Scott E. Page on The Diversity Bonus

What if workforce diversity is more than simply the right thing to do in order to make society more integrated and just? What if diversity can also improve the bottom line of businesses and other organizations facing complex challenges in the knowledge economy? It can. And The Diversity Bonus shows how and why. Scott Page, a leading thinker, writer, and speaker whose ideas and advice are sought after by corporations, nonprofits, universities, and governments around the world, makes a clear and compellingly pragmatic case for diversity and inclusion. He presents overwhelming evidence that teams that include different kinds of thinkers outperform homogenous groups on complex tasks, producing what he calls “diversity bonuses.” These bonuses include improved problem solving, increased innovation, and more accurate predictions—all of which lead to better performance and results. Drawing on research in economics, psychology, computer science, and many other fields, The Diversity Bonus also tells the stories of people and organizations that have tapped the power of diversity to solve complex problems. The result changes the way we think about diversity in the workplace—and far beyond it. Read on to learn more about the Diversity Bonus.

What is the Diversity Bonus?
The diversity bonus refers to the increase in performance that results from cognitive diversity.

When team members think differently, when they bring different representations, categories, heuristics, models, and frameworks, their collective performance includes a diversity bonus, an extra amount. That bonus is a quantifiable, measurable value add.

Can you give examples of diversity bonuses?
I’ll give three. When multiple people make predictions, their collective error (the error of their average guess) depends in equal amounts on their average error and on the diversity of their predictions.  If each person made the same prediction, the crowd would be as accurate as the average person. If they make different predictions, the crowd is more accurate than the average person. In one study involving thousands of predictions by professional economists, the crowd was better than the average economist by 21%. That 21% is the diversity bonus.

Creative tasks produce similar bonuses. Psychologists measure the creativity of a person by the number of ideas she can generate. They measure the creativity of a team similarly. A creative team therefore requires creative people. It also requires diversity. If the creative people all have the same ideas, then the whole only equals the parts. If they differ in their ideas, they produce a diversity bonus.

Finally, when solving problems, diverse representations create what Stuart Kauffman called different adjacent possiblesA smart person can be stuck on a problem and another person might present a new adjacent possibility and get that person unstuck. New adjacent possibles create diversity bonus.

Where do you see evidence of biggest diversity bonuses?
The evidence from the academy is overwhelming. It used to be that most papers were written by one or two people. Now teams predominate, as noted in a major report by the National Research Council. Multiple studies based on about 20 million academic papers written by, among others, Brian Uzzi, Ben Jones, Richard Freemen, and Wei Huang, find that working with people from other schools or from different ethnic groups results in substantial diversity bonuses. Lada Adamic and coauthers find similar effects for patents. The deeper dives on both papers and patents shows a correlation between the number of ideas, and combinations of novel ideas. In brief, the evidence from almost every academic paper ever published and every patent ever issued by the United States strongly aligns with diversity bonuses.

I should add that in creative domains, diversity bonuses could be even larger. Just as the academy has now turned to teams, so has Hollywood and the music industry. Not that many people are aware that the modal billboard hit now has multiple songwriters. Pop music has followed the same trend as physics and computer science. The same goes for movie scripts. Most films are now written by teams.

Your core argument rests on cognitive diversity. When most people talk about diversity they mean identity diversity.   Are the two related?
Great question. Yes. The two types of diversity are interwoven. The connection merits a careful unpacking. Identity diversity refers to differences in race, gender, sexual orientation, ethnicity, physical capabilities, and culture. Cognitive diversity refers to differences in information, knowledge bases, representations, categories, heuristics, causal models, and frameworks. In thinking about how identity diversity correlates with and influences cognitive diversity, we must guard against simple one to one causal claims such as their being something called a “woman’s perspective.” Better to recognize that our identities consist of multiple dimensions that collectively influence what we know, how we see, and how we think.  Our whole selves contribute to our cognitive repertoires. We cannot pull out one component of identities and map it to one component of our cognitive repertoires.

