Making the Most of Your Mistakes

This is Hidden Brain. I'm Shankar Vedantam. In 2009, British businessman Philip Davison-Sebree was celebrating his wife's 50th birthday in the Maldives when he got a phone call. The caller asked for a business meeting the next day at 8:00 AM. Philip explained that that would be a little difficult, seeing as he was 4,500 miles away from work on vacation. What are you doing away at a time like this? The voice at the other end of the line shouted. Your company is in liquidation. Philip thought it was a joke in poor taste. In an interview with Wales Online, he recalled that the caller assured him that it was no joking matter. Here's what happened. A British government agency had reported the demise of Philip's 134-year-old engineering company Taylor and Sons. The government agency, known as Companies House, serves as a kind of registrar for British businesses. It said that Taylor and Sons, created in 1875, was being shut down. Turns out, a government clerk had made a typo. The company that was going out of business was Taylor and Son in Manchester, not Taylor and Sons In Wales. Philip felt sick. His company had been doing well. It had some 250 employees. Within days, he later said in that interview with Wales Online, his contracts dried up. Orders were canceled. Creditors demanded to be paid. The government agency did correct the mistake after some days, but a debt spiral had taken hold. In time, Taylor& Sons actually did go out of business. Not all errors are so consequential, but some are deadly, and many have unpredictable effects. Wouldn't we all prefer that governments, organizations, and companies avoid making mistakes altogether? That's an understandable response, but it turns out that demanding no errors Flaws, flubs, and fallacies. This week on Hidden Brain. Support for Hidden Brain comes from Planet Visionaries. Professional climber and environmental advocate Alex Honnold hosts Planet Visionaries, a podcast spotlighting the people tackling climate challenges with real hopeful solutions. Throughout Season 6, Alex brings together extraordinary changemakers for powerful conversations about grit, determination, and the power of hope to fuel our fight for a better future. In partnership with the Rolex Perpetual Planet Initiative, this is Planet Visionaries. Listen or watch wherever you get your podcasts. Support for Hidden Brain comes from Southern New Hampshire University. The brain isn't fixed. It's flexible. That means we're always capable of transformation. A master's degree from SNHU can help you build the skills to become whoever you want— a leader, career changer, dream chaser. With no set class times and low online tuition, SNHU makes grad school possible because it's never too late to learn something new. Get started at snhu.edu/brain. Support for Hidden Brain comes from Progressive. Whoever says saving money is hard doesn't know that new customers who bundle and save with Progressive save hundreds. Because switching your home and auto insurance is better than cutting down on those iced lattes you love. Switch to Progressive and see if you could save. Get your quote today at progressive.com. Progressive Casualty Insurance Company, affiliates, and other insurers. Not available in all states. To err is human. When people work on things, mistakes are inevitable. This is true in our personal lives, in our workplaces, and at the level of public policy. Not all mistakes are created equal, though. Some failures are trivial, while others can be disastrous. At Harvard Business School, Amy Edmondson studies how failures come about and what we can do about them. She has surprising insights into how organizations and people should think about the mistakes they make. Amy Edmondson, welcome to Hidden Brain.

Thank you so much for having me.

Amy, as a young scientist working on your first major research project, you spent months collecting data from doctors and nurses at 2 local hospitals. The stakes here were high. I understand that you were tracking medical mistakes?

Yes, we call them adverse drug events. So that is when something bad happens to a patient that is deemed caused by human error. And so I would get a phone call from one of the physicians in the study who would say, there's just been an event, and so we're going to take a look at what happened. And so I would hop on my bike and ride down to the hospital, and I'd find myself in a conference room, and we would then sit around and hear from the perspective of different people who may have touched or been aware of the adverse event, and we try to truly understand what happened. So for instance, in one case, there was a patient that received a drug called lidocaine, and they were supposed to get a drug called heparin. The 2 drugs were labeled similarly and they were in the same location even though they do very different things. Now in this case, the lidocaine would not hurt the patient, but the absence of heparin might have led to real harm. It didn't. So these adverse events didn't always involve harm, but they always involved at least the potential for harm.

Now you became aware that some teams at these hospitals were making more errors, more mistakes than others. Besides tracking mistakes, you also were examining how teams functioned, and you found that some teams functioned better than others. Tell me about the components of teamwork that you measured.

Well, I used a classic team survey called the Team Diagnostic Survey, and it measured such things as the quality of interpersonal relationships in the team, the team's own self-assessment of how well they were performing, the team's assessment of whether And the degree to which they had the resources they need to do their job well, especially interested in their assessment of the leadership of the team and how good was that leadership. And these are a set of factors that had been previously recognized as important to team effectiveness.

And you were also looking at how much people cared about their work and whether people felt like everyone was pulling their fair share of the weight.

Yes, and I think that assessment is partly captured in the quality of relationships measure, but there also was the measures of their satisfaction with the work, how happy they were in their job, and all of these measures tend to travel together. So in a good team, in a well-led team, they tend to be high on all of these factors. In a not good team, they're low on all of these factors.

So you now have 2 sets of data, information on high-performing teams versus low-performing teams and information on teams that make few mistakes or lots of mistakes. I mean, it seems quite obvious what the answer is going to be, but what was your intuition about how the quality of teams would relate to the mistakes that teams were making?

Well, my intuition was that better teamwork would lead to fewer mistakes or adverse events for patients. This just makes sense. And the more I understood about the nature of patient care in a hospital, the more I realized how interdependent it was. First of all, it's 24/7 operations, so there's shift handoffs. And second of all, most patients are seen by multiple different caregivers through the course of their stay. And so the quality of the coordination and the collaboration ought to really determine the degree to which high-quality care is given. So of course, I expected better teams would have Fewer adverse events or mistakes.

So the day comes when you're ready to analyze all of the data. You have a small computer disk with all the medication errors made by each team. Paint me a picture of what happened that day, Amy.

Well, I synced up the data on the disk with the data that I already had on the team properties in my computer and started to run the statistical analysis. to connect those 2 data sources. And I just ran some simple correlations, and I saw right away that the p-value, which indicates, you know, whether or not the finding is statistically significant, I saw that the p-value indicated that my data were statistically significant. So I was very excited. And then I looked more closely, leaning into the screen, and I realized that the sign was in the wrong direction. In other words, instead of seeing a relationship between good teamwork and low error rates, the statistical significance was saying there was a relationship between good teamwork and high error rates.

How could that possibly be, Amy?

Well, that was my question. And I sat there, I think I froze. I was upset and I was scared. And so I sat there looking at it and my first reaction was, I must have made a mistake. I must have put the data in incorrectly. So I walked very carefully through everything I'd done. I redid it. And nope. Maybe my hypothesis had been a mistake, but I had not made a kind of data entry mistake. And so there I was staring at it again and again. puzzled. This just can't be true, right? It can't be that better teams with higher quality relationships, more able and willing to collaborate effectively, to coordinate clearly, could have more, not fewer adverse drug events. And I suddenly had a thought, you know, maybe better teams don't make more mistakes, maybe they're more able and willing to report them. And I suddenly remembered that I had inserted an extra question that wasn't in the original survey that is stated as follows: if you make a mistake in this unit, it's held against you, and it's rated on a 7-point scale from, you know, not at all to a great deal. And it turned out that that single item was profoundly significantly correlated with the actual error rates. So that meant that when people agreed with this item, that making a mistake would not be held against you, the error rates were higher. That's not, you know, perfect proof, but it certainly suggested that there was something in the climate of the team that would make it easier to speak up about and report error.

So you hired a research assistant to actually go to the hospital and observe firsthand how teams at the hospital were functioning, testing this hypothesis that better teams, in fact, were more willing to report the mistakes, and that's why they were showing up as having committed greater numbers of mistakes. What did the research assistant find?

