Aware That Everyone Else Knows

0:00When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs. Chronic migraine is 15 or more headache days a month, each lasting four hours or more.

0:35Botox, onabotulinum toxin A, prevents headaches in adults with chronic migraine before they start. It's not for those with 14 or fewer headache days a month. It prevents on average 8 to 9 headache days a month versus 6 to 7 for placebo. Prescription Botox is injected by your doctor. Effects of Botox may spread hours to weeks after injection causing serious symptoms. Alert your doctor right away as difficulty swallowing, speaking, breathing, eye problems or muscle weakness can be signs of a life-threatening condition. Patients with these conditions before injection are at highest risk. Side effects may include allergic reactions, neck and injection site pain, fatigue, and headache.

1:07Allergic reactions can include rash, welts, asthma symptoms, and dizziness. Don't receive Botox if there's a skin infection. Tell your doctor your medical history, muscle or nerve conditions, including ALS Lou Gehrig's disease, myasthenia gravis or Lambert-Eaton syndrome, and medications, including botulinum toxins, as these may increase the risk of serious side effects. Why wait? Ask your doctor, visit BotoxChronicMigraine.com, or call 1-800-44-BOTOX to learn more.

1:38All right, so Stephen, thank you for being with us today.

1:40Steven Pinker:Thanks for having me. Great. So your book is about common knowledge, sort of what it is and how we use it in ways that we're aware of and in ways that we aren't aware of. So, you know, for the audience, what are you getting at with common knowledge and why should we care about that? I'm using the term in a specialized sense, not to refer to conventional wisdom or something that is widely known, but to something that is known to be known. That is, I know something, you know it. You know that I know it. I know that you know it. You know that I know that you know it. And so on ad infinitum. So that's common knowledge in the technical sense.

2:14Steven Pinker:It's important because it's necessary for coordination, for people, two or more people, to be on the same page, to make choices that might be arbitrary, but it works for everyone as long as everyone makes the same choice. Do you stay home on Saturday or Sunday? Do you drive on the right or drive on the left? Now, for common knowledge to work, you don't literally have to think, I know that she knows it, I know that she knows, because your head starts to spin after one or two levels. and we have a sense of common knowledge when something is conspicuous or self-evident or public or out there. If I see it while I see you seeing it, then I kind of know that you know that I know that you know it.

2:53So this is The Emperor Has No Clothes.

2:55Steven Pinker:Well, I begin the book with the story of The Emperor's New Clothes because there's a sense in which it's a story about common knowledge. Because when the little boy said the emperor was naked, he wasn't telling anyone anything they didn't already know. But he's changed the state of their knowledge nonetheless less, because by blurting out what everyone could see with an earshot of everyone else, at that moment, everyone knew that everyone else knew that everyone else knew that the emperor was naked. And another point in the book is that just like driving on the right or driving on the left is a solution to a coordination problem, or staying home Saturday or staying home Sunday, or respecting paper currency, I suggest that our informal social relationships, Are we friends?

3:38Steven Pinker:Do I defer to you? Are we transactional partners? Are we lovers? All of those are matters of common knowledge as well. They're coordination games, and we solidify them by generating some public signal that we both see that inaugurates the relationship. But there can be forms of common belief, common misconception, common pretense, where you do have assumptions about what other people are thinking and vice versa. that in some cases may not actually be reality. So in the case of a common pretense, where we refer to that by saying we're ignoring the elephant in the room. The metaphor is that an elephant in the room is something you can't ignore, but we're pretending to ignore.

4:22Steven Pinker:There is a phenomenon called pluralistic ignorance or a spiral of silence. In economics, it's sometimes called the Abilene paradox, where no one actually believes something, but everyone thinks that everyone else believes it, but no one actually does. Is there an easy example of that? Sure. It was originally studied in a fraternity where all the frat guys said privately that it's really stupid to drink until you puke and pass out. But they said, what can I do about it? All the other guys think it's cool. And it turns out none of them thought it was cool, but everyone thought that everyone else thought it was cool.

4:59Steven Pinker:I think there have been many phenomena like that. It turns out that in Saudi Arabia, most of the men think that women should have the right to work and drive, but they couldn't allow their wives to do it because they mistakenly thought that all the other men thought that it was impermissible. So I want to lead this conversation sort of mainly into economic, financial sort of market areas because we are the HBR IdeaCast. But your book is – I'd say it's challenging in some ways. There's a lot of brain – When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs.

