How to improve your resilience in uncertain times
Remember the last time you were wrong? And I don’t mean slightly off-target but very, very wrong. Everything looked crisp, clear. It just made sense. There was no doubt, so you went all in.
Then the shock. Reality sank in. Slowly at first. Gradually there was more nuance. Gray shades were all over the place. Finally what had been so obviously true, was not there after all.
Former Federal Reserve Chairman Alan Greenspan must have felt this way in 2008 as he sat across Congress describing the mistake in belief that led to the unfolding of the financial crisis: “The whole intellectual edifice […] collapsed in the summer of last year.” At least, this is one notable example. You can find other conspicuous mistakes all over the web1,2.
So if you were ever wrong before, you are in good company. And yet. Maybe you want to know how to be less wrong, less of your time. Interdisciplinary studies around the world, and within MORSE @UM can help. Following are three science driven tips to achieve resiliency to uncertainty.
I am a member of two SBE Spearheads: The UM Behavioral Insight Center (UM-BIC); and the Maastricht Observatory on Resilient, Responsible & Sustainable Enterprise and Economy (MORSE) as sub-theme leader on Resilience to Uncertainty
Avoid the trap
Take fake news. According to the WHO, next to the COVID-19 pandemic the world faced an equally intense infodemic, where people in masses believed and shared misconceptions about the virus and about the state of the world3. As a direct result of wide-spread wrong beliefs, many deaths occurred that could have been avoided4,5. Of course, social media plays a part in this6.
Thanks to networks on social media people enter echo-chambers where misinformation is rampant, and the information flow is cut from the rest of the world discourse7. This is a problem, as outlined by the father of American psychology William James in 1890: “There is nothing so absurd that it cannot be believed as truth if repeated often enough”. More recently, Nobel prize winner Daniel Kahneman dubbed this the exposure effect8, and current research shows how different styles of social media posts significantly amplify and moderate this effect9,10.
Therefore tip #1 is: avoid confining yourself to social network echo-chamber traps for your daily news, as that will make you more vulnerable to genuinely believe misinformation. In other words when you are facing uncertainty, be sure to maintain active conversations with people with different points of view, even when they seem quite far from yours (or outright flawed!). This is not only for their good, but for the resilience of your own beliefs.
And yet. People regularly share fake news disproportionally more than real news11. In fact, even in controlled environments where information and beliefs are considered, people are more likely to share the fake news they came to believe in, rather than the real news12. This fact points to the root of the infodemic laying in fundamental behavioral mechanisms, rather than merely in social media traps. So that is where we look next.
Face your fears
Imagine an ancient human walking the wild savannah. She hears an unfamiliar sound, and the green bushes nearby move. If she thinks nothing of it and stays on the path, she is most likely right, and will get home in time for dinner. But she could also be scared by the uncertainty, imagine it is a wild lion, and then she would run. Clearly, the costs of the two choices here are quite unbalanced. If she runs but she is wrong, she will waste some energy and come home a bit late and hungry. But if she stays the path and is wrong, she is going to end up being dinner to a wild lion, and that ends all her potential future decisions13. What would you do?
Fast-forward to nowadays. People are indeed very good at seeing patterns. At asking about the reasons why things happen. And finding the answers. We evolved for this. This drive led us on the moon, and into quantum physics. That is what we do, as a human society. We cooperate on a large scale to discover the unknown, find answers, understand the reason why things happen. We deal with situations of uncertainty and find solutions. Daily.
Indeed research shows that now, like with the ancient humans, uncertainty still leads us to unbalanced choices. In times of salient uncertainty we are wired to overreact by believing detailed stories, even conspiracy theories, because they provide us with a clear action plan14.