Well, first of all, I think it's important to point out that I did not tell him what the survey data said nor what the error data said. He only knew that there was a study of error going on. And I said, I just want your impression of what it's like to work in these units. I want you to observe them. I want you to interview them when they're on breaks and just, you know, learn as much as you can about these different work environments. And off he went. And after a week or so, he came back. He said, you know, they really are very different places to work. Some of them, he said, his words, were just far more open, and others, he said, again, his words, were authoritarian in nature. In some units, people would say things like, if you make a mistake in this unit, you get treated like a 2-year-old, or you get put on trial, so you really don't want to have made one. Or the nurse manager, who is essentially the boss of the unit, if you're a nurse, would get angry and treat you badly. In other units, even though they're only maybe across the hall or up a floor or two, He found people saying things like, well, in this unit, it's really easy to talk about mistakes because of what's at stake. You know, patients' health is at stake. So of course, you're never afraid to speak up, and you're never afraid to tell the nurse manager about what you see.

I'm wondering how this insight started to change your thinking about the nature of mistakes and failure, Amy.

Well, to begin with, I realized you can't learn from mistakes. that aren't reported. When we think about organizations and teams and the goal of learning from mistakes and learning from failures, job one is to make sure we're actually talking about them honestly and openly. And so that started me thinking that maybe there are differences in work environments in what I called then interpersonal climate. And if the interpersonal climate differs, That would have real implications for people's ability to learn from mistakes and failures.

Amy was starting to see that errors and failure are not always signals of disaster and dysfunction. When we come back, why failures are not created equal, how to tell them apart, and what we should do about different kinds of failure. You're listening to Hidden Brain. I'm Shankar Vedantam. Support for Hidden Brain comes from Progressive. Whoever says saving money is hard doesn't know that new customers who bundle and save with Progressive save hundreds. Because switching your home and auto insurance is better than cutting down on those iced lattes you love. Switch to Progressive and see if you could save. Get your quote today at progressive.com. Progressive Casualty Insurance Company, affiliates, and other insurers. Not available in all states. Support for Hidden Brain comes from Quince. We all have those pieces in our closet that we can count on. The versatile jacket, the perfect t-shirt. These are the pieces that make getting dressed easy. And that's what Quince does best. Quince makes elevated everyday essentials using premium materials in designs that are timeless, thoughtfully crafted, and made to be worn again and again. And when the temperatures start to drop, Quince makes it easy to build on these everyday staples with versatile layers designed to keep you warm and comfortable all season long. Find your next fall favorites at Quince. Download the Quince app for app-exclusive offers, Or go to quince.com. Get free shipping on your order and 365-day returns. Now available in Canada and the UK too. And when Quince asks where you heard about them, let them know it was Hidden Brain. This is Hidden Brain. I'm Shankar Vedantam. When airline pilots make grave mistakes, planes crash and people can die. When surgeons make mistakes, patients can bleed out on the operating table or have the wrong limb amputated. When you leave something in the oven too long, no one dies, but you'll have to eat burnt cinders for dinner. There is a reason parents, teachers, managers, and chefs try so hard to stamp out errors. Mistakes are costly, unpleasant, and dangerous. At Harvard Business School, Amy Edmondson studies the science of mistakes. She's discovered that we make a big mistake when we lump all failures into the same bucket. Amy, if you told the average leader of a company that you could completely eliminate all mistakes at her company, she would probably be ecstatic. But you say that we're making a mistake in the way we think about mistakes. Why is it problematic to try to completely eliminate all failure?

You said it at the outset, to err is human. We are fallible human beings, and we will always make mistakes. I don't mean we'll make mistakes all the time, but there is always the possibility that a mistake will occur. So a better approach is to think about how can we be set up to catch and correct mistakes before they cause harm.

And in some ways, from the hospital study that you were mentioning to me earlier, When you send a signal that failure is not going to be tolerated, what happens then is not that the failures stop, but that the failures stop being reported.

Exactly. It's one of these profound insights that I think way too few leaders or even just people in families recognize, that when you insist that we must have error-free performance or error-free lives, The main thing that happens is not that error goes away. It's that you stop hearing about it.

There's another approach to failure. In some ways, this is the polar opposite to the first approach. And this idea is popular, or at least used to be very popular, among tech entrepreneurs in Silicon Valley. And this was to celebrate failure. Fail fast, fail early was the motto. Was this a better approach than leaders telling employees that failure was unacceptable?

I don't think it's possible to say one is better than the other. They are better for different contexts. So the fail fast, fail often is a fantastic approach for a laboratory or for an R&D group. The, you know, let's adhere to the highest possible standards and try our very best to get everything right is how we want to run an operating theater.

Right. If you're running an airline company, I'm not sure you want to tell your pilots, fail fast, fail often.

Of course not. Imagine being the head of a factory making Toyota automobiles who decides, let's fail fast today.

No.

No, no, no.

So rather than a blanket rejection of failure or a blanket embrace of failure, you say that we need to stop treating all mistakes as if they are the same. And you cite the social scientist Sim Sitkin, who once made the case for something he called intelligent failures. What are intelligent failures, Amy?

Intelligent failures are the undesired results of forays into new territory that are driven by a hypothesis and are as small as possible. And so in a sense, an intelligent failure is an experiment that didn't produce the result you had truly wanted it to produce.

In some ways, what that implies then is that intelligent failures are almost always failures that take place on the frontiers of knowledge or discovery. Yes.

So there's 2 kinds of frontiers. One is the frontier of knowledge or discovery in that we're talking about a place where no one has been before. And the other is the frontier that's just new for you. Let's say you pick up a new hobby. You decide to take a ceramics class. That's new territory for you, and you can expect some intelligent failures along the way, even if it's not new to the world.

I want to come back and talk at greater length about intelligent failure later in our conversation. You have a series of very useful insights into how people and organizations can use intelligent failure as an engine for growth and discovery. But it may be helpful before we do that to be able to spot 2 other kinds of failure. These are the kinds of failure we should, in fact, do our best to stamp out. Now, the first can superficially look like intelligent failure because these failures can also take place while people are engaged in complex tasks on the frontiers of human knowledge and discovery. In 2003, the space shuttle Columbia broke apart upon reentry into Earth's atmosphere. killing the 7 astronauts aboard. You conducted an in-depth analysis of what happened to the Columbia when it broke apart. And it was something that you ended up calling a complex failure. Tell me the story of what happened, Amy.

Well, the shuttle had completely combusted on reentry into the Earth's atmosphere on February 1st, 2003. And it was later determined that the reason for that is something called a foam strike. Now what happens is to get the shuttle out beyond the Earth's atmosphere, it takes off with the help of a solid rocket booster. And that has— that sort of has the energy to bring it out into space. And that is surrounded by insulating foam. And occasionally little bits of that insulating foam would break off just because of the pressure of the launch. And sometimes those little bits strike the shuttle. And that's what happened. And make little dents, you know, just little nuisance problems that would lead to maintenance later on to fix them up. But in this case, there was a rather large piece of foam that dislodged and hit the shuttle on a delicate spot, the leading edge of the wing. And so it unfortunately made a larger hole, a hole the size of a human head. Now, a hole that size in the shuttle As it reentered the Earth's atmosphere, allowed all the hot gases of the atmosphere in and led to instant combustion.

Now, tell me a little bit about what happened in the days leading up to the launch, because at least in retrospect, when people went back and did the investigation, they tried to follow the breadcrumbs and ask, could we have known what was going to happen before it actually happened?

Well, yes. And in this case, Unlike the even more famous Challenger incident, no one had any worries leading up to the launch, which was January 16th, 2003. But on January 17th, the day after the launch, an engineer named Rodney Roca was looking at the launch video and he saw just a grainy speck on the screen. That bothered him, and he— because he thought that grainy speck might be a foam strike. And the very fact that he couldn't really make out what it was, but the very fact that he could see a speck at all suggested to him that the chunk, if it were a foam strike, it might be big enough to do real damage rather than just create a nuisance and a maintenance problem. And so, so that worried him. Now, that was about 15 days before reentry, so— Theoretically, NASA had 15 days to kind of figure out whether there had been a real problem, and if so, whether there was an alternate plan to the simple reentry that was part of the schedule. You know, in other words, could they find out, A, is there really a problem, and then B, if so, is there anything we could do about it in that 15-day window? But unfortunately, Roca and His immediate colleagues were never able to get senior managers at NASA to take the problem seriously, to really believe that there was a problem.