5:36It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs. Chronic migraine is 15 or more headache days a month, each lasting four hours or more. Botox, onabotulinum toxin A, prevents headaches in adults with chronic migraine before they start.

6:10It's not for those with 14 or fewer headache days a month. It prevents on average 8 to 9 headache days a month versus 6 to 7 for placebo. Prescription Botox is injected by your doctor. Effects of Botox may spread hours to weeks after injection causing serious symptoms. Alert your doctor right away as difficulty swallowing, speaking, breathing, eye problems or muscle weakness can be signs of a life-threatening condition. Patients with these conditions before injection are at highest risk. Side effects may include allergic reactions, neck and injection site pain, fatigue, and headache. Allergic reactions can include rash, welts, asthma symptoms, and dizziness.

6:41Don't receive Botox if there's a skin infection. Tell your doctor your medical history, muscle or nerve conditions, including ALS Lou Gehrig's disease, myasthenia gravis or Lambert-Eaton syndrome, and medications, including botulinum toxins, as these may increase the risk of serious side effects. Why wait? Ask your doctor, visit BotoxChronicMigraine.com, or call 1-800-44-BOTOX to learn more. There are a lot of, you know, prisoners, dilemmas, things like that. But it's also fun. I mean, there are a lot of, you know, popular references, jokes, cartoons. And then examples, really interesting, you know, kind of game plan examples.

7:11So one of the things you talk about is, you know, the Keynesian Beauty Contest, which, and if I get it wrong, you'll correct me, But where, you know, a judge is rated... A judge doesn't simply select the contestant that he or she thinks is most attractive, but rather is rewarded on selecting based on what he thinks he or she thinks the other judges will select, right?

7:35Steven Pinker:Who are engaged in the same puzzle. They're guessing what everyone else will judge to be the prettiest face, which is different from the old Miss Rheingold competition, where people voted on the prettiest face in the beauty contest that Keynes hinted might have been in the newspapers in his day. This would be London in the 20s. No one can ever actually verify whether there really was such a contest. But it was a great example because for Keynes, where he said everyone is trying to outguess other people, outguessing still other people, he said that's the way speculative investing works. They buy the security because they think they can sell it at a higher price to other people who think it's underpriced, who in turn will want to sell it to still other people.

8:20Steven Pinker:And so speculative bubbles, crypto perhaps being one of the most recent examples, are cases where people think that other people will, in the future, will want to buy in. Sometimes called the greater fool theory of investing, that you invest because you think other people will invest because they think that still other people will invest. The thing is, of course, bubbles can pop when the market starts to run out of the greater fools who think that it will continue to appreciate forever. But this can all get started when there is some public signal, like in the case of the emperor's new clothes, the boy blurting it out, or like a public ceremony or a public signal, where if there is just a rumor or some reason to think that other people are getting in, that can cause other people to get in.

9:09Steven Pinker:A couple of recent examples are meme stocks, where an influencer might talk up a stock, even if the fundamentals are pretty crummy. But the fact that other people know that he's talking it up, and they know that still other people are talking it up, means that it really can appreciate, at least for a while. Or in two Super Bowls ago, there were a number of high concept ads for crypto exchanges. which mentioned nothing about the advantages of crypto. These are the Larry David ads. The Larry David, the Matt Damon, where the point of the ads were, everyone's getting into crypto, don't be left out.

9:49Steven Pinker:And in fact, the punchline to the Larry David comic ad was, don't be like Larry, don't be left out. So this sounds like a tool that people who understand the psychology, you know, could and probably do benefit from, right? Yes. And getting back to marketing, I talk about an analysis by a political scientist like Michael Chua, who's in some ways my predecessor in writing a book about common knowledge, where he analyzed the most famous and most expensive ad in history. This was the 1984 ad directed by Ridley Scott of Blade Runner and Alien fame. It ran exactly once during the 1984 Super Bowl, and it was to introduce the Apple Macintosh.

10:37Steven Pinker:So it's a revolutionary new product. Unlike those of us who remember the first personal computers, remember it had a little screen with 24 lines of 80 characters, and you had to type in alphanumeric commands like, you know, Dell foobar dot, foo dot bar. And they were clumsy. So Apple's coming out this, you know. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes.

11:17Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs. Chronic migraine is 15 or more headache days a month, each lasting four hours or more. Botox, onabotulinum toxin A, prevents headaches in adults with chronic migraine before they start. It's not for those with 14 or fewer headache days a month. It prevents on average eight to nine headache days a month versus six to seven for placebo. Prescription Botox is injected by your doctor. Effects of Botox may spread hours to weeks after injection, causing serious symptoms.

