Risk Literacy Builds Trust

Risk Literacy Builds Trust

In his book Risk Savvy Gerd Gigerenzer writes about a private medical panel and lecture series that he participated in. Gigerenzer gave a presentation about the importance of risk literacy between doctors and their patients and how frequently both misinterpret medical statistics. Regarding the dangers this could pose for the medical industry, Gigerenzer wrote the following, recapping a discussion he had with the CEO of the organization hosting the lectures and panel:

“I asked the CEO whether his company would consider it an ethical responsibility to do something about this key problem. The CEO made it clear that his first responsibility is with the shareholders, not patients or doctors. I responded that the banks had also thought so before the subprime crisis. At some point in the future, patients will notice how often they are being misled instead of informed, just as bank customers eventually did. When this happens, the health industry may lose the trust of the public, as happened to the banking industry.”

I focus a lot on healthcare since that is the space where I started my career and where I focused most of my studies during graduate school. I think Gigerenzer is correct in noting that risk literacy builds trust, and that a lack of risk literacy can translate to a lack of trust. Patients trust doctors because health and medicine is complex, and doctors are viewed as learned individuals who can decipher the complexity to help others live well. However, modern medicine is continuing to move into more and more complex fields where statistics and risk play a more prominent role. Understanding genetic test results, knowing whether a given medicine will work for someone based on their microbiome, and using and interpreting AI tools requires proficient risk literacy. If doctors can’t build risk literacy skills, and if they cannot communicate risk to patients, then patients will feel misled, and the trust that doctors have will slowly diminish.

Gigerenzer did not feel that his warning at the panel was well received. “The rest of the panel discussion was about business plans, which really captured the emotions of the health insurers and politicians present. Risk-literate doctors and patients are not part of the business.”

Healthcare has to be patient centered, not shareholder centered. If healthcare is not about patients, then the important but not visible and not always profitable work that is necessary to build risk literacy and build trust won’t take place. Eventually, patients will recognize when they are placed behind shareholders in terms of importance to a hospital, company, or healthcare system, and the results will not be good for their health or for the shareholders.

Discount Confidence

Discount Confidence

You should probably discount confidence, even your own, when it comes to the certainty of a given outcome or event. I previously wrote about confidence stemming from the logical coherence of the story we are able to tell ourselves. I have also written about how logical coherence of personal narratives is easier when we lack key information and have a limited set of experiences to draw from. The more we know, the more experiences we have, the harder it becomes to construct a narrative that can balance conflicting and competing information. Laddering up from this point, we should be able to see that the more detailed and complete our information, the less coherent and easily logical our narrative about the world should be, and the less confidence we should have about anything.

 

If you have a high level of confidence in your own intuitions, then you probably don’t know enough about the world. If someone tells you they are very confident in something, like say an investment strategy, then you should probably discount the outcome based on their certainty. They may still be right in the end, but their certainty shouldn’t be a factor that leads to your support of the outcome they tell you to be a sure thing. As Daniel Kahneman writes in Thinking Fast and Slow, “The confidence that people have in their intuitions is not a reliable guide to their validity. In other words, do not trusty anyone – including yourself – to tell you how much you should trust their judgment.”

 

We tend to be very trustworthy. Our society and economy run on trust that we place in complete strangers. Our inclination toward trust is what causes us to be so easily fooled by confidence. It is easy to assume that someone who has a lot of confidence in something is more trustworthy, because we assume they must know a lot in order to be so confidence. But as I laid out at the start of this post, that isn’t always the case. In fact, the more knowledge you have about something, the less confidence you should have. With more knowledge comes more understanding of nuance, better conceptions of areas of uncertainty, and a better sense of trade-offs and contradictions. Confidence alone is not a predictor of accuracy. Our assumptions influence how accurate our prediction is, and we can be very confident in our assumptions without having any concrete connection to reality.
Hindsight Bias and Misleading Headlines

Hindsight Bias and Misleading Headlines

I absolutely hate internet ads that have headlines along the lines of “Analyst Who Predicted Stock Market Crash Says Makes New Prediction.” These headlines are always nothing but clickbait, and reading Daniel Kahneman’s book Thinking Fast and Slow has given me even more reason to hate these types of headlines. They play on cognitive errors in our thinking, particularly our hindsight bias. When we look back at previous choices, decisions, and important events, whether in our individual lives or across the globe, our present state of being always seems inevitable. It was clear that the internet would lead to major social network platforms, and that those platforms would then contribute to major challenges and problems with misinformation, how could anyone fail to see this as far back as 2004?