Was this partly because there had been other foam strikes that turned out to be fairly minimal, you know, routine maintenance kinds of issues?

Exactly. So unfortunately, people at NASA had learned to equate the foam strikes that did happen with just maintenance. They're not a safety risk, but they had had so many of these little tiny foam strikes that they didn't think it was worth looking into.

In some ways, this is sort of understandable, even though in retrospect we know this was a mistake. I mean, if for years shuttles have been returning safely despite these foam strikes, it's quite understandable how people could have become blasé to them.

It's completely understandable. Their own experience had taught them that it was fine. I have enormous empathy for everyone who was a part of that shuttle program who believed it to be fine because I'm that way too. I'm a fallible human being who overly trusts my prior experience and often fails to be curious enough about, well, maybe this one's different. Ooh, let me look into it. Let me see what I can learn. So It's tragic, but there are no bad guys here.

You point out that complex failures are often not the result of one big cause, but rather a number of small factors that line up perfectly in this perfect storm, as you called it. I understand that in the healthcare arena, these kind of complex failures are sometimes called the Swiss cheese model of failure. Explain that term for me, Amy, and explain how You use this analogy to analyze a case in which a young patient received a dangerous overdose of morphine.

That's right. And the Swiss cheese metaphor comes from an error theorist named James Reason from the UK. And he uses this metaphor of Swiss cheese to try to explain the notion of complex failures. He says, you know, when your cheese has air bubbles in it, those are in a sense defects in the cheese. but they're not problematic until they line up and make a tunnel. It just rarely happens, but when it happens, then the error goes all the way through. So in the case of this morphine overdose, I was able to analyze 7 factors contributing to the accident. So to begin with, there had been an overflow in the intensive care unit where most post-surgical patients go, and this boy had just had surgery, so he was sent to the regular medical floor, which has less specialized staff. So that's one factor. Now, that by itself would not lead to this kind of overdose, but unfortunately, there was a brand new nurse right out of school who was assigned to take care of him. And then there was an infusion pump that's used to deliver this pain medication, and it happened to be located in a rather dark corner, making it a little harder to see. And the nurse also hadn't done this kind of programming before, so he asked for a colleague to help. She stopped by to help, but she didn't do her calculations independently. She just looked over his shoulder and verified his. And then finally, the medication label was printed badly by IT and a little difficult to read, so that contributed to them Not able to determine the concentration of the drug exactly right. And so all of those holes in the Swiss cheese lined up and let this overdose go through. Fortunately, it was noticed very quickly and they called the physician and instantly delivered a drug to help correct the error. But it's the kind of story that Is unfortunately common in healthcare, but especially in any complex system.

And in some ways, Amy, it points out to me the importance of allowing people to speak up about problems that they're seeing and also to take a systemic view of problems rather than looking for, you know, the smoking gun approach to problems.

That's absolutely true. Right. And our tendency is to look for that smoking gun. Like, we— our brains are used to looking for the single cause, the small part that broke, rather than to back up and see how the parts are relating to each other and coming together in a way that created the failure or created the flaw. And it's a discipline to sort of realize that there's multiple factors. In order to prevent complex failures, speaking up is essential. People need to know that their voices are welcome because all you have to do is catch and correct one of the many factors, and you've prevented the failure.

It is possible to implement procedures that ensure that errors are caught and corrected early.

Tell me how this is done by the Toyota is one of the best examples of doing this well. And probably the best practice that is maybe even the most famous of the Toyota Production System is something called the Andon cord. And that is a literal cord that any team member is encouraged to pull whenever they see something wrong, or even more importantly, whenever they see something that Might be wrong. Now, many people think once you pull the cord, the line instantly stops. It doesn't. When you pull the cord, what happens is that a team leader comes quickly over and says, what do you see? And you explain. And the two of you together diagnose what's happening. And most of the time, it turns out that you can either fix it or recognize that there wasn't a real problem, and the line keeps going. But 1 out of 12 times, There is a real problem there. The line will stop, and it won't start again until that problem is fixed. So that prevents the complex failure of some small problem moving on downstream, and we're pouring good money after bad at that point.

Because when you stop the assembly line, when you're stopping production, it is costly. But I guess in the long run, the benefit is that the production becomes a higher quality production. And over time, you're starting to stamp out more and more mistakes.

Exactly. So it's— yes, it's absolutely costly in the short term. If the line stops for a minute, that is literally the loss of one car sale. So you are allowing a frontline associate to cost the company several thousand dollars anytime they wish. And of course, as your question suggested, they understand that this is money well spent. This is not a cost. This is an investment because every time we can stamp out small problems along the way, we are less at risk for producing anything less than a perfect car with high quality that will serve that customer well for years and years.

We've talked about intelligent failures and complex failures. In some ways, at the bottom of your taxonomy of failures are what you call basic failures. You encountered one of these failures when you went sailing A few years ago. Tell me what happened, Amy.

Well, I had signed up for an alumni regatta at Harvard. And when I got there, I realized kind of to my horror that everybody else there was about 2 years out of school, not several decades as I was. But that was okay. I can do it. I'm a good sailor. I'll do the best I can. So off I went and I was thrilled to not come in dead last in the first race. After the second race, there was a break where all the boats go back to the dock before the regatta continues. The dock was dead downwind, which means that if you're in a sailboat, the boom on the sailboat holding up the sail is as far out as it can possibly go. And if you're dead downwind and the wind shifts even just a little bit, the boom is at risk of Flying over to the other side. So any experienced sailor, and I am an experienced sailor, knows that. So we all know that when you're heading dead downwind, you had better be vigilant because you are at risk. Now, in the Charles River where this regatta was, the wind is notoriously shifty. But the race was over. We're just heading into the shore. So I'm chatting with my crew. A little bit relaxed. And all of a sudden, the boom flies across the boat with a little wind shift, knocks me out. Next thing you know, I'm in the freezing cold Charles River.

Oh my God. You got knocked overboard?

I got knocked overboard. It's early May. The water is probably 40 degrees. Fortunately, my crew, who's a fantastic sailor, you know, quickly turns the boat around to come get me. I climb in. The back, the stern of the boat. And then I just see it, all the blood everywhere in the hull that's coming out of my head. So it led to 9 stitches in the side of my head. And it was a basic failure. It was a small moment of inattention, looking away, not paying attention, just being overly casual when in a sense I'm operating dangerous machinery.

And in some ways, I think what I hear you say is that The situations in which we tell ourselves, I can do this in my sleep, these are the situations in which basic failures can often happen.

That's exactly right. Anytime you hear yourself or someone else saying, oh, I can do this in my sleep, watch out. You can't.

I understand that a simple tool like a checklist can be very effective when it comes to preventing basic errors. We've actually talked about the power of checklists on an earlier episode of Hidden Brain. You've pointed out, Amy, that sort of just Having a checklist is not enough. You actually have to do it mindfully. And you describe the story of an airline crash that took place some years ago. Tell me the story of what happened.

So it was a freezing cold January morning in Washington, D.C., and Air Florida Flight 90 was headed for Fort Lauderdale, back home, I guess. And unfortunately, they crashed into the Potomac River. Why did that happen? Well, it turns out, yes, they used the checklist. And most of our listeners are probably aware that the checklist includes the item anti-ice. When the first officer said, as part of the checklist, anti-ice, the captain said habitually off. It's Air Florida. I think most of their flights would not be using the anti-ice machinery. The first officer went on to the next item on the checklist. That was a tiny but crucial and catastrophic mistake that led to this terrible failure.

Because, in fact, you did want to de-ice the wings before taking off on that very cold day in Washington, D.C.

