Mark Koscinski behavioral economics, decision analysis

Lessons From a Cornhole Tournament

My university runs an annual cornhole tournament at the end of the Fall semester.  A colleague from the School of Business and Economics and I entered the tournament for the first time. We didn’t make it past the first round.  We were  annihilated by a team from the Admissions Office.  Our defeat was quick and decisive.  In truth, I was a piano on the back of my colleague.  I was nowhere near the target with my errant throws, sometimes missing the entire board.   As I thought about  my poor performance, I realized there were several lessons any manager can take away from the entire event in general and my poor performance in particular. What can you learn from a poor showing at a cornhole tournament?  Well, maybe a few things… 

Teamwork and morale building exercises are great tools and contribute to  successful organizations.   The tournament was a celebration at the end of the semester.  All staff and faculty across the entire university were invited.  Over thirty teams showed up to compete for minimal, even seemingly trivial  prizes. The real prizes ( and  joy)  were the friendly competition and being in the presence of  colleagues from other departments we don’t get to interact with during the semester because we are  all too busy.  It was a magnificent team building experience.   A simple event like this spread goodwill and enjoyment throughout the organization at a minimal cost.  Even though we were shellacked, my teammate and I felt good about participating and being part of the university community. 

The regression to the mean is a powerful force but has a common exception..  Daniel Kahneman won  the Nobel Prize in Economics in 2002 for his work in decision analysis. In his book Thinking Fast and Slow. He tells the story of how Israeli Air Force pilots were expected to repeat exceptional performances. They  routinely failed to do so. Kahneman pointed out our performances all regress to our mean performance over time.  If we do something extraordinary (defined in a cornhole tournament as hitting the target hole with our bag), the expectation is we should be able to do that again and again and even improve on our performance.  In reality, we should expect to perform worse after an unusually good performance. We tend to regress to our mean performance. In my case, that means  just plain missing the hole, or even sometimes the entire board after previously sinking the bag into the hole on the previous throw. 

Another common example of this principle is the awesome  batting averages major league baseball players have at the beginning of the season.  The players  can keep their performance at a high level for a short streak, but over time they will perform at their mean batting average.  In our case, my partner and I hit bullseyes a couple of times but were not able to repeat this with any regularity.  

There is one caveat to the regression to the mean theory. Repetitive tasks can  tire you out over time. Economists explain this as the difference between the short run and the long run. What works in the short run  may not work in the long run.  In the long run you tire out and you can’t keep your performance level up. Your performance degrades until it is  below your mean performance simply because you get tired. A friend of mine claims a round of golf should only be fourteen holes.  He gets tired and his performance diminishes drastically over the last four holes.  He gets tired and loses his concentration.  The baseball season is 162 games.  Players get tired or injured over time and their batting averages decline. In the cornhole tournament, I felt my concentration declining as the game wore on. In short, don’t expect your employees to repeat unusually high performances and don’t ignore the toll that repetitive action and time will have on your performance. 

Keep in mind the difference between noise and bias. Kahneman, in his book Noise, uses a bullseye and the resulting shot pattern of misses around the bullseye to demonstrate the difference between noise and bias.   A normal distribution of misses around the target is an example of noise.  Misses that fit into a discernible pattern are an example of bias.  This was a useful insight  to me as I kept “missing to the left” when I was throwing the bag.   I moved to the right and was able to make an adjustment to my throws  that eliminated that bias.  The noise is not so difficult to overcome.  In my case, I still kept missing. Practice is the only way to overcome the noise.

Who knew decision analysis theory could be so useful in everyday life? 

Mark Koscinski behavioral economics, decision analysis

Stocking Stuffers

With  Christmas being upon us, we often scramble to find some small, last minute gifts that can be used as stocking stuffers.  This year, try something different. Why not give someone something old fashioned, like a book?  I mean an actual book in print and not a digital version of the book. Something they can hold in their hands.  I know, a quaint idea…. A book is a perfect stocking stuffer. 

So, If you are actively involved in management of any kind of organization, whether it is for profit, not for profit, or governmental, here is my reading list and ideas for last minute stocking stuffers.  They are listed in alphabetical order and not in suggested priority.  

