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The Kryptonite of Smart Decisions? Overconfidence

PAFF_030816_OverconfidenceKryptonite_newsfeatureResearch shows that people in general are overconfident, but entrepreneurs appear to be particularly prone to cockiness.
About half of new companies fail within five years, according to the US Bureau of Labor Statistics. Despite the imposing failure rate for new businesses, entrepreneurs are often quite confident that their ventures are going to succeed. One survey of 3,000 entrepreneurs found that 81% believed that their chance of success was 70% or higher; and a whopping 33% estimated their chance of success to be 100%.
New research from psychological scientists Daylian Cain (Yale University), Don A. Moore (University of California, Berkeley), and Uriel Haran (Ben-Gurion University of the Negev) suggests that entrepreneurs may be the victims of their own better-than-average beliefs.
Across three experiments, the researchers showed that the better a person believes they are relative to others on a task, the higher the likelihood that they will decide to compete on that task. This overconfidence leads to larger numbers of competitors in “easy” markets, which could provide one reason why so many entrepreneurs make the mistake of confidently entering markets that are already overflowing with competition.
“Naturally, if people believe their chance of success is higher than that of the competition, it will increase their willingness to enter contests or start new businesses, even when their objective chances of succeeding are not particularly good,” the researchers explain.
In one of their overconfidence studies, 160 participants completed two math and logic puzzles – one easy and one difficult. After completing the quizzes, they could choose to enter one of their quiz scores into a competition market against other anonymous players.
The higher their score relative to other competitors, the more “tickets” they would be able to enter into a drawing for a cash prize, and the higher their chance of winning. Half of the participants were told that the difficult quiz was associated with a large prize ($90) and the easy quiz was associated with a smaller prize ($45), whereas the prize values were reversed for the other group of participants.
Regardless of prize size, people overwhelmingly preferred to compete in the easy-quiz market: Only 53 individuals chose to compete in the difficult-quiz market. This meant that the easy market was flooded with competition, driving the odds of winning the cash prize down.
“Our experiments revealed that this tendency of people to flock to competitions characterized by easy tasks is driven by their beliefs that they are better than others on these easy tasks but worse than others (or at least, not so much better than others) on difficult tasks,” Cain and colleagues write.
This finding supports previous research on overconfidence conducted by Moore and Albert Mannes of the University of Pennsylvania. In a study published in Psychological Science, Moore and Mannes found that people tended to overconfident in their estimates, even after receiving accurate feedback.
When it comes to opening a new business, Cain and colleagues make the argument that it is not whether one can make a hamburger that leads to success at opening a burger joint, but whether one can do so better than the competition.
“When it comes to relative standing, the performance of one’s competition can be just as important as one’s own performance,” they conclude. “As the old joke goes, when two campers are being chased by a hungry bear, it is not necessary to outrun the bear—only to outrun the other camper.”
 
References
Cain, D. M., Moore, D. A., & Haran, U. (2015). Making sense of overconfidence in market entry. Strategic Management Journal, 36(1), 1-18. doi: 10.1002/smj.2196
Mannes, A. E., & Moore, D. A. (2013). A behavioral demonstration of overconfidence in judgment. Psychological Science, 24(7), 1190-1197. doi: 10.1177/0956797612470700
from Association for Psychological Science » Minds for Business http://bit.ly/1XcRIR0

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How Caffeine Can Keep You Honest