While identity matters, it is also not the only contributor to cognitive diversity. Our experiences, formal training, work activities, social networks, and preferences all contribute to how we think. Identity interacts with each of these and how much it contributes in any one instance will vary. I would guess that identity matters more in discussions of health care than in a statistical analysis of the evidence for the Higgs’ Boson.

The contribution in any one context will be up for empirical studies to reveal. That said, I’m a theorist and I would warn against placing too much weight on empirical studies until we better learn how to work in diverse teams. As we learn how to achieve diversity bonuses, we will increase the likelihood and magnitude of those bonuses.

Do diversity bonuses exist for all problems?
No! Diversity bonuses will only exist on complex, high dimensional tasks. On routine tasks like processing claims forms, packing boxes, or chopping down trees, no bonus will exist. The performance of the team equals the sum of the performances of the individuals. Economists call such tasks separable.

Diversity bonuses arise in complex, high dimensional contexts. As work becomes more cognitive—most high value workers solve problems, design, predict, and create—diversity bonuses become more and more important.

How do diversity bonuses challenge current thinking?
Diversity bonuses challenge narrow “meritocratic” thinking. Diversity bonuses mean that the best team will not, as a rule, consist of the best performing individuals. The best team will include diverse thinkers. Hiring, college admissions, and promotion decisions tend to make direct comparisons among individuals rather than think about what a person brings to teams.

How does an organization produce diversity bonuses?
That’s a great question. It used to be that organizations had diversity policies. Now, almost all organizations speak about diversity and inclusion. That’s because diversity bonuses do not come for free. You cannot just toss diverse people in a room together and expect bonuses to fall from the sky. Bonuses happen for a reason. They have an underlying logic. The book lays out that logic to guide you to diversity bonuses. Without that logic, to paraphrase Da Vinci, you are setting sail without a rudder or compass.

The logic suggests the following: you must identify the tasks where diversity bonuses will exist, you must create space and opportunity for people to contribute, you must reduce biases in hiring and recruiting, you must adopt policies and protocols that enable diversity bonuses, and, most important, you must practice.

 

PageScott E. Page is the Leonid Hurwicz Collegiate Professor of Complex Systems, Political Science, and Economics at the University of Michigan and an external faculty member of the Santa Fe Institute. The recipient of a Guggenheim Fellowship and a member of the American Academy of Arts and Sciences, he is the author of The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies and Diversity and Complexity. He has been a featured speaker at Davos as well as at organizations such as Google, Bloomberg, BlackRock, Boeing, and NASA.

Luke Mayville: Is money-making an art or a mania?

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by Luke Mayville

“I don’t do it for the money,” reads the opening line of Donald Trump’s The Art of the Deal. “I’ve got enough, much more than I’ll ever need. I do it to do it. Deals are my art form. Other people paint beautifully…or write wonderful poetry. I like making deals.”

Contrary to the efforts of Elizabeth Warren and others to castigate Trump as a money-grubber—someone monomaniacally obsessed with accumulating wealth—the Trump campaign has sought to present him less as a money-maker than as an artisan and a master-builder whose greatness lies not in his wealth but in the structures he has built.

“In our business,” proclaimed Ivanka Trump in her speech at the RNC, “you’re not a builder unless you’ve got a building to show for it, or in my father’s case, city skylines.” Donald Trump’s ruling desire, the story goes, is not merely to accumulate but to build and create—jobs, skylines, deals.

This persona is in keeping with a story that Americans have long told about private ambition and the desire to get rich. Consider Ayn Rand, a writer who is idolized by Fortune 500 CEOs and who may be peerless in her influence on American culture. The heroes of Rand’s novels are not maniacal money-grubbers but rather inventors and architects. Howard Roark, the heroic protagonist of The Fountainhead (and a character whom, by the way, Donald Trump strives to emulate), is described by Rand not as a greedy egoist but as a man who “struggles for the integrity of his creative work against every form of social opposition.”

