Other People’s Mistakes
Other People’s Mistakes
Aug 5, 2021 by Morgan Housel
George Carlin once joked how easy it is to spot stupid people. “Carry a little pad and pencil around with you. You’ll wind up with 30 or 40 names by the end of the day. It doesn’t take long to spot one of them, does it? Takes about eight seconds.” Like most comedy it’s funny because it’s true.
But Daniel Kahneman mentions a more important truth in his book, Thinking, Fast and Slow: “It is easier to recognize other people’s mistakes than our own.” I would add my own theory: It’s easier to blame other people’s mistakes on stupidity and greed than our own. That’s because when you make a mistake, I judge it solely based on what I see. It’s quick and easy.
But when I make a mistake there’s a long and persuasive monologue in my head that justifies bad decisions and adds important context other people don’t see. Everyone’s like that. It’s normal.
But it’s a problem, because it makes it easy to underestimate your own flaws and become too cynical about others’.
I try to stop myself whenever my explanation for other people’s behavior – financial or otherwise – is “well, they’re not very smart.” Or greedy. Or immoral. Yeah, sometimes it’s true. But probably less than we assume. More often there’s something else going on that you’re not seeing that makes the behavior more understandable, even if it’s still wrong.
A few things make it that way.
1. When judging others’ poor behavior it’s easy to underestimate your own susceptibility to the power of incentives.
The worst behavior resides in industries with the most extreme incentives. Finance, where scams are everywhere. High-end art, where counterfeits proliferate.
But it’s important to ask: Are immoral people attracted to industries where there are big rewards for bad behavior? Or do big rewards for bad behavior cause good people to slide into immorality, justifying their decisions along the way? I think so often it’s the latter.
It helps explain things like the 2008 financial crisis. Was it caused by greedy bankers? Maybe here and there. But the huge majority of it was good, honest people who wanted to do the right thing but whose definition of “the right thing” is instantly warped when they’re paid $8 million a year to sell subprime bonds.
Incentives are almost like a drug in their ability to cloud your judgment in a way you would have found unthinkable beforehand. They can get good people to justify all kinds of things.
That doesn’t excuse bad behavior. But it’s hard to know what you’d be willing to do until you’re exposed to an extreme incentive, and that blindness makes it easy to criticize other people’s mistakes when you yourself may have been just as tempted if you were in their shoes.
2. It’s hard to tell the difference between boldness and recklessness, greed and ambition, contrarian and wrong.
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