PAFF_031116_CaffeineHonest_newsfeatureCaffeine is the most commonly used psychoactive drug in the world. And anyone who has ever worked in an office probably has a good reason for this socially accepted drug use: Caffeine enhances many cognitive processes, particularly when people are tired. This could explain why around 90% of Americans consume caffeine every day.
In addition to wreaking havoc on productivity and safety, researchers have found evidence that sleepiness may also play a role in unethical behavior. Sleep deprivation increases the presence of adenosine, an inhibitory neuromodulator that decreases cellular activity in the brain. One known mechanism by which caffeine counteracts the negative effects of sleep deprivation is by blocking adenosine receptors and increasing availability of the nerve cell messenger glutamate.
In one study, psychological scientists Michael Christian (University of North Carolina) and Aleksander P.J. Ellis (University of Arizona) found that sleep-deprived employees, those who received less than 6 hours of sleep in a night, were more likely to be engage in negative and unethical behavior at work the next day. However, in another study, Christian, Ellis, and colleagues David Welsh (University of Washington) and Ke Michael Mai (University of Arizona) found that providing tired people with a jolt of caffeine may help ward of negative behavior.
For the study, about 100 college students were kept awake all night in a lab where they could watch TV and play board games. The next morning, they were joined by a group of 100 well-rested students. At the start of the experiment, all of the students were given two pieces of mint-flavored gum. Half of the participants were given normal gum, but the other half received gum with 200 mg of caffeine — approximately the same amount of caffeine contained in a 12-ounce coffee.
Participants then took part in a money-sharing game. They were led to believe they were splitting $7 with another person in the study, but in reality they were playing against a computer opponent. In the game, the participant was given information about two options for splitting the money; in option A the participant received $5, while in option B they would receive $2. They could send their partner either an honest message (choose option A and you get $5) or a deceptive one (choose option B and you get $5).
Half the participants were assigned to a social influence condition, in which one of the experimenters encouraged them to send the deceptive message. In the control condition, participants received no encouragement either way.
Overall, sleep-deprived students were far more likely than their well-rested counterparts to send the deceptive message. But caffeine appeared to help tired students stick to their ethical principles. Among sleep-deprived students, those who had consumed caffeine were significantly less likely to send a deceptive message compared to their un-caffeinated counterparts, even under social pressure from the experimenter.
“The effects we found might be even stronger in an organizational context where employees not only have to stay awake all night but must also fulfill challenging job responsibilities during this period,” the researchers write.
Organizations need to be aware that the negative costs of sleep deprivation not only hurt employees, but can also hurt the bottom line. In a recent special section of Perspectives on Psychological Science, researchers argue that policymakers need to start taking steps to prioritize sleep health in the workplace with stronger regulation of work hours and schedules.
While Welsh and colleagues suggest that providing caffeine in the workplace is one way to help avoid ethical lapses, they also warn that caffeine is no substitute for getting a good night’s sleep.
 
Reference
Welsh, D. T., Ellis, A. P., Christian, M. S., & Mai, K. M. (2014). Building a self-regulatory model of sleep deprivation and deception: The role of caffeine and social influence. Journal of Applied Psychology, 99(6), 1268. doi: 10.1037/a0036202
from Association for Psychological Science » Minds for Business http://bit.ly/1MbEiih

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To Spot a Liar, Listen Closely

PAFF_030116_CatchaLiar_newsfeatureThe car company Volkswagen recently came under fire for purposely designing diesel engines to “cheat” emissions tests. Volkswagen is now facing billions of dollars in fines from countries around the world. Volkswagen’s CEO claims that he was unaware of the scheme, but German prosecutors are now probing the CEO for fraud charges.
It’s difficult and expensive for regulators to catch corporate fraud, but new insights from psychological science may eventually provide new techniques for spotting deception.
In general, research has shown that people are not very good at spotting lies. People tend to use nonverbal behaviors when they’re trying to spot a lie, but research suggests that vocal cues are much more reliable.
In a comprehensive review of the literature on lying, published in Psychological Science in the Public Interest, Aldert Vrij (University of Portsmouth) and colleagues give an example of this. Participants in one study were supposed to detect lies in a statement from a convicted murder. The more visual cues the participants reported, the worse their ability to distinguish between truths and lies. Those who mentioned nonverbal behaviors, like gaze aversion or fidgeting, as “tells” for lying had the lowest accuracy at spotting lies.
Instead, the study showed that listening carefully to what was being said was the best way to accurately discern the truth from a lie.
To find out more about verbal “tells” for lying, a team of researchers led by Judee Burgoon of the University of Arizona analyzed the speech of corporate fraudsters. Burgoon and colleagues analyzed over 1,000 statements made by the CEO and CFO of one company during six quarterly earnings conference calls. These two company executives were eventually convicted of fraud in multiple securities class action lawsuits.
The corporate earnings conference calls allowed the researchers to accurately compare lying during both scripted, as well as unscripted, speech. These calls are publicly broadcast, and follow a typical pattern; executives give an hour-long presentation on the company’s earnings, followed by an unscripted Q&A with financial analysts.
The research team hypothesized that lying would be more cognitive taxing than telling the truth. Compared to making a truthful statement, it might be easier to use simpler language during a lie.
“Because of the increased cognitive load and the human mind’s finite processing capacity, liars will have difficulty simultaneously maintaining a false story and producing linguistically complex utterances,” Burgoon and colleagues write. “In other words, the more difficult it is for deceivers to concoct a believable response, the more they must resort to simpler language.”
Previous experiments indicate that liars enlist specific strategies to try to distance themselves from their lies. They try to keep statements short and use vague or hedging language (e.g., “I guess” and “maybe” or “could,” “might”). Liars also tend to avoid first-person singular pronouns (e.g., “I,” “me,” “myself”), which are usually a clear signal that the speaker is taking ownership of a statement.
Using special software, the researchers analyzed sound recordings from these calls at a granular level. In order to differentiate between lies and true statements in the recordings, a financial expert was recruited to code the overstatements and lies related to financial fraud.
The analysis confirmed that there were certain speech patterns the executives fell into while lying. Fraud-related speech tended to be more “fuzzy” than non-fraudulent statements; the executives used more hedge words, more distancing language, and more uncertain statements. Contrary to their expectations, the researchers also found that fraudulent statements tended to be longer and more detailed than honest ones.
Executives also used more positive and fewer negative emotional words during fraudulent statements, “suggesting a desire to put a positive spin on what was being reported.”
The researchers caution that the results of this study are limited because this study was based on only two people from one company. However, as different types of data become increasingly available – including call transcripts, online chat logs, social media – researchers will have a bigger pool of materials to draw from.
“For better or worse, new frauds are exposed on a regular basis leading to an expansion of available data. As additional candidate scenarios and features become available, richer analysis is possible,” the researchers conclude.
 
