Shake Shack-onomics

And that time Fabio taught me how to read a balance sheet...

“I would be most content if my children grew up to be the kind of people who think decorating consists mostly of building enough bookshelves.”

-Anna Quindlen

Do I own too many books?

Any person who has been in my apartment since college has a strong opinion about this question.    For my entire adult life, and perhaps much of my childhood, I always wanted to own as many books as possible.   Of course, while I wanted to read all of the books I own and read many of them,

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the reality is that I still own far more books than I’ll ever be able to read in my lifetime.

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  And don’t get started on digital books; I’ve read a little over 500 books on my Kindle.  I own over 3,000 Kindle books…    

But Nassim Nicholas Taleb totally approves.   

In The Black Swan, Taleb argues that a person’s “anti-library,” what he defines as the books that a person owns but has not read, is actually a positive indicator of a person’s humility and curiosity.   In contrast, Taleb calls the person who only focuses on how many books are unread the “anti-scholar.”

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Of course, Taleb’s argument is convenient for my own confirmation bias; I want to buy books with reckless abandon.    But Taleb’s formulation is a fascinating demonstration of the power of reframing; instead of claiming that I own too many books, he is claiming that the people who say I own too many books are not curious enough!   All of a sudden, what can seem like a ridiculous fetish is actually a mark of my own greatness, whether or not it’s true.

The Framing Effect

Consider the following hypothetical: You need a medical procedure,

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and your doctor presents you with two surgical options:

1. Option 1 has a 90% success rate

2. Option 2 has a 10% mortality rate

Each question contains a rhetorical sleight of hand; the probability of success is the same no matter which option you choose.    If 10% of patients die from surgery complications, that still means that 90% do not die, and if 90% of operations are successful, that still means that 10% are not.

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    In theory, the option we choose should be the same no matter how we word the question.

But you wouldn’t be reading this newsletter unless you know that how we frame the question matters a great deal.

This is the “framing effect,” another concept identified by Amos Tversky and Daniel Kahneman (and there are still more to come…get excited!).

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Using a similar example to the above question, Tversky and Kahneman point out that while classical economic theory assumes a person should make the same choice no matter how options are framed, the evidence suggests the opposite.

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People only make a decision after the problem has been framed, which leaves the opportunity to frame options in a particular way such that it will affect the “norms, habits, and expectations of the decision maker.”

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In other words, if my doctor tells me that 10% of patients die from the surgery I am considering, the likelihood of my permitting that surgery will be different if the doctor tells me that the surgery has a 90% success rate.

Beware of the framing effect when judging organizational effectiveness.  Jewish organizations largely self-report their impacts on their world, and thus any person invested in a particular organization is going to paint the rosiest possible picture.   One of the reasons that population studies such as Pew’s Jewish Americans in 2020 tend to draw so much attention is that they provide at least some “outside view” on organizational effectiveness that the organizations cannot control from their “inside view,” but even studies from high-quality researchers can fall victim to the framing effect.   

But more importantly, while we should hope that Jewish organizations would want to know whether one approach works better than another, ultimately it is Jewish people who stand to benefit the most.   No matter a person’s affiliation, it is reasonable to assume that a person making a choice as a Jewish consumer is going to want to be able to judge one option versus another, instead of sifting through a bunch of rosy, misleading pictures. This is where the lack of quality data sets about the effectiveness of Jewish organizations becomes particularly tragic.

Setting the Table

If you need a break from recommendations of dense, academic books, then you’re in luck this week; my favorite example of the framing effect is found in Danny Meyer’s Setting the Table: The Transforming Power of Hospitality in Business.   Meyer is the best-known restaurateur in the United States, particularly for Shake Shack and the Union Square Cafe.   And in his book on hospitality, he describes something called “The 51% Solution.”   

