Naltrexone, an anti-addiction drug (sold as Revia by DuPont, Depade by Tyco Healthcare’s Mallickrodt Pharmaceuticals, and Vivitrol by Alkermes/Cephalon), has been found to decrease kleptomaniacs’ need to steal. Science Daily reports:

It appears that a drug commonly used to treat alcohol and drug addiction has a similar effect on the compulsive behavior of kleptomaniacs – it curbs their urge to steal, according to new research at the University of Minnesota.

While the drug is not a cure for kleptomania…it offers hope to those who are suffering from the addiction. He also said the drug would most likely work best in combination with individual therapy.

This sounds like a desperate grab in an ailing national market. The mite-sized fraction of the population suffering from kleptomania may find relief through the pill, but I doubt the study was commissioned because people are genuinely worried about them. Rather, it’s a catchy way to gain publicity, repackage the drug as Nobesteelin, and push it on suspicious parents and juvenile hall psychiatrists.

They should put it to good use and prescribe it to the Department of the Treasury.

"The first principle is that you must not fool yourself – and you are the easiest person to fool." – Richard Feynman.

"We know accurately only when we know little. With knowledge, doubt increases." – Goethe

I have a personal vendetta against cognitive biases. I think one of the best ways to be successful in life is not to make any major mistakes – the kind that send you into bankruptcy, surgery, divorce, or any other traumatic life altering situation. Of course, the flip side of that coin is that not taking any risks is a sure way to a life of mediocrity.

I balance these two things by trying to take risks smartly. And that means avoiding lousy decisions because of cognitive biases. The problem is that cognitive biases are so dangerous because we don't know we have them and don't recognize when we fall prey to them. I am always on guard for this very reason. I spend a lot of time, when I make decisions, examining my thought processes for evidence of cognitive biases.

In social situations though, an obsession with cognitive biases can be, in some ways, self-defeating. In my case, it often leads to what I call recursive self-doubt in business decision making. It explains why fools are often more triumphant than the intelligent.

Imagine a situation in which you are discussing strategy with your strategic thinking team. Let's say it is two years ago and "wisdom of crowds" is all the rage. Everyone on your team wants to figure out how to use the wisdom of crowds to transform your company by engaging ideas and skills from the "edge." But you don't buy it. You've read books about the madness of crowds. You realize that the average person knows next to nothing about your business, and you in general have a healthy skepticism towards anything new. But what if you are wrong? What if there is some cognitive bias that is preventing you from thinking clearly about the matter? After all, new books are coming out explaining how this is a revolutionary transformation that you need to embrace. "Wikinomics" is often quoted by your the people on your team. Bloggers and even some in the mainstream media are talking about the crowd revolution. Your concern that you may have missed something causes you to begin to doubt yourself – not because you really do doubt yourself, but because you understand the propensity of humans toward cognitive biases and bad decision making.

This is the problem of recursive self-doubt. Once you go down that path, it can snowball as you first question yourself, then question your questioning of yourself, then question why you questioned your questioning of yourself, and so on until you basically assume the group must be correct. And it all started because you were the only one at the table who understood cognitive biases. You were the only one trying to guard yourself against them, and as a result, you made a bad decision.

By mid 2007, when the whole wisdom of crowds thing has died down and most people have realized the severe limitations under which crowds can outperform other forms of decision making, no one remembers that you were the lone one on the team questioning the decision. No one thinks to listen to you a little more intently the next time around. The people who implemented your wisdom of crowds strategy have been promoted, and the blame when it didn't work has fallen on those who came along later.

Teamwork is tough when you are the only rational player on an emotional team. Particularly when you know that no one is always right. By choosing a cautious approach to decision making, you can actually end up worse off. But you know that changing your approach to jump from fad to fad doesn't work either.

The problem with taking a long-term view, the contrarian view, is that you have to have pillars of support. You must have the financial and emotional reserves on your business (and life) balance sheet to make it through the next year when no one wants to deal with you because you aren't part of the fad. And of course, when you really do believe a structural change is taking place, you have to explain why, as a non-fad follower, you are following this latest fad.

In much the same way that daily horoscopes are written generically so that whatever happens is interpreted as fulfillment of the horoscope, I think a significant majority of people go through life making poor decisions but taking advantage of some good luck, and believing that it wasn't luck that put them there. A person making one accurate prediction and 40 inaccurate ones will hold on to that one time they were correct as a reason for why you should listen to them, read their book, hire them to consult, or whatever it may be. Smashing the latest business idolatry is a niche market, and is not nearly as profitable as reinforcing what others already want to believe.

How do you fight the slide into recursive self doubt without sacrificing your attention to quality decision making and your guard against cognitive bias? For me personally, I just always try to minimize the downside of being wrong. I use my decision tickler to help monitor the progress of my decisions, so that I can change course early if necessary. It doesn't totally eliminate RSDD (recursive self doubt disorder!) but it helps manage it.

