make, again, better, more ethical

21:56

and more societyally beneficial decisions.

21:58

And it's kind of a major

22:00

contribution to the literature, but

22:02

also I would say the

22:04

key bridge between going from

22:06

this descriptive research to a

22:08

prescriptive perspective on how to

22:11

make the world better. And

22:13

not long after they wrote

22:15

a book, a group in

22:17

London connected to the British

22:19

government called behavioral insights team,

22:21

sometimes called the Nudge Unit,

22:23

really became masters at putting

22:25

this into practice where they

22:27

would run literally hundreds of

22:29

experiments on how to make

22:31

government work more effectively. And

22:34

part of this movement, which

22:36

may come out of the

22:38

earlier decision literature, is that

22:40

most proponents of the Nudge

22:42

framework. believed in empirical testing.

22:44

That is, we might make

22:46

some inference about how to

22:48

do this, but given that

22:50

we're moving into the field,

22:52

we're moving into a unique

22:55

setting, instead of rolling this

22:57

out on 100 million Americans,

22:59

maybe we can first test

23:01

it on 10,000 and see

23:03

what happens. So this notion

23:05

of using behavioral science, designing

23:07

interventions to make better decisions,

23:09

and testing, became all very

23:11

important in core parts of

23:13

the nudge world. Another concept,

23:16

and we just came up

23:18

a little bit earlier, I

23:20

wanted to come back to

23:22

it, is what you call

23:24

the power of the situation.

23:26

And part of that is

23:28

the debate about whether situations

23:30

or dispositions are more deterministic

23:32

in how people are going

23:34

to behave. So talk a

23:36

little bit about what that

23:39

means and then what you

23:41

learn. Yeah, our consideration of

23:43

this issue reflects a long-standing

23:45

discussion in psychology. between the

23:47

social psychologists and the personality

23:49

psychologists, just to simplify the

23:51

camps here, on what best

23:53

human behavior. Is it that

23:55

there are some people who

23:57

are outgoing and talkative and

24:00

some people who are shy

24:02

introverts and that explains who

24:04

speaks up or who initiates

24:06

conversation with others or are

24:08

there social situations in which

24:10

everybody regardless of how extroverted

24:12

tends to keep to themselves?

24:14

an elevator with strangers, or

24:16

other social situations when everybody,

24:18

no matter how shy and

24:21

introverted, will chat with people

24:23

who they've just met, parties.

24:25

And if you want to

24:27

try to account for the

24:29

variance in behavior, the... You

24:31

can argue about whether the

24:33

glasses have fuller glasses have

24:35

empty if you want to

24:37

give personality a fair shot

24:39

and try to predict how

24:42

people will behave based on

24:44

how they answer personality surveys.

24:46

Max and I come down

24:48

more on the situational side

24:50

of this discussion being persuaded

24:52

by the evidence on the

24:54

power of situations to change

24:56

behavior. That accounts for a

24:58

whole lot of the variants

25:00

that we observe. Personality is

25:02

a real thing. People differ

25:05

and it does influence behavior,

25:07

but more often we observe

25:09

situations as powerful influences and

25:11

when personality matters it's more

25:13

often in interaction with the

25:15

situation. What that means for

25:17

nudging people toward good decisions

25:19

and executing effective decision leadership

25:21

is that as the leader

25:23

you often have an enormous

25:26

amount of power to change

25:28

the situation. One example that

25:30

we use in the book,

25:32

connecting to Max's earlier question

25:34

to your question about Nudges,

25:36

or Max's answer to your

25:38

question about Nudges, is the

25:40

work of Jesse Wisdom at

25:42

Google, where they. tried to

25:44

use simple insights from situational

25:47

effects on behavior to influence,

25:49

say, the way Googleers ate

25:51

in the cafeteria, putting the

25:53

desserts at the back in

25:55

opaque containers, not removing them,

25:57

but just making them less

25:59

tempting and obvious. Google was

26:01

paying for people's food and

26:03

paying for their health care.

