Taking Action: Learning to Admire Other Cultures

Let’s take a trip around the world.

First up, Italy, where you enjoy long leisurely meals full of wine and laughter. Dining is viewed as an active pleasure in Italian culture. Italians spend double the time eating each day on average when compared to Americans. In experiencing this, you soak it in, socialize, and feel more relaxed.

Next, you hop south of the Mediterranean to Morocco, where you navigate through a market known as a souk. There, you haggle with shopkeepers over bits and bobs. You enjoy the “game” and the strategy involved.

A flight takes you to Rio de Janeiro, where you enroll in a samba class. It’s exhilarating to dance in this warm new style, taught to you by a pro.

You next travel to Japan, where you take part in a tea ceremony. You find the tradition fascinating and the emphasis on politeness admirable.

During this trip around the world, you were open to appreciating the customs and attributes of each culture – a trait that will greatly aid your cross-cultural integration

Admiration

We discussed the Colonial Superiority Complex and how it may be difficult for those from Western cultures to shed their ethnocentricity in order to see the value in other cultures.

But if you don’t try, you’re at a net loss.

Throughout history, the West has not always been economically superior to other cultures.

Muslim cultures, for centuries, were more scientifically advanced and economically powerful than European cultures.

In fact, Emperor Mansa Musa of Mali is considered by many historians to be the richest man in world history.

Neither Warren Buffet, nor Bill Gates could compete.

Mansa Musa lived during the 13th and 14th centuries and was so wealthy that he is said to have done his Hajj pilgrimage to Mecca flanked by a caravan of tens of thousands, some of whom hauled hundreds of pounds of gold for Musa to splash out on extravagances. He also spread his wealth across Africa in the form of educational centers and mosques.

In today’s money, his fortune is estimated to be around $400 billion. Comparatively, Jeff Bezo’s net worth is currently half that.

Asia’s Economic Growth

More recently, Japan’s economic growth in the ‘80s, with brands like Sony and Toyota booming, made America check their superiority complex at the door.

They faced competition on the global stage, prompting cross-cultural research on a scale never before seen.

Moreover, China’s rise over the last three decades shows that the West does not hold a monopoly over the global economy.

This is all to say that while you appreciate your own culture’s achievements and history, you should also recognize the achievements of other cultures.

Humanity’s heritage is woven with threads of the accomplishments, discoveries, and inventions of people from different backgrounds. All the world is an invaluable part of this tapestry.

Making an active effort to recognize this will put things in sharper relief for you – in a context more objective  – and will ultimately aid your cross-cultural integration.

The Colonial Superiority Complex: Why Adapting to Another Culture is a Struggle for The West

Do you easily adapt to another culture? Do you find value in another’s values and seek to understand norms and behaviors?

For Westerners, in particular, this step in cultural integration is difficult.

And its difficulty has its roots in history.

The Colonial Superiority Complex

Samuel P. Huntington, American political scientist and former director of Harvard’s Center for International Affairs, considers two opposing civilizations as particularly dangerous: the Muslim world and Western civilization.

Why did he consider these two civilizations to be dangerous?

1) Their “superiority complex” in relation to other cultures

2) Their willingness to enforce their values and norms on others

In this case, we’re defining “civilization” as a group of cultures that share history and values.

In his groundbreaking book, The Clash of Civilization, he writes, 

“It is my hypothesis that the fundamental source of conflict in this new world will not be primarily ideological or primarily economic. The great divisions among humankind and the dominating source of conflict will be cultural. […] The clash of civilizations will dominate global politics. The fault lines between civilizations will be the battle lines of the future.” 

Published in the nineties, a number of Huntington’s predictions unfolded in reality. These two civilizations did indeed come to a head in many conflicts along the “fault lines” and continue to today.

Both Muslim civilization and Western civilization have a history of invading other cultures and universally imposing their rule of law and way of life through violence.

While all civilizations enter into war for access to resources, some in history have notably allowed the local culture to remain without much or any interference.