 

The problem of course, is that the inevitable present moment and the pathway that seems so obvious in retrospect, was never clear at all. There was no way to predict a major housing bubble and financial collapse in 2008 if you were living in 2006. Headlines introducing some genius who saw what the rest of us couldn’t see before the Great Recession, and then claiming that this person has made another prediction are pulling at our emotions and playing with hindsight bias in a way that is deliberately misleading. The fact that someone made an unlikely prediction that came true is not a reason to believe they will be correct again in the future. If anything, we should expect some version of regression to the mean with their predictions, and assume that their next grand claim is wrong.

 

Rather than using hindsight bias to convince more people to follow links to bogus news stories, we should be more cautious with hindsight bias and our proclivity toward inaccurate heuristics. As Kahneman writes, “Hindsight is especially unkind to decision makers who act as agents for others—physicians, financial advisers, third-base coaches, CEOs, social workers, diplomats, politicians. We are prone to blame decision makers for good decisions that worked out badly and to give them too little credit for successful moves that appear obvious only after the fact. There is a clear outcome bias. When the outcomes are bad, the clients often blame their agents for not seeing the handwriting on the wall—forgetting that it was written in invisible ink that became legible only afterward. Actions that seemed prudent in foresight can look irresponsibly negligent in hindsight.”

 

Our key decision-makers can be punished by our hindsight bias. It can cloud our judgment for what we should expect in the future and lead us to trust individuals who don’t deserve trust, and mistrust those who are making the best possible decisions given a set of serious constraints. Hindsight bias deserves a greater recognition and more respect than use for misleading headlines.
Confident But Wrong

Confident, But Wrong

We like confident people. We like people who can tell us something direct and simple to understand while being confident in the statements they make. It makes our job as a receiver easier. We can trust someone with confidence because surely they have thought out what they say, and surely their lack of ambivalence or hesitation means they have solid evidence and a logical coherence to the ideas they are expressing.

 

The problem, however, is that confidence and accuracy are not actually linked. We can be very confident in something that isn’t accurate, true, or correct. What is even worse, it can be hard for us ourselves to recognize when our confidence is misplaced. As Daniel Kahneman writes in his book Thinking Fast and Slow, “We are often confident even when we are wrong, and an objective observer is more likely to detect our errors than we are.”

 

We need to surround ourselves with thoughtful people with expertise in important areas where we will be making crucial decisions. We need to collect input from more than one person before we express complete confidence in another person, idea, or prediction. In the real world, this isn’t often possible, but it is something we should at least be aware of.

 

Trusting confident people is a way of answering an easier question in place of a more difficult question. The question might be, should we invest in this mutual fund or that mutual fund, or should we have a totally different investment strategy that doesn’t involve mutual funds. Instead of asking ourselves how we should invest our savings and doing the difficult research to understand the best strategy for ourselves, we switch to a different question and ask, “do I trust the financial advisor giving me the investment advice?” This is an easier question for us to answer. If the advisor sounds smart, has awards on their desk or wall, and exudes confidence, then they are going to appear more trustworthy, and we will believe what they say. They can present us with a lot of confidence, but be totally wrong, and we will likely go with their recommendations anyway.

 

As Kahneman explains, however, outside observers can help us overcome these confidence traps in ourselves and in how we perceive others. If we have a reliable person with knowledge of a certain area, they can help us think through our arguments to determine if we should be as confident as we are. They can help us evaluate the claims of others, to determine whether their confidence is also well deserved or needs more scrutiny. What is important to remember is that we use confidence as a heuristic, and sometimes we can be confident, but wrong with our thoughts and opinions on a given subject.
Scaling Local Networks

Scaling Local Networks

Dave Chase presents an interesting idea about local networks in his book The Opioid Crisis Wake-Up Call. Local networks, Chase explains, grew from the small groups and tribes that humans evolved within. The systems and structures that allowed for cooperation in small groups, have evolved into complex structures of institutions like government, insurance risk pools, and social media. Chase focuses on the health insurance side of these local networks, and considers whether scaling local networks is really the best thing for today’s societies.

