Transaction Costs, Inaction, White Lies (12/2018)
When there is a price associated with the transfer of something, economists trenchantly call this a “transaction cost.” Typically tied to a trade (say, my money for your used car), the transaction costs can by time, money, effort, emotion…but read about it on Wikipedia if you want to learn more about Neoclassical microeconomic theory.
Here’s a fun paper about ex ante transaction costs and how their existence leads to inefficient outcomes and unexploited gains from trade. HAHAAHAHHAHAH. You aren’t going to read that paper and we both know it. But this is why it matters: feedback, that holy grail of improvement for any skill set, is a perfect example of how transaction costs can yield massive inefficiencies and lost possible gains.
Let’s say, for simplicity, our coworker, Hal, has pungently bad breath. He has for years. But to our knowledge neither we, nor anyone else has told him directly, even though we’ve all noticed. Instead of direct feedback, we commit little lies of omission, or tell microscopic white lies when he hints at why people dodge him in conversation. “I don’t know why people don’t engage more, Hal. It’s a mystery.” His breath doesn’t affect us much, because we can avoid him, but for him, the cumulative effect of every individual avoiding him can have a huge impact on his life. The tragedy here is that no one individual is incentivized to pay the interpersonal transaction cost of letting him in on his dragon breath.
Before providing potentially challenging feedback to another person, there is uncertainty about the recipient’s reaction. It could be positive, even life-changing for that person; it could be negative…very negative…hold-a-grudge-and-seek-vengeance-forever negative. Just the uncertainty alone represents a minimum transaction cost to the giver of feedback. There is a mental calculus of the likelihood that this is beneficial, worthless, or neutral and a weighting on the return-on-investment we are getting from the feedback. (Spoiler alert: unfortunately for the giver, the expectation value ROI is rarely positive.) Tolerating the uncertainty of the receiver’s response is an often overlooked but critically important element of the feedback equation. We cannot know before the feedback is given exactly what the response will be, though there is automatically some cost to us to give it in the uncertainty of response. What’s more, even if our buddy Hal were to respond favorably to our feedback about Listerine strips, the benefits of the interaction disproportionately accrue to Hal and not to us, despite our rolling the emotional dice and subjecting ourselves to the possibility that Hal demands a blood sacrifice for our perceived criticism. Sure, we might benefit a bit from less redolent conversations, but Hal probably represents 1/100th of our daily conversations. Whereas Hal is a part of 100/100 of his daily conversations. So whatever rewards there are from making new decisions about dental hygiene, Hal stands to reap the vast majority, despite us paying the discomfort cost. And to make the equation even further imbalanced against our providing feedback (in addition to the discomfort of uncertainty and the benefit largely accruing to him) is the non-zero likelihood that he respond genuinely negatively and in attempt to assuage his wounded ego he seeks every opportunity to wound ours with ad hominems and any subterfuge at his disposal.
Herein lies a fundamental problem: there are MANY situations where the potential benefits (to careers, relationships, lives) are left rotting on the vine simply due to the asymmetric costs and benefits of feedback. Too much upfront cost for the giver and not enough direct benefit (even if the net surplus of the information transfer is very positive) leads to silence. This is the well-studied Mum Effect, the Persian Messenger Syndrome. Rather than individually subject ourselves to the transaction cost of information, we stay mum and let a non-optimal situation continue indefinitely. Sure, the halitosis example is trite, but it’s pedantically illustrative. Face-to-face interactions may not be the ideal format for interpersonal feedback.
So that’s where Hiark comes in. First, you only get feedback from people you’ve explicitly opted-in to. Second, even after you’ve opted in, you can only get feedback from them AFTER you’ve asked for it on the topic that YOU want to hear about. It’s pull-not-push feedback. And third, because of the asymmetry of costs to the given and benefits to the receiver, we anonymize the giver in a private 1-on-1 chat to reduce the cost the giver must pay to get this net-positive-surplus interaction transacted. The giver is still someone amongst the 20-minimum people that you’ve expressly opted-in to, but not identified unless they choose to verify themselves (or they threaten/abuse users anonymously). This spreads the costs amongst a group and lowers it to a point that information can flow more freely than through in-person interactions.
The transaction costs go down from all three factors: you want their feedback (by opting-in to them), you want feedback about this topic at this time (by asking for it directly), and they are anonymized (less risk of ad hominem or retaliation).
Hiark can help reduce the inefficiencies of the feedback market, helping more people grow, and opening new channels of information previously closed due to very rational cost-benefit asymmetry. The ultimate goal of this feedback, of course, is to help people. We need challenges to our persona status quos, and this is one way to find those challenges and develop our persona fitness.