Others, however, attempt to convert cultures to their own way of life, often buoyed by religion.

Consider this: if your belonging to a civilization is based on race (for instance, Chinese or Slavic civilizations), the culture cannot expand.

However, if belonging is built on behavior, values, and norms, then yes, conquered people can adapt to the lifestyle.

European Colonialism in Africa

A vivid illustration of this lies in Africa.

20th century European colonialism exploited the continent both economically and culturally.

Schools, universities, and churches were built, so Western values and norms could be exported.

The political leaders in the West at that time viewed their culture as superior, so imposing it on others came with the territory.

However, as failed attempts at implementing working democracies in North Africa have shown, an external force imposing culture in this fashion does not work and instead results in civil war and failed states (e.g. Libya, Syria).

Although that’s not to say democracy will never work in other countries, a shift from ethnic culture to national culture is required, and such a shift in mentality takes willingness and time.

The West didn’t allow either.

China in Africa

On the other hand, there’s China.

Without anyone noticing, China has become Africa’s biggest trading partner, with more than $200 billion in annual goods exchanged.

During the first decade of the 21st century, a million Chinese expats have moved to Africa, largely as traders and laborers.

But the Chinese approach is different than Western colonialism. No attempts have been made by China to promote their culture on the continent.

There are no Chinese missionaries, think tanks, schools, or cultural centers. China is there purely for economic benefit; not to globally expand their culture and civilization.

African culture and political systems are left untouched by their largest trading partner.

This is the difference in approach. And this historical difference is why those from Western cultures find learning and adapting to another culture to be difficult.

Next week, we’ll talk about how to overcome that.

QUERY: “How can the law have any place in a society that is not rule-based?”

Rules or relationships.

Where is the emphasis placed in your culture? Which is valued more?

Identifying where your values lie will tell you whether you’ve grown up in a relationship-based culture or a rule-based culture.

Once you discover what grounds you, you may wonder how these values impact the mechanics of your culture and your own decision-making and moral perspective.

Let’s take a look.

A Query in Context

I recently received an email query about rule-based versus relationship-based cultures.

The anonymous author wrote:

“I’m a lawyer in the USA, and I tend to be more black/white and rule-based. I’ve encountered attorneys and judges that don’t seem to care about the rules (aka the law) and it can be frustrating…

When I think about it, how can the law have any place in a society that is not rule-based? Your example of lying to protect your friend from criminal prosecution for killing someone in a school zone by speeding in a relationship-based society flaunts the law. It supports the whims of men, which may change from time to time much faster than the law. It destroys expectations…

How can I plan for the future when some bureaucrat may decide the law doesn’t apply to my adversary, contract counterparty, tortfeasor, etc? It supports dishonesty and bribery, as is common, at least more overtly, in the rest of the world.

What about judicial and lawyer ethics codes? How can those matter if you live in a non-rule-based society? It’s OK that I lied to the court to protect my client/brother? Really? That can’t be ‘right.’ Moral relativism must have a stopping point…”

Let’s see if we can clear a few of these questions up.

Rule of Law in Culture

The post anonymous is referring to is Rule of Law in Culture: Are Laws More Important Than Relationships?

It describes a study in which U.S. and Venezuelan managers were surveyed about the hypothetical scenario described.

U.S. participants more heavily leaned toward testifying against their friend who broke the law, while two thirds of Venezuelan managers said they would lie in their testimony to cover for the friend.

The scenario illustrates where each cultures values lie.

But just because a culture prioritizes relationships over rules does not mean the rules don’t exist or apply.

All societies have rules. Sometimes those rules are relationship-based, as described in my post, Relationship- vs. Rule-Based Cultures: Socially-Based Control vs. Individual Autonomy.

The post illustrates how the Shona society is ruled by a hierarchy based on familial relationships. It’s a fundamental part of their culture.

Unlike some cultures, where laws strive to be objective, the laws of the Shona society are shaped by relationships. Still, the rules exist.

