Sunday BS #1 (Rebrand alert!)
Welcome to the 1st edition of Sunday BS!
Those who have been following this newsletter for the past month will have noticed the rebrand. I started this Sunday newsletter as ‘Sunday Ross Beef’ - 3 ideas, thoughts or provocations from my readings of the last week.
Well, much of the thesis sticks, except that I am now unifying my podcast series and newsletter under the broad theme of behavioural science; research and exploration which fascinates me greatly and which I want to share and write about more consistently.
So there remain 3 simple and thought-provoking ideas here every week. Some will be expansions from my podcasts, others will reflect my wider BS reading and thinking.
Subscribe to the podcasts
If you haven’t done so already, you might like to subscribe to my podcast series, A Load of BS: The Behavioural Science Podcast to accompany your reading here.
Now on with the show…
1) Luck vs. Skill
I addressed the luck vs. skill question on my podcast last week with Paul Craven (to be published soon). Paul introduced me to Michael Mauboussin’s heuristic, a pure luck vs. pure skill continuum on which a game of roulette sits at one end and a game of chess at the other.
To assess where your job sits on the line, ask yourself how deliberately you can screw up your own performance. If you can mess up easily, well, there is some skill there. If it’s all the spin of a wheel…
Mauboussin believes investing is dominated by luck because investor skill level has risen to the point where the market is largely efficient. He believes asset managers acknowledge but underestimate luck and that process improvements are the easiest way for investors to improve performance. As a seasoned investor AND behavioural scientist, Paul thinks that’s overly harsh and there’s greater skill involved; and I tend to agree with him.
2) Fear of Dogs
Walking my collie poodle in the park, I notice children’s occasional fear as little Hero bounds up playfully. My initial reaction was that parents must do more to help their kids overcome the fear.
The thought took me to psychologist Albert Bandura’s research on social proof as a cure of phobias. And so to disprove my own cod theories.
In one study, young children who were terrified of dogs watched another small child play with a dog for twenty minutes a day. After only four days, 67% of the subjects were willing to climb into a playpen with a dog and pet it. When these children’s fear levels were tested again one month later, the improvement had not changed and the children were still happy to play with the dogs.
An equivalent experiment using just video clips of other children playing with dogs had the same effect. I.e. it was not necessary for the children with the phobia to see a live demonstration. The most effective video clips were those which showed lots of other children playing with dogs.
The principle of social proof works best when the proof is provided by lots of people as opposed to just a few.
3) Obi Wine Kenobi
As a wine enthusiast, I’m hugely looking forward to interviewing wine expert, writer and presenter Joe Fattorini soon. I’ve learned a lot from him already.
8,000 years old and rich in social mores and cues, wine throws many intriguing questions our way:
Why are some ‘bad’ wines so successful? 19 Crimes and The Prisoner are two examples. For one, they’re not called Cabernet Sauvignon, both loosely allude to rule breaking and rebellion and rapper Snoop Dog sponsors the rosé. And so unsurprisingly, they’re both very popular with younger, male drinkers
What unconscious biases really drive our wine choice? Joe tells me BS research has shown the sound of a popping cork is worth c. 15% more on the price of a bottle. Splitting the label in two is worth 50p. Adding an idiotically high-priced bottle to a wine list anchors restaurant customers to a higher price and lifts the average price of other bottles, even if the high-priced one never sells
Joe is part of a new venture called Pix, the world’s first wine discovery platform with a simple matchmaking mission: to pair people with bottles that bring them joy.
In our upcoming chat, we’ll dive into the detail of how Pix is deploying BS thinking into wine matching as well as getting to the heart of the curious biases which make us drink the way we do.
Have a great week!