Phil Rosenzweig likes criticizing other people. He is usually correct. Still, at his worst, he is highly selective in his criticisms. Rosenzweig seems starstruck by CEOs and their dodgy pronouncements. He happily agrees with dubious advice from top managers. He shows a bias towards a bias to action. Yet, he gets out his microscope when examining academic writing.
The Error Of Overconfidence Research
In Left Brain, Right Stuff he dissects academic overconfidence research for, amongst other things, a failure to define overconfidence clearly. Many points are well made but Rosenzweig isn’t half as careful elsewhere.
A Bias Towards A Bias To Action?
What bias means to him isn’t clear. In the book he supports the, frankly extremely silly, “bias for action” so popular with macho strategy writers. In evidence for this, he tells us the story of a team in a stock picking competition. Their “bias” meant they took a “risky” strategy because they realized that the prize was only for coming first.
In such a situation, however, any expected value model would recommend such a “risky” strategy. It is better to risk all and maybe you win than play sensibly and guarantee second place in a game where only first place gets a prize. Thus taking an “aggressive and sometimes extremely risky strategy” (Rosenzweig, 2015, page 75) surely can’t be evidence of bias. It is just a reasonable response to the incentives. This ‘risky plan’ would be adopted by any “unbiased” decision-maker. Rosenzweig even implies this in saying that the team showed “an astute understanding of the competitive context”(page 75). I.e., they weren’t biased.
That they took the risky strategy isn’t evidence of a bias towards action. It is basic math.
Overconfidence About A Bias Towards a Bias To Action
If bias is another word for a clear understanding of the incentives in this market it is hard to reconcile with the idea that “cognitive biases are unconscious”(page 75). Rosenzweig realizes this. He, therefore, just abandons any attempt to properly define bias. He rips into overconfidence bias research for not being specific enough about what overconfidence means. Yet, he won’t specify what bias itself means. Quite frankly he has a bias towards a bias to action. He doesn’t really make sense on this topic.
Rosenzweig defends a bias by illustrating how unbiased behavior is good. Not his best moment.
For more on real-world decision making see here, here, and here.
Read: Phil Rosenzweig (2014), Left Brain, Right Stuff: How Leaders Make Winning Decisions, Public Affairs.