Category Archives: organizational culture

Why we should be more ignorant

Contrary to the popular belief that education is eradication of ignorance, learning is driven by ignorance.

While life-long learning is probably one of the top items on any CEO’s agenda, few really know how learning takes place. This leads to a continuation of flawed models and a replication of school/university systems.

What we really need is a fresh look at learning within organizations based on our understanding of learning. I write about this in the latest Mint article in “Behavior By Brain” series.

Dukes of Moral Hazard

The state of affairs of one’s personal finances have helped behavioural scientists model two aspects of their professional lives: to estimate the level of risk they may be willing to take at work to complement their personal risk propensity, and to signal to potential employers or relevant authorities on their reliability to adhere to regulations in the future.

Jennifer graduated at the top of her class in Purdue the same year she married her high school boyfriend. Over the next decade her life saw its ups and downs: she joined a bulge bracket investment bank in New York, moved into a charming townhouse on Long Island; she worked her way up in the trading team for institutional markets, and went through a messy, stressful divorce- during the settlement of which she was diagnosed with rheumatoid arthritis and forced to take a sabbatical from her job. Her high levels of debt brought on by the burgeoning needs of her fast-track lifestyle, multiple mortgages, medical bills and alimony payments to her unemployed husband, meant that she was back looking for high-profile jobs before she had made a full recovery.

By then her debt had caused her consumer credit score, like millions of other New Yorkers, to plummet. As of 2015, the average revolving debt for an American household is $15,609, and the average mortgage debt is $156,706. Credit card debt is now second only to student loans as the largest source of unsecured debt in the United States.

But here’s the kicker: Jennifer’s low credit score puts her at a considerable disadvantage during job interviews. FICO awards no concessions to single divorcees paying alimony, and a large number of employers have now begun to see credit history as a substitute for an applicant’s family background, reliability and a sense of responsibility. This is truer in the financial services industry, particularly for job profiles such as trading, that require employees to make quick, sometimes risky, but extremely profitable decisions on behalf of their company. If the risk pays off, a portion of profit made on the trade is awarded to the employee. Outside of employment, credit scores have also become an important point of reference when leasing apartments or purchasing a cellphone on contract.

The behavioural trigger for such risk taking behaviour is explained by a concept in behavioural economics called loss aversion: picture a visitor to a casino who has already lost $10,000 at roulette. He is more likely to take riskier bets now as compared to when he first stepped in, hoping to quickly nullify his initial loss- and being gleefully ignorant of the prospect of losing $10,000 more in the process.

It is natural for readers to feel indignant at the unfairness meted out to Jennifer. From employers’ perspective, the motivations for such discrimination can be explained by two related concepts: agency dilemma and moral hazard. The former comprises of a principal who hires an agent to make decisions on her behalf. The agent, however, is motivated to pursue his own interests, not those of the principal. A necessary condition is that there is asymmetric information between the two parties: the principal is not aware or not capable of being aware of all of the agent’s activities. The second concept – moral hazard, refers to a particular situation of the agency dilemma, where the agent engages in riskier behaviour because he is protected from its consequences.

The subprime mortgage crisis of 2008 is an example of a continuing chain of moral hazard. The players at each step of the sequence- realtors, consumer bankers, investment bankers, insurance companies, credit rating agencies and regulators- all fuelled by ever-increasing property prices, took higher risks because each felt protected from the repercussions of their decisions as long as they passed the buck up the chain. At the tipping point of the crisis, property prices started to fall and set off a chain reaction that brought the sequence of moral hazard to its worst possible outcome – a global financial meltdown.