That's exactly right. You wanted to de-ice the wings and take the time that is required to do that to have a safe takeoff.

Amy's work on how to generate fewer basic and complex failures makes sense. We all want to see fewer errors in hospitals and in space shuttle missions. When we come back, in a world where failure is generally stigmatized, how to get people and organizations to do the hard thing— systematically identify places where they can fail intelligently. You're listening to Hidden Brain. I'm Shankar Vedantam. Support for Hidden Brain comes from Instagram. Instagram Teen Account's automatic protections limit who can contact teens, the content they can see, and the time they spend on the app. Teens are automatically placed into Teen Accounts. Teens under 16 will need a parent's permission to change any of those settings to be less strict. Learn more about Teen Accounts and Instagram's ongoing work to protect teens online at instagram.com/teenaccounts. Support for Hidden Brain comes from Air France. Air France Business Cabin offers comfort throughout the journey With priority check-in, boarding, and lounge access. Onboard, enjoy menus from renowned French chefs, wines and champagne selected by a sommelier, and free high-speed Wi-Fi. When it's time to rest, settle into a fully adjustable lie-flat bed with added mattress comfort. The art of travel elevated, because Air France Business Cabin goes further in every detail to make your journey exceptional. This is Hidden Brain. I'm Shankar Vedantam. Amy Edmondson studies the science of failure. She's the author of Right Kind of Wrong: The Science of Failing Well. In her research, she has found that we make a mistake when we lump all mistakes into the same bucket. There are indeed many kinds of failure that we should actively try to stamp out, but taking an ax to all mistakes ignores the fact that some failures are actually useful. They are what Amy and her colleagues call intelligent failures. Amy, you found that intelligent failures happen in very specific circumstances. The first is that the failure happens in new and uncharted territory. I understand that you spoke to a prominent chemist, Jennifer Heemstra, and like many scientists, she does work on the frontiers of knowledge. I mean, she's trying to discover things that we don't know already. What did she tell you about what failure looks like in her lab?

Well, she has a wonderful way of leading her very thriving laboratory. She tells her students and young scientists, we're going to fail all day. And she says failure is a part of science. And of course, she's right. And what she means is if we are on the leading edge of our field, and that's where we hope to be, we're going to have some very smart, well-informed hypotheses, but many, if not most of them— in fact, in her view, 90% of them— will end in failure. They will have been wrong. But each of those failures is in itself an important discovery. It lets them know what didn't work so that they can then quickly rethink and try the next one and hope that that might work.

In some ways, it's like, you know, wandering around in a dark room with your arms outstretched and you're searching for the door. And each sort of stab in the dark might not give you the door handle, but it tells you where the door handle is not. And eventually, if you make a sufficient number of failures, you're likely to eventually find the door handle.

I think that's a wonderful image. And you can take that image into so many different aspects of your life, whether that's finding a life partner or innovating in how you do your work or in the kitchen trying a new dish. And eventually, you'll find that door handle.

You say that blind dates are examples of intelligent failure because such failures are inherently unpredictable. What do you mean by this?

If you are looking for a partner, particularly, let's say, a blind date, whether from a mutual friend or an app, you go out and you're going to meet someone for the first time. There's no real way to know for sure in advance whether this is going to be thumbs up or thumbs down. There is an opportunity here, you hope, to meet someone and get along with them. You've done as much as you can to figure out whether this is a viable possibility. And so off you go. But if it's a failure, it's an intelligent failure.

I understand that you know a couple of people in your own family who courted this kind of failure. Tell me the story of your mom, Mary, and her friend, Bill.

Well, so my mother grew up in New York City in the same neighborhood as a boy named Bill. They were good friends. And they just stayed in touch even after they went off to college. My mother went to an all-women's college called Vassar. Bill was at what was then an all-male college called Princeton. And he had a friend named Frank. And he said— Bill thought it would be fun for my mother to come down on one of these weekends that were organized with dances and so forth. And he said, you know, Mary, why don't you come? I think you'll like this guy. So my mother came and spent the whole weekend at at Princeton. And she had a terrible time. She didn't like him one bit. He drank too much. He was too forward. She wished she had stayed home at Vassar doing her homework. So it was a failure. It might not have been intelligent, but it was a failure.

Uh-huh.

Then fast forward a year or so, and Bill says, I have a friend I want you to meet. And she's thinking, No way. And he says, no, really, I really think you're gonna like this guy. He's the brother of a woman I'm dating, and I really, really want you to meet him. And my mother, probably intuiting the strategy of small losses, agreed to meet this other guy for a drink, right? Not a weekend away, but a drink. And lo and behold, this new guy named Bob And Mary hit it off right away, really liked each other, had a great deal in common. And they ultimately married. And those are my parents.

Wow.

And you can see how the intelligent failure in the first date, in some ways, prompted your mom to do something very smart in the second date, which is to limit the size of the potential failure. So instead of spending a whole weekend with Bob, she met Bob Can you talk about how this is also one of the markers of intelligent failure, which is you try to make the failure as small as you possibly can?

It's so important that we minimize the waste. It's how much time, how many resources, how much of an investment do you have to make in an unknown outcome to get the information you need to then go forward?

And of course, in a non-personal domain, you can see how organizations might be able to put this insight into practice. If you're training pilots, for example, maybe the smart thing is not to put them in a plane on day 1, but to put them in a simulator.

Exactly. Don't give them 200 living passengers who are depending on their skill to land the plane safely. Put them in the simulator. And in fact, You can give them all sorts of incredibly challenging scenarios and see how they do.

Can you think of any other domains, Amy, where organizations can try and help people fail, but fail small rather than fail big?

Well, in every organization, the research and development group is trying to develop new products and services that will, in the future, be the source of revenue. And you have Experiments. You say, well, maybe this will work. Maybe they'll like this. Maybe this technology will work. And more often than not, you're having failures. But you're mitigating the risk of customers thinking badly of you because you're having a failure, because you're having it in the R&D department, not out in the marketplace.

A 3rd marker of intelligent failure is that we have a very clear goal in mind. And a vivid example of this comes from the inventor Thomas Edison. Tell me about his intelligent failure, or rather his intelligent failures, Amy.

Thomas Edison was dogged in his pursuit of the inventions that he knew, or he believed were possible, and he knew could really change lives. So he's, of course, credited with inventing the incandescent light bulb, and he tried literally thousands of different materials and techniques that one after another, they didn't work. They had all sorts of problems. But he didn't give up. He just kept going. And when a lab assistant, I think attempting to be supportive, said, gosh, all these failures must be very hard for you, sir. He responded, failures? I haven't failed. I've just found 10,000 ways that don't work.

Yeah, so this is the very definition of intelligent failure here.

Yeah, he completely understood the concept of intelligent failure. You have a goal, you've done your homework, you've used the knowledge you have from your prior experiences, from available literature, from everything you can get your hands on, and then you reach that point where there is no way to go forward other than by trying it out, acting, having an experiment. And then lo and behold, again, you were wrong. But fortunately, you're wrong behind closed doors or you're wrong at a small scale. You know, you haven't caused real harm. You haven't blown anything up.

Another factor involved in intelligent failures is something you alluded to a second ago, Amy. And that is that we have done our homework. What does this term mean?

Well, it means different things in different contexts. If you're a scientist hoping to make an important discovery and publish in a journal, it's about being up to date on the most recent research so that you're really in new territory. If you're going on a blind date with a friend of a friend, you have asked that friend, well, tell me about this person, right? What do they like to do? You've found out as much as you can. before agreeing to go spend time with them.

You mentioned the work of the chemist Jen Heemstra a little while ago. She and her team really did their homework when searching for a way forward to isolate nucleic acids. Can you explain what they were trying to do and what they did?

Well, they were trying to get RNA, the double-stranded helix of RNA, to separate. They tried various different reagents which didn't work. And each of these experiments that fail is a disappointment. And yet they doggedly continued. Then this young scientist named Steve Knudsen in her lab went to the literature and found a rather obscure paper from the 1960s. And it was talking about a reagent called glyoxal. And because of the properties of glyoxal, Steve hypothesized that it might work in their goal to separate the strands of RNA. And lo and behold, it worked.