11:54Allerge your doctor right away as difficulty swallowing, speaking, breathing, eye problems, or muscle weakness can be signs of a life-threatening condition. Patients with these conditions before injection are at highest risk. Side effects may include allergic reactions, neck and injection site pain, fatigue, and headache. Allergic reactions can include rash, welts, asthma symptoms, and dizziness. Don't receive Botox if there's a skin infection. Tell your doctor your medical history, muscle or nerve conditions, including ALS Lou Gehrig's disease, myasthenia gravis or Lambert-Eaton syndrome, and medications, including botulinum toxins, as these may increase the risk of serious side effects.

12:24Why wait? Ask your doctor, visit BotoxChronicMigraine.com, or call 1-800-44-BOTOX to learn more.

12:30Steven Pinker:Insanely great new product with windows and menus and icons and a mouse. But they realized that no one would buy it if they thought they were the only one buying it, because the price wouldn't come down because of demand. There wouldn't be a community of users and experts and markets for peripherals and consumables. So how do you break the knot and cut the knot, I mean, and get people to buy something that they'll only buy if enough other people are buying it? And the answer is the Super Bowl is an annual right in American culture. You know that a lot of people are watching it, and you know that a lot of people know that a lot of people are watching it.

13:12Steven Pinker:It is a common knowledge generator. And to break the logjam, Apple paid for this ad. It said nothing about the Apple computer. For those of you who have seen it, it played off the fact that it was January 1984, the date of George Orwell's novel. And so it showed a grim corporate meeting where gray drones trudge into a cavernous hall and listen to drivel from a voice on the screen, intercut with scenes of a live young woman in bright red gym shorts and a singlet carrying a mallet. And she bursts into the corporate meeting, hammer throws the mallet into the screen which explodes in a fireball revealing the crawl that says on January 25th, Apple will introduce the Macintosh, and you'll see why 1984 won't be like 1984.

14:10Steven Pinker:Now, the point of the ad was not to advertise the product. It didn't say anything about the product, but to advertise the potential buyership. It generated common knowledge. I'm seeing the ad. I know lots of other companies are seeing the ad. And what Choua showed, this is, I mean, it's a story. How did he prove it? Well, he looked, because you can't, I mean, that's just a sample of one. So he looked at other products that only work if enough other people adopt it, products that depend on network effects. But Monster.com was one of the first job-seeking ads. Now, why would anyone look for a job on Monster.com unless they thought that lots of employers were posting there?

14:53Steven Pinker:Why would employers post there unless they thought a lot of job seekers were looking for jobs there? Monster.com was introduced at the Super Bowl. So they're companies that depend on network effects that have to generate common knowledge. Everyone has to know that everyone knows about them. Another example is the Discover credit card, which was a great credit card, rebates and high limits, but didn't matter if you were the only one who had a Discover card because no merchant would accept it, and no merchant would accept it unless they thought enough people were going to carry it, introduced in the Super Bowl.

15:27Steven Pinker:And Chua argued that it was another category, aside from products that inherently depend on networks, they're prestige goods that depend on other people that you respect also consuming that product. Products that are consumed in public and where the brand image is important also tend to advertise in the Super Bowl. And crucially, what Chua showed was not so much that advertisers were willing to pay per eyeball, but they're willing to pay a premium for venues that were common knowledge generators, where it was known that a lot of people were to watch them. They're willing to pay more per eyeball for products that were consumed in public or that depended on network effects.

16:15Yeah. So the phenomenon... Maybe the flip side of this phenomenon is the toilet paper shortage during COVID, which was, you know, not this, not network effects, but an assumption that I know what you know.

16:52That's indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs. Chronic migraine is 15 or more headache days a month, each lasting four hours or more. Botox, onabotulinum toxin A, prevents headaches in adults with chronic migraine before they start. It's not for those with 14 or fewer headache days a month. It prevents on average eight to nine headache days a month versus six to seven for placebo. Prescription Botox is injected by your doctor. Effects of Botox may spread hours to weeks after injection, causing serious symptoms. Allerge your doctor right away as difficulty swallowing, speaking, breathing, eye problems, or muscle weakness can be signs of a life-threatening condition.