 

Chase writes, “When local networks are scaled up, you add hierarchy, says Brookfield [Venture Capitalist Chris Brookfield], and this creates opportunity for theft and redirection.”

 

The idea from Brookfield that Chase is getting at is the idea that many of our systems were formed in small groups and tight communities where social accountability and trust were easy. Everyone knew each other, the community had many close ties and interactions, and it was not hard to keep track of personal debts and obligations. As societies grew, and as our cities, nations, and global structures became more complex, we brought along the same structures of the systems that served our evolutionary tribal ancestors well.

 

However, as complexity grew within those structures, the pitfalls of scaling local networks became apparent. There are too many transactions, too many opportunities for theft and fraud, and too few people who have real oversight and understanding of how the systems work. This allows for abuse of the system and for people to get away with cheating.

 

In healthcare it might look like increasing premiums year-over-year, without a clear explanation as to why premiums are increasing. It might look like unnecessary healthcare expenditures, unnecessary healthcare procedures performed and billed by providers, and opaque systems of approving or denying medical claims. No one knows anyone anymore, no one is accountable, and no one has a clear accounting of debts and obligations. Some outright fraud occurs, a lot of abuse of the system occurs, and even more common, a lot of fudging things and pushing boundaries takes place. Our healthcare insurance system is built on a structure and idea that doesn’t fit the complex high scale realities of the world we live in today.

Segregation of Trust and Opportunity

“Very often the United States deals with its problems by sending them away to a different part of the country or a different part of town or, saddest of all, by sending them to jail,” writes Tyler Cowen in The Complacent Class. Cowen addresses our problems of segregation and incarceration in his book and looks at the strange reality in the United States where we have several booming metropolitan economies across the country and regions with high trust, cooperation, and philanthropy, but nevertheless we lead the world in the number of people incarcerated. Cowen sees our incarceration problem and this split between productivity and apparent moral/social failure as a consequence of American complacency in our modern age.

 

He writes, “Alexis de Tocqueville originally visited the United States to study its prison system, noting that [i]n no country is criminal justice administered with more mildness than in the United States. That has not been the case for some time.” We arrest a large number of people, many of whom have had high exposures to lead, have mental illnesses that have not been diagnosed, or have been implicated in implicit bias. Rather than confronting difficult realities and striving to improve society for those of us who are the worst off, there are some senses in which we have chosen to jail those of us who fall short rather than striving toward a better society.

 

“Cooperation is very often furthered by segregating those who do not fit in. That creates some superclusters of cooperation among the quality cooperators and a fair amount of chaos and dysfunctionality elsewhere.”

 

Complacency is taking the challenges and the hard parts of life and society and putting them in a box. We take the people who have failed, those who were not brought along through progress and development (often due to explicit exclusion), and set them aside. We physically locate them in prisons, run away from them to suburbs, or push them out of the downtown spaces we want to revitalize. Rather than working with these individuals and figuring out how we can help them connect with our globalized economy to find a way to be productive and engaged in the world, we shut them out and ignore them.

 

Cowen complains that we have lost a sense of betterment. We don’t believe we can solve big problems anymore, and instead of trying, we burrow into our own niches and push aside those who don’t fit with the narrow vision we want to realize. To get beyond this complacency requires inclusionary thinking that asks big questions about making the world better for everyone as opposed to just making ourselves better. Complacency segregates and ignores while the ambition we need to jump-start productivity acknowledges, innovates, and includes.

City Power

Where does power and authority come from? I think this is an interesting question to ask ourselves. What is it that makes a nation, a state, a city, or an institution powerful and authoritative? Thousands to hundreds of years ago we solved this question by outsourcing – we decided that a divine being had vested power and authority in a single individual. Today, what creates authority for our mayor, the supreme court, and our nation is not divine, but public trust, cooperation, and economic prospects. Building society with these blocks isn’t always perfect, but it has managed to work for humans for a few hundred years now.

