The Art of Thinking Clearly: Better Thinking, Better Decisions

See also Coincidence (ch. 24); Association Bias (ch. 48); Clustering Illusion (ch. 3);
Story Bias (ch. 13); Induction (ch. 31); Beginner’s Luck (ch. 49)

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38
EVERYONE IS BEAUTIFUL AT THE TOP
Halo Effect
Cisco, the Silicon Valley firm, was once a darling of the new economy. Business
journalists gushed about its success in every discipline: its wonderful customer
service, perfect strategy, skilful acquisitions, unique corporate culture and
charismatic CEO. In March 2000, it was the most valuable company in the world.
When Cisco’s stock plummeted 80% the following year, the journalists
changed their tune. Suddenly the company’s competitive advantages were
reframed as destructive shortcomings: poor customer service, a woolly strategy,
clumsy acquisitions, a lame corporate culture and an insipid CEO. All this – and
yet neither the strategy nor the CEO had changed. What had changed, in the
wake of the dot-com crash, was demand for Cisco’s product – and that was
through no fault of the firm.
The 
halo effect
occurs when a single aspect dazzles us and affects how we
see the full picture. In the case of Cisco, its halo shone particularly bright.
Journalists were astounded by its stock prices and assumed the entire business
was just as brilliant – without making closer investigation.
T h e 
halo effect
always works the same way: we take a simple-to-obtain or
remarkable fact or detail, such as a company’s financial situation, and extrapolate
conclusions from there that are harder to nail down, such as the merit of its
management or the feasibility of its strategy. We often ascribe success and
superiority where little is due, such as when we favour products from a
manufacturer simply because of its good reputation. Another example of the 
halo
effect
: we believe that CEOs who are successful in one industry will thrive in any
sector – and furthermore that they are heroes in their private lives, too.
The psychologist Edward Lee Thorndike discovered the 
halo effect
nearly 100
years ago. His conclusion was that a single quality (e.g., beauty, social status,
age) produces a positive or negative impression that outshines everything else,
and the overall effect is disproportionate. Beauty is the best-studied example.
Dozens of studies have shown that we automatically regard good-looking people
as more pleasant, honest and intelligent. Attractive people also have it easier in

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their professional lives – and that has nothing to do with the myth of women
‘sleeping their way to the top’. The effect can even be detected in schools, where
teachers unconsciously give good-looking students better grades.
Advertising has found an ally in the 
halo effect
: just look at the number of
celebrities smiling at us from TV ads, billboards and magazines. What makes a
professional tennis player like Roger Federer a coffee machine expert is still
open for debate, but this hasn’t detracted from the success of the campaign. We
are so used to seeing celebrities promoting arbitrary products that we never stop
to consider why their support should be of any importance to us. But this is
exactly the sneaky part of the 
halo effect
: it works on a subconscious level. All
that needs to register is the attractive face, dream lifestyle – and that product.
Sticking with negative effects, the 
halo effect 
can lead to great injustice and
even stereotyping when nationality, gender, or race becomes the all-
encompassing feature. One need be neither racist nor sexist to fall victim to this.
The 
halo effect
clouds our view, just as it does the view of journalists, educators,
and consumers.
Occasionally, this effect has pleasant consequences – at least in the short term.
Have you ever been head over heels in love? If so, you know how flawless a
person can appear. Your Mr or Ms Perfect seems to be the whole package:
attractive, intelligent, likeable and warm. Even when your friends might point out
obvious failings, you see nothing but endearing quirks.
The 
halo effect
obstructs our view of true characteristics. To counteract this, go
beyond face value. Factor out the most striking features. World-class orchestras
achieve this by making candidates play behind a screen, so that sex, race, age
and appearance play no part in their decision. To business journalists I warmly
recommend judging a company by something other than its easily obtainable
quarterly figures (the stock market already delivers that). Dig deeper. Invest the
time to do serious research. What emerges is not always pretty, but almost
always educational.