26:05

So had a strong incentive

26:07

to help Googleers eat more

26:10

healthfully. And small changes in

26:12

cafeteria and menu design helped

26:14

them support the healthy choices

26:16

of their employees. You talk

26:18

a little bit about, well,

26:20

I'm actually, I'm going to

26:22

go back on myself. So,

26:24

um, You've used a bunch

26:26

of examples about how people

26:28

have used these, but I

26:31

would love for you to

26:33

talk a little bit more

26:35

about a leader influencing like

26:37

their managerial staff to make

26:39

decisions. Can you talk a

26:41

little bit more about some

26:43

of those examples that are

26:45

maybe not obvious for people

26:47

who are actually like in

26:49

a corporate, we're really talking

26:52

about sort of corporate or

26:54

organizational environments. What are some

26:56

of those levers that a

26:58

leader has to use the

27:00

nudges and the power of

27:02

the situation to create that

27:04

framework that you discuss? Yeah,

27:06

so let me go back

27:08

to the behavioral insights team

27:10

in the UK. So basically

27:12

they were appointed for a

27:15

very limited period of time

27:17

by David Cameron in the

27:19

UK government and they were

27:21

charged with producing that you

27:23

can on the government's investment

27:25

in creating the unit. So

27:27

the first place that they

27:29

started was collecting more taxes.

27:31

So if people pay their

27:33

taxes more, people can see

27:36

a relatively clear benefit and

27:38

they got far more than

27:40

a tenfold return on the

27:42

initial. investment. And then all

27:44

of a sudden, lots of

27:46

different government agencies were interested

27:48

in getting their constituents to

27:50

get back to work faster,

27:52

to show up for their

27:54

health care exam, and we

27:57

can go on and on

27:59

and on. And what David

28:01

Halper and the leader of

28:03

the behavioral institute seemed ill

28:05

along with a very talented

28:07

staff was create a different

28:09

norm among leaders within the

28:11

British government. So instead of

28:13

trying, all of a sudden

28:15

instead of trying to sell

28:17

them on will you let

28:20

us run an experiment, they

28:22

had large numbers of people

28:24

coming to them saying we

28:26

need your help to figure

28:28

out how to run an

28:30

experiment. So they changed the

28:32

culture about the idea of

28:34

using psychology, behavior, economics and

28:36

nudges to think systematically about

28:38

what are the changes that

28:41

we can make, that can

28:43

make government more effective. In

28:45

the process, it became phenomenally

28:47

successful. You might recall David

28:49

Cameron was a big fan

28:51

of privatizing. aspects of government

28:53

and one of the things

28:55

that was privatized was the

28:57

behavioral insights team. So they

28:59

went off of making a

29:02

consulting firm one-third owned by

29:04

the British government and basically

29:06

spread their word across the

29:08

world in many ways. Thank

29:10

you. I want to ask

29:12

about another element that I,

29:14

it seems obvious but I

29:16

was impressed by the surprising

29:18

nuance of it and that

29:20

is how leaders can determine

29:22

how to incorporate insights from

29:25

others into their decision-making and

29:27

how they can learn when

29:29

to trust their own judgment.

29:31

When do you incorporate and

29:33

when do you trust? Well,

29:35

I think we tend to

29:37

under-trust the judgment. of others.

29:39

So Don's been part of

29:41

a literature on to what

29:43

degree do we pay attention

29:46

to other people's judgment. So

29:48

if you take a very

29:50

simple context of you estimate

29:52

something and you're told someone

29:54

who has equal talent is

29:56

you, you told their estimate,

29:58

what weight should you put

30:00

on your own judgment? persons,

30:02

what weight should you put

30:04

out of people's judgment? And

30:07

many researchers, including Don, have

30:09

found that we tend to

30:11

overweight our own judgment and

30:13

then underweight the judgment of

30:15

others, and we could perform

30:17

more effectively if we more

30:19

seriously considered their weight. In

30:21

simple version, if you're, if

30:23

the other person knows roughly

30:25

as much as you do,

30:28

averaging the two is going

30:30

to do better than either

30:32

deferring to them, I'm using

30:34

your own judgment. A colleague,

30:36

Duke, Rick Leric, has shown

30:38

basically the wisdom of small

30:40

crowds. So a lot of

30:42

people know the argument of

30:44

the wisdom of crowds, if

30:46

you have a thousand people,

30:48

estimates and surprisingly good, because

30:51

they all have the same

30:53

signal. and the errors are

30:55

both high and low, so

30:57

on average they do pretty

30:59

well, which provides really convincing

31:01

evidence that there's a wisdom

31:03

of small selected crowds. So

31:05

if instead of getting a

31:07

thousand people, you've got five

31:09

smart people within your own

31:12

firm who view the same

31:14

task. If you're making an

31:16

important assessment of what will

31:18

sales be next year or

31:20

what is this claim worth

31:22

in an insurance context, five

31:24

smart people and then averaging

31:26

them is going to do

31:28

remarkably well better than the

31:30

randomly sought person who happens.