This is just one example, but perhaps the misunderstanding is in what these two terms mean.

What “Rule-based” and “Relationship-based” Truly Means

Do the terms “rule-based” and “relationship-based” imply there are no rules (and no application of these rules) in the latter and no relationships in the former?

No.

It’s a matter of priority – i.e. do you break rules because of relations, or do you stick to rules, despite harming your relationships?

In rule-based cultures, an individual’s priority is, more often than not, on the law, while in relationship-based cultures, relationships take priority.

This does not mean there is no place for rule of law in relationship-based cultures. In regard to the study example, it wasn’t that the law or the legal system, the lawyer or the judge, was prioritizing relationships; it was the witness – an individual in the relationship-based society – prioritizing them.

The example about lying to protect your friend from criminal prosecution was not to indicate whether doing so is “right” or “wrong.” As we’ve also discussed in this blog, one culture’s “right” is always another one’s “wrong,” and such ideologies are shaped by primary socialization.

Anonymous questions this, writing, “Moral relativism must have a stopping point.” 

In other posts, we’ve described this stopping point. We’ve outlined what active tolerance is, how to accept conflicting cultural values, and when to personally arrive at this “stopping point” when working cross-culturally.

You might choose to draw the line of moral relativism at harm, as described in our post: “tolerance ends where harm begins.”

In this instance, your stopping point might be that your friend should be in prison. Or it might be that your friend’s life and your shared relationship is more important.

Whether or not valuing relationships over rules “flaunts the law” or is unethical is both for the society to decide and for you – on a personal level – to decide.

Prioritizing Relationships Over Rules

In a cross-cultural sense, understanding the rationale behind another culture’s priorities is the best you can do to make that decision for yourself and know where you draw the line.

To see the logic, you must empathize and understand the mechanics of the culture, which are based on the values it upholds.

Once you achieve that understanding, it’s easy to see why those who value relationships might wish to support the relationship over the law. 

Cultural Differences in Business Communication,” by John Hooker, describes exactly why one’s priority might lie with the relationship:

“In relationship-based cultures, the unit of human existence is larger than the individual, perhaps encompassing the extended family or the village. Ostracism from the group is almost a form of death, because one does not exist apart from one’s relatedness to others.”

If you’re part of a clock, do you remove the minute hand?

No.

Just as every part in a clock has a relationship to the other parts, so do the people in a relationship-based society.

When destroying that relationship means death, you’d agree that even the law is less important.

As with Victor Hugo’s Les Miserable, the concept of flaunting the law – stealing bread rather than letting your family starve to death – brings that idea to the fore.

What would you do? Is what you’d do “right” or “wrong”? And how does your choice reflect your values?

Prioritizing Rules Over Relationships

And, in the other vein, you can understand why those cultures who value rules might stand by the law instead of the relationship.

Rule-based cultures are usually individualist and don’t have the same level of relationship connectedness as collectivist, relationship-based cultures.

Because of this, the mechanics of the society don’t work the same.

You might remove and replace the minute hand of the clock, because it kept getting stuck.

Just as you might testify as a witness against your speeding friend, as you believe him to be a danger to society.

More importantly, your rule-based society won’t ostracize you for telling the truth, because most view justice in the same way as you do; in fact, you’ll likely even be praised for putting the rule of law over your relationship, as this is a difficult decision to face.

In both societies, rules exist. But the individual chooses where to place their loyalty, which is all based on cultural conditioning and the reciprocal relationships between individuals in a culture.

Whether or not anonymous (or anyone in a rule-based society) believes putting relationships over rules is unjustified or unethical, this doesn’t necessarily mean doing so is “wrong” or there isn’t logic and reason in such societies.

What is the Point of Law?

Anonymous ends with the question,

“So what is the point of law and lawyers in non-rule-based societies? How does it work? Is it more about manipulation, sales, and gamesmanship than seeking objective truth?”

There are benefits and costs to both types of governance.