Ralph Waldo Emerson spoke for an American tradition when he insisted that the pursuit of wealth was driven by something much nobler than greed, ostentation, or a lust for power. “Men of sense,” wrote Emerson, “esteem wealth to be the assimilation of nature to themselves, the converting of the sap and juices of the planet to the incarnation and nutriment of their design.”

Emerson’s suggestion is that the Donald Trumps of the world should be recognized as master craftsman who repurpose the raw stuff of nature into ingenious works of art.

But as we learned in July, Trump’s Art of the Deal was ghostwritten. The real Trump, according to ghostwriter Tony Schwartz, is motivated not by the passion of the craftsman but by an insatiable desire for “money, praise, and celebrity.” What Schwartz revealed is that the career of Donald Trump does not fit the mold of America’s romantic ideal of money-making. Instead, Trump’s character and motives are better explained by an alternative strain of American commentary.

John Adams, who was the second President of the United States and also a shrewd critic of America’s emerging commercial culture, believed that the pursuit of wealth was driven by a raging passion for social distinction. The desire for riches was akin to political ambition, which Adams described as a motive that “strengthens at every advance, and at last takes possession of the whole soul so absolutely, that a man seeks nothing in the world of importance to others or himself, but in his object.” The desire for riches, which was merely one variety of the desire for praise and distinction, was maniacal because it was ultimately insatiable. “The love of gold,” wrote Adams, “grows faster than the heap of acquisition; the love of praise increases by every gratification, till it stings like an adder, and bites like a serpent; till the man is miserable every moment when he does not snuff the incense.”

Martin Luther King Jr. echoed Adams when he described Americans’ love of money as a variety of the “drum-major instinct,” a desire “to be out front … to lead the parade … to be first.” The desire to stand out was not a bad thing in itself. In fact, King believed that the instinct should be harnessed to motivate service to humanity. But much more common was the case of the avaricious man who, moved by the drum major instinct, buys a fancier car and builds a bigger house than the next man, all in an effort to out-do the Joneses.

Among the revelations of Trump’s ghostwriter was that the depiction of Trump as a passionate artisan—someone who crafts real estate deals in the same way that a poet writes poetry—was merely a cover-up used to hide his true ruling passion: to get rich and, beyond that, to prove “I’m richer than you”—to be distinguished and celebrated for his wealth.

Surely, not all money-making is driven by such self-absorption. Riches have often been the reward of the bourgeois virtues of thrift, saving, timeliness, and industriousness. Much of America’s wealth can in fact be traced to extraordinary feats of invention and ingenuity. But the phenomenon of Donald Trump reminds us that the idea of money-making as craftsmanship—even if it contains a substantial part of the truth—is also readily deployable as a self-serving myth. And the problem is not just that the myth excuses the greed of those billionaire politicians who wish to govern us. It also flatters the pervasive yearning for riches among the broader public, the same yearning that motivated droves of Americans to buy The Art of the Deal.

MayvilleLuke Mayville is a postdoctoral fellow at the Center for American Studies at Columbia University. He is a contributor to Commonweal and the author of John Adams and the Fear of American Oligarchy.

The Rise and Fall of American Growth is a New York Times Best-Seller!

GordonWe’re thrilled to announce that The Rise and Fall of American Growth by Robert J. Gordon will enter the New York Times Best-Seller list at #18 this month. Gordon’s book, which makes a critical contribution to debates surrounding economic stagnation, has been generating a wave of interest, with Adam Davidson’s New York Times Magazine piece on the book set to appear in print on Sunday. Davidson writes that the book “is this year’s equivalent to Thomas Piketty’s ‘Capital in the 21st Century’: an essential read for all economists, who are unanimously floored by its boldness and scope even if they don’t agree with its conclusions.” Robert Atkinson also mentioned the book in the Harvard Business Review, where he calls the stagnation of productivity “the central economic issue of our time.”