So really, I think the picture I'm getting from you, Amy, is that intelligent failures are not about gamblers or adventurers. In fact, they're taking chances while trying to de-risk things as much as possible.

Yes, they want to succeed. But because they have chosen to try to succeed in new territory, Ken, whether that's scientific research or a blind date, they're willing to do the work.

You mentioned something else a second ago as well, which I think is really germane here, which is that you need a really strong stomach to tolerate repeated failures because if you don't have that capacity, it's very difficult to practice intelligent failures.

Yes. And you could think of that as a I think that's a part of wisdom and a part of building character is that ability to withstand the setbacks that are just ordinary parts of our jobs. They're parts of our lives. And it's essential to appreciate how necessary they are, especially if you are trying to pursue great things, if you're trying to make a contribution, if you're trying to live a full life. You have to learn to reframe the setbacks as necessary, as part of being human, and not as bad, I don't like it, to, oh, that's disappointing, but it's okay.

Yeah. I've discovered 5,999 ways that you cannot build a light bulb. These are all discoveries, not failures.

Yeah. I mean, if Edison was sincere, and I'm going to believed that he was. He truly had learned how to think of each and every one of those failures as valuable information, right, as true discoveries in their own right. So that kind of cheerful attitude can seem Pollyanna-ish, but I disagree, right? I think it's actually scientifically valid.

And perhaps a larger lesson is that many companies and many individuals should be seeking out intelligent failures more often?

I think especially, you know, once you're an adult and once you have maybe some success or some area of expertise, it is so tempting to want to avoid failures at all costs, right? To not want to get anything wrong. So that would lead you to basically close yourself off from adventure, to not pick up a new sport or make new friends or pick up a hobby or shift careers in some way that might be meaningful but scary to you. But then if you have a framework that says, well, it may not go well right away, but it will be an intelligent failure because of course I'm not supposed to be expert at that yet, and the goal will be to learn. So it helps you think, I think, a more productive and thoughtful way about new experiences So that you can welcome them rather than be reluctant to jump into them.

As we go through life, there is one important ingredient in intelligent failures that we have not discussed. This ingredient shapes how we approach personal relationships, new ventures, and our careers. It shapes almost everything we do. That secret ingredient is money, or rather, the way we think about money. Money is a tool that allows us to pay the bills, to start a new business, to travel. How we grapple with money and think about debt can determine whether we successfully engage in intelligent ventures, including intelligent failures, or dive into things in a foolhardy manner, or are so risk-averse that we never try anything new. When we come back, stories and advice on how to get money and debt to work for you. You're listening to Hidden Brain. I'm Shankar Vedantam. Support for Hidden Brain comes from Instagram. Instagram Teen Accounts' automatic protections limit who can contact teens, the content they can see, and the time they spend on the app. Teens are automatically placed into Teen Accounts. Teens under 16 will need a parent's permission to change any of those settings to be less strict.

Learn more about Teen Accounts at teenaccounts.instagram.com.

Thanks for watching Hidden Brain.

Working as a dedicated Fidelity advisor, I always ask, what's important to you?

I'll look at those priorities and goals alongside your full financial picture to build a comprehensive plan designed to help grow and protect your wealth. With proactive portfolio insights and an eye on tax and retirement planning, Fidelity advisors are here to help you achieve your financial goals.

I'm here to help you make the most of your money.

I'm Laura Maxwell, and I'm a dedicated Fidelity advisor. Learn more at fidelity.com/wealth.

Investment minimums apply.

Fidelity Brokerage Services, LLC, member NYSE SIPC.

This is Hidden Brain. I'm Shankar Vedantam. A central idea in treating failure as a friend instead of a foe is to understand the risks involved in different ventures. If the risks of failure are small, then it makes a lot of sense to try something new. If the risks are catastrophic, it's wise to be cautious. At Wright State University, John Dinsmore studies how we think about money and debt. Those things shape our ability to take on risk and to explore new ventures. We featured John's research on a recent episode of the show titled The Debt Trap. Many listeners had thoughts, comments, and personal stories about their adventures with money and debt. John is back today to respond to those stories. John Dinsmore, welcome back to Hidden Brain.

Thanks for having me.

John, one of the things that makes it difficult to accurately judge the risk of doing or not doing something is what scientists call The optimism bias. When it comes to money and debt, how does this bias work?

Well, we always tend to— when we think of the future, we always tend to think of it in terms of things working out for us, us getting the promotion, us making more money in the future than we're making now. And while that is a good perspective to have in terms of perseverance and motivation, things don't always work out that way, right? We all have hiccups along the way. Everyone has a story of running into some bad luck. And when we make financial decisions involving projecting our future circumstances, that optimism can sometimes get us to take out more debt than we probably should, or maybe have things— our finances be a little tighter than they should going forward.

Do we know why the optimism bias comes about, Jon? In some ways, you know, there's been other research that shows that Human beings are very attentive to the negative. Why is it in this case, when we think about the future, we tend to err on the side of the positive?

Well, if you want to take what we'd call an evolutionary perspective, beyond even just finances, if we didn't believe that our future was going to be better than our present or our past, it'd be pretty hard to get out of bed in the morning. But it is this optimism, whether it's finances or love or anything else, it is something that convinces us to get up, get out of the house in the morning, and go live a life and maybe take some chances.

We also discussed the idea of intertemporal discounting. How we value something today might not be how we value it in the future. How does this play out when it comes to taking on debt?

When we're looking at taking on debt, and it could be something as simple as, you know, maybe buying some furniture, it doesn't have to be a house or a car or something like that. Studies have shown that we think of debt or expense differently in the future than when we're dealing with it today. So even though all of our past and our present tells us that, well, we're not going to have that much disposable income left at the end of the month, Even if we push the payments for things off a little bit into the future, we somehow convince ourselves, well, I've never had disposable income in the last 30 years of life, but next year is probably going to be different. So I'll go ahead and take that chance.

So John, our troubles with debt are not exclusively the result of our own internal biases. Sometimes marketers and other operators are actively trying to manipulate our judgment. You've written about the concepts of drip pricing and drip debt. What are these, and how can they ensnare us?

Drip pricing is where you encounter a price for a good, and you think that it's all— that one price represents all that the good is going to cost you. But as you go through the purchasing price, there are all these little add-on costs. A popular example of drip pricing would be airline tickets, right? You get the airfare. You go through the work to figure out Here's the route and the time and the price. And then once you select that flight and start going through the purchasing price, well, then you get hit with, do you want to choose your seat? Do you want to have priority boarding? Do you— all of these add-on things. But since people have already committed to the initial purchase, they usually absorb these extra prices as they go. Typically, when you're looking at how certain forms of debt, say credit cards, are advertised, you usually just see one interest rate upfront, the interest rate being the price for the debt. But there are usually lots of kickers, whether it's late fees or maybe the rate goes up over time. But, you know, we, we bite into that initial price that we encounter. And as we go through the purchasing process and we see all these escalators and added fees, Hmm. we just kind of take them on. Since we've already committed to the purchase.

I want to share with you a story we heard from a listener named Maria because it seems to be a great example of how our logical minds can sometimes be hijacked by our emotions when it comes to money. So Maria was on vacation, and on this vacation, she was convinced by marketers to purchase a timeshare. She says that she was enticed into the deal, which involved putting $10,000 down on a credit card after the salesman offered her 3 free weeks at any of the timeshare properties in their portfolio.

We're normally very smart about our finances, but we got caught up on being vacationed and, and by the lure of the 3 weeks and then by the opportunity of staying in international locations. And well, it ended up being all lies. Everything they said, they just made it impossible. And for All this time you had to keep paying the monthly fee in addition to the credit card that we purchased. The $10,000 was paid on a credit card. We also had to pay a monthly maintenance fee. We never even got to use it. So basically we lost $10,000 just from really stupidity.

