Iconoclast: A Neuroscientist Reveals How to Think Differently (21 page)

The interesting thing about the Linux story is how USENET provided the lattice for the early hackers to communicate with each other. Because Linux was created in an open environment, everyone could see what everyone else was contributing. Code was tagged by who wrote it. And so not only did the network bootstrap itself; people began to develop a history. And this leads to the next critical element of social intelligence: reputation.

Building Reputations for a Fair Deal

Although our brains make snap judgments about the trustworthiness and familiarity of faces, these reactions are not the only determinants of building a social network. The strength of connections between people in a network depends on the history of their behavior. Both the Milgram and Watts small-worlds experiments illustrated that successful networking is not simply a matter of who knows whom. The high rate of dropped messages, especially the digital kind, means that strong connections in a social network may be more important than degrees of separation.

A core attribute of integrity that is deeply wired in all primates is the ability to assess, and respond to, fairness. Individuals who make decisions that consider equitable outcomes for all participants possess a high degree of integrity. Those who do not, get labeled as selfish. The balance between self-interest and fairness shifts back and forth for everyone, but the importance for social networking lies in how other people perceive you. Given the choice, would you prefer to do business with a greedy person who you know will try to milk you for everything he can, or would you rather make a deal with someone who takes into consideration your needs? Some have called this the “win-win” approach to negotiation, but there is good biological reason for considering the fairness of business deals.

In a remarkable experiment, the Emory University primatologists Sarah Brosnan and Frans de Waal found that even capuchin monkeys
dislike unfairness. Brosnan and de Waal taught the monkeys to perform a simple token-exchange task. A token, in the form of a small granite rock, was placed in each monkey’s cage, and Brosnan simply stood in front of the cage with her hand stretched out, palm up. If the monkey gave her the token within sixty seconds, she uncovered a bowl with a piece of food in it, which was either a low-value food (a slice of cucumber) or a high-value one (a grape). The bowl was transparent, so the monkey could see its contents before deciding to exchange the token. In an interesting twist to this setup, Brosnan paired up the monkeys so that one could watch the other. Sometimes, while its partner was watching, Brosnan simply handed one monkey a grape without requiring any exchange. Brosnan then measured the rate at which the jilted monkey refused to exchange its token on the next round. After the partner witnessed an unfair exchange, its rate of participation plummeted. Like humans, Brosnan wrote, “monkeys, too, seem to measure reward in relative terms, comparing their own rewards with those available, and their own efforts with those of others.”
²⁵

If monkeys have such strong reactions to unfairness, it is a sure bet that these responses are deeply wired in the brain. Although there may be a time and a place for the exploitation of inequities, the iconoclast who is building a social network is best served by fostering a perception of fairness and integrity. Recent neuroimaging experiments have revealed how the brain reacts to fairness and how these responses affect people’s subsequent decisions to trust a person.

The classic economic game for studying fairness is called
ultimatum
. In this game, two participants who don’t know each other are given a pot of money—say, $100—to split. The first player offers to split the pot in any ratio he wants. If the second player accepts this offer, both players take home their share of the pot. But if the second player rejects the offer, nobody gets anything. Despite the apparent simplicity of the instructions, the decisions of what the first player offers and whether the second player accepts are wrapped in the essence of
fairness. No matter the amount of money at stake, the second player will almost always reject offers less than about 15 percent of the pot.
²⁶
Apparently irrational from the perspective of giving up free money, it makes sense when one considers the value that we place on fairness. When individuals are faced with such an unfair split, the
anterior insula
—a part of the brain closely associated with disgusting tastes—becomes more active. The more active this part of the brain, the more likely a person will reject an offer.
²⁷

It is significant that people forego free money, in effect paying to punish the other person for bad behavior. In these one-shot ultimatum games, the participants don’t know each other. Given our evolutionary heritage from small communities, however, we possess a reciprocity assumption—a biological golden rule. Our brains are wired to be sensitive to fairness because it might just come back to haunt us (and in the small communities of yore, it probably would). An efficient strategy for any social interaction is to assume that you will meet up again someday and the other person will remember how you behaved. Humans, in particular, have good memories and long lives, so behaving equitably toward others may well have evolved as a more adaptive strategy than short-term self-interest.

Warren Buffett and the Evolution of Reputation

In his efforts to bring his idea to the masses, the iconoclast runs the risk of being labeled a snake oil salesman. Our brains pick up anything that is unexpected. The amygdala, in particular, serves as radar for potential threats. Its biological xenophobia serves as a hair trigger on our bs detectors. The amygdala is good at what it does, but it is not an innate response. Both trust and its counterpart, distrust, are learned responses based on an individual’s past experience. And while the amygdalectomized patients appeared more trustworthy on some psychological
tests, the iconoclast cannot count on putting potential investors’ amygdalae to sleep with hollow promises of security. The key to trust is through reputation.

As Warren Buffett famously said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” Buffett’s reputation runs so deeply that it commands a premium unto itself. When word gets out that Buffett is adding a company to Berkshire Hathaway’s holdings, the company’s value immediately shoots up. Buffet adheres, more or less, to the value approach to investing that Benjamin Graham formulated and other contrarians like David Dreman and Bill Miller continue to use, and it is hard to argue with Buffett’s success. But what is unique about Buffett is his reputation for straight talk. His letters to shareholders are lessons in clarity. After Berkshire Hathaway suffered $3.4 billion in insurance losses from the 2005 hurricane season, Buffett answered the question on every investor’s mind about staying in the catastrophic insurance business. “I don’t know the answer to these all-important questions. What we do know is that our ignorance means we must follow the course prescribed by Pascal in his famous wager about the existence of God. As you may recall, he concluded that since he didn’t know the answer, his personal gain/loss ratio dictated an affirmative conclusion.”
²⁸
It was Buffett’s way of saying, assume the worst and only write catastrophic policies at higher prices.

