Marc’s Matrix and The Only Two Stories That Sell
When Marc Andreessen is part of a conversation, I listen closely. As the name behind the Silicon Valley venture capital firm Andreessen Horowitz (a16z) and popularizer of tweet storms, amongst many other accomplishments, he’s got a reputation for sharing worthwhile thoughts. When I heard him on the a16z podcast episode Innovating in Bets, a discussion on the topic of high-stakes decision-making under uncertainty, I took note of his comment that the news fixates on certain narratives. The slippery topic of how those narratives influence almost everyone’s decision-making was touched on throughout the discussion, so I thought I’d try to bring it together here.
In the mid ‘90s, during the ramp-up to the dot com boom, Andreessen spoke with the veteran reporter Jared Sandberg (then at the Wall Street Journal, now senior executive editor at Bloomberg). It was the early days of the internet, but the new technology was rapidly changing society and the business world. Nevertheless, Andreessen was frustrated. He wanted to know why the internet revolution was not being covered in the news. Sandberg responded with a lesson in journalism: “The story of ‘something is happening’ is not an interesting story. There are only two stories that sell newspapers: one is Oh the glory of it, the other is Oh the shame of it.” The mere fact that internet companies were happening was not fit to print.
“The story of ‘something is happening’ is not an interesting story. There are only two stories that sell newspapers: one is Oh the glory of it, the other is Oh the shame of it.”
On the surface, Sandberg’s reality check carries some humor, but a deeper truth in Andreessen’s decades old recollection still applies today: we thrive on stories, particularly the dramatic variety. You don’t have to look too hard to find the Glory or Shame spin because that spin drives sales. But what does this draw to the sensational have to do with making decisions?
To get better at something you have to observe mistakes, get feedback and work on improvement. If you want to make better decisions, you probably ask yourself “Was that a good decision?” often. This is where stories come in. Outcomes of events drive most stories, and these stories act as proxies to evaluate success. Thus we tend to judge decisions based on outcomes alone. As a simple example, you can be right for the wrong reasons (i.e. lucky) and, unfortunately, conclude “That was a good decision!” If you are lauded in any way, you’re all the more likely to draw a positive conclusion and assessment of your decision making prowess. Learning to separate judgment of a decision from the outcome, examining “decision quality,” is one of the primary topics in the podcast. To help frame the judgment problem Andreessen offers up what the show’s host referred to as “Marc’s Matrix.”
For most decisions there is a prior consensus with which you either align or go against, and, in time, your decision will be evaluated as either right or wrong¹. Together, this gives four possible outcomes in the model, but Andreessen’s emphasis is that people tend to collapse the story into only two narratives that matter. If you align with consensus opinion, regardless of outcome, there isn’t much to talk about². You’ve effectively joined a group decision, and the outcome (whether it’s in your group’s favor or not) may generate some news, but it won’t be news about you. However, when you go against the consensus there is potential for drama. Now there is an individual to cheer or ridicule, an individual to be revered as a genius, or labeled a complete moron — if you happen to be a CEO or in major league sports, this is when headlines are made.
Thus, Andreessen maintains, there are really only two stories in decision making, and they both sell. The problem isn’t only the amplification of these narratives³, but that deeper analysis is rarely present. If you’re right for the wrong reason, you should want to know that. Furthermore, some outcomes aren’t a binary right or wrong, but rather a measure to some degree. If you make a decision and anticipate a +30% change for the better, but find a +60% result — you’ll celebrate the success, but you should seek to understand why you were off by a factor of two. Look for flaws in your reasoning and examine the directional quality.
In the absence of support and practice, humans are innately bad at carrying out effective analysis of decisions⁴. As a result, most people cannot manage exploring high-risk, high-reward opportunities. Andreessen suggests one can intellectualize an understanding of these challenges, but the reality of going against the consensus and being wrong is often too much to bear. He wraps up his outlook by likening such an experience to touching a hot stove as a child, such that one learns to never do it again. His conclusion is perhaps more cynically humorous than helpful. After all, Daniel Kahneman’s magnificent Thinking, Fast and Slow, which has arguably catapulted the whole field of behavioral psychology and cognitive biases into the public mind, was only published in 2011. Kahneman’s 500-page distillation covering decades of research remains part of popular discourse, which suggests there’s still a lot of learning going on.
Personally, I have a lot of optimism⁵ for improving group decision making, and I don’t think I’m alone. If you’re looking for a place to start, Kahneman’s 12-point checklist makes for a bite-sized introduction.
[1] An entire category of failure actually stems from decisions not being evaluated. This can be due to timescale (outcomes far from decision), complexity (large, interconnected systems obfuscate a lot), laziness or all of the above!
[2] Of course, being consensus-wrong or -right should be worthy of reflection and decision evaluation. But the discussion here is about why that often isn’t the case.
[3] Andreessen comments in the discussion that the two-stories reality is so extreme and so common that it has driven him to mostly withdraw from reading tech news.
[4] The topic at hand is known as outcome bias (slightly different from hindsight bias), coupled to the amplifying effects of social groups or major news media.
[5] No escaping biases! See optimism bias.
Additional Recommendations
I hope to have the pleasure of introducing these recommendations. Rather than fire off a list of all the books related to decision making, cognitive biases and all that, I tried to pick a short list you might not have come across. Enjoy!
- Getting Lucky by Howard Marks: If you’re interested in finance and luck, I highly recommend this memo. It is humorous, concise and insightful.
- Success and Luck by Robert Frank: A thought-provoking, slender book on meritocracy, luck, and tax reform. Maybe that’s not the best way to sell it, but it has some nice numerical simulations, cognitive science and societal commentary.
- Wiser by Sunstein & Hastie: Another beautifully concise book more in the applied than theoretical category, covering the topic of group decision making.
- Getting Better by Being Wrong: Shane Parish of the Knowledge Project interviews Annie Duke, the subject of a16z’s podcast discussed in this post, but in a much longer format. I found this episode more educational and enjoyable.
Thanks for your time, and if you’ve made it this far perhaps you’d like to read my short piece on learning how to keep on learning. Enjoy!