So, John, the timeshare industry is especially well known for hard selling. What do you hear in Maria's story?

Well, first of all, Maria is not stupid. I mean, it sounds like— well, I'm sure there are lots of perfectly reputable timeshare companies out there. I mean, there is, as you alluded to, a reputation for certain operators within the space. It sounded like there was a misrepresentation of what was going to be offered. I think also, you know, salespeople have the choice, as do marketers, of presenting the facts or the attributes of the product that help them make the sale. It doesn't sound like that they were upfront about all the fees that would be coming on and probably presented it as, if you pay this $10,000, you're going to get all of these things. And then of course, when they make the purchase, they probably get a 100-page contract that includes all the fees that no one wants to read, and she probably just wanted to get on to her international vacation. So she's not stupid. Nobody reads those contracts, but, you know, hopefully in the future she will pay someone to read a contract like that because there can be a lot of very expensive things hidden in those pages.

So talk about 2 ideas that you just raised. One is that just the sheer complexity of many of these agreements make it very difficult for people to make good judgments about what it is that they're actually signing on to.

Right. So as a marketer, and even though I wrote a book that's skewering a lot of marketing practices, I would say that when you're advertising something, the mantra is to go for simplicity. If there's something you really want people to remember and understand, you make your argument as simple as possible. Well, if you're going to take the other side of that, if there's something you don't want people to understand or pay attention to, you make it very complex. I would imagine that, with Maria, a lot of those gotcha aspects were hidden in the complexities of fine print.

The other issue that strikes me about Maria's story, Jon, and I wonder if this has ever happened to you, is that When a salesperson is sitting in front of you and they're showing you brochures of these beautiful vacation properties in fabulous locations, it's very difficult not to imagine yourself sitting in one of these beautiful properties, enjoying the sun on your face, enjoying the sand under your toes. And at that point, it becomes more difficult in some ways to think critically about the contract that they're actually placing before you.

No, I think that's fair. I think there's a fair— some amount of seduction in getting people to think about living the life that they aspire to, even if it's not a life that they can afford. And showing, say, you work hard, and of course that person does work hard. Don't you deserve to be skiing on the slopes of Aspen? I mean, deserve, sure, but you still can't afford it. So it's, it's easy to get swept away when Has that ever happened to you, John?

Have you ever had a time when your emotions have basically swept you off your feet and prevented you from thinking clearly about a decision?

Well, you know, I'm a drummer, and right after college, before trying to get on with quote-unquote adult life, I was actually a touring musician playing with a jam band, playing drums, and I ended up being talked into buying drums that were way out of my price range by a very skilled salesperson. And I think a lot of it was, you know, it was so tied to my aspirations of who I wanted to be and how I wanted to be looked at that, yes, the salesperson was very skilled, but I think I was also very kind of ripe for the picking given where I was at the time.

Can you talk a moment about what the salesperson did? How did that interaction go that made you ripe for the picking?

Well, the salesperson took a big interest in me, asking me all sorts of questions, and then went about having me imagine— you know, they always say, there's an old adage in advertising saying, you know, don't sell the journey, sell the destination. And him painting a picture of me kind of of as an accomplished musician with adoring fans and having climbed the mountain of trying to be a professional musician. And I just— I was seduced.

So, John, I understand that your son is now a musician. And I'm guessing you've probably bought musical instruments for him. Have you used your own experience from back in the day to inform how you help your son make better decisions, both musical and financial?

Absolutely. So, you know, we started with— he said he wanted to play bass, so there was a starter bass kit at Walmart for $100. So we started there, and I said, show me that, you know, you're going to stick with it, that you're going to practice. And so then we went to a slightly better bass. And when he got his first job— and so musicians always want to get, I think, new gear— I have I've advised him, look, used gear is typically as good as new. And so I've really tried to help him focus on value rather than, you know, brand or flash or image or that sort of thing, of really getting the most for your money.

When we come back, the stories we tell and the stories we inherit about money and how they shape our financial decision-making. You're listening to Hidden Brain. I'm Shankar Vedantam. Support for Hidden Brain comes from Stripe. Stripe is built for whatever comes next, because as your business scales, so does the complexity of fraud— new customers, new markets, new AI-driven attack patterns. Stripe Radar protects your business as it scales with the scale of the Stripe network. The more payments Stripe sees, the smarter its AI gets at detecting these patterns as they emerge. Stripe's network is so vast, it has seen $1.9 trillion in payment volume across millions of global businesses. In fact, when a card is used, there's a 92% chance the Stripe network has seen it before. All of this means fraudulent patterns across payments, accounts, and customer abuse can be detected, flagged, or blocked more easily, based on the rules you set up, of course. Blocking bad actors, welcoming good customers. Keeping more of your revenue your revenue. Learn more about fighting fraud with Stripe at stripe.com/radar. Support for Hidden Brain comes from U.S. Bank. With a U.S. Bank Smartly Visa Signature Card, you earn an unlimited 2% cash back on every purchase. No quarterly activations, no categories to track, just unlimited 2% cash back on every purchase. Visit usbank.com/smartlycard to learn more. The creditor and issuer of this card is U.S. Bank National Association, pursuant to a license from Visa USA, Inc. Some restrictions may apply. This is Hidden Brain. I'm Shankar Vedantam. The Beatles said that money can't buy you love. Whatever the truth of that statement, this much is certain: there are a great many things in life for which you do need money. Learning to use money well, and to also understand the way your own mind thinks about money, is a crucial part of becoming an effective adult. John Dinsmore is the author of The Marketing of Debt: How They Get You. John, we were just talking about the experience of a listener named Maria who lost thousands of dollars after she was pressured into buying a timeshare. One thing I noticed in Maria's story is that she feels really badly about the mistake. She thinks of herself as being smart with finances, but she now feels stupid in buying the timeshare. Talk a moment about how debt can affect our self-confidence, even our self-concept.

Oh, well, I will say, after our original episode aired, I received email from people who said that they enjoyed listening to the episode because they had had similar experiences and they've been carrying lots of shame around. The truth is, even the most successful people have some financial decisions they'd like back if they could. I owned a house in Washington, D.C., and I think I sold it about 5 minutes before the real estate boom happened in the mid-2000s. And, you know, where I had made a tidy, like, modest profit, if I had held on to it for a year or two, I would have just made an insane amount of money. And it took me several years to actually kind of get comfortable with it, even though we all just do the best we can with the information we have at the time.

Hmm.

And none of us bat 1,000. You know, the most successful you can think of, you know, name your billionaire. I mean, they still have a number of— they've made a number of wrong calls in their time, even if on balance they've done really, really well. So the challenge is to keep moving forward and understand that, you know, we're all going to miss a few along the way.

I'm wondering, John, if the reverse is also true, that sometimes, you know, we make correct financial decisions, but we are correct largely because of luck. And now we start to overestimate our own financial skill and acumen.

Yeah, I think that's pretty fair. Human beings in general are pretty uncomfortable with the subject of luck. We tend to think of— psychologists allude to something called attribution theory. So for what I do as a teacher, the joke is if a student gets an A, they will say that they earned an A. But if if they get an F, they'll say that the professor gave them an F, right? And so there's some loaded language in there that reflects some sense of self-concept, right? And we do this with financial decision-making too. So we may punish ourselves too much for something that didn't work out great, or we may think that we're geniuses when actually, you know what, it just so happened that, you know, maybe I had to sell the house because I had a new job and I had to move to a new town and it just so happened that that coincided with a really great time to sell the house.

Of course, I think what you forget in retrospect is all of that other detail, all of the things that were weighing on you that prompted you to say, I want to sell the house right now. Looking back, all you think about is, oh my gosh, if I had waited 2 years, I could have made a windfall, and you tend to forget all of the details that prompted you to make the decision that you actually made.