31:33

have that task, yet people

31:35

don't use these tolls of

31:37

paying attention to the assessments

31:39

of others as much as

31:41

they should. A few additional

31:43

thoughts on that. I agree

31:45

with everything that Max has

31:47

noted there. Organizations can take

31:49

better advantage of exactly the

31:51

dynamics that Max is talking

31:53

about by aggregating judgments, having

31:56

people. make forecasts or bets,

31:58

and reduce the need for

32:00

meeting to discuss it. I

32:02

think it's pretty common for

32:04

organizations to rely too heavily

32:06

on meetings, where you get

32:08

together to talk about something.

32:10

Just to pick a stylized

32:12

example, the organization has to

32:14

choose path A or path

32:17

B. Which way are we

32:19

going to turn at this

32:21

strategic intersection? so you get

32:23

together to talk about it.

32:25

And too often those discussions

32:27

are dominated by the highest

32:29

paid person in the room

32:31

and there's basically one brain

32:33

in operation and people line

32:35

up behind the boss. You

32:38

have sacrificed the wisdom of

32:40

the crowd by lining everyone

32:42

up behind the boss, and

32:44

turning the crowd into a

32:46

mob, where errors are correlated

32:48

too strongly with the person

32:50

who's ready to assert their

32:52

will, and talk over others.

32:54

Instead, if you elicit independent

32:56

predictions... from a large group

32:58

or maybe a small select

33:01

group as Max suggests, that

33:03

can provide guidance where what

33:05

they're predicting is, okay, well,

33:07

what's going to happen if

33:09

we pick path A? What's

33:11

going to happen if we

33:13

pick path B? Every decision

33:15

depends on a forecast of

33:17

its consequences. And you got

33:19

to pick the right outcome.

33:22

What do we care about

33:24

predicting in path A versus

33:26

path B? But gathering people...

33:28

independent judgments can be very

33:30

helpful. Sometimes that by itself

33:32

will point the way toward

33:34

a clear decision. Sometimes there

33:36

may be issues to be

33:38

worked out by talking about

33:40

those consequences and elaborating on

33:43

the initial guesses that people

33:45

have made. But as a

33:47

rule organizations take too little

33:49

advantage of those sorts of

33:51

prediction markets and rely too

33:53

heavily on meetings for working

33:55

out decisions. I can give

33:57

an interesting example of this.

33:59

So about a decade ago,

34:01

I had the wonderful opportunity

34:03

of working on a consulting

34:06

project with Danny Cunningham, and

34:08

the client was an insurance

34:10

company, and we were doing

34:12

work on helping them make

34:14

better decisions and negotiate claims

34:16

more fairly and more efficiently

34:18

and reducing legal costs. And

34:20

at some point... We were

34:22

invited to a meeting of

34:24

what they called a roundtable,

34:27

and a roundtable was to

34:29

have someone who had a

34:31

large claim, perhaps tens of

34:33

millions of dollars. And before

34:35

they started negotiating over the

34:37

claim, they wanted to make

34:39

sure that they had a

34:41

good assessment of what was

34:43

a fair amount to pay

34:45

on the claim. And we

34:48

thought, well, that's interesting. They're

34:50

going to put people together.

34:52

And we were very much

34:54

thinking... along the lines of

34:56

Don just outlined, well, it's

34:58

quite useful to have, you

35:00

know, a dozen different experts

35:02

independently, it's us to claim.

35:04

And what we immediately saw

35:06

to our horror was that

35:08

the person with the claim

35:11

presented the story in detail

35:13

and then told everybody what

35:15

they thought it was worth

35:17

and then turned around and

35:19

said, what do the rest

35:21

of you think that this

35:23

is worth? Kind of just

35:25

eliminating the whole power. of

35:27

getting advice from others by

35:29

creating that of anchor and

35:32

it wasn't hard to do

35:34

some demonstrations to convince this

35:36

organization that they could make

35:38

some very mild changes in

35:40

what a roundtable look like

35:42

to make it more effective

35:44

following the advice of Don

35:46

Outline for you. Yeah, it's

35:48

really great. This was the

35:50

part of it that I

35:53

found really nuanced and just

35:55

as a side I worked

35:57

in a situation once where

35:59

the... management team that I

36:01

was part of like to

36:03

do what they called getting

36:05

everyone's input. But the way

36:07

that that happened was very

36:09

similar to this where everyone

36:11

went in and everyone was

36:14

trying to guess what the

36:16

decision maker was wanted and

36:18

so then what actually came

36:20

out was not what they

36:22

actually thought, but what they

36:24

thought someone else wanted. And

36:26

so it is very new.