Remarkably, this insight is empirically relevant at the national level. According to a recent paper15, in times of high national aggregate uncertainty, domestic households actually exhibit lower subjective uncertainty (meaning that their beliefs are more precise rather than more general). This new empirical fact is counter-intuitive, since for instance professional forecasters (people hired to make financial forecasts) declare a higher subjective uncertainty (a wider set of beliefs), during these same times of heightened aggregate uncertainty. Crucially, both households and professional forecasters are on average excessively pessimistic with their chosen beliefs. Households are just more sure about their pessimistic beliefs than professional forecasters are.
This leads to tip #2: When facing an uncertain choice, act like a detached professional forecaster, and weight the likelihood of the most extreme scenario against less vivid outcomes. In other words when in doubt, increase the resiliency of your reaction by accepting the fact that the future is uncertain after all, and by allowing yourself the chance to expect the unexpected.
And yet. Even when you get used to facing uncertainty, the job is only half-way done. No one lives in a vacuum. Some social contexts are more prone to uncertainty than others. Uncertainty (even when you follow the tips above!) comes with hard, sometimes impossible choices, and often with costly mistakes. Think of the period commonly referred to as the Great Moderation, in which many Western countries grew steadily with only small variations through the business cycles. And compare that to the anxiety and social issues of the last fifteen years, with a Global Financial Crisis, the Euro debt crisis, the recent pandemic and now the energy and food emergencies. Like most problems of our times, being resilient to uncertainty joins the individual with the public.
High uncertainty correlates with society-wide outcomes which policy-makers can – at least in theory - affect. For instance these are waves of optimism and pessimism, disagreement and polarization, economic bubbles and downturns. Policy makers (like central bankers and politicians) now have a host of theoretical and applied tools they can use that include these variables explicitly in their decisions of how quickly and intensely to react to a crisis16–19.
With this toolset in place, a smooth information flow remains pivotal. A proper information flow provides decision makers with the input in real time needed to choose right more times than wrong, despite the own individual traits20. Information flow in the post-pandemic era is made of digital data and by the way we make use of it. Digital data is widely available. Structured and unstructured big data, when used ethically and responsibly, can provide the raw material. The way we make use of it depends on our collective choices.
Current research points to the role of social dynamics in the outcomes for society. For instance, the structure of society sets norms on privacy and mutual respect. A desirable structure would be one that is able to attract and keep citizen’s trust in its institutions21. This means that the choices we make today may affect tomorrow’s resilience. Should online or hybrid work replace work in the office? Can we future-proof our primary and higher education systems by teaching skills consciously? What is the role of public institutions in fostering trust and stability?
Under this view, it is the fabric of society, the social system and its interactions, that determines how to use and what to make of this data. This leads to tip #3: Resilience to uncertainty is fostered by an efficient information flow, which is composed of both an ethical data infrastructure and healthy social dynamics. Maintaining a healthy social dynamics at the individual level is a good first step to ensure individual and social resilience to uncertainty. It is this social dynamics, that we maintain through our interactions with the world, that can produce the information on which we, as decision-makers, can act.
Resilience to uncertainty is now more urgent than ever. Social transitions, even toward sustainable development goals, come with temporarily higher uncertainty. More regionally, in Europe lower polarization and resilient democratic institutions spell the difference between joint solutions and failure to find a European way forward. The costs of uncertainty fall squarely on citizens, which have no choice but to make the best of the hands dealt to them by history and geography. It is our responsibility to shape tomorrow’s society, so these costs are manageable, and squarely lower than in the recent past. Research from many disciplines has come far to understand the nature of the struggle. But more remains to be done. The agenda for resilience to uncertainty is clear:
- Maintain an open and active conversation with all citizens and all of society’s agents.
- When in doubt, acknowledge the uncertainty you are facing and leave room for the unexpected.
- Build and maintain an efficient information flow, through ethical use of big data and healthy social interactions. This information can be used by citizens and by decision makers to learn about the world.
1. Historyplex. 21 Greatest Mistakes in History That You Should Know About. Historyplex https://historyplex.com/greatest-mistakes-in-history-that-you-should-know-about (2015).
