How Elite Psychological Biases Explain A Civilisation In Free Fall

Stop assuming rational decision making

Audio version

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If like me you’re looking around and wondering why things keep getting worse, one of the mistakes you might be making is assuming rational decision making.

From climate collapse to ecological breakdown to mass pandemic death, the signs of a civilisation in free fall are all around us. Systemic hazard is piling on top of systemic hazard.

With the need to change course looking obvious to many of us, why isn’t it obvious to those in power?

Let’s say you’re writing a book. You’ve spent thousands of hours researching your topic, travelled around the world interviewing people, dedicated years of your life to making this thing happen and then you find out: it has already been written. Your exact book is already out there. Worse than that, it’s a bestseller.

What do you do?

Do you look at the situation dispassionately, weigh up the probability of your almost-identical book outselling its rival, decide that probably won’t happen, cut your losses and move on to another project? Or do you push on in spite of everything? The majority of people will push on, weighing the cost of abandoning their investment above any outcome that comes from continuing. This is what’s known as the sunk cost fallacy.

The sunk cost fallacy also dovetails with the commitment bias. This is a psychological mode that compels us to keep moving forward on a project or stay committed to an idea even when presented with evidence that the idea is wrong or the project bound to failure. And often this escalation happens especially when presented with the evidence of its wrong-headedness. We also feel losses more acutely than we feel gains (loss aversion bias), which can motivate us to keep making bad decisions in hopes of recouping the prior loss, rather than in anticipation of any gains.

This is why Las Vegas is so popular.

These biases have played a big role in too many major historical failures to list, but here are a few:

1. Concorde. The British and French governments and their engineers realised that the costs of developing and operating the supersonic plane were never going to be offset by the profits once in use. Never. Even if it ran for 100 years. But they continued, the plane eventually leaving service after 30 years.

2. The Vietnam War. From the mid 1960s it was obvious to many war historians the war could not be won. Even the CIA thought so, with later unclassified documents detailing the private thoughts of many within the spy agency that the war was a lost cause. But the US had a huge sunk financial and political cost. Their losses were only cut once the Viet Cong had literally driven the remaining US presence in South Vietnam from the roof of the embassy in Saigon. Many years later even the architect of the war seemed to recognise his escalation to commitment bias.

3. Kodak. The biggest name in photography for most of the 20^th century, Kodak dismissed the invention of the digital camera and continued to double down on the paper and film model that had been so spectacularly profitable for it in the past. They eagerly invested in new paper and film assets even as the digital market boomed, thinking they were the smartest guys in the room.

Then Kodak went bust.

The problem we have now is that we’re not talking about elite psychological biases sinking a plane, a photography company, or even a war. We’re talking about them sinking a civilisation. What might it look like if the elites than run our societies were captured by the sunk cost fallacy, escalating their commitment in spite of all the evidence that this was going to end in disaster?

It would probably look a lot like what we see today.

A quick glance at some important metrics demonstrates irrefutable problems. An ongoing pandemic forcing down global life expectancy, climate pollution at levels not seen for millions of years, a mass extinction, an energy crisis, rising poverty in the world’s richest country and globally, record food bank use in the richest countries in the world and much more.

To those of us with little agency over the direction of the system but with a keen interest in not going up in a ball of flames, the evidence that we need massive change is obvious. But if you are deeply invested in the system as it is, if you helped develop and define it, if its functioning continues to be advantageousness for you personally, the need for change won’t be obvious. Many of our elites are decades into this thing, their fingerprints all over how the system works and why it works the way it does.

Building a system

In the US, Joe Biden was writing foundational policy to deregulate the banking industry and create the carceral state that still stands to this day.

In the UK the prime minister is a near-billionaire worth more than the king and the main opposing party is led by a knight of the British empire who was the top copper in the UK.

Many current politicians backed the bank bailouts from 2008, spending enough money to fundamentally rewire economics and create a financial system that would work for everyone. But motivated by their creation of the system and investment into it, elites chased the loss, resurrecting and locking in a failing economics.

So with things starting to go very obviously wrong, rather than look rationally at the evidence and change course, the elites are turning to strange schemes and bizarre ideas, unable and unwilling to believe that the whole edifice they helped build and run is crumbling.

Strange and bizarre ideas

In the UK, the government put the army on the streets to cover for striking health workers rather than offer them a pay rise, unwilling to believe their pay is insufficient to live on. The British chancellor is pleading with over-50s to come back to work, unwilling to believe a virus has forced millions into long-term sickness, despite the clear evidence. The government refuses to change course on Brexit, arguing it is not exacerbating worker shortages, despite the evidence.

In Australia the government has called on oversee backpackers to work, while in the EU, governments are turning to Ukrainians fleeing from war - refugees - to fill worker shortages.

In the US, some states have proposed bills to legally allow the return of child labour, codifying what has been informally happening for a while: child labour violations in the US increased 37% in 2022.

In Alabama, Hyundai (a company with sales of nearly $100bn in 2021) has effectively admitting to employing children as young as 12 in its factories, with lawmakers imposing no consequences. Some companies are putting more prisoners to work, building on a grand tradition.

Denial and doubling down

And as things fall apart, denial kicks in. Robert Reich, a progressive-ish economist in the US, is pushing the idea that there’s no labour shortage, only a decent wage shortage. He says if we just make employers do better, all will be well. Of course employers are creaming off more than ever before. Of course they can pay workers more. But worker shortages all started at the same time around world, from Germany, to New Zealand, to Canada, Japan to France, Australia to Denmark to Spain. The evidence says its covid (shortages eased significantly in 2021 when covid safety policies held down infection rates), but there are no plans to end mass infection policies.

As far as maintaining a habitable planet goes, governments continue to invest in and subsidise fossil fuels to record levels, despite historic heatwaves, crop losses and destroyed infrastructure. With water overused and running out, governments, afraid to rein in capitalism, instead allow investment funds to buy the rights to water, doubling down on an economics that is dooming us. With industrial animal agriculture destroying forests and causing a mass extinction, rather than scale down this industry, governments are expanding it.

We cannot hope to break the cognitive biases of political and business elites. They are too deep in to business-as-usual and too well-rewarded by it.

The elite have sunk everything into this ideological project for the last 40 years, and will continue to escalate their commitment, in denial of their failings, until it all falls apart.

Any change will have to come from the outside.

From people and forward-thinking movements with no investment in the systems and institutions that govern us.

From those with no skin in the game.

With conditions worsening, the next pandemic inevitable and the planet getting less habitable by the year, this change needs to come soon.

(Artwork by @ronniefurbear on IG)