The Sneetches. (2016)

“One bulwark against hubris bias or conformity bias comes from placing decision-making in the hands of a committee, diverse in its composition, independent in its mindset.

Andrew G. Haldane, Chief Economist, Bank of England
Speech given at Scottish Business Friends dinner in aid of BBC Children in Need, Edinburgh 12 May 2016.

Andrew discusses the importance of promoting diversity, expanding themes from the classic 1953 children’s book by Dr Seuss.

From page 9: ….we now know that individuals suffer from a heady cocktail of behavioural biases. Two of the more important are hubris bias (an exaggerated individual sense of ability) and conformity bias (a tendency to act in line with consensus).

The first leaves decisions vulnerable to the whims of an over-confident individual, while the second generates insufficient challenge of prevailing orthodoxy, so-called “groupthink”…..

One bulwark against bias comes from placing decision-making in the hands of a committee, diverse in its composition, independent in its mindset. Experimental evidence suggests that, so comprised, committees make for more robust decisions. They do so by avoiding large errors, by leaning against the eccentricities of individuals and the groupthink of crowds. Decision-making diversity makes for greater systemic resilience. …..

Over time, these insights have found their way into institutional design. For example, diverse decision-making underlies judicial practices in many countries – for example, the design of the US Supreme Court. It is also embodied in the design of the Bank of England’s policy committees – the Monetary Policy Committee (MPC), Financial Policy Committee (FPC) and Prudential Regulation Committee (PRC). Each comprises internal and external members, individually accountable and drawn from diverse backgrounds.

The global financial crisis provides the example, par excellence, of the resilience benefits of diversity. A lack of intellectual diversity sowed the seeds of the crisis. So too, arguably, did a lack of gender diversity. And a lack of diversity within the financial eco-system – with many institutions holding very similar portfolios – fed and watered these seeds. This lack of diversity, intellectual and financial, contributed significantly to the depth and severity of the crisis. ….

We are all Sneetches, some with stars, some without. The sooner we recognise that our minds are biased, the better placed we will be for dealing with its consequences. Diversity is a public good because it corrects our biased minds in ways which benefit society – from greater creativity and innovation to more robust and resilient decision-making, in every social setting from schoolrooms to sports fields, from companies to communities, from eco-systems to economies.

Access the full text of Andrew’s speech here: The Sneetches.