Volunteer Work Is for the Birds: Volunteer’s Folly
Jack, a photographer, is on the go from Monday to Friday. Commissioned by fashion magazines, he divides his time between Milan, Paris, and New York and is constantly in search of the most beautiful girls, the most original designs, and the perfect light. He is well known on the social circuit, and the money is great: $500 an hour, easy. “That’s as much as a commercial lawyer,” he brags to his buddies, “and what I have in front of my lens looks a lot better than any banker.”
Jack leads an enviable life, but lately he has become more philosophical. It feels as if something has come between him and the fashion world. The selfishness of the industry suddenly repels him. Sometimes he lies in bed, staring at the ceiling, and yearns for more meaningful work. He would like to be selfless once again, to contribute something to the world, no matter how small.
Dear reader, it may surprise you, but I (Rolf Dobelli) know you personally. This is how I would sum you up: “You have a great need for other people to like and admire you. You have a tendency to be critical of yourself. You have a great deal of unused capacity, which you have not turned to your advantage. While you have some personality weaknesses, you are generally able to compensate for them. Your sexual adjustment has presented problems for you. Disciplined and self-controlled outside, you tend to be worrisome and insecure inside. At times you have serious doubts as to whether you have made the right decision or done the right thing. You prefer a certain amount of change and variety and become dissatisfied when hemmed in by restrictions and limitations. You pride yourself as an independent thinker and do not accept others’ statements without satisfactory proof. You have found it unwise to be too frank in revealing yourself to others. At times you are extroverted, affable, and sociable while at other times you are introverted, wary, and reserved. Some of your aspirations tend to be pretty unrealistic. Security is one of your major goals in life.”
Three easy questions. Grab a pen quickly and jot down your answers in the margin. First question: In a department store, a Ping-Pong paddle and a plastic ball cost $1.10. If the paddle costs $1 more, how much is the ball? Second question: In a textile factory, five machines take exactly five minutes to make five shirts. How many minutes will it take one hundred machines to produce one hundred shirts? And, the third question: A pond has water lilies growing in it. The flowers multiply quickly, each day doubling the area they take up. If it takes forty-eight days for the pond to be completely covered with water lilies, how many days will it take for it to be half covered? Don’t read on until you have written down the answers.
For each of these questions, there is an intuitive answer—and a right one. The quick, intuitive answers come to mind first: ten cents, one hundred minutes, and twenty-four days. But these are all wrong. The solutions are: five cents, five minutes, and forty-seven days. How many did you answer correctly?
On January 31, 2006, Google announced its financial results for the final quarter of 2005. Revenue: up 97 percent. Net profit: up 82 percent. A record-breaking quarter. How did the stock market react to these phenomenal figures? In a matter of seconds, shares tumbled 16 percent. Trading had to be interrupted. When it resumed, the stock plunged another 15 percent. Absolute panic. One particularly desperate trader inquired on his blog: “What’s the best skyscraper to throw myself off?” What had gone wrong? Wall Street analysts had anticipated even better results, and when those failed to materialized, $20 billion was slashed from the value of the media giant.
Every investor knows it’s impossible to forecast financial results accurately. The logical response to a poor prediction would be: “A bad guess, my mistake.” But investors don’t react that way. In January 2006, when Juniper Networks announced eagerly anticipated earnings per share that were a tenth of a cent lower than analysts’ forecasts, the share price fell 21 percent and the company’s value plunged $2.5 billion. When expectations are fueled in the run-up to an announcement, any disparity gives rise to draconian punishment, regardless of how paltry the gap is.
Why Small Things Loom Large: The Law of Small Numbers
You sit on the corporate board of a retail company with one thousand stores. Half of the stores are in cities, the other half in rural areas. At the behest of the CEO, a consultant conducted a study on shoplifting and is now presenting his findings. Projected onto the wall in front are the names of the one hundred branches with the highest theft rates compared to sales. In bold letters above them is his eye-opening conclusion: “The branches with the highest theft rate are primarily in rural ares.” After a moment of silence and disbelief, the CEO is first to speak: “Ladies and gentlemen, the next steps are clear. From now on, we will install additional safety systems in all rural branches. Let’s see those hillbillies steal from us then! Do we all agree?”
Hmmm, not completely. You ask the consultant to call up the hundred branches with the lowest theft rates. After some swift sorting, the list appears. Surprise, surprise: The shops with the least amount of shoplifting in relation to sales are also in rural areas! “The location isn’t the deciding factor,” you begin, smiling somewhat smugly as you gaze around the table at your colleagues. “What counts is the size of the store. In the countryside, the branches tend to be small, meaning a single incident has a much larger influence on the theft rate. Therefore, the rural branches’ rates vary greatly—much more than the larger city branches. Ladies and gentlemen, I introduce you to the law of small numbers. It has just caught you out.”
John, a soldier in the U.S. Army, has just completed his paratrooper course. He waits patiently in line to receive the coveted parachute pin. At last, his superior officer stands in front of him, lines the pin up against his chest, and pounds it in so hard that it pierces John’s flesh. Ever since, he opens his top shirt button at every opportunity to showcase the small scar. Decades later, he has thrown away all the memorabilia from his time in the army, except for the tiny pin, which hangs in a specially made frame on his living-room wall.
Mark single-handedly restored a rusty Harley-Davidson. Every weekend and holiday went into getting it up and running; all the while his marriage was approaching breakdown. It was a struggle, but finally Mark’s prized possession was road-ready and gleamed in the sunshine. Two years later, Mark desperately needs money. He sells all his possessions—the TV, the car, even his house—but not the bike. even when a prospect offers double the actual value, Mark does not sell it.
If You Have an Enemy, Give Him Information: Information Bias
In his short story “Del rigor en la ciencia,” which consists of just a single paragraph, Jorge Luis Borges describes a special country. In this country, the science of cartography is so sophisticated that only the most detailed of maps will do—that is, a map with a scale of 1:1, as large as the country itself. Their citizens soon realize that such a map does not provide any insight, since it merely duplicates what they already know. Borges’s map is the extreme case of the information bias, the delusion that more information guarantees better decisions.
Searching for a hotel in Miami a little while ago, I (Rolf Dobelli) drew up a short list of five good offers. Right away, one jumped out at me, but I wanted to make sure I had found the best deal and decided to keep researching. I plowed my way through dozens of customer reviews and blog posts and clicked through countless photos and videos. Two hours latter, I could say for sure which the best hotel was: the one I had liked at the start. The mountain of additional information did not lead to a better decision. On the contrary, if time is money, then I might as well have taken up residence at the Four Seasons.
How to Increase the Average IQ of Two States: Will Rogers Phenomenon
Let’s say you run a small private bank. The bank manages the money of wealthy and mostly retired individuals. Two money managers—A and B—report to you. Money Manager A manages the money of a few ultra-high-net-worth individuals. Money Manager B has rich, but not extravagantly rich, clients to deal with. The board asks you to increase the average pool of money of both A and B—within six months. If you succeed, you receive a handsome bonus. If not, they’ll find someone else to do it. Where do you start?
It’s quite simple, actually: You take a client with a sizable but not a huge pool of money from A and give it to B instead. In one fell swoop, this brings up A’s average managed wealth as well as B’s without you having to find a single new client. The only remaining question is: How will you spend your bonus?