References
Burgoon, J., Mayew, W. J., Giboney, J. S., Elkins, A. C., Moffitt, K., Dorn, B., … & Spitzley, L. (2015). Which spoken language markers identify deception in high-stakes settings? Evidence from earnings conference calls. Journal of Language and Social Psychology. doi: 10.1177/0261927X15586792
Vrij, A., Granhag, P. A., & Porter, S. (2010). Pitfalls and opportunities in nonverbal and verbal lie detection. Psychological Science in the Public Interest, 11(3), 89-121. doi: 10.1177/1529100610390861
from Association for Psychological Science » Minds for Business http://bit.ly/1QS4rdA

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Want to get promoted, ladies? Save up for platform shoes and voice coaching

PAFF_021116_BackdoorBacklash_newsfeatureAsking for a promotion, negotiating for a raise, or speaking up about concerns may help a male employee get ahead, but a female employee could easily end up labeled as “bossy” or worse for the exact same behavior. Research suggests that many women rightly worry that being “too aggressive” may result in backlash from their colleagues and supervisors.
This double-standard may help explain why women across the globe still struggle to gain leadership positions and pay parity with their male peers.
“Management and supervisory positions are overwhelmingly held by men. Within each sector men are more often promoted than women, and paid better as a consequence. This trend culminates at the very top, where amongst CEOs less than 4% are women,” according to the European Union’s Commission on Justice.
A large body of research suggests that people tend to penalize others for violating behavioral norms. Beliefs about appropriate roles for men and women often encourage men to be strong and assertive, and women to be warm and nurturing. Both men and women risk being socially penalized for violating these prescribed gender roles.
For example, Yale University researcher Victoria Brescoll has found that women are frequently penalized for engaging in the assertive behaviors necessary for professional success. In a 2008 study published in Psychological Science, Brescoll and colleagues found that men received a boost in their perceived status after expressing anger. On the other hand, “women who expressed anger were consistently accorded lower status and lower wages, and were seen as less competent.”
However, a new meta-analysis suggests that there are ways for women to avoid some of this workplace backlash. Study authors Melissa Williams (Emory University) and Larissa Tiedens (Stanford University) designed a meta-analysis of 71 studies examining gender, dominance, and backlash.
Consistent with previous research, they found that, compared to men, women were much more likely to be punished for showing dominance behaviors. That is, assertive behaviors like asking for a raise or talking during a meeting can carry substantial professional risk for women.
They also found that although dominant men tend to get a professional boost, women often pay a price in “likability.” Being dominant did not hurt perceptions of women’s competence, but it did make people like them less. Importantly, Williams and Tiedens found that likability can be an even more important factor than competence for getting hired.
“Male leaders are able to express dominance—without incurring liking penalties—in ways that female leaders are not. Past research has established, for instance, that employees must be seen as likable as well as skilled to be hired or promoted— competence alone is insufficient,” Williams and Tiedens explain in the journal Psychological Bulletin.
But the researchers found that not all forms of dominance led to backlash. Interestingly, the results suggested that implicit forms of dominance, such as body language or facial expressions, did not harm women’s status.
“There appears to be no need, for instance, for leaders to shy away from taking a commanding presence in a meeting, such as by standing tall and using a loud voice,” Williams and Tiedens write.
The researchers admit that this is not a solution to the systemic problem of gender bias. However, Williams and Tiedens hope that these results will provide women with tactics – such as using dominant body language – that can help them achieve professional goals without incurring social costs.
 