36:28

It's not just about getting

36:30

a bunch of smart people

36:32

in a room. That's really

36:34

not the point. I think

36:37

you make this very clear

36:39

in the book, but I

36:41

love that you are able

36:43

to bring that out here

36:45

in this discussion. It's not

36:47

just a bunch of smart

36:49

people in a room following

36:51

a methodology that allows each

36:53

of their separate opinions and

36:55

biases and insights. to reflect

36:58

individually and then you're putting

37:00

those together afterwards, not guessing.

37:02

And that allows for decision

37:04

leadership. Yes, what's the role

37:06

of the leader there aside

37:08

from setting a structure? What

37:10

do they do that? The

37:12

leader should not be driving

37:14

some political agenda that everybody

37:16

else is trying to guess.

37:19

The leader who wants to

37:21

get good information in order

37:23

to inform wise decisions should

37:25

seek the truth. And if

37:27

they suspect, as they often

37:29

have good reason to suspect,

37:31

that what they say is

37:33

likely to influence others, they

37:35

should want to collect independent

37:37

judgments first. And here we

37:39

might think of the Delphi

37:42

method that the Rand Corporation

37:44

developed, where you first collect

37:46

independent guesses from some group.

37:48

Then maybe you share those

37:50

averages, maybe allow the group

37:52

to update their perspectives, and

37:54

at some point maybe it's

37:56

necessary to get together. If

37:58

you do get together to

38:00

talk, the responsible leader who

38:03

wants to get information out

38:05

of the people who are

38:07

there will start by having

38:09

the... lowest ranked person present

38:11

speak first with the leader

38:13

reserving judgment and holding their

38:15

tongue until everyone else has

38:17

had a chance to weigh

38:19

in such that you don't

38:21

get everyone just complying with

38:24

whatever the leader recommended. Right.

38:26

I want to move on

38:28

a little bit to the

38:30

negotiation some of the negotiation

38:32

pieces that are in here

38:34

and I'm going to start

38:36

and just. ask you to

38:38

talk a little bit about

38:40

the myth of the fixed

38:42

pie mindset and how breaking

38:44

away from that can improve

38:47

negotiations. But then, you know,

38:49

if there's other stuff you

38:51

want to bring in, go

38:53

for it. That's just the

38:55

piece I wanted to make

38:57

sure got covered there. Wow.

38:59

And do I get to

39:01

advertise the fact that I

39:03

just published a new book

39:05

on negotiation called Negotiation the

39:08

Game is Change. And so

39:10

I think I'll take that

39:12

question because I may or

39:14

may not have been the

39:16

person who first use the

39:18

term the mythical Fix Five.

39:20

But the basic idea here

39:22

is that in teaching executive

39:24

programs at Northwestern and now

39:26

at Harvard, one of the

39:29

amazing things that happens is

39:31

that you get sort of

39:33

fascinating executives with, you know,

39:35

successful careers who think that

39:37

they are good negotiators and

39:39

you give them a relatively

39:41

straightforward exercise. where one person

39:43

cares more about one issue

39:45

and another person cares more

39:47

about another issue. And rather

39:49

than trade off, they compromise

39:52

on each issue. And the

39:54

reason that they miss the

39:56

opportunity to trade off the

39:58

two issues isn't because they

40:00

don't want to. They've literally

40:02

never thought about the idea.

40:04

of growing the pie through

40:06

trade-offs across time. And so

40:08

one of the things that

40:10

happens to these executives and

40:13

negotiation training at any good

40:15

business school is that they

40:17

learn to bust the mythical

40:19

fixed pie and we provide

40:21

them techniques for finding gains

40:23

from trade. And it's not

40:25

just uncomplicated business decisions. But

40:27

when Marla and I go

40:29

out to dinner, I'm married

40:31

to Marla for approximately forever.

40:34

Oh, when we go out

40:36

to dinner, sometimes we'll compromise.

40:38

And then over dinner, because

40:40

she'll want kind of fancy

40:42

Northern Italian and I'll want

40:44

a pizza and we'll compromise

40:46

on Southern Italian and over

40:48

dinner, we'll talk about what

40:50

movie to watch after dinner

40:52

and she'll want some artsy

40:54

film and I'll want some

40:57

comedy, so we'll settle on

40:59

a drama. But after we're

41:01

all done, we find that

41:03

Marla cared more about the

41:05

movie choice and I cared

41:07

more about the dinner choice.

