June 2008 – Irrational behaviour stalks the jobs market
You don’t need me to tell you that the jobs market
is heading for an uncertain summer. But we shouldn’t
start digging out the history books to look for neat patterns,
nor should we be rushing to make assumptions about where
the market is heading.
Some financial employers have begun making cuts, but many
are doing so without fanfare while trying to hang on to
their essential staff. Redundancies in the City so far have
been limited but more may follow.
The news this week that Goldman Sachs had cut staff at
its investment banking division was no surprise. Just now,
however, it is the peripheral costs that are getting cut.
Since staff began working shorter hours - still longer than
normal office hours - one bank has cut out free canteen
meals and taxis home for those staying late.
The banks, however, have been hit by the credit crunch
far more than other institutions. While the housing market
too has stalled, that can be interpreted as a good thing
for first time buyers and those who have not overstretched
themselves on borrowing who can look forward to a better
deal on property when trading up.
Newspaper headlines often overlook the sensible people
who are still willing to save. There are a lot of them about
and some of them are still spending as the latest UK high
street sales figures have revealed.
But behaviours are changing, not least in the workplace.
According to recent reports, people are spending more time
in the office just now, rather than working from home. They
are also smartening up their appearance. Ties sales have
risen markedly in the past three months.
These last points suggest that, whatever we may believe
about change in the workplace, it doesn’t take much
for people to reach for the apparent safety of familiar
What’s in a tie, you might ask? The answer, quite
simply, is a perception of greater job security or at least
the belief that smartening your appearance around the office
might send the right signals about your commitment to the
job. So people are making themselves more visible in the
workplace, and, at the same time, they are asserting their
seriousness with clothing.
This shouldn’t be surprising. It is why we dress
smartly for job interviews. Rightly or wrongly, enduring
decisions are made on the strength of our appearance.
It takes a certain spirit to defy convention. When Albert
Einstein’s wife once asked him to change his clothes
to meet the German ambassador, he replied: “If they
want to see me, here I am. If they want to see my clothes,
open my closet and show them my suits.”
Einstein was making a rational point. Unfortunately people
behave irrationally all the time and when economies falter
such behaviour becomes more pronounced.
In a new book, Sway, The Irresistible Pull of Irrational
Behaviour, the authors Ori and Rom Brafman, outline a series
of irrational behaviours that remind us just how often decisions
are made not on sound reasoning but on emotional impulses
that can have critical consequences.
What should we make, for example, of the airline pilot
who let concerns for lost time cloud his judgement when
deciding to take off in foggy conditions without terminal
clearance? A series of misjudgements and miscommunications
led to the world’s worst aviation disaster when 583
people aboard two aircraft were killed in Tenerife in 1977.
But, as the Brafman brothers point out, the decisions that
led one of KLM’s most experienced pilots, Captain
Jacob van Zanten, to go ahead with take off, were influenced
in no small measure by his desire to complete his journey
before he would be grounded for a mandated rest period.
The brothers explain his decisions partly through a phenomenon
known as “loss aversion.” Loss aversion has
been noticed in the way people respond to price increases.
Prof Daniel Putler, a former researcher in the US Department
of Agriculture, noticed when looking for patterns in Californian
egg sales, that people were far more sensitive to price
increases than they were to price decreases. While egg buying
improved a little if prices dropped, it dropped steeply
when prices went up. The same has just happened in diesel
consumption among motorists.
This so-called asymmetric behaviour is not just of interest
to economists; it also influences decisions on staffing.
According to the Brafmans, assumptions made during job interviews
and selection can influence attitudes about individuals
that can make or break their careers.
They quote another piece of research, this time looking
at the performance of American basketball players relative
to the order in which they are first chosen to represent
In the US, professional teams line up every season to pick
players from that year’s college draft of young talent.
Using various measures such as “assists per minute”
researchers found that, above and beyond a player’s
performance, the variable most responsible for a National
Basketball Association player’s time on court was
his draft selection order.
This means that a player selected fifth in the draft will
get more time on court than a player selected eighth, regardless
of how well each of them performs.
More than that, we make judgements on people based on a
whole series of external influences. In the same way we
may like a piece of art, simply because it is valued by
someone influential who was prepared to lend it some worth.
To illustrate the way this value attribution works (or
fails) the authors point to an experiment run by the Washington
Post in 2007 when the newspaper persuaded virtuoso violinist,
Joshua Bell, dressed in jeans and a baseball cap, to play
his $3.5m Stradivarius in a subway station at rush hour.
Bell, who normally performs to sell-out audiences in the
biggest concert halls, played his best for 43 minutes, while
more than a thousand people passed him by without stopping.
“Without realising it, the commuters attributed
the value they perceived – the baseball cap, the jeans,
the subway venue – to the quality of the performance,”
say the authors who add: “Whenever we’re called
upon to make judgements, value attribution plays a role,
often altering our perceptions to a person or thing.”
All those people, therefore, who are wearing ties today
while dashing around the office, are doing so for a reason.
They know, instinctively, that these make a difference;
they shouldn’t, but they do.
My biggest surprise at the Joshua Bell story was that it
didn’t surprise me. As Einstein again once remarked:
“Two things are infinite: the universe and human stupidity;
and I’m not sure about the universe.”
*Sway, The Irresistible Pull of Irrational Behaviour,
by Ori Brafman and Rom Brafman is published by Doubleday,
See also: Who wants
to be a commodity?