Essentially, Danny Meyer’s restaurants weigh employee evaluations, where 51% of one’s evaluation is related to emotional job performance, and 49% is related to technical job performance.   In other words, it is theoretically possible to be perfect in the technical elements of cooking and still not be the kind of person Meyer wants to hire.   Meyer describes explains this choice in the following way:

“Imagine if every business were a lightbulb and that for each lightbulb the primary goal was to attract the most moths possible.  Now what if you learned that 49 percent of the reason moths were attracted to a bulb was for the quality of its light (brightness being the task of the bulb) and that 51 percent of the attraction was to the warmth projected by the bulb (heat being connected with the feeling of the bulb). It’s remarkable to me how many businesses shine brightly when it comes to acing the tasks but emanate all the warmth of a cool fluorescent light. That explains how a flawless four-star restaurant can actually attract far fewer loyal fans than a two-or three-star place with soul. In business, I want to be overcome with moths. Our staff must be like a scintillating string of one-hundred-watt light bulbs, whose product is the sum of 51 percent feeling and 49 percent task.”

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Why is this an instance of the framing effect?    Because a chef who wants to work in one of Meyer’s restaurants would still fail as an employee if they met all of the emotional requirements of the job, but none of the technical ones.    51% may be a majority, but it is still a failing grade.   That said, given the reasonable assumption that many chefs with incredible pedigrees want to work with Danny Meyer, sending the message that emotional intelligence matters more than technical proficiency puts everyone on notice.

Weekly Links

1. Don’t Try to Worry Less.  Worry Smarter: Any author who thinks that we can hack worrying to be more efficient is speaking my language!   Check out this article in The Washington Post.

2. Saving Management from Leadership: I may be alone in this, but I feel like the Jewish community has an obsession with leadership to the point where we forget how difficult management is.   This article hit me in exactly the right way, and I hope you’ll consider reading it.

3. Cognitive Biases That Influence Product Development Decisions: I am unapologetic about embracing the idea that great Jewish organizations create great “products''; sometimes, the product is a spiritual experience, and other times it is a program, but if we don’t recognize that Jews are making consumer choices, we miss critical opportunities to make things better.   Here is a fantastic introduction to how the behavioral science we’ve learned can be used in product development.

4. Should Synagogues Be Tax Exempt?: Although unlikely to happen, every year a debate takes place over whether or not religious institutions should remain tax-exempt.   Here is an article in Sojourners on why they shouldn’t, and here is an article in The Chronicle of Philanthropy on why they should.

5. How to Read Balance Sheets: “If I wanted to do the math, I wouldn’t have gone to rabbinical school”; said me, many, many times.  That said, reading a balance sheet is critical in any leadership role, and here is a great introduction.    Not sure why the author’s profile picture is of Fabio…

One Podcast

Moneyball is even more important in a world of political polarization, as polarization and confirmation bias are intimately related. Below is a podcast from Not Another Politics Podcast on why political polarization in the United States is not what it seems…

1. Starting in 2011, I kept a running spreadsheet of every book I read. I know that I’m weird, but I found out a few years ago that my late grandmother Eudice Lowenthal z’’l did the same thing so that she wouldn’t accidentally take out the same book from the library.

2. Do you know how The New York Times Book Review does interviews with authors about what books are on their bedstands? Here is my pile of books:

This is half of my to-read pile.

3. Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable (New York: Random House Publishing Group, 2010).

4. Here’s a scary thought: I’m about to be the same age as Billy Crystal’s character in City Slickers. Props to Yoni Warren for pointing it out. But the music is not too loud…

5. Remember: I’m not a doctor.  This is not about any particular kind of surgery, just about how the options for any surgery could be framed.

6. You may notice that I change the order of these two authors (i.e. sometimes they are “Kahneman and Tversky” and other times they are “Tversky and Kahneman”).   This is actually based on how their names are listed in the original article, and the order shifts back and forth.  This is also the framing effect, given the assumptions we make about academic papers based on whose name comes first.

7. Amos Tversky and Daniel Kahneman, “Rational Choice and the Framing of Decisions,” The Journal of Business Volume 59, Number 4 (1986), S251–78.

8. Ibid., S257.

9. Danny Meyer, Setting the Table: The Transforming Power of Hospitality in Business (New York: HarperCollins, 2009), Kindle Locations 2216-2223.