Why don’t they get it?

Why don’t they get it?

Predicting the development and adoption of new technology is difficult, with problems ranging from focusing too deeply on detailed technical features, to being swept along by an emotional gut feeling that may be unique to you.

When our forecasts don’t pan out, we can feel great frustration with the people in the market who we see as either extremely cynical, irrational or stupid. Sometimes we just plain don’t understand them.

In the mid 1990s I worked for a research company. At one point I produced forecasts of UK broadband penetration that turned out to be about 10 years too aggressive. We had totally underestimated the reluctance of BT to let go of potential ISDN revenues and invest in ADSL. The long-term technical call was correct, but the timing was naïve. I had understood the technology, but not the people.

The piece he linked was highlighting television broadcasters’ efforts to get the government involved in what are currently purely commercial negotiations between program producers and broadcasters. Rather than negotiate payments for rights, some broadcasters are asking the government to require program makers to grant these rights through new legislation.

You can see why broadcasters would want this, but how could a government begin to think this would be a good idea all-in-all for the economy?

To quote the distinguished Princeton psychologist and economist Daniel Kahneman, I believe it’s because human beings are “endlessly complicated and interesting.” Rather than take the knee-jerk response that politicians must just be in the pocket of big media, I’m going to look at how some aspects of human behavior make this kind of highly damaging legislation more likely.

We need only assume that politicians are people who are “against unemployment” and “against crime.”

Fear of loss is much stronger than desire for gain

Kahneman’s groundbreaking research with Amos Tversky on loss aversion showed that the fear of losing something generally (and strongly) outweighs the desire to acquire it.

So when an established industry like broadcasting cries out that there will be massive job losses if they don’t get legislative support, then politicians’ fear of loss will often greatly outweigh any desire to loosen or enact legislation to encourage innovation and new job creation.

If the broadcasters are able to convince the government that what was once considered fair use of material should really be seen as criminal copyright infringement, then they might also be able to push the “against crime” button.

A bird in the hand

Enacting heavy-handed legislation to support old, lumbering businesses can positively damage the prospects of new businesses and future job creation.

As investors, we learn through discounted cashflow analysis how to compare a dollar now with a dollar next year. We can apply this to compare a job now with a job in the future. Unfortunately, humans are often poor at this and undervalue future events compared to immediate circumstances (so-called hyperbolic discounting). In our broadcast media case, a perceived crime now (e.g. file sharing) can seem to totally outweigh the value of possible future job creation.

Political bandwidth is very narrow

To discuss or influence government policy we face a massive bandwidth problem, as politicians need to be able to state their position as crisp soundbites.

Allied to this is the fact that politically-engaged people tend to feel the urge to pick a side or risk being portrayed as spineless ditherers. Having picked a side, another psychological bias (confirmation bias) can kick in, leading to a tendency to fit evidence to their current viewpoint. Broadcast legislation is a walk in the park compared to climate change legislation, however. And I’ll leave evolution denial to The Onion

In our media example, there are two sides to copyright (and also patent) law:

  1. Encouragement of innovation and creativity
  2. Punishment of criminal infringers

Our broadcasters are pushing hard to make the first point disappear off the radar, and ensure that copyright is perceived solely as an open-and-shut “protection of property” issue, similar to housebreaking or auto theft.

Unless the proponents of innovation can reclaim this ground, we will see that there is only room for the simplest of soundbites. They will eventually lead to works of art like the Protect IP Act.

So how do you combine an understanding of people and technologies?

The world is complex. Even the most sophisticated attempt to model “things” has led to a realization that this can only take us so far, and that we must put people’s behavior at the center of our models.

If you doubt this, ask Google what they are up to with Google+.

I’m not a psychologist — I have an iPhone app development business and a background in media and business strategy. However, I would strongly recommend that anyone discussing or commenting on new technology get to know as many of the quirks and biases of human behavior as they can, as you’re modeling people first and technology second.

I’m sure you’ve come across Freakonomics, but if you really want to swallow up the rest of the day I can recommend the Wikipedia list of cognitive biases, which has more than 100 listed reasons why people don’t behave like technology.

So, next time you find yourself wondering why elegant and simple logical assumptions have once again been poleaxed by “some bunch of [insert your favorite insult here],” you’ll probably find that some, if not all, of these cognitive effects are at play somewhere in the model.

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