Financial regulators have since commandeered several important legislations to minimise moral hazard. For obvious reasons these new legislations have relied on several non-conventional fields of study, including behavioural sciences- which have progressed far beyond being merely an intuitive, behind-the-scenes predictor in assessing such risk. New algorithms by leading credit bureaus attempt to model behavioural traits that predict not just one’s creditworthiness, but also how reliable they are in their personal and professional lives. The Fair Isaac Co. (FICO), for example, uses their Medical Adherence Score to predict the likelihood of a patient following through with their prescribed medication. Other bureaus use similar models to predict asset-side information of clients, which have so far been a major blind spot for the industry: the Income Insight Score by Experian uses credit and personal history to predict an individual’s income levels. Similarly, Equifax offers two products to companies to help predict potential consumers’ discretionary spending power.

The successful use of holistic personal data showcases the predictive power of behavioural models, and thus the ability of university departments and firms that deal with behavioural economics- to widen the scope of predictive analytics. Variables from one’s personal life- number of marriages or broken relationships, frequent visits to party towns and pilgrimage towns (or both), and even the extent of social media presence- may wield a substantial advantage over traditional variables that are restricted to their isolated sphere of study. Moreover, such singular risk assessment models of ex-ante moral hazard come with limitations. In France, for example, young adults whose parents have had few or no accidents (and presumably are safe drivers), are offered lower premiums for their own insurance policies. Over the years, the probability of these youth being involved in accidents has proven by studies to be equal to those youth with parents who were deemed ‘reckless’. Yet, moral hazard may explain these figures in reverse – those youth with lower premiums purchase more comprehensive insurance policies, and are thus more likely to take higher risks on the road. It is this familiar sinusoidal pattern and its moderating effects that must make Jennifer hopeful about not just about her credit prospects, but life in general.

Kids sit back and wait for the bailout

Image Source: The Daily Omnivore/Original Owner: The New Yorker

We are partners in The India Backbone Implementation Network


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Implementation has been a major problem in India, particularly in public policies and programs. Planning Commission jointly with India@75 foundation has launched a unique initiative- India Backbone Implementation Network (IBIN) to remove bottlenecks for improving implementation of policies. Pronounced as ‘Ib’+ ‘In’, IbIn combines ‘Ib’ meaning now in a Hindi dialect and ‘In’ for India. It echoes the founding ethos of IbIn: India Now.

Final Mile is proud to be a partner in this ambitious initiative. At the core of the implementation problem is behaviour of individuals, agencies and groups and the lack of coordination between them. An accurate interpretation of the problem will help us design interventions to influence the behaviour of stakeholders involved in policy implementation. Final Mile hopes to bring in its expertise in Behavioural Sciences and Design to drive collaboration and improve coordination among the agencies involved in policy implementation. We understand that its a long journey, but one that we must start now.


“Citizens in India are fed up with foundation stones strewn across the country by political leaders yearning for the limelight. They want more ‘finishing stones’.  Projects are stuck in tardy processes of approval and snarled in inter- departmental wrangles.

In India, a highly diverse as well as democratic country, consensus is required for all stakeholders to move together, forward and faster. This consensus cannot be commanded. We need another mechanism specifically designed to bring people with different perspectives together: to listen to each other, to distill the essence of their shared aspiration for the country, and define the critical principles they will adhere to in their work as partners in progress. In other words, a backbone capability within the system, that supports collaborative approaches to solving complex/multi-layered issues, is required. The India Backbone Implementation Network (IbIn) will play this role.
The concept of the IbIn has been developed through extensive discussions to determine the root causes for coordination and implementation failures within the country and explore methods of coordination and effective implementation adopted by other countries. The concept of an IbIn has also been incorporated into the 12th Plan.

The architecture of IbIn has been designed along similar principles as the TQM movement of Japan. TQM was a movement of adoption of new techniques by several organizations to improve performance in multiple places in Japan.