John Shuhe Li’s article, entitled “The Benefits and Costs of Relation-based Governance: An Explanation of the East Asian Miracle and Crisis,” provides some examples of these costs/benefits.

Li first emphasizes that agreements can only be enforced through rules or relationships. If neither exist, governance resorts to violence.

Li then outlines the benefits of relationship-based governance compared to rule-based governance, writing:

“When relation-based governance works, given two transaction partners, it can enforce all mutually observable agreements (by the two parties). When one party deviates from a mutually observable agreement, the other party can punish the deviator by playing (for example) tit-for-tat strategies. In contrast, given two transaction partners, rule-based governance can only enforce a subset of the mutually observable agreements that can also be observed by third parties. Thus, perhaps a large part of monitored-activities, which are mutually observable by the monitor and the monitee but are not verifiable by a third party can be enforced by relation-based governance, but not by rule-based governance.”

He also describes how a small relationship-based market can lower transaction costs over the larger fixed cost in a rule-based market. There are some limitations in this, however, including the small number of partners one can force relations agreements with. 

Rule-based governance has its benefits, as well.

Li writes,

“In contrast, there exist economies of scale in rule-based governance; thus a firm can resort to rule-based governance to enforce contracts (impersonal agreements) with an unlimited number of partners, including strangers.”

The activity coordination of the transaction parties can result in the sharing of more technical information (information not directly related to enforcement) in relation-based governance, which is another advantage. Moreover, without all the bureaucracy, renegotiations in relation-based governance can be less costly.

Lastly, when it comes to business, the fact remains that some economies are catching-up economies and can’t rely on rule-based governance.

Li writes,

“In catching-up economies…relation-based governance is the only available mechanism to enforce agreements. Thus, investing in relations can be profitable and rational, especially in developing countries.”

While this refers to business rather than criminal law, you can see that there is a point of law and lawyers in relationship-based societies; the rules simply lean more heavily into relying on relationships to enforce the rules of an agreement and keeping relationships on good terms.

And across cultures, those terms vary.

Empathy in Action: An Exercise in Developing Empathy

Close your eyes, and picture this:

You are born into a relationship-based culture.

Relationships are the most important thing to you, because they are so integral to society.

Not only do they help you rise in the world, but they have your back when you fall.

Everything is tied to these relationships.

How do you see the world? How does this foundation impact your behavior, values, and norms?

Exercise in Empathy

The above was an exercise in empathy

Being able to put yourself into another’s shoes and imagine things from their perspective builds empathy – a tool that you can wield to your advantage.

Last week, we talked about how empathy is an essential personality trait when managing across cultures.

It’s not easily alterable or acquired; some are naturally more empathetic than others.

But like every trait that doesn’t come naturally, one can take actionable steps to develop it.

Developing empathy is an active, voluntary act.

And when working in a cross-cultural environment, you must be willing to volunteer this shift of perspective in order to adapt to your host culture.

We’ve talked a bit about the “monkey experience” in this blog and in my book I am the Monkey.

It’s one example of an exercise in empathy: viewing the world through the eyes of a monkey – and imagining others’ perceptions about you, the monkey, in turn.

It’s a radical shift in perspective, but a necessary exercise in understanding other individuals, other cultures, and better responding to differences in behaviors and values.

Another Exercise

You teach the third grade in New York City.

A new student enters your class. He just moved to America from the U.K. He is timid and visibly shaken. 

How do you sympathize with the student?

You comfort him, sharing with him that you understand his fear in this new situation.

But how do you demonstrate empathy?

Here’s how:

Picture yourself in his shoes: a young foreign child in a new school, new country, new culture.

Although you may never have been in this position yourself, drawing from your own similar well of experiences in unknown places, you may have a sense of what he’s feeling: the fear, the discomfort, the vulnerability, the confusion.

Sympathizing is the first step to creating a cross-cultural warmth of companionship and camaraderie; empathizing goes far deeper.

In this instance, you understand the child’s inner turmoil and are thereby better able to provide support and confidence through your words and actions.