References
Brescoll, V. L., & Uhlmann, E. L. (2008). Can an angry woman get ahead? Status conferral, gender, and expression of emotion in the workplace. Psychological Science, 19(3), 268-275. doi: 10.1111/j.1467-9280.2008.02079.x
Williams, M. J., & Tiedens, L. Z. (2016). The subtle suspension of backlash: A meta-analysis of penalties for women’s implicit and explicit dominance behavior. Psychological Bulletin, 142(2), 165. doi: 10.1037/bul0000039
from Association for Psychological Science » Minds for Business http://bit.ly/1o7TyYo

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For Job Interviews, Earlier in the Day May Be Better

PAFF_063015_InterviewTiming_newsfeatureDuring a job interview, many applicants worry that their professional fate rests in the first few moments of the interview. After a few minutes—or even seconds—the interviewer has sized them up and arrived at a decision.

But new research suggests that there may be a different factor for job candidates to worry about: timing. Data gathered by psychological scientists Rachel Frieder (Old Dominion University), Chad Van Iddekinge (Florida State University), and Patrick Raymark (Clemson University) challenge the common belief that interviewers rely on near-instantaneous snap judgements. Instead, their research suggests that a successful interview may depend on your place in the interview schedule.

For the first one or two applicants, interviewers don’t have much information to process, allowing them to make a decision about a candidate’s suitability fairly easily. But, as more candidates are interviewed, interviewers have to remember, process, and compare increasing amounts of information. Therefore, interviewers may resort to using rule-of-thumb strategies, also known as heuristics, to help them make decisions.

“We expected that interviewers would take longer to make decisions about the first few applicants they interviewed and take less time to make decisions as they interviewed additional applicants,” Frieder and colleagues write.

To test this theory, the researchers analyzed data from hundreds of real job interviews conducted at a university career fair. A group of 166 experienced interviewers representing a variety of organizations interviewed a total of 691 students.

Each interviewer conducted an average of six interviews, each scheduled for a 30-minute time slot. Immediately after each interview session, interviewers rated the performance of the job candidate and noted at what point in the interview they had come to their decision.

According to the interviewers’ self-reports, snap judgements were actually very rare: Interviewers reported making a decision within the first minute of the interview only about 5% of the time. This generally happened when an applicant’s performance was either exceptionally good or bad.

Most of the time, interviewers reported making their decision between 5 and 15 minutes into the interview. However, over 20% still hadn’t made up their minds even after the interview was over.

The data showed that interviewers tended to take progressively longer to come to a decision after the first few applicants. However, after talking to about four applicants, the deliberation time began to decrease after each additional applicant.

In other words, as the number of applicants increased, interviewers took longer to deliberate because they had more information to process. The findings suggest that once the cognitive load of all the information got to be too much, around the fourth candidate, they began to rely more on heuristics to come to a quicker, more automatic decision.

“One implication is that interview order may place some applicants at a disadvantage,” the researchers conclude. “For example, applicants interviewing later in the schedule might not get as much opportunity to perform as those earlier in the schedule.”

Other factors also influenced how quickly an interviewer came to a decision. Interviewers who engaged in small talk with applicants tended to make quicker decisions, as did interviewers with more experience.

The researchers caution that they were not able to determine whether interviewers who took longer to make a decision were actually better at choosing high-performing applicants. It’s entirely possible that quick judgements were just as accurate at gauging talent as more deliberate interviews.

However, organizations may benefit from making sure that interviewers give each candidate an equal shot to show their stuff during the interview. The researchers suggest limiting the number of interviews that an interviewer conducts in immediate succession and ensuring there are breaks between interviews.

 

Reference

Frieder, R. E., Van Iddekinge, C. H., & Raymark, P. H. (2015). How quickly do interviewers reach decisions? An examination of interviewers’ decision‐making time across applicants. Journal of Occupational and Organizational Psychology. doi: 10.1111/joop.12118

from Association for Psychological Science » Minds for Business http://bit.ly/1U5sjcj

 

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A ‘Learning’ Attitude Helps Boost Job Search Success

PAFF_060315_LearningAttitudeSuccess_newsfeatureFor most jobseekers, the job hunt is no picnic — disappointment, rejection, and desperation seem to have become hallmarks of the typical job search. It’s common to hear stories of job hunters who have submitted hundreds of applications before getting a single interview.

No one will argue that looking for a new job isn’t stressful, but new research finds that the way people manage and channel this stress could have a big impact on their ultimate success.
Continue reading “A ‘Learning’ Attitude Helps Boost Job Search Success”