 

Bruce Katz and Jeremy Nowak look at the implications of the authority and power philosophy I described above in their book The New Localism. They write, “The power of cities and counties is not like the power of nations or states. It is grounded in markets and civics more than in constitutions or charters.” The authors make a split between the local and national in terms of how power and authority play out to create a social structure of trust. Nations and states tend to be based on written charters agreed to by relatively diverse populations. Cities and local counties tend to be based on shared values, experiences, and backgrounds with shared economic prospects and motives being the ultimate binding glue.

 

I think there are two things that we can understand about national versus local systems from the description provided by Katz and Nowak. Nations and states, with authority grounded in written constitutions and charters, have a more permanent and stable feel to them. changing something in a drastic manner requires a change to the written founding documents. This gives national and state governments more structure and a form that is more likely to endure longer into the future, but at the cost of making them rigid and hard to adapt to changes in the economy, in social preferences, and other trends.

 

As a contrast, city and local governments, which are based more on shared interests, engaged civic actors, and local economic contexts are more flexible and adaptable to trends, changing social preferences, and new economic developments. This gives local and state governments the flexibility that is needed to take advantage of new innovations and technologies. It allows the governments to solve problems through the power of collective action, but it also leave them vulnerable to wild swings in economic fortunes and broader sociopolitical forces.

 

While nations are able to define their populaces and establish binding rules for citizens across decades or centuries, cities often find it hard to create structures and institutions that are guaranteed to last as long. City populations are more prone to leave when things go south, and the strength of institutions can be greatly diminished when the population falls and a few actors exert undue influence in local decision making. Nevertheless, humans seem to be drawn toward cities and seem to be willing to reinvent cities on a continual basis. This creates the dynamic power that cities are exerting today to solve problems and address global challenges that seem to be paralyzing nations.

Institutional Vehicles

In a public policy class, I had a professor once ask, “What is an institution?” One student responded that another professor once answered that question by stating that an institution was something you could kick. That’s true for some institutions (you can kick the supreme court, the city hall, and the local police department), but not all. We recognize marriage as an institution but you can’t kick it, and you certainly can’t kick equal protection under the law even though you theoretically could kick the actual paper on which the 14th amendment was written. Our institutions are sometimes physical buildings (or housed in them), but they are often processes, ideas, and systemic structures that guide our interactions, thoughts, and societies.

 

Our institutions only exist and function because we chose to place both trust and authority in our institutions. They can only operate when those within them and those who recognize them from the outside are aligned and coordinated together to recognize and legitimize action and outcomes from our institutions. In the book The New Localism, Bruce Katz and Jeremy Nowak explain what this means as problem-solving and initiative-taking move from Federal levels of governance to local levels of governance. They write, “New Localism refers to multi-sectoral networks that work together to solve problems, as well as the institutional vehicles they invent to get things done.”

 

Coalition building is an important part of politics, but it is also just an important part of life in general. If you want your family to go to Tahiti for the holidays instead of Grandma’s house, then you need to build the right family coalition to get everyone to agree. If you want to work on a specific project in the office, if you want to do a job a certain way, and if you want to reorganize the workplace, you need to build coalitions to get people on board to follow your direction. Coalition building is super complex at the national level, but at the local level where a smaller handful of actors can generate a bigger (relative) push, then coalition building is possible and creating or inventing institutional vehicles to move policy can be a powerful tool.

 

Networks are key in new localism because they open the possible avenues for movement via new institutional vehicles. Connections and shared goals behind key stakeholders make new localism possible with coalitions created through networks of like-minded community leaders. Those who have an interest in seeing reinvention, seeing successful policy development, and seeing adaptable and resilient communities can come together to form new coalitions, pulling people from varying public, civic, and private sector organizations. These groups can then think about the structures shaping our lives, our decisions, and our interactions, and how new institutions can alter the status quo to solve problems in new ways that are unique to a given city, metro, or region.