Now if you ever wonder how fools get ahead and how the world gets to be as screwed up as it is, you only need to look to RSDD. Many smart people fall prey to Goethe's quote at the beginning of this post. By knowing more, they are less confident than their less informed peers. Of course, applying this at the level of national politics implies that most politicians… well, we don't talk about politics on this blog.

I don't experience much cognitive dissonance these days, but the following story from a book I am reading (and will review later) slapped me upside the head. I'm normally very good with problems like this, so when I didn't immediately understand it, I was surprised. I'll pose the problem below, and make you click through for the answer.

During World War II, statistician Abraham Wald tried to determine where to add extra armor to airplanes. Based on the patterns of bullet holes in returning airplanes, he suggested that the parts not hit should be protected with extra armor. Why?

Wald was looking at what is sometimes called "dead evidence." He reasoned like this… if these planes are returning, we know that if they are hit in the spots they have been hit, they can still fly. The planes that did not return must have been hit in different places. So put the extra armor wherever the returning planes were not hit.

I think most people would have a natural inclination to put the armor where the returning planes had been hit. The real answer is simple, but counterintuitive. It's called "dead evidence" because it is what people ignore when they make these judgments. For instance, you may see a story on tv about how to survive a plane crash. The producers will interview 10 plane crash survivors, and figure out what they did in common, then recommend that you do that too. What they don't think about is how many people did those same things, but still died in the crash. The dead can't be interviewed, so we will never know.

How can you use this in your business? Think about the dead evidence. Don't look just at winners, look at losers to see if they did the same things as the winners. Don't just look at what the top companies in your industry are doing, look at what all kinds of different companies are doing. Sometimes you can learn more by looking at failures than at successes.

Dave Munger writes about the futility of predicting unlikely events. Runaway successes are rare, and difficult to predict in advance. Luckily for us, catastrophic failures are rare as well. I laugh when people tell me they have "the next Google" – as if anyone could have predicted the dramatic success of the first Google. If your goal is to have that level of success, all you can do is build something that has the potential, and hope a little randomness fall your way. VC's don't predict winners, they just screen out the most likely losers and hope with enough investments, the black swan is friendly to them.

Munger's post references this interview with Nassim Nicholas Taleb, author of The Black Swan which I highly recommend. (Be forewarned though. If you struggle with counterintuitive ideas, you may not enjoy this book.)

In the interview, Taleb makes the following statement.

Taleb argues that history books make up reasons for events that are by their very nature improbable. If someone had sat in a coffee house in Vienna in 1913 and related the history-book explanation of the situation in at that time, explaining that Europe was on the brink of an unprecedented continent-wide war, Taleb claims, he would have been carted off as a lunatic.

I think we do the same thing in business. Why do some businesses go from good to great? We make up stories and see patterns where they don't exist, because we are looking for that magic bullet that will make our company do the same. Why did the latest project fail? When we piece it together after the fact, we often get it wrong. That's why I like to use the decision tickler.

So if randomness matters so much, why try? Because you can still take advantage of it. Experiment. Expose yourself to random ideas, random people, random chance, and sooner or later, you might catch a ride on a black swan.

Here is some interesting news out of Carnegie Mellon about brain scans done on consumers that were about to purchase products.

This study challenges the conventional economic account of consumer purchases, which views consumers as deciding between the immediate pleasure of making a purchase and the delayed pleasures of alternative things for which the same money could be used. The results of this paper support an alternative perspective that views consumers as trading off the immediate pleasure of making a purchase against an immediate pain: the pain of forking out the money for the item. The results can explain the growing tendency of consumers to overspend when purchasing items with credit cards instead of cash, because consumers do not immediately pay for items charged to credit cards and the "pain" of the potential loss is minimized.

I must have some overactivity in the part of my brain that controls business book purchases. Maybe there will be a drug for that soon.

You see, I have goals. Some of them

I don't think the criticism of Wikipedia or the hive mind in general should be that it is crappy work. My concern, and the criticism I put forth against most things web2.0 is that this collectivism causes people to seek popularity over advancement of knowledge, and that creates problems. The problem with Web2.0 is that it rewards popularity over and above anything else, and the problem with popularity (particularly popularity on the web) is that it is driven primarily by short-term reward systems in the brain.

People are ultimately driven by incentives, and regardless of what the Web2.0 gurus say, I do not believe it is altruism. Successful open source software is the exception, not the rule. How else do you explain companies like Prodigii that help open source companies find funding? Why would open source programmers want to make their project commercial? Incentives.

If the primary incentive is to become popular, and popularity is primarily driven by short-term reward circuits in the brain, then popularity causes short term thinking. Many entrepreneurs have ignored the idea of providing any real economic value in exchange for the latest tweak on an idea. The incentive is not to put your head down and build something remarkable that makes people more productive or makes life easier. The incentive is to build something fast that people like because it's new and entertaining, and then hope a large tech company is dumb enough to buy it. If you read reddit or digg regularly, you would come to believe that entrepreneur = 1 man web design company and programmer = web programmer. I'm not saying these definitions are false, just that they are incomplete. But the hive mind will accept incomplete because they prefer breath over depth.

