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Monday, November 22, 2010

The Two Cultures

Let me apply some psychological analysis to one of the phenomena described by David Brooks (The Two Cultures, New York Times, November 15, 2010).

He takes at face value that business leaders are accurately reflecting the causes of their behavior when they say that "she is holding off on investing because she is scared about the future..."

But we are not very good at identifying and reporting on causal attribution. When things are going well for us, we tend to identify the causes internally: we developed new products, we designed them well, our manufacturing was of high quality, and we marketed the products well. When things are not going well, we make attributions to the environment: the market collapsed, there is too much uncertainty, and so on.

This pattern of attributions has been well documented in the Management Letters of many firms as they confront the ups and downs of the business cycle.

The fact is that firms can enact their environments. If the 300,000 members of the Chamber of Commerce were each to hire one new employee next week that might well start a virtuous cycle of increased demand (hopefully for goods and services made in the US) leading to increased hiring and so on.

Sent to the New York Times

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