41:09

And there was a better

41:11

evening involved by busting the

41:13

mythical Fix Five and finding

41:15

those kinds of tradeoffs. So

41:18

for me, this is such

41:20

a critical topic in negotiation

41:22

because there's literally millions of

41:24

dollars on the ground that

41:26

no one's picking up. because

41:28

they're not finding these trades

41:30

and it permeates all of

41:32

our ongoing negotiation relationships and

41:34

it permeates all of our

41:36

personal relationships where we can

41:39

simply do better if we

41:41

try to maximize the collective

41:43

benefit. But in order to

41:45

do that we need to

41:47

understand that that's even possible

41:49

and it is almost any

41:51

time we're negotiating two or

41:53

more ships. So if I'm

41:55

negotiating with the car dealer

41:57

over a specific car, there

42:00

isn't necessarily room for game.

42:02

for trade, but for the

42:04

important negotiations that your listeners

42:06

are involved in, there's typically

42:08

more going on in finding

42:10

those trades becomes critical to

42:12

finding wise agreements. And the

42:14

term mythical really just highlights

42:16

the fact that people are

42:18

walking around with a bad

42:20

assumption about how to create

42:23

value or negotiation. underscore and

42:25

amplify Max's point by stating

42:27

something implicit in what he

42:29

just said, and that is

42:31

that by making wiser trades

42:33

in negotiation, the parties involved

42:35

create value. They make the

42:37

world better off by helping

42:39

each other achieve more of

42:41

what they care about. And

42:44

that is a powerful analogy

42:46

to the message that we're

42:48

trying to deliver in this

42:50

book. They're better. and worse

42:52

ways to support others' decision-making.

42:54

And we're seeking approaches that

42:56

leave people, organizations, and societies

42:58

in aggregate better off by

43:00

helping people achieve those things

43:02

that they care about most

43:05

at lower cost to them

43:07

and the institutions that they're

43:09

a part of. I think

43:11

this is such a powerful

43:13

idea. I really came away

43:15

from this part of the

43:17

book, excited about what you

43:19

were saying. And I would

43:21

like to give a gift

43:23

from my parents, who I

43:25

just imagine everything my parents

43:28

ever say is like old

43:30

Jewish people, you know, like,

43:32

what do they do? But

43:34

my parents once gave me,

43:36

they never give advice. They're

43:38

very good about not putting

43:40

their nose in there. But

43:42

they gave me one piece

43:44

of marriage advice, which is

43:46

just ask, every time, how

43:49

important is this to you?

43:51

That's terrific. Yeah. And so

43:53

when they make a decision,

43:55

they always say, they always

43:57

say, Well, okay, we're going

43:59

to decide about where we're

44:01

going for dinner. And they

44:03

use numbers, scale one to

44:05

ten. This is a five

44:07

for me. This is an

44:10

eight for me. And then

44:12

they... negotiate. Now, of course,

44:14

when they're feeling bad, when

44:16

they're feeling angry, whatever, they're

44:18

like, it's Jen, you know,

44:20

but for the most part,

44:22

they've agreed to use that.

44:24

And I always thought that

44:26

was great advice. So this

44:28

is my gift from my

44:30

parents to you. I like

44:33

that. Thank you. Are they

44:35

looking for jobs as negotiation

44:37

teachers? Thank them from us.

44:39

Yeah. Maybe we'll get them

44:41

to finally listen to one

44:43

of my episodes. Okay, I

44:45

want to move on a

44:47

little bit to ethical decision-making.

44:49

And so can you talk

44:51

a little bit about how

44:54

leaders can create environments that

44:56

promote that ethical behavior? And

44:58

I think maybe even more

45:00

important in some ways, but

45:02

some of the common pitfalls

45:04

that undermine ethical decision-making. One

45:06

common ethical pitfall that we

45:08

highlight in the book is

45:10

a leader who guide there.

45:12

subordinates or their reports by

45:15

saying do whatever it takes

45:17

to achieve some outcome. That

45:19

instruction too often turns a

45:21

blind eye to the ethical

45:23

consequences of what it would

45:25

take to achieve some level

45:27

of profitability, for instance, that

45:29

there are approaches that would

45:31

necessitate cutting ethical corners, that

45:33

the boss may be unwilling

45:35

to endorse and even uncomfortable

45:38

with, but by saying do

45:40

whatever it takes is implicitly

45:42

recommending that others shoulder that

45:44

ethical burden and violate their

45:46

own ethical standards in order

45:48

to fudge the numbers or

45:50

shift the revenues from some

45:52

future quarter into this quarter

45:54

to make the numbers look

45:56

better and we recommend instead.