2. Alexander, S. 5-HTTLPR: A Pointed Review. Slate Star Codex https://slatestarcodex.com/2019/05/07/5-httlpr-a-pointed-review/ (2019).
3. 3rd Virtual Global WHO Infodemic Management Conference. https://www.who.int/teams/risk-communication/infodemic-management/3rd-virtual-global-who-infodemic-management-conference.
4. Partisan differences in physical distancing are linked to health outcomes during the COVID-19 pandemic | Nature Human Behaviour. https://www-nature-com.mu.idm.oclc.org/articles/s41562-020-00977-7.
5. During this coronavirus pandemic, ‘fake news’ is putting lives at risk: UNESCO. UN News https://news.un.org/en/story/2020/04/1061592 (2020).
6. Cinelli, M. et al. The COVID-19 social media infodemic. Sci. Rep. 10, 16598 (2020).
7. Rao, A., Morstatter, F. & Lerman, K. Partisan asymmetries in exposure to misinformation. Sci. Rep. 12, 15671 (2022).
8. Kahneman, D. Thinking, Fast and Slow. (Farrar, Straus and Giroux, 2013).
9. Uniting the Tribes of Fluency to Form a Metacognitive Nation. https://journals.sagepub.com/doi/epdf/10.1177/1088868309341564 doi:10.1177/1088868309341564.
10. Fard, A. E. & Piccillo, G. Repeated Exposure. (2022).
11. Vosoughi, S., Roy, D. & Aral, S. The spread of true and false news online. Science 359, 1146–1151 (2018).
12. t’Serstevens, F., Piccillo, G. & Grigoriev, A. Fake news zealots: Effect of perception of news on online sharing behavior. Front. Psychol. 13, (2022).
13. Foster, K. R. & Kokko, H. The evolution of superstitious and superstition-like behaviour. Proc. Biol. Sci. 276, 31–37 (2009).
14. Piccillo, G. & van den Hurk, J. The surprising effect of social distancing on our perception: Coping with uncertainty. CEPR Covid Econ. 2020, (2020).
15. Thank the Financial Crisis for Today’s Partisan Politics. The University of Chicago Booth School of Business https://www.chicagobooth.edu/review/thank-financial-crisis-todays-partisan-politics.
16. Kurz, M., Piccillo, G. & Wu, H. Modeling diverse expectations in an aggregated New Keynesian Model. J. Econ. Dyn. Control 37, 1403–1433 (2013).
17. Piccillo, G. & Poonpakdee, P. Ambiguous Business Cycles, Recessions and Uncertainty. (2022).
18. Gomez, T. & Piccillo, G. Diverse Risk Preferences and Heterogeneous Expectations in an Asset Pricing Model. https://papers.ssrn.com/abstract=3517050 (2019).
19. De Grauwe, P. & Ji, Y. Trust and Monetary Policy. SSRN Scholarly Paper at https://papers.ssrn.com/abstract=4069895 (2022).
20. Emile van Ommeren & Piccillo, G. Central Bank Governor and Interest Rate Setting by Committee | CESifo Economic Studies | Oxford Academic. https://academic.oup.com/cesifo/article/67/2/155/6024913?login=true.
21. Kimbrough, E. O. & Vostroknutov, A. Affective Decision-Making and Moral Sentiments. 53.
On 16 November 2023, METRO fellow Haiyang Yu successfully defended his PhD thesis with the title "Rethinking Environmental Salvage and Salvage Law: Towards an Efficient Mechanism for Environmental Emergency Response in Maritime Accidents?"
Starting or running a student initiative as an international isn’t always easy. Especially for those who don’t speak the language, navigating official documents and systems can prove difficult. The Student Initiative Helpdesk supports students of Maastricht University who are involved in student...
Last Wednesday and Thursday, an international independent External Review Committee has visited CAPHRI. We are looking back at a positive site visit with a few preliminary key messages, which we would like to share.