Buffett commands a reputation premium because people trust him. It is easy to see from a Darwinian perspective why reputation and trust may have evolved to be highly valued traits. Imagine a world of creatures that are completely self-interested. These creatures are the perfect embodiment of Adam Smith’s selfish individual. Each of these animals, in accordance with both Darwinian principles of natural selection and sexual selection, is primarily concerned with finding food to eat and someone with whom to mate. In the case of foraging for food, self-interest
may serve the animal quite well, especially if it must compete with other animals. But imagine what would happen if two of these animals got together and somehow agreed to share the food that they found. As long as they trust each other, these cooperating creatures stand to do substantially better in the race for survival. In fact, evolution pretty much guarantees that such cooperative relationships will be discovered by animals because they are superior to completely self-interested strategies of survival. But there is a wrinkle in this story. Imagine an entire colony of these friendly creatures, which willingly cooperate with each other, sharing food and shelter. Such a lovefest creates the opportunity for more sinister operatives to take advantage of their trusting counterparts. In a culture of complete and absolute trust, evolution begins to favor creatures that can deceive other members of the species. The final balance between cooperation and deception is called an
evolutionarily stable strategy
. It means that in any society there will always be a mix of cooperation and deception. It is only the possibility of deception that confers value to cooperation.

How does such a society deal with bad apples? It punishes them. But punishment is costly, and it calls upon individual members of the society to perform essentially altruistic acts for the benefit of the common good. Recent neuroeconomic experiments have demonstrated why the mere possibility of punishment is both necessary and desirable to form cooperative relationships in a society. It is important for the iconoclast to be aware of the biological mechanisms that exist in our brains that monitor socially acceptable and unacceptable behavior, because they act as filters for potential deception.

Bettina Rockenbach, an economist at the London School of Economics, performed a critical experiment on what determines whether people trust each other. She had individuals play a public goods game. This game required each participant to contribute money to a common pool. The money in the pool accrued earnings and was then redistributed to
all the participants. The more money in the pool, the more money that everyone made. But there was a selfish incentive to take a free ride. Even if a person didn’t contribute anything, they still reaped the benefits of the distribution of the common pool of money. In each round of Rockenbach’s experiment, participants had the choice of playing the game with, or without, the possibility of punishing free riders. Initially, most participants chose to play the game without the possibility of punishment—a sort of utopian view of the world. But after just a few rounds, more than 70 percent of the participants were playing the game that allowed punishment, whether the punishment was actually exercised or not. On closer examination, Rockenbach found that only a few individuals formed the glue of the society and punished people, but they established and enforced a cooperative culture that attracted even previously noncooperative individuals.
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Rockenbach’s experiment takes Buffett’s remark about reputation one step further. The experiment demonstrates on yet another level the importance of knowing who makes up the “shadow network”—which people form the glue of the community. Initial efforts should be targeted to these people or the people immediately connected to them. This is where Armstrong ultimately failed. His onetime friend, David Sarnoff, was president of RCA and probably the single most important person in the radio community. When Armstrong had a falling out with Sarnoff, Armstrong lost his connection and damaged his reputation with the one person who could have made the difference for him.

Building Networks

As we have seen in this chapter, the transition from solitary iconoclast to a successful one requires the masses of noniconoclasts to buy into an idea. Iconoclasts such as Ray Kroc and Arnold Schwarzenegger were successful as much for their novel ideas as their ability to connect to
other people. The successful iconoclast cannot wait for the world to see things the way he does. He must reach out and connect with people who initially will not share his views. Every iconoclast encounters resistance, but it is only the successful ones who are able, through social intelligence, to persuade other people.

Persuasion
is perhaps too strong a word, because it implies a conscious, rational process. But as we’ve seen in this chapter, selling an idea appeals only partly to rational thought. The successful iconoclasts have an uncommon ability to connect on a social level that transcends the idea itself. The key to doing this is through social networks. In order to be successful, the iconoclast builds a network through two fundamental approaches: familiarity and reputation.

Drawing on recent advances in network science, the iconoclast can shrink the six degrees of separation between any two individuals. The goal of the iconoclast is to decrease the number of jumps between himself and connectors in the community that he is selling to. There are no shortcuts. The biggest impediment to creating new connections is the anonymity of electronic communications. E-mail is so cheap that it might as well be worthless as a medium for creating new contacts. Although e-mail is valuable for maintaining existing networks, the iconoclast must use more expensive means of communications to create meaningful social connections.

The goal is keep people’s amygdalae from firing. In addition to responding to fearful situations, the amygdala has a hair trigger for anything unfamiliar. Iconoclasts, by definition, are foreign to most people, and anything that seems new or different will tend to set off the amygdala in most people. This is not a good situation. When the amygdala fires, it activates the arousal system of the body. The end result is that people will avoid the unfamiliar.

The key to taming other people’s amygdalae lies in familiarity. The successful iconoclast creates an aura of familiarity to keep the amygdalae
of his target audience in check. When Ray Kroc created Ronald McDonald as a connector to children, he banked on the familiarity of clowns to kids. Without this familiarity, it would have been absurd to market hamburgers to children with no disposable income. Arnold Schwarzenegger accomplished the same feat. Having already created connections with millions of people through movie roles, he banked on his familiarity to become governor of California.