Kennon-Green & Co. Global Asset Management and Value Investing

Mental Model: Calibration Errors

Calibration errors are when people lack the genetic or cultural ability to calibrate communication based upon the situation, people involved, or other contextual clues.  To understand calibration errors as a mental model,  it might help to give you three real-world scenarios that would require the observer to calibrate the hyperbole.

  • A group of frat boys lives together in a private fraternity.  On a Thursday night, one sent a text message to another that said, “I’m going to kill you.”  Most reasonable people would be able to judge that, given the audience and the contextual clues, the sender of message does not, in fact, intent to murder the receiver.  Most likely, if they two were roommates, one left their dirty clothes all over the floor or ate the last box of Pop Tarts.
  • An insanely hormonal couple, consisting of a 19 year old boy and an 18 year old girl, just started dating.  They can’t keep their hands off each other and are engaged in inappropriate displays of public affection.  Walking by a bench on campus one day, you hear the girl say to the boy, aggressively, “I want to rape you!” and the boy responds, “If you ever cheat on me, I’ll cut out your heart.”  Despite the actual words spoken, and the wildly inappropriate nature, most reasonable adults are going to raise an eyebrow but instantly realize that the contextual clues indicate that the girl has no interest in raping the boy against his will and the boy has no interest in cutting apart the girl.
  • A successful woman at lunch with friends runs into an acquaintance from her private boarding school.  Introducing the person, she squeals, “You are so my favorite person!” turns to the other women at the table and says, “This is one of my best friends in the whole wide world!”.  Despite the actual words spoken, the fact they haven’t seen each other in years or don’t speak regularly indicates that the woman’s language needs to