45:59

that ethical leaders not say

46:01

to do whatever it is.

46:03

and instead empower those with

46:05

whom they're working to give

46:07

voice to their own ethical

46:09

concerns and express doubts about

46:11

the viability of stretch goals

46:13

or unrealistic ambitions when that

46:15

implies breaking the rules or

46:17

violating their own ethical principles

46:20

to do so. If you

46:22

think back to that steroid

46:24

era of either baseball or

46:26

cycling... The press liked to

46:28

focus on who the players

46:30

were or who the riders

46:32

were who used steroids and

46:34

got caught. And I don't

46:36

mean to take them off

46:38

of the hook. They broke

46:40

the rolls. I don't think

46:43

that they should have done

46:45

that. But I think that

46:47

the far more guilty parties

46:49

were the leaders who were

46:51

rewarding people for home runs

46:53

under any circumstances. and were

46:55

not enforcing the rules in

46:57

any way. So, you know,

46:59

the baseball commissioner's office and

47:01

the teams were rewarding people

47:04

for taking steroids, and then

47:06

when eventually the media catches

47:08

up and finds a specific

47:10

instance, the leaders are saying

47:12

bad, bad player, when in

47:14

fact, they had created the

47:16

environment. And that's... where we're

47:18

saying the situation is so

47:20

important. So you can kind

47:22

of see so much of

47:25

human behaviors being guided by

47:27

the situations that leaders create,

47:29

including ethical behavior. Max wrote

47:31

a very important book called

47:33

Noticing, and here this is

47:35

one of the circumstances where

47:37

ethical and responsible leaders will

47:39

notice the consequences for the

47:41

incentives that they set up

47:43

and the consequences of turning

47:46

a blind eye to cheating

47:48

in various forms, whether that's

47:50

taking steroids or massaging the

47:52

accounting numbers. But we're getting

47:54

near the end of our

47:56

time. I want to ask

47:58

you to summarize. our listeners,

48:00

the most important things that

48:02

you want to take them to, want

48:04

them to take away from your book.

48:07

We've said it in various forms

48:09

throughout our conversation, but we

48:11

want people to see themselves

48:13

as decision leaders, helping those

48:15

around them make better decisions.

48:17

Better decisions by their own

48:19

standards of what they care

48:21

about and better decisions according

48:23

to their own ethical compasses.

48:25

And there's more opportunity to

48:28

make positive change than most

48:30

of us realize. And maybe you

48:32

can tell us a little bit

48:34

about what's next for each of you.

48:36

I enjoyed implementing some of the

48:38

book's lessons in my leadership role

48:41

here at the School of Business

48:43

and having stepped back from my

48:45

service in the dean's office. I

48:48

am excited to be returning to

48:50

the classroom and sharing some of

48:52

those lessons to empower my students.

48:55

to be decision leaders. So

48:57

I'm currently spending some time

48:59

doing podcasts on negotiation. The

49:02

game has changed. And I've

49:04

recently finished up a book

49:06

called Inside an academic scandal

49:09

for your listeners who have

49:11

been following some of the

49:14

recent social science problems having

49:16

to do with data fabrication.

49:18

I happen to be an

49:21

author of the... pretty famous

49:23

paper that's known to be fraudulent.

49:26

And I've written a book

49:28

that describes in detail how

49:30

that could come about and

49:32

how we might reform social

49:34

science to improve its integrity

49:37

moving forward. Thank you both.

49:39

And my favorite part of everyone

49:41

is what books do you want

49:43

to recommend to our listeners? Are

49:45

we allowed to be self-serving and to our

49:48

own horns? I was going to pick

49:50

your book, don't I? Well, then, I'll

49:52

tell people that they should read negotiation,

49:54

the game has changed. I've made it

49:56

required reading in my negotiations class that

49:58

I'm teaching right now. fantastic. And

50:00

what's what's What's your What's your

50:02

perfectly confident by I guess

50:05

it's perfectly All right. by Don

50:07

Moore. Sorry, got it. All That

50:09

was that equitable. Every every

50:11

equity Thank you very much. So

50:13

Don Moore and Max Moore it

50:15

has been a huge pleasure been

50:17

a with you today about decision

50:19

leadership, empowering others to make

50:21

better choices. Thank you both

50:23

for joining us on you both for

50:25

joining Thank you. Thank you, books network.

50:27

Thank you.