Friday, September 24, 2010

I, Toby Flenderson (And Not Bernie Madoff!)

Without going into laborious detail, I work in human resources, which means I disseminate truly devastating information on a semi-regular basis. And as such, I've had ample opportunity to learn how to do it–at least, learn well enough to save my windows from bricks. One of the things I've picked up is the awesome power of Fridays. Seriously: people take character-assasinating threats to their livelihood much better on a Friday.

But I'm neither the first nor last person to figure this out. Governments do it to cover their hides; companies do it to sway their shareholders–why, it's become a downright fixture in our lives. Who hasn't observed the uncanny esteem Fridays curry with earnings reports? With press secretaries? It's a form of opacity, really. But, the nice thing is no one notices. No one's going to defer his or her well-laid plans. No one's going to derail his campout. It's brilliant because it's opaque–but opaquely so.

And who would ever want to be transparently non-transparent? Decide to equivocate, you fool no one. Decide to deceive, you might get caught. And yet, you see these tactics everywhere. (Bernie Madoff, anyone?) But why would they get employed? Why not use Fridays instead? Let's consider the options:

1) Framing effects (like brandishing the "Friday"): they can't conceal the truth; but they can make it more palatable. Now, if the truth itself is something of value–say for keeping up appearances or cultivating confidence–you get the best of both worlds. My workplace is the perfect example: it's of independent value for me to appear forthright, frank, honest, etc. because then (and only then) do I seem like a neutral arbiter. In that context, some unnerving truth is essential: it's expected I crack some eggs. But I don't have to be a butcher to make an omelette. And that's key: I also have to shade what truth is, because people appreciate it in the abstract but detest it when it's real. People love public spending, but hate public debt–love fiscal prudence, but hate being cheap. And the list goes on and on. It's no wonder governments prefer this: states don't derive their support on the consent of a skeptical public. And it's no wonder businesses prefer it: investors seldom flock to owning shares in an obfuscate whole.

But there are exceptions.

2) Dodging the issue (otherwise known as equivocating): it doesn't pass the smell test, usually. We're all factory-equipped with thresholds for bullshit, and this one trips the alarm. But it can be useful in a few circumstances. Consider the shoplifting granny. Hasty generalisations on the part of her audience give her a licence to blather nonsense. For granny, that's is all we need to hear. Similarly, the confirmation bias insulates well liked personalities from the public's scrutiny. (Are you really going to disagree with Air Jordan?) And the same dynamics are at work in primaries: Mike Huckabee was preaching to an admiring choir, so his lunacy never got vetted. And the press corps too: Helen Thomas was a sweet enough lady, so we overlooked her racism. Cognitive psychology, basically, gives some people a free pass. And why would any of them choose framing instead? Talk about opportunity costs!

3) Lies: Deception is a gamble; and lying takes the risk. The formula's pretty simple. Let x be the cost of the truth. Set zero as the maximum payoff for deception. (The cover-up worked, which means the status quo remains and you lost nothing.) For any lie a, there's a fixed cost of exposure, y, which makes the total cost of a equal to y discounted by the possibility it doesn't happen.

Y's initial value is usually y > x (meaning it's more expensive to get caught lying than it is to confess). But is only a speculative event, as we said; so we get the cost of a by multiplying y by its probability of happening (an integer between zero–impossible–and one–unavoidable). By doing so, we find the worthwhile lie at a < x, where getting exposed is sufficiently unlikely to adjust the fixed cost y below x.

Perhaps this sheds some light on Mr Madoff. Obviously, his downfall cost him billions (and his liberty). But any confession made during the years leading up to it would have cost just as much: it doesn't really matter if you admit to committing fraud, you still committed it; it doesn't really matter if you tell your investors how you bilked them, you still end up ruined. So at some point, x became homogenous with y. And at that point, almost any a looks good.

I'm just glad I'm disposed to framing. Being Toby's not all bad. Really!

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