Gordon argues that economic growth cannot and will not continue unabated, demonstrating that the life-altering scale of innovations between 1870 and 1970 were unique, and can’t be repeated in our modern society. He contends that the nation’s already-slow productivity growth will be further held back by rising inequality, stagnating education, an aging population, and the rising debt of college students and the federal government:

Gordon infographic

Robert Gordon asks: Has the era of unprecedented growth come to an end?

This will be the fifth appearance of a PUP book on the New York Times bestseller list since 2000. The list includes our classic titles Irrational Exuberance, by Robert Shiller, On Bullshit, by Harry Frankfurt, This Time is Different, by Carmen Reinhart and Kenneth Rogoff, Alan Turing: The Enigma, by Andrew Hodges, and, now, Robert Gordon’s The Rise and Fall of American Growth. Congratulations to Robert Gordon and the Princeton University Press staff who have worked hard to bring this important book the attention it deserves.

Joel Brockner on “bad process” in the Yahoo layoffs

Many feel that upper management in some of the most prominent companies has lost touch with how to care for employees on every rung of the ladder.  In his book The Process Matters: Engaging and Equipping People for Success, Joel Brockner addresses managers who want to promote a high-quality work environment for employees. Today he writes about the problem of management manipulation in the case of Yahoo’s recent, unexpected rash of layoffs. Brockner insists that it was the method used by management rather than the action of firing the employees that lead to such an outcry.

Yahoo Lawsuits Begin Over Management Manipulation

by Joel Brockner

Process matters jacketYahoo has been going through tough times so we shouldn’t be surprised to hear, as the New York Times recently reported that, “More than one-third of the company’s work force has left voluntarily or involuntarily over the last year.” It also comes as little surprise that among the involuntarily departed, some are suing for wrongful termination. It’s tempting to chalk up the negative reactions of former employees to economic considerations. After all, when people’s livelihood is at stake, it’s understandable for them to be looking elsewhere or for giving their former employers hell to pay.

However, many studies show that it’s not simply decisions that are economically unfavorable that are causing the upset. Rather, the combination of economically tough decisions and people’s perceptions of the decisions being handled poorly are putting them over the edge. Those filing suit at Yahoo claim that the way in which the layoffs were implemented was unfair, in several respects. First, the layoffs allegedly violated both state and Federal law which requires 60 days advance notice. Furthermore, there was considerable consternation about how it was decided which employees would be laid off and which would remain. On paper, it is hard to argue with Yahoo’s method: based on their Quarterly Performance Review (QPR), those people who received the least favorable evaluations were the ones targeted for dismissal.

The problem, however, is not with making layoff decisions on the basis of (de)merit, but rather, with people’s perceptions of the way in which the QPR was done. According to the New York Times, “The Q.P.R. process was opaque and the employees did not know who was making the final decisions, what numbers were being assigned by whom along the way, or why those numbers were being changed,” the lawsuit says. “This manipulation of the Q.P.R. process permitted employment decisions, including terminations, to be made on the basis of personal biases and stereotyping.”

I suppose we also shouldn’t be terribly surprised to hear that the combination of a bad outcome and a bad process makes people very upset. After all, there is an expression in everyday life that captures such a state of affairs: “Adding insult to injury.” People feel injured by the bad outcome, and they are insulted by the way in which it was carried out. However, one thing we are learning from research and experience is that the expression, “adding insult to injury” doesn’t do justice to how aggrieved people feel when they find themselves in that situation. In mathematical terms, the expression, “multiplying insult times injury” is more like it. This is why I advise people in authority positions (executives, as well as teachers and parents) that whenever they have to make the tough decisions they should do whatever they can to ensure that the process for making and carrying them out is as high-quality as possible. This is not to say that that those on the receiving end will be happy; grudging acceptance comes closer to how most people will take it. But, grudging acceptance is a lot better than what authorities are likely to encounter when those on the receiving end feel like they have had the injury of an unfavorable outcome multiplied by the insult of an unfair or otherwise flawed process.