17:30Patients with these conditions before injection are at highest risk. Side effects may include allergic reactions, neck and injection site pain, fatigue, and headache. Allergic reactions can include rash, welts, asthma symptoms, and dizziness. Don't receive Botox if there's a skin infection. Tell your doctor your medical history, muscle or nerve conditions, including ALS Lou Gehrig's disease, myasthenia gravis or Lambert-Eaton syndrome, and medications, including botulinum toxins, as these may increase the risk of serious side effects. Why wait? Ask your doctor, visit BotoxChronicMigraine.com, or call 1-800-44-BOTOX to learn more.

18:01Steven Pinker:Well, yes. Justin Wolfer's speculated that the great COVID toilet paper shortage was like a bank run, where people withdraw their money, not necessarily because they think that there's anything wrong with the bank, but they have heard that other people think there might be something wrong, unsound. And they may just have heard that other people think that might be something that's unsound. So you get this reverberant doubt. And no one wants to be the last customer withdrawing at a point where the bank no longer can cover its deposits. So people rush to the bank to withdraw their savings, which actually causes the bank to fail, which otherwise it wouldn't.

18:36Steven Pinker:Likewise, Wilfrid suggested that when there actually wasn't a toilet paper shortage, It's true that people were staying home, so they were using six packs of Charmin instead of the big jumbo rolls in their workplace. But Kimberly-Clark quickly stepped up production to meet the demand. But somehow people just know that in an emergency, people hoard toilet paper, which can cause the very shortage that leads people to hoard toilet paper. And so they did hoard toilet paper. A lot of retailers then posted signs, max three rolls per customer. That would reinforce it, yeah. And that ended the shortage, not so much because people didn't strip the shelves, because they couldn't, but they were reassured that since no one else could buy more than three rolls, there was no reason for them to panic.

19:30Steven Pinker:And again, getting back to common knowledge, how did this originate? At least according to one history, it all started with another common knowledge generator, The Tonight Show, which back in the three-network era, Johnny Carson was the king of late night. He had not only a huge audience, but people knew that people were watching Johnny Carson, which is why catchphrases from the show like, here's Johnny, you know, everyone recognized it. So one night, I think it was 1973, he said, you know, there have been all kinds of shortages lately. And this is an era where there were lines to get gasoline because of the Arab oil embargo.

20:07Steven Pinker:And there was a meat shortage and a coffee shortage. Anyway, he said, have you heard the latest? I read it in the papers. There's a shortage of toilet paper. Now, it turned out it wasn't true at the time. There was no shortage of toilet paper. But then that created a shortage of toilet paper when everyone ran out to buy it. And since then, at least according to the story, it's hard to prove. it's just become conventional wisdom that people, that toilet paper becomes scarce in an emergency. Yeah, that is fascinating. So all of this must be very valuable for people who are in negotiation, right?

20:41Because negotiation is always, you know, what is it that we both know, and what is it that only I know, and, you know, I mean, that's how you win. But... Yeah. Yeah, talk about, yeah, to what extent I know you know. I mean, that's the fundamental of... And the people who negotiate better probably understand this concept.

21:00Steven Pinker:Yes, a negotiation is one of a number of kinds of games in the game theory sense. Meaning, my best option depends on what you do and vice versa. And in any time in which there can be multiple equilibria, cases where everyone is better off if they both do something, but it isn't preordained what they'll do. So negotiation is what's sometimes called a battle of the sexes, is the technical term. It has nothing actually to do with the sexes, but it refers to a hypothetical couple where they like to spend time together. He would prefer that they go to the hockey game. She would prefer they go to the opera.

21:41Steven Pinker:They'd rather go to either than not do something together. The question is, which one do they go to? Both of them are equilibria. In the case of negotiation, let's say a car salesman and a buyer, there's a range of prices in which the salesman makes a profit and the customer. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes.

22:17Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs. Chronic migraine is 15 or more headache days a month, each lasting four hours or more. Botox, onabotulinum toxin A, prevents headaches in adults with chronic migraine before they start. It's not for those with 14 or fewer headache days a month. It prevents on average 8 to 9 headache days a month versus 6 to 7 for placebo.

23:13Tell your doctor your medical history, muscle or nerve conditions, including ALS Lou Gehrig's disease, myasthenia gravis or Lambert-Eaton syndrome, and medications, including botulinum toxins, as these may increase the risk of serious side effects. Why wait? Ask your doctor, visit BotoxChronicMigraine.com, or call 1-800-44-BOTOX to learn more.