With more information, you can make informed decisions about how to address his discomfort. And empathy gives you that information.

Visualization is the key to empathy – placing yourself into the untied shoes of that third grader, and viewing the big, scary world through his eyes.

This is empathy in action.

Next week, we’ll provide some examples of empathy in the workplace.

Using Stereotypes Wisely: German Planning vs. Russian Improvisation

Meet Ralf.

Ralf is a German manager and the head of business development. His company is expanding into Russia.

Vlad, the Russian project manager, calls him one morning from St. Petersburg, where he’s aiding the opening of the new office.

“Planning is underway,” Vlad confirms. “Everything will be completed by the deadline.”

Ralf asks some follow-up questions, pressing for further details to ensure things are, indeed, on track, but he finds that despite Vlad’s initial assurances, his responses are vague.

“At this point, only the rough planning is done,” Vlad admits, adding, “but everything is under control.”

Needless to say, after this phone call, Ralf does not feel confident that his ducks are in a row, while Vlad feels he was being interrogated.

Stereotype: Russians Don’t Like to Plan

When Ralf shares his concerns with his boss, he says: “Don’t worry, the office will be finished according to schedule. Russians aren’t good at planning. They say that if you plan too much, you can’t demonstrate your improvisational skills.”

Although Ralf’s boss employed a stereotype to placate his worries, there is truth in this stereotype.

According to scientific studies, Russians generally do not prioritize detailed planning as much as Germans or Austrians. They’d prefer to resolve issues as they occur instead of predicting and investing time in future issues.

Ralf’s boss responded with a stereotype, but his response alleviated Ralf’s stress and may have diffused misunderstanding and potential conflict in the company’s cross-cultural business relations.

One reason this stereotype could be considered wise is that it was explanatory; it allowed Ralf to better understand the rationale behind his Russian counterpart’s behaviors.

Stereotype: Germans Like Detailed Planning

Back in St. Petersburg, Vlad sensed Ralf’s lack of confidence in his management of the project. Being a bit annoyed, he, too, mentioned the exchange to his boss.

Vlad’s boss tells him: “Germans like to plan. Their plans are concrete and detailed, down to the letter. They anticipate potential issues and their variable responses to these issues in order to use time efficiently and reduce risk.”

This is another stereotype. It’s generally true that Germans view time as a resource that shouldn’t be wasted, hence they invest in detailed planning.

This, too, is backed by data making it, more or less, the norm.

This is one way in which stereotypes can aid mutual understanding, allay worries and unnecessary stress, and prevent cross-cultural conflict.

Stereotypes Exaggerate the Norm

Despite the sometimes-usefulness of stereotypes, it’s important to note that stereotypes aren’t all-encompassing and tend to exaggerate norms.

Not every German is a planner and not every Russian likes to improvise.

To illustrate this exaggeration, consider these graphs.

monkey_charts_CMYK-16

The top graph shows how Russians view their own penchant for planning. They acknowledge that improvisation is valued as much as planning, leaving the curve centered.

The next graph shows the Russian perspective on the German penchant for planning. Russians view Germans as planning fanatics, leading to most Germans falling under this stereotypical umbrella right of center.

In the end, the reality is more like the last chart. Germans are, on average, slightly more adept at planning than Russians, and the German company culture often produces and favors managers who work accordingly. However, this stereotype doesn’t apply so severely to all Germans, though the Russian perspective exaggerates that view.

Point being, take stereotypes with a grain of salt.

Their primary use in business management should be to provide generic odds and a general understanding of the values a culture prioritizes.

But don’t let stereotypes color your opinion about another individual in an ugly way, especially if their actions show you the opposite.

As Maya Angelou wisely wrote,

“When someone shows you who they are, believe them.”

The Rice Field Analogy: Negotiation Tactics Across Cultures

Cultures have codes.

The past few weeks, we’ve discussed how to tap into these codes by using analogies constructively.