The Beekeeper: Pollinating Your Organization for Transformative Growth by Katie Desiderio and  Michael Frino.  This is a wonderful and easy to read book describing how successful managers should run their organizations and treat their employees and colleagues.  The book is narrated by Catherine, the young founder of a business. A magical vacation experience transforms the way she leads her organization. Any manager will find this to be a thought provoking book.

Move: How Decisive Leaders Execute Strategy Despite Obstacles, Setbacks, and Stalls by Patty Azzarello. Discerning the proper strategy for an organization can be hard enough. Executing that strategy can be a whole different story.  Patty Azzarello, a successful consultant and business executive presents her ideas on how to get your organization moving forward. To be sure, this is not a book written for academics. Rather, It is written for the manager in the trenches who is trying to  execute strategy. This book  is a practical guide on implementing the organization’s mission and vision.

Noise: A Flaw in Human Judgement by Daniel Kahneman, Oliver Sibony, and Cass Sunstein. The authors of this book don’t need any introduction.  They are the Dream Team of Management Theorists.  Noise can be thought of as a sequel to Thinking Fast and Slow, Kahneman’s previous book on decision making.  Kahneman et. al. distinguish  between bias and noise. Bias receives all the attention, but noise can cause just as much variability in decision making. This is a well-written book that explains some difficult concepts in an understandable and accessible way. 

The Voltage Effect: How to Make Good Ideas Great and Great Ideas Scale by John List. Scalability has become a buzzword in the management community.  The author, a renowned academic and chief economist at Lyft and Uber, takes us on a tour of how to ramp up a small operation and make it larger.  List describes both the successful strategies for scaling and the pitfalls in trying to scale your organization.  It is a delightful book with many great ideas. 

All work and no play is not good for anyone.  So, if you are looking for pure pleasure reading on an offbeat topic,  I would suggest American Cosmic and Encounters, both written by Diana Walsh Pasulka.  These books discuss the UAP phenomena  from a fresh and interesting perspective. 

So everyone, good luck on beating the crowds in the shopping malls.  From someone who has always hated that, these books all have one advantage: you can order them from Amazon!

Have a great holiday season. 

Mark Koscinski behavioral economics, decision analysis, NFP

Altruism

In a previous blog, I wrote about optimism and its importance in both the business and the NFP world.  Today, I would like to discuss altruism. What makes someone donate to a charity? If only NFP fundraisers knew the answer to this question… Neuroscientists and behavioral economists are trying to provide an answer.  Donors and volunteers have a sense of altruism, gained from  acts reducing their own well-being in order to help others. These acts include  donating or volunteering. The reductions in savings and free time to help out arguably reduces the donors’ well being.  Or, do they? Economists use the term “other regarding preferences” to describe altruistic acts. Giving  time and treasure to a charity comes from internal motivation and a sense of  identity. Donors and volunteers get a “warm glow” feeling or additional utility (to use another economic term) from these actions and neuroscience has developed evidence of this. Dopamine levels rise when altruistic acts are performed. 

Are altruistic acts completely altruistic? Sometimes a seemingly altruistic act isn’t so altruistic. Donating and expecting returns is not really altruistic. For example, political donors may expect  they will receive an appointment or their companies may receive additional business from the government.  Donating significant amounts of money to a charity can send a signal to others of great wealth and conspicuous consumption. These would not be altruistic acts. To a lesser extent,  don’t we expect some return for our donations?  We might get tax deductions for our donations and some recognition for our volunteer efforts.  The economist James Andreoni coined the term “impure altruism”  in 1990 to describe how even the warm glow feeling we get from donating makes our motivation somehow tainted with self-interest. 

While this  discussion is intellectually stimulating, don’t look too deeply into the motivation of donors and volunteers.  They are objectively doing a good thing so I suggest just leave well enough alone.  There are philosophical treatises on mixed motives that are well beyond the scope of this article, but I would suggest human beings are complex creatures who may not be able to articulate their motivations to themselves let alone to anyone else.  As a practical matter judging motivations of a donor or volunteer is at best a very, very tricky endeavor, not worth the time and effort of the NFP management.  There is no moral, ethical, or legal requirement to do so.  Running an NFP is difficult enough.  Why take on the burden of figuring out the motives of donors?