The other thing that keeps creeping into the discussion is the idea of markets as wisdom of the crowds and the prototypical example of good collective decision making. However, market prices do not always reflect inherent economic value in the short term. Market prices are simply the prices at which the given supply can be cleared. The hive mind is the biggest problem with markets. People buy/invest according to what is popular instead of what is valuable to them.

I look at it this way. Collectivism is an attempt to say that 26 people each running a mile is somehow as impressive as one person running all 26. Each person has the 'edge competency' to run one mile. If you get in a situation where you need someone to go the whole 26, you are screwed because no one is prepared for it.

So what it all boils down to is this:

The new online collectivism is a drain on the economy because it shifts resources away from long-term goals and towards short-term popularity

Some problems take a long time to solve, and we are sucking resources away from those problems. It is the intellectual equivalent of buying things now with debt instead of saving and investing.

Don't get me wrong. Popularity is not inherently evil, and neither is collaboration. What I dislike is this idea that Web2.0 somehow defines a great new paradigm shift that will kill the old school companies that don't embrace it. Let's be honest. All this stuff is right for a few niche applications. Let's keep it in context.

People inherently have a depth and complexity that we are not encouraging or embracing when we encourage collectivism. I think that over time the unfulfilled need of that part of our psyche will build and build to the point that there will be a (admittedly paradoxical) "popular backlash against popularity." Web 3.0 will be about the "new individualism."

That is how I feel today. I struggle with grasping all the implications of this topic, as is probably apparent by my randomness in the post, but it helps me to work through this and write out my thoughts, disconnected as they are. I hope on some level it makes you think, regardless of whether or not you agree with the main points.

The way that you work is going to change. If you think the Internet rocked the business world, wait until the brain revolution filters down into your daily workflow. Things. Will. Change. People are the core of any business, and much of the conventional wisdom about people is flat out wrong. Are you Type A or Type B? What is your Myers-Briggs? Should you use a carrot or a stick? Does the focus group like your advertisement? Is charismatic leadership the way to go? Should you pursue a low-price strategy?

If only it were that simple. That is what we have made business. Simple. That can be good, sometimes, but there are two problems with simple rules.

1. Too many people let the rule replace the analysis. That is fine for simple cases, but complex issues may have subtle factors that often make the rules irrelevant.

2. Competition is intense. As a result, incremental gains matter more than ever before. If you can squeeze out that extra 1%, it could make a major difference in your bottom line.

Things are changing. Business will be affected by the findings of brain science. Ignore this at your own peril. But also be warned that reading the rest of this post could tear down your candyland view of how business works.

Important Findings of Neuroscience

Areas of Business

Economics
Marketing
Strategy
Management
Leadership
Execution
Finance
HR
Technology

More negative research on multitasking that multitaskers will probably not believe.

Multi-tasking affects the brain's learning systems, and as a result, we do not learn as well when we are distracted, UCLA psychologists report this week in the online edition of Proceedings of the National Academy of Sciences.

"Multi-tasking adversely affects how you learn," said Russell Poldrack, UCLA associate professor of psychology and co-author of the study. "Even if you learn while multi-tasking, that learning is less flexible and more specialized, so you cannot retrieve the information as easily. Our study shows that to the degree you can learn while multi-tasking, you will use different brain systems.

"The best thing you can do to improve your memory is to pay attention to the things you want to remember," Poldrack added. "Our data support that. When distractions force you to pay less attention to what you are doing, you don't learn as well as if you had paid full attention."

This is exactly why I shaved my goatee – to look more trustworthy.

This is what I've been preaching about for a long time now. The findings of neuroscience will have significant impacts on business, in particular management. The article raises more questions than it provides answers, but then again that is the current state of neuroscience research. Here is an example that criticizes employee performance management based on methods from the outdated field of behaviorism.

Performance management training manuals on administering annual appraisals often counsel managers to "deliver constructive performance feedback." Translated from the jargon, this means, "Politely tell people what they are doing wrong." Though colored by humanist intent, this approach is, in its own way, as mechanistic as behaviorism. It assumes that if people receive correct information about what they are doing wrong, and the right incentives are in place, they will automatically change.

But the human brain can behave like a 2-year-old: Tell it what to do and it automatically pushes back. Partly this phenomenon is a function of homeostasis (the natural movement of any organism toward equilibrium and away from change), but it also reflects the fact that brains are pattern-making organs with an innate desire to create novel connections. When people solve a problem themselves, the brain releases a rush of neurotransmitters like adrenaline. This phenomenon provides a scientific basis for some of the practices of leadership coaching. Rather than lecturing and providing solutions, effective coaches ask pertinent questions and support their clients in working out solutions on their own.

I already see problems with this approach. Managers want canned answers to give employees. They don't actually want to sit and…listen (YIKES). The next thing you know, someone will expect full blown honest communication throughout the organization, claiming that it helps circumvent the cognitive biases that come with every human brain. And if that happens, how will people be able to blame someone else when things go wrong? The whole corporate structure will fall apart if people are judged on real results.

Also check out Johnnie's analysis of the article.