What Explains the Puzzle of Independent Thinking?
What we can learn from Michael Lewis' The Big Short
Posted Feb 22, 2018
If you were like me in the aftermath of the 2008 financial crises, you often heard (and believed) that no one saw this coming. There were prominent firms going bankrupt that had thousands of people working in them who had every reason to see the risk they were taking. If no one saw this coming, the financial crises must have been the result of hidden and overwhelming financial complexity, beyond the realm of anyone’s ability to see it.
When I read Michael Lewis’ book The Big Short, this was a dramatic blow to this naïve belief. Many individuals did see this coming, and it was more than a half-formed opinion—they made million-dollar bets based on their analysis. But why did the individuals portrayed in the book have it figured out while so many others were caught blindly unaware?
I posed this question to an old college friend who has spent his career at prominent investment banks and hedge funds in New York City. He responded that you had to be an outsider to see it. To a large degree, the individuals in the Big Short were outsiders to Wall Street, although not exclusively as seen by Steve Carell’s character in the movie adaptation of The Big Short.
So what might account for the independent thinking that allowed many individuals to see what others couldn’t? While early in this research, there are likely a cluster of thinking habits (and situational conditions) that help foster independent thinking. Some of these thinking habits are outlined in the “employee voice” literature in the field of management. Employee voice is when individuals speak up at work, sometimes for ethical violations, but sometimes because they see things differently and have the courage to speak their minds. (For an overview of the employee voice field see Chamberlin, Newton, & LePine, 2017).
Some of the thinking habits of the employee voice literature include having a proactive personality and desire to make improvements, but these habits hardly explain the puzzle of independent thinking, especially in the face of the financial crisis.
One clue is that our thinking and motivation is powerfully shaped by wanting to be part of a social group. We are powerfully motivated to belong and to be a part of an “Inner Ring” (Lewis, 1944). This means we agree with the dominant view and desperately fear being ostracized (Eisenberger, Lieberman, & Williams, 2003). Those who are outsiders are free of these constraints. This is certainly one plausible candidate to partly explain independent thinking.
In research I have done on employee voice, many interviewees discuss a spontaneous response that breaks with the social norms of their immediate reference group. The reason often given for this response is “integrity.” Respondents mention not being able to live with “integrity” if they didn’t speak their mind and defend a core value. There would be an unacceptable split between how they were acting and what they truly believed.
While being relatively immune to being a member of the “Inner Ring” and having a sense of integrity are both important, I think there was something else at play with individuals able to see the forthcoming financial crisis. For lack of a better term, I would call it having a “commitment to the truth,” meaning a dogged persistence to look at reality as clearly as possible and listen to any hint of delusion within oneself and those around you.
It’s hard to know how a “commitment to the truth” is developed, perhaps with exposure to scientific thinking, or being part of an organization committed to truth (see Dalio, 2017). There are likely many ways this disposition is developed. If you have some candidates, please comment below any ideas you may have.
Chamberlin, M., Newton, D. W., & LePine, J. A. (2017). A meta-analysis of voice and its promotive and prohibitive forms: Identification of key associations, distinctions, and future research directions. Personnel Psychology, 70, 11-71.
Dalio, R. (2017). Principles: Life and work. New York: Simon & Schuster.
Eisenberger, N. I., Lieberman, M. D., & Williams, K. D. (2003). Does rejection hurt? An fMRI study of social exclusion. Science, 302, 290–292.
Lewis, C. S. (1944). The Inner Ring. Memorial Lecture at King’s College, University of London. Retrieved from http://www.lewissociety.org/innerring.php.