The objective of IbIn is to promote widespread capabilities in the country to systematically convert confusion to coordination, contention to collaboration, and intentions to implementation. ” (Excerpts from

A storm in the brain

We are obviously talking about Brainstorming here. I guess most of us have been in some and walked out with a sense of accomplishment.  Since Alex F. Osborn, an Advertising Executive introduced this to us in 1953, it has made way in to all kinds of organizations. Of course, Scott Adams, creator of Dilbert, has a different story and according to him ‘Brainstorming got its name from a method that was developed during the dark ages. The technique involved removing the brains of smart people and leaving them out in a storm. The storm-washed brains would then be beaten against flat stones and hung out to dry. Later they would be ironed to get the wrinkles out. After the freshly laundered brains were sown into their original skulls, the smart people would be expected to come up with great ideas. If they didn’t, it was proof they were witches” (The Joy of Work, 1998)

On a serious note, Osborn proposed that we could get great ideas if we deferred judgement and focused on quantity. The world went about doing it although not entirely sticking to the process laid out by Osborn, Here is the interesting thing though, no study so far has proved that Osborn was right. Brainstorming has no scientific basis, even though many of us might feel that it works. In fact more studies have proven otherwise, that we generate more ideas as individuals as opposed to doing it in a group.

Jonah Lehrer, in his latest book ‘Imagine: How creativity works’ talks about the inadequacies of Brainstorming as a creativity enhancing technique. There is now a growing body of evidence against the idea of this harmonious technique that discourages dissent and criticism.

He cites the example of how Pixar completely reinvented the idea of brainstorming. At Pixar, dissent and criticism are encouraged. Bad ideas are torn apart, but one has to have a better solution, its not just about criticizing. You need to do ‘plussing’, take the idea you criticized and improve it or propose a better alternative. In most studies, including the first empirical study on brainstorming conducted at Yale in 1958, there is little evidence that brainstorming works as it is meant to. Of course, believers in brainstorming contest these findings. A study by Charlan Nemeth at UC-Berkeley found that criticism and dissent increased the number of ideas and interestingly, the process of idea generation continued long after the brainstorming session. This seems rather counter-intuitive. Criticism and Dissent lead to Anger and we have known to believe that anger can only be bad. This Scientific American article talks about the some of the positives of Anger. ( As always, such studies come with few riders.  Anger in moderation apparently boosts creativity. However prolonged anger isn’t very good for creativity. In the short run it increases our determination and resolve to demonstrate our capabilities it seems.

Now what are the possible implications. Junking the idea of a brainstorm in its current form is a good start. However, we don’t want to get in to fist fights and increase enemies at the workplace. A good way is to build a culture where people are less sensitive to dissent and criticism. A boss who welcomes criticism and encourages dissent is a good start. If criticism and dissent are the norm, the people in the session should have trust in other people’s intentions and the maturity to not take this personally. This could pose a significant challenge. Its easy for people to take positions and get defensive. If we are serious about real creativity, these challenges need to be overcome. One way would be to have a strict screening mechanism and get the right kind of people in to the room to make this work. So, avoid the trouble makers and those who can’t handle a debate and criticism professionally. Equally keep out people who are unnecessarily nice. In its current form, brainstorming seems like an exercise designed to keep everyone satisfied by avoiding conflict and friction. Everyone behaves and everyone gets a medal! While this gives us a lot of comfort, it has no use beyond that. Come to think of it, expecting the spark of creativity without friction is counter-intuitive.

And if you need further proof of the actual ‘benefits’ of brainstorming, this line by Scott Adams should do the trick. “This brainstorming process lost favor everywhere except in England, where it was credited over the years with creating such great ideas as warm beer, over-taxing the American colonies, poll tax and pissing off the Irish” I am sure this line makes the English people angry and may be that’s a good thing!

So, the next time you want to Brainstorm try to create that storm rather than chasing the calm.

Subtle nudges to instill integrity

As a bank, how do you instill integrity into your employees, which is crucial for your overall success and day-to-day functioning?

Instilling integritySee it large

Syndicate Bank, intuitively does a great job at that by using subtle nudges and showcasing other employees who have proved their honesty.

Social proof, demonstrating desirable behaviour, will enable employees to better resonate with bank values, getting them to mirror these very behaviours.

Hallway posters don’t stand a chance to influence actions as much as these evidently tangible conducts.

So, how are you, as a company, working towards influencing employee behaviour?