Right. And also, you know, thinking of the house I sold in retrospect too early. Well, I was renting it out. The tenants were driving me crazy. I was glad to be rid of it. And then, you know, a year or two later, all of a sudden I thought what an idiot I was, where at the time I made what was the right decision for me.

Hmm. We heard from a listener named Hannah who called in with a story about buying her first home at the age of 29. Hannah says the whole process was really easy, and she was especially drawn to what seemed like a too-good-to-be-true monthly maintenance fee on the townhouse.

I remember thinking, how did I get so lucky that this was simple? I found a good deal on a place that I really loved, and my offer was accepted right away. The inspection came back clean, and it felt like everything was just falling into place. I also thought I scored big because finding a townhome with no HOA fees was rare, and this didn't have any HOA. I was saving at least $250 a month, probably more, just from no HOA. But fast forward to 2023, and I had moved out. I was renting the place to tenants, and they mentioned that they saw a small hole in the corner of one of the upstairs bedrooms. But I'd lived there for 3 years, and I never noticed anything like that. I thought it was minor, but when we had someone come out and look, what we discovered was that the entire backside of the house had extensive dry rot caused by long-term water damage. It was affecting 3 different owners before me and went unnoticed, but then it became my problem. It wasn't a sudden event or weather catastrophe, so insurance wouldn't cover it. To repair the structural damage— studs, insulation, Siding and all, it cost me over $90,000. So what I thought was a really simple, lucky first-time home buying experience, it was pretty much the most expensive lesson I ever learned. And I'm still recovering from my financial impact.

So John, I find Hannah's story very relatable. Homeownership can sometimes feel like an endless money pit of repairs and fixes. What do you make of Hannah's story?

Well, one, I'm really sorry for Hannah because that is an incredible amount of money. But I, I don't think she really necessarily made any mistake. You can't predict every possible outcome. Like, I know there, there's people who ran into COVID, right, and ended up having trouble paying for houses that they bought and that sort of thing. Well, I mean, who could have seen that coming? That was the first pandemic in 100 years. So I mean, sometimes, again, we just get unlucky.

So John, you talk about something called the expense prediction bias. And I'm wondering whether Hannah's story might be a candidate for this bias.

So expense prediction bias says that we actually are pretty good at being able to predict our regular expenses.

Right.

So things like our mortgage or our heating bill, they happen at the same time every month and typically for about the same amounts. But we are pretty poor at predicting our irregular expenses. So things like car repairs, home repairs, entertainment expenses, things like that that happen sporadically and at different amounts. So we, when we think of a budget or we're trying to predict how much things are going to cost us, over a given month, we're able to incorporate the regular expenses, but we completely ignore the irregular expenses. If you have ever owned a home, you know that there's always going to be frequent but irregularly timed— maybe not every month, but, you know, one happens 3 months and then another 7 months from then— these significant expenses that you know are going to happen at some point, but you don't know exactly when or for what amount. So we tend to not take those into account in terms of our mental budgets and how much we think something's going to cost.

So in Hannah's case, I mean, the expense was just gigantic, $90,000. But for many other people, it could be your heating unit breaks down or your AC needs work or some other big expense that you hadn't quite budgeted for.

Yes. Well, if you look back at the housing collapse in the early 2000s, there were a lot of people who were not taking all of the expenses of home ownership into account. And a significant number of people who, if their refrigerator went out or they had to have something done to the roof, all of a sudden were way over budget on things. And these are, again, irregular expenses. So it's, it's pretty common that people fail to take these into account when making a budget.

We received an email from a listener named Bill. He writes, my father grew up during the Great Depression and fought in World War II. His guide to borrowing was, if you can't afford to pay cash, you can't afford it. What do you think of this approach by Bill's father, Jon?

Well, Bill's father is not unusual in that respect. There's a number of people and people who have significant followings online Who say you should never take out any debt for any reason. And the truth is, sometimes you have to take out debt. There's a lot of jobs that, well, if I'm gonna have this job, then I need a car, and unless I can stroke a check for however much money, then I need a car loan. Well, I definitely want to have a job, so I'm gonna take out a loan for it. The truth is, debt is an essential component of modern life. But it It does need to be managed properly. So that's great if you can pay cash for everything. I see the wisdom in it. But most people can't. And there's a lot of things like education, housing, and transportation that you're probably going to need to take on some debt. Just don't take on more of it than you have to or a more expensive version of it than you should. Hmm.

So we often acquire our financial beliefs by watching how family members deal with money. Talk a moment about how the social context around us can affect our own cognitive biases when it comes to our finances and when it comes to debt.

So context matters quite a bit, whether it's culture or your community and where you're surrounded, right? So people typically have very limited financial means. Typically, there are fewer resources for financial education. There's typically fewer people in a household who are savvy about handling debt and understanding things like compound interest versus other communities or cultures that are maybe more affluent, where there are people who have greater experience in handling this. Because studies show that financial education is not a one-and-done type of thing. The effects of financial education fade over time. Being in these communities or cultures where there's more familiarity and experience in dealing with it, they tend to do better over the long term in managing debt appropriately.

I'm wondering whether, when you look around the world, though, whether there are differences between places, John. I can imagine that places that have been through war or civil war or natural disasters might think about setbacks and debt very differently than places that are used to good things happening or have had good things happen to them over a long period of time.

I mean, I would imagine so. I think what you see across cultures is that people who've had bad experiences with finances or with other things like war, they typically carry these experiences with them, and it changes their behavior over the long term. So a prior listener was talking about a grandfather who made it through the Great Depression. That entire generation was never the same with money after dealing with financial trauma like that. So it does change cultures over time, having gone through periods of extreme scarcity.

When we come back, the forces outside our control that can shape our financial futures. Plus, advice for keeping your head above water when it feels like you're drowning in debt. You're listening to Hidden Brain. I'm Shankar Vedantam. Support for Hidden Brain comes from LinkedIn. Hiring for a small business is hard. LinkedIn Hiring Pro acts like a helpful hiring partner. Chat with it about what matters most, compare candidates side by side, and share feedback like, I want someone with more hands-on experience. Hiring Pro adjusts and surfaces candidates who fit your needs. Get started by posting your job for free at linkedin.com/hb. Terms and conditions apply.

Comcast Business is now offering advanced big business cybersecurity for small businesses with an AI-powered firewall built right into your network connection.

Switch to Comcast Business and get started for just $50 a month for 1 year on a qualifying internet package with 1 month of Security Edge Preferred on us. Plus, for a limited time, ask about a $500 prepaid card. Call today. Limited time offer. Restrictions apply. New customers only. Requires 300 megabits per second internet, Security Edge, Security Edge Preferred, and Wireless Connect. 1-year agreement, paperless billing, and automatic payments required. Equipment, taxes, and fees extra. After promo, regular rates apply.

This is Hidden Brain. I'm Shankar Vedantam. At Wright State University, John Dinsmore looks at the psychology of money and debt. He's the author of The Marketing of Debt: How They Get You. John, one thing we haven't talked about yet are the many structural factors at play that shape our finances. In the United States, for example, there's a lot of concern about the price of homes or the cost of healthcare or stagnant wages for workers. Even without the mental biases that can trip us up as individuals, these factors can make it really difficult for people to get ahead. How do you make sense of the interplay between these structural forces and how our individual minds make decisions around money?

Yeah, I mean, there are some things, policies, I think, that could be invoked to make debt more kind of user-friendly and better understood, and that, I think, would be a good thing for consumers as a whole. Now, in terms of, you know, why do we struggle with figuring out debt? It's because it's hard. Right. It's a highly complicated thing. You know, most things that we buy have a price associated with them that is static. It doesn't change. But the price for a lot of debt changes every day. And maybe there's multiple prices. And how we perceive those prices depends on a lot of things— our background and skill, the context of that day. Were we feeling good that day? Were we feeling tired? Were we in a noisy environment where it was hard to think? So all of those things can come to play to contribute to, you know, the quality of a financial decision or the lack thereof.