So can they be used to tap into negotiating with other cultures.

Innate Analogous Terms in Negotiation

Negotiation is a game.

In each culture, this game has different rules.

Strategy in negotiation requires understanding the game you’re playing.

Language used in negotiation is, of itself, analogous.

Negotiation is sometimes likened to going to war. Rules are minimal. Often, sports jargon is used, such as “fair play,” which is:

“in sport, the fact of playing according to the rules and not having an unfair advantage.”

Negotiations are something to be “won.”

These analogous terms used in negotiations naturally extend to cultures.

Framing a foreign culture’s negotiation tactics in the form of an analogy will help drive the correct strategy to “win.”

Cultural Analogies in Negotiation

In negotiation, Russians are “playing poker”; Germans are “playing chess.”

These are pretty straight forward analogies, easily understood by Westerners.

But what about the Chinese?

Chinese negotiations can be an enigma to foreigners.

You might feel mutual confidence, trust, and cooperation one day and, the very next, feel tricked into accepting something you hadn’t discussed.

The “pattern” is not like poker; it’s not like chess.

It’s variable and inconsistent.

To understand this seemingly random give-and-take, a friend provided me a succinct analogy: Chinese negotiations are like working in a rice field.

Rice is, without a doubt, an important part of Chinese culture.

It provides the people sustenance every single day from childhood to old age.

Cultivating this crop necessitates much more cooperation within a village than do crops in Europe or the U.S.

The rice field terraces in the countryside are flooded with a common irrigation system. The water irrigates one field to the next, and this requires that the entire village collectively working together.

Focusing on your land, alone, won’t work.

Instead, you must both hold your own and cooperate with others in equal parts.

This is what negotiating in China requires.

blog rice2

View it as working together on these rice terraces: you must hold your own while using the same irrigation system as that which feeds your business partner’s field. And your business partner is doing the same.

In order to be successful, you must support and cooperate with your business partner while playing defensively and cleverly, seeking your own advantage and ensuring that your partner doesn’t exploit his.

When negotiating with Chinese partners, you aren’t playing poker, neither are you playing chess.

You’re working in a rice field together, both supporting and competing.

3 Mechanisms That Bias Our Decision-Making: Anchoring Bias

An anchor prevents a boat from straying from a set point.

When making decisions, managers are starting from their anchor – their initial set point, which is grounded in culturally-influenced values and norms.

A manager will drift from this point until the chain pulls taut.

There, he will reach a final decision, but inevitably, because he is anchored to a set point, that decision is influenced by anchoring bias.

We’ve talked about availability bias and representative bias in the last two blog posts and how each influences decision-making.

This week, let’s take a deep look at anchoring.

Anchoring in North African Souk

Let’s say you’re from a Western culture and travel to Northern Africa as a tourist. There, you head into a souk, and a seller zeroes in on you.

Knowing that your cultural norms and values are anchored in paying top prices for quality goods, the seller asks for a much higher price for a carpet than he might ask of locals.

Assuming your ignorance of the local pricing market, he starts astronomically high when haggling. That way, he can negotiate down to the highest amount you’re willing to pay.

He knows your anchoring bias allows for it.

If you never discover how much locals are paying for the same carpet, you’ll be none the wiser. You might even walk away thinking you scored a real bargain, when in reality, you paid ten times the local rate.

But if you later discover the seller gouged you on the price, you’ll likely feel scammed, which can often strain future negotiations.

This is one way in which markets use anchoring bias to their advantage in cross-cultural business.

Anchoring in Vancouver Housing Market

Sometimes, exploiting anchoring biases can backfire for local communities.

Let’s travel from North Africa to Vancouver.

The ‘90s saw a peak in Hong Kongers and mainland Chinese immigrants migrating to Canada. A large number settled in the Vancouver area.

Hong Kong real estate is notoriously pricey, so when Hong Kongers anchored in Vancouver, they were willing to pay top dollar for property.

The local real estate market exploited this anchoring bias and charged higher rents.