In-Group Loyalty

One thing I have written about on the blog a lot is our tribal nature and how we now live in world that demands global solutions and thinking that we seem to be unable to achieve due to our tribal evolutionary past. We face great challenges today and have opportunities to put in place policies that lift everyone, but often spend much of our time fighting among each other over meaningless tribal points. We become raving sports fanatics for no sensible reason, we will get in fights about which students from which college major is better, and we will form clubs around the typed of truck we drive and literally get in fist fights because we drive Fords and those people over there drive Dodges. For some reason, we feel compelled to be loyal to these groups, even when there is no tangible benefit (in the sense of really prospering or attracting new mates) to being so loyal to a meaningless group.

 

Our loyalty within these groups is a phenomenon that I find extremely interesting, and at times deeply troubling. One of the reasons why it can be so detrimental and scary for our society is well explained in The Elephant in the Brain by Kevin Simler and Robin Hanson, “When a group’s fundamental tenets are at stake, those who demonstrate the most steadfast commitment – who continue to chant the loudest or clench their eyes the tightest in the face of conflicting evidence – earn the most trust from their fellow group members.”

 

Groups favor and actively reward loyalty even when loyalty is undeserved. We praise those who stick with the party when the leader is clearly in the wrong. We say that true sports fans still show up and root for the team even when the team flat out sucks and isn’t even fun to watch. We encourage our fellow group members to stick with our side even when overwhelming evidence shows that our side is in the wrong.

 

This leaves me asking how we ever move forward based on shared understandings of reasonable facts? How do we improve our society if all we do is advocate for things that benefit our social group, even if those things are bad for everyone else? How do we create common understanding if we don’t acknowledge our group and our efforts to advantage our group over others?

 

I think a key is to begin working to show how meaningless many of the groups we belong to can be. On an individual level we need to develop skills to recognize when we are being defensive about something and showing group loyalty over an idea or to a group that just doesn’t matter. When we can start to step back and admit we were wrong and that changing our opinion doesn’t matter, we can start to move forward. The great challenge is doing this on a societal level, especially if bad actors don’t have the incentive to behave the same way.

Conflicting Views of the Continental Army

The American Founding Fathers and the citizens of the American Colonies had a lot of conflicting views about government and governance at the time of the American Revolution. Post war, the states existed as effectively autonomous sovereign nations tied together by shared yet distinct histories. During the war, the citizens needed an army capable of defeating the British, but also feared the power that a strong standing army would hold. Throughout the revolution and post-war period, the states understood that they would need to pay the army and pay for the support they received, but no one wanted to have a central authority collect monies to pay the soldiers and mercenaries who fought against the British. Joseph Ellis captures the conflict in his book The Quartet and writes,

 

“The unspoken and unattractive truth was that the marginal status of the Continental Army was reassuring for the vast majority of Americans, since a robust and professional army on the British model contradict the very values it was supposedly fighting for. It had to be just strong enough to win the war, or perhaps more accurately not lose it, but not so strong as to threaten the republican goals the war was ultimately about.”

 

The Continental Army at points was barely holding together with minimal supplies and food. Robert Morris, a private citizen, stepped in and paid the soldiers and army himself, from his own private funds, and was viewed as a war profiteer. The Colonies sought independence, but fears of a strong standing army and a history of abuses by a central authority created fear among the colonies that hampered their efforts to build a robust force to bring them the independence they desired.

 

The conflict within the mindset of the colonies is a phenomenon we still see happening within American politics today. Foreign policy and healthcare are two arenas where similar conflicts still emerge and are quite visible. We want stability, positive outcomes, and assurances that we will not be bothered with inconveniences, but we are barely willing to pay for it. We expect our government to be farsighted and to operate perfectly, but we refuse to fund it fully and look for any abuse of power and any misuse of money as an example of why we cannot trust and cannot fully fund our government. Healthcare eats an enormous amount of total spending (governmental, private, and individual) in our country, but we don’t seem to actually work toward the things that make us healthier. The government spends less that 1% of total budget on foreign affairs, but people assume we spend much more. In both of these areas, spending more directly to assist health and foreign aid would reduce the problems that arise later on and become our excuses and examples of why we cannot trust government. From our founding through today it seems that our distrust of government has been less in line with reality, and more in line with our fears and the stories we tell ourselves about what we need and what values we should try to live up to as a nation.