A listener named Anna called in with a moving story. In 2017, she and her new husband bought their first home. The house needed a ton of work, and they met this challenge. They fixed it up, and then they sold it at a nice profit. Using this cash in hand, they decided to build their dream house. I'll let Anna pick up the story from here.

My dream was to build our forever home somewhere that felt rural enough for my kids to play in the woods and climb trees just like I did, but still close enough to everything in the city. We went with a turnkey build, so we paid the builder for the land upfront, and the builder handled construction, and then we would close once the home was finished, just like a traditional purchase. So we bought almost 3 acres for under $80,000, designed a modest colonial with a front porch on a plot of land that bordered a babbling brook, and we put everything in storage. And that's when everything started to fall apart.

So in 2021, John, Anna and her family moved into a small apartment as they waited for the construction of their dream house. But with the COVID-19 pandemic, building a new house became very, very expensive. Material costs and mortgage rates skyrocketed. And here is Anna with the rest of the story.

By the time our house was finally ready, our rate had gone from what would have been around 4.9% to 8%, which meant the mortgage we had planned for and knew we could afford had doubled. We had thousands of dollars invested, nowhere else to go, and rent was not any cheaper. So We closed and trusted it would work out, but it became unsustainable pretty quickly. We were putting everyday expenses on credit cards just to keep up. More than half my paycheck went to childcare, and most of my husband's paycheck went to the mortgage. And the hardest part in all of this was we did everything quote unquote right. We bought the fixer-upper, we built the sweat equity, we followed the plan. But the goalposts just kept moving. And I think that's the part that people don't always understand. Sometimes you can follow every step you were given only to find out that the system was never built for you to win.

So, John, I really feel for Anna. It's heartbreaking when she says she feels the system wasn't built for her to win. She's still struggling with that as a result of what happened. How would you advise her to think about it?

I would probably say to Anna a couple of things. One, it sounds like she and her husband took a very thoughtful approach to things and were doing things the right way, or at least in a careful and thoughtful way. And then she ran into a once-in-a-century event like COVID-19. It's probably cold comfort, but if you're familiar with the sphere in Las Vegas. So James Dolan, who owns the New York Knicks and Madison Square Garden, uh, he planned to build the Sphere at the exact same time that Anna was building her house and ran into the same challenges, and, uh, it doubled the cost of that venue. Now, James Dolan is a super rich guy, and so he can afford to have probably more financial pitfalls than the rest of us. But it's just a way of demonstrating that, you know, they didn't do anything wrong, right? In terms of, you know, it feels like the system isn't built for them, you know, the one part where I would agree is that financial theory requires that if someone is a riskier borrower, they have to be charged higher interest rates. Well, who's considered a risky borrower? Well, probably someone with less money. So this means that someone with less money is typically paying more for their loans than someone with lots of money. And there's, you know, plenty of arguments that economists and finance people can make as to why that is and that there is good that it does bring, but it does feel sometimes that the people who need a break the most aren't getting that break. It sounds like they've navigated the situation as well as you can and that they're digging out. Crawling out of a debt hole is one of the hardest things you can do because you found yourself in that hole because you didn't have enough money in the first place. And now you have to find not only enough money to live, but even more money that you didn't have before to start paying down this debt. And that can be a vicious cycle.

Hmm. Can you talk a moment about a subtext in Anna's story, which is she feels like this is really You can hear this in what she says. She says, we did everything right and it still didn't work out. Talk about this idea that our sense of fairness is actually an integral part of how we think about money. We have internal norms and rules about how we think money should operate, how debt should operate, and it really pains us when those rules are broken.

Yes. If you study pricing, which is one of the areas that I do, So price fairness is a big determinant of how people feel about the price of something, right? A favorite example is Coca-Cola experimented with doing dynamic pricing with some of their machines, and the hotter it was outside, the more they charged for beverages out of the machine. And people were furious about it because they felt like that they were being exploited. They felt it was unfair. Now, there is a lot about Dealing with debt and purveyors of debt that can feel either unfair and/or maybe disingenuous because it's very complex. A lot of things are buried in the fine print. So it can feel like maybe there— it is unfair and that maybe even people are out to get us. There are good purveyors of these services and products out there. And you can find them. But on the other hand, too, sometimes, again, we're just unlucky. And it sounds like Anna unfortunately was— she just ran into a very unlucky thing, even though she and her husband were doing things the right way.

The foreword to your book, Jon, is by an advertising executive who writes, in the end, the best marketing isn't about separating people from their money, It's about connecting people with solutions, products, and services that they want and need. Now, I love that. It makes me think that some portion of the solution to our problems with debt have to do with encouraging more ethical practices in business and in marketing.

Absolutely. So I've been in marketing. I was in marketing industry and now marketing academia my whole life, although I wrote a book that's kind of making fun of marketers and some of the tactics that you'll see, but the truth is there can be a lot of good that's done in business or in marketing if you really just focus on creating something that people want and find of value. There is a negative connotation to marketing where that it's, you know, either superfluous or disingenuous, but there are companies that are really great at marketing and create products and services that we really love. And that is, I think, the ultimate goal of marketing and business, whether it's in financial services or elsewhere, which is if you are really thinking about your customer and something that they would benefit from, that would make their lives better, that the business can win and the customer can win.

John Densmore studies marketing at Wright State University. He's the author of The Marketing of Death: How They Get You. John, thank you so much for joining me today on Hidden Brain.

Thank you, Shankar.

We also heard today from Harvard's Amy Edmondson, who's the author of the book Right Kind of Wrong: The Science of Failing. Hidden Brain is produced by Hidden Brain Media. Our audio production team includes Annie Murphy-Paul, Kristen Wong, Laura Querelle, Ryan Katz, Andrew Chadwick, and Nick Woodbury. Tara Boyle is our executive producer. I'm Hidden Brain's executive editor. And I'm your host, Shankar Vedantam. Today, we say a heartfelt thank you to Hidden Brain producer Autumn Barnes, who's been with Hidden Brain since the launch of our independent media company in 2020. Autumn is leaving to pursue graduate work in mental health counseling, which is a fitting career move for someone with Autumn's kindness and emotional intelligence. Autumn, we are so grateful for your hard work on both Hidden Brain and Mayansung Here.

Thank you.

And we're rooting for you as you begin this new adventure. I'm Shankar Vedantam. See you soon.

What's up, sports fans? I'm Rachel Domita, here to tell you about my show, Courtside Club. If you love hoops and hot takes, then you're in the right place. Want to hear about Caitlin Clark's unstoppable rise in the WNBA? How stars like Wemby and Luka Dončić are dominating the The NBA, or maybe you just want the tea on this week's most viral sports moments. Don't worry, we'll keep you updated on all of it. So grab your popcorn and come hang with us courtside. You can listen to Courtside Club wherever you get your podcasts. Oui and ah.

Hi, I'm Angie Hicks, co-founder of Angie. One thing I've learned is that you buy a house, but you make it a home. For decades, Angie's helped millions of homeowners hire skilled pros for the Angie, the one you trust to find the ones you trust. Find a pro for your project at angie.com.

Traditional home security only alerts you after a break-in, and that's too late.

SimpliSafe is changing that.

Stop, this is SimpliSafe.

Police are on the way.

We don't just alert, we help stop crime before it starts. Plans starting around a dollar a day. Right now, get 60% off your new system with professional monitoring at simplisafe.com. SimplySafe.com/SXM.

SimplySafe.

Ahead of crime in real time.

Outdoor deterrence plans start at $49.99 a month.

Visit SimplySafe.com/licenses for alarm license information. You wouldn't take financial advice from a 72-hours-in-a-single-day alpha influencer, would you? Same goes if you're in a car accident, or any accident. Who you choose matters. That's why Morgan& Morgan exists. They're the largest injury law firm in America, and they've built their reputation by actually winning cases. Not just talking about it. Over 1,000 lawyers across all 50 states and $30 billion recovered.

Injured?

Go to forthepeople.com/podcast. That's forthepeople.com/podcast.