The result was that, like Hong Kong, Vancouver real estate now has a reputation of being exceptionally expensive.

According to MoneySense,

“Data collected by David Ley shows how, over the last few decades, metro Vancouver has become similar to other Pacific Rim ‘gateway’ cities, such as Hong Kong, Singapore, London and Sydney. Each of these gateway cities have rising housing costs that are fueled by high immigration-driven population growth and foreign investors.”

So, when exploiting anchoring biases in cross-cultural business goes South for local communities, how do they re-anchor?

In 2018, the British Columbia New Democratic Party was voted in primarily due to their platform on housing costs. Their goal was to increase the housing supply, slow demand, and dissuade overseas buyers by taxing empty homes and raising the foreign-buyer tax from 15 to 20 percent.

In this way, Vancouver is attempting to re-anchor their housing market to align with their own cultural norms and values.

3 Mechanisms That Bias Our Decision-Making: Representativeness Bias

Every single person has a mental model.

When assessing the likelihood of an event, the individual bases the event’s probability upon its similarity to that model.

This is called representativeness bias.

Last week, we talked about availability bias, one of the three mechanisms that bias our decision-making.

Availability bias involves one’s perception of an event’s frequency based upon its vividness and frequency in the forefront of one’s mind.

Now, let’s take a look at how this second mechanism – representativeness bias – distorts judgment and decision-making.

Marriage & Divorce

One example of representativeness bias involves marriage.

Many people’s mental model of marriage is that of a lifelong partnership. Not often does a couple enter into a marriage with a view of divorce.

Due to their mental model of eternal love, only around 5 percent of couples in the U.S. sign a prenup, despite around 50 percent of marriages ending in divorce, according to research by Harvard Law.

Somehow, most don’t consider they’ll be part of the statistic and, so, don’t plan for it.

In this way, the power of representativeness bias is stronger than the logic of probability.

Representativeness Bias in Business Decisions

Culture, of course, influences our mental models, and so representativeness biases are grounded in culture.

Let’s look at another example of how a business decision revealed representativeness bias, likely to the detriment of the business.

The global insurance company, Allianz, had built business in eleven African countries. Although profitable, the business was small and, in March 2014, Allianz reviewed their strategy on the continent.

They narrowed their way forward down to two roads: 1) apply aggressive growth through acquisition, or 2) wholly sell off the business.

The board of Allianz was presented with a growth strategy. They rejected it.

Their view was that Africa’s corruption was too extensive and might put the insurance company at reputational risk.

However, Allianz continued to do business throughout Eastern Europe.

According to the Transparency International list – an index of worldwide national corruption – several countries in Eastern Europe, in which the insurance group remained, rated equally corrupt as their African counterparts.

The West’s mental model of Africa considers the entire continent as one monolith of extreme corruption, thereby biasing judgment in lieu of logical probability.

In dismissing growth based on representativeness bias, the company may have lost out on a successful business venture and the profitability that accompanied it.

Tune in next week for anchoring bias.

3 Mechanisms That Bias Our Decision-Making: Availability Bias

Managers apply simple models to help make decisions. Personal experience and culture help form these models.

Our cultural environment largely influences the rationale of our decision-making processes.

Daily decisions don’t require extensive analysis; rather, progress is made more efficient using prior experience and rule of thumb.

But it’s important to note that when we lean heavily into “rule of thumb” and prior experience, we unconsciously rely on bias.

As identified by research, three mechanisms affect this decision-making bias:

  • Availability
  • Representativeness
  • Anchoring

We’ll outline each across the next few blog posts, starting today with availability.

First, a question…

Which of the following do you think kills more people worldwide each year?

  1. Vehicular accidents
  2. Lung cancer
  3. Cape buffalo

If you answered “a) Vehicular accidents,” you’re a product of availability bias.

Availability bias involves making a judgment based upon the frequency of an event in the forefront of one’s mind rather than the event’s real-life probability.

