At Work Newswire

By Jefferson Flanders

No discussion of clear thinking is complete without considering some of the more common fallacies—mistakes in reasoning or flaws in logic—encountered in many seemingly persuasive arguments.

Many of these fallacies were first identified centuries ago by teachers of classical Greek and Roman rhetoric, and there are good reasons for their persistence into the 21st century. These fallacies, despite their flaws, can be persuasive and on the surface can appear quite logical; some tap into primal emotions in a convincing (albeit irrational) way.

Much of the fallacious thinking resident in business and management circles appeals to our natural sense of optimism. Anthropologists and genetic scientists have identified a biological basis for optimism, and it appears that hopefulness about the future may very well be a hard-coded human trait. In his 1979 book Optimism: The Biology of Hope, Lionel Tiger argued that optimism developed to encourage early humans to persevere in the dangerous and risky task of hunting.

One modern form of optimism—expecting future returns on investment and effort—has become a vital part of any market-based economy. Entrepreneurs and innovators must embrace a risky future to succeed. Yet that trait also leads to the starry-eyed behavior of investors during market bubbles and the willingness of credulous managers to believe over-optimistic projections of growth. The management challenge is to bring the proper level of skepticism to judgments about the future, without missing opportunities because of risk-aversion or timidity.

The endless growth fallacy is often found in high technology and other fast-growing sectors of the economy. It assumes past performance (market penetration, unit volume growth, upward sales trends) can be seamlessly projected into the future (“There’s more where that came from!”). The key question to ask when considering such bullish arguments is this: how likely is it that growth can be sustained? Yes, there may still be an upside—but what is its likelihood? And how can we better forecast the inevitable slowdown? Seasoned venture capitalists and private equity investors will tell you that they mentally discount growth projections by a significant factor when making investment decisions.

The sunk cost fallacy—agreeing to commit additional funds for a project or investment in the hopes of recouping an original investment—is explicitly noted and taught in many accounting courses, yet it remains a common, and understandable trap. A successful entrepreneur once told me, “Thank God for sunk costs,” because he believed an early financial commitment made investors more psychologically likely to continue funding his ventures (“In for a penny, in for a pound.”) Indeed, there are enough cases where sustained investment yielded superior returns (think Amazon.com, or Yahoo) that the notion of backing a longshot, or of not abandoning a potential winner too quickly can be very seductive. However those making disciplined managerial decisions should focus on the immediate and likely prospects for the future success of a project, proposal or investment without factoring in prior commitments in corporate support or funding. The more independent that assessment can be, the better the outcome.

When analyzing proposals or projections for the future, too often managers fall prey to the false precision fallacy and are impressed by detailed financial estimates and painstakingly developed spreadsheets. Yet a projection of $109,975.25 is no more valid than one of $110,000, although the natural human tendency is to believe that something calculated to the second decimal point is somehow more accurate. Some analysts can be fooled into believing that extensive calculations and financial detail reflects careful planning and forecasting (which is one reason why swindlers and con men are eager to supply extensive projections)—this may or may not be true. Insisting on a range of projections, and isolating the underlying key variables and assumptions, represents one way to avoid falling into the false precision trap. Such a process also acts as a reminder of the uncertainty of forecasts.

The appeal to authority fallacy exists in business, but also in academic and political discourse. It is particularly effective in organizations that value hierarchy. One variation can be seen in the truism that “no purchasing manager ever was fired for selecting IBM.” Another example of an appeal to authority: when a given course of action is based on the advice of management consultants or because respected or feared competitors have adopted it. Again, making decisions on the merits of the situation is the wiser response—for there is no real safety in numbers (competitors can make mistakes), and consultants are fallible.

While hope (with perhaps a dash of greed) underlies many common logical fallacies in the world of business, other all-too-human traits—fear and suspicion—play a large part in fallacious political argument. Ad hominen (from the Latin: ”against the man”) attacks and appeals to emotion have become common in modern politics. They hold a special allure for the partisan.

Attacking a candidate or elected official on personal grounds, such as questioning their character, integrity, or motives, allows for a transfer of perceived wickedness from the target to his or her policies or proposals. If Candidate X is shifty, dishonest and immoral, then we are less likely to consider his or her tax plan on its merits. Ad hominem attacks often play on fear and suspicion; for example, the attempt to associate Democratic presidential candidate Barack Obama with deposed Iraqi dictator Saddam Hussein by referring to Obama by his full name: Barack Hussein Obama. Campaign managers and political consultants have long known that “going negative” is effective (especially in suppressing voter turnout), which is why negative personal attacks are so prevalent.

Appeals to emotion seek to replace a measured consideration of an argument or policy with a less rational response, drawing on both powerful positive feelings (hope, sympathy, piety, belonging, compassion) and negative ones (fear, resentment, anger). These emotional appeals often rely on evocative images (flags, smiling children, etc.) and loaded language designed to trigger those feelings. They employ words and phrases such as: God, country, patriotism, working people, terrorist threat, our way of life, etc. Loaded language often acts on us at a sub-conscious level, evoking emotions that can cloud our judgment.

What are effective antidotes to fallacious thinking? Some universities and business schools have added critical thinking courses as a way to arm their graduates with a better understanding of how arguments can be twisted or distorted. In the political arena, organizations like FactCheck.org now analyze candidates’ rhetoric and advertising claims and publicly warn of misleading or fallacious reasoning. All of these efforts share a common premise: identifying and analyzing logical faults and mistakes in reasoning—pointing out the fallacies—is crucial in achieving clarity in thought.

Jefferson Flanders is an author, educator and independent journalist. He blogs on issues of the day at Neither Red nor Blue.

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Copyright © 2007 Jefferson Flanders

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