So, the Yahoos of the world who are faced with having to be the bearers of bad news have a choice. By investing in a well-handled process, they can minimize (read: not eliminate) the ire that translates into actions like lawsuits. Alternatively, by ignoring the quality of the process, they are at peril for more lawsuits or other expressions of discontent. Over and above the ethical imperative of handling the process well, there is an economic one: would you rather spend resources needed to handle the process well, or the far greater resources you are likely to need to defend yourself in a court of law?

Joel Brockner
 is the Phillip Hettleman Professor of Business at the Columbia Business School. He is the author of A Contemporary Look at Organizational Justice: Multiplying Insult Times Injury and Self-Esteem at Work, and the coauthor of Entrapment in Escalating Conflicts. His most recent book is The Process Matters: Engaging and Equipping People for Success.

The Process Matters: Joel Brockner critiques Twitter’s most recent layoff method

Process Matters coverAccording to Joel Brockner, author of The Process Matters: Engaging and Equipping People for Success, an overemphasis on “results only” in the workplace is as widespread as it is detrimental. As Brockner aims to demonstrate in his opinion piece in Fortune magazine, the process managers use to reach their goals is itself critical. He critiques Twitter’s recent decision to block employee email accounts as a way of notifying staff of layoffs, while professing the highest respect and consideration for its employees. Brockner explains:

While the generous exit package may have been well-intended, the message of utmost respect fell by the wayside because the approach Twitter took was a process disaster… Given Twitter’s professed intentions, it seems that they could have found a more dignified way to tell people that they were being let go. But Twitter isn’t alone in process dysfunction.

Brockner continues to discuss the potential reasons for such a managerial mishap: perhaps the misstep isn’t obvious, or the managers are simply unaware of its unintended consequences. Yet he maintains that executives should prioritize improving managerial-employee processes, because ultimately the company will, “pay now or pay (a lot more) later.”

Read the full opinion piece in Fortune here.

Joel Brockner is the Phillip Hettleman Professor of Business at the Columbia Business School. He is the author of A Contemporary Look at Organizational Justice: Multiplying Insult Times Injury and Self-Esteem at Work, and the coauthor of Entrapment in Escalating Conflicts.

PHISHING FOR PHOOLS and CLIMATE SHOCK included in the long list for FT & McKinsey Business Book of the Year Award

Climate ShockPhishing for Phools jacketThe long list for the FT & McKinsey Business Book of the Year Award has been published, and we’re thrilled to see that two Princeton University Press titles have been included. Nobel Prize winners George Akerlof and Robert Shiller’s new book on on economic trickery, Phishing for Phools, and Gernot Wagner and Martin Weitzman’s examination of the global crisis of climate change, Climate Shock have both been listed in the top 15. Other titles appearing include Ashlee Vance’s biography of Elon Musk, Martin Ford’s study of jobs and automation, The Rise of the Robots, and Anne-Marie Slaughter’s take on how to narrow the gender gap, Unfinished Business.

Read more about this year’s long listed titles and the other books recognized during the award’s 11-year history here.

The shortlist of up to six finalists will be published on September 22nd.  The £30,000 prize will be awarded on November 17th in New York.

Find sample chapters of Climate Shock and Phishing for Phools here and here respectively.

 

 

Forecasting & Business Charts [Slideshow]

The slideshow below, assembled by Walter Friedman, author of Fortune Tellers: The Story of America’s First Economic Forecasters, brings together several forecasting and business charts from the early twentieth century.

More information on many of these charts and the forecasters themselves is in Friedman’s book which you can sample here. If you would like to download a PDF of these images and captions, please right click and save this file.

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