Emotional or easily imaginable events – like vehicular accidents – are recalled more readily than a vague, obscure, or uninteresting incident.

This makes such events seem more prevalent and probable than they actually are.

And the answer…

An experiment was done in the U.S. with just such a question, where participants were asked whether more worldwide deaths were caused by lung cancer or car accidents annually.

Most answered that car accidents resulted in a higher fatality rate. The reality is that lung cancer kills nearly twice as many each year.

On average, over 2 million die each year from lung cancer, according to the World Health Organization, while the CDC states that around 1.35 million are killed on roadways across the globe annually.

The reason there is such a lopsided perception on each event’s probability is partially related to media culture, in which vehicular deaths are much more widely covered than those caused by lung cancer.

Humans really do have a selective memory: we remember more frequently and distinctly situations with a vivid narrative.

This skews the perception of each event’s frequency.

Other aspects that contribute to an individual’s availability bias include personal experience. If the individual knew of someone or multiple people, for instance, who had died from either lung cancer or a vehicular accident, this information might also bias their judgment.

Now, consider if you asked the same question of a Kenyan participant. In Africa, 200 people die each year from Cape buffalo, and such fatal incidents are likely heavily covered by the media.

Overall, a Kenyan participant might have a higher estimate than their U.S. counterpart regarding the global fatality rate caused by Cape buffalo.

In this way, cultural differences impact our availability bias and, in turn, our perception and judgment when it comes to decision-making.

On deck next week: representativeness.

4 Managerial Styles to Cope with Stressful Decision-Making

You are facing a global pandemic. You must decide the best approach to keeping your business afloat.

How do you protect your bottom line? Do you lay off workers? Can you do mental gymnastics and reassess your business model, making the current economy’s limitations work for you?

The way you cope with the stress of complex business decisions reflects both your personality and your culture.

Four different managerial styles have been identified through research.

We’ll call these styles:

  • The architect
  • The free spirit
  • The expert-seeker
  • The panic attack

You may recognize one – or all – of these strategies in yourself and your management methodology.

Let’s take a look at each.

The Architect

This form, which is most taught in schools of management, considers alternative solutions to complex business decisions through the attentive collection of facts.

This methodology and its application is one in which Western managers pride themselves.

An architect is a planner, accounting for the whole picture and all potential outcomes.

The Free Spirit

Complacency and spontaneity are the main tools in the free-spirit’s managerial toolbox.

No complicated decision-making process is employed; the free-spirit takes the first available practical course of action that presents itself.

In doing so, she may be blind to alternatives with better outcomes.

The Expert-Seeker

Instead of relying on his own managerial expertise, the expert-seeker passes the buck to those more knowledgeable or qualified on the subject.

The expert-seeker might consult a specialist or supervisor in all aspects of an issue in order to direct his decision-making.

The Panic Attack

The last managerial decision-making style is one you should avoid.

This tactic involves succumbing to panic mode and making reckless, ill-advised decisions largely based on hysteria.

Obviously, this decision-making methodology is not recommended.

Personality and Culture Impacts Decision-Making Methodology

Your decision-making process is largely impacted by both your personality and culture.

Although you’ll find all four strategies in every culture, some styles may be more predominant than others.

For instance, you’ll find The Architect methodology is applied more often in Western cultures (e.g. the U.S. and Australia) than in, say, Japan or other East-Asian countries.

That does not mean the chosen strategy is any less rational or effective (unless we’re talking The Panic Attack).

The difference in methodology is based on a different set of cultural norms and values so, rather, a style that is ineffective in one culture may be more effective in another.

As we discussed in past posts, people act rationally within their own culture.

One example:

Intuition and emotion often direct Japanese managerial decision-making.

Due to the collectivist values of the culture, a primary concern will be how the decision might be received by the group and how it might affect the social fabric.

Collectivist societies take stock in the collective view; the welfare of the entire group, rather than simply the individual, is most important.

We’ll talk more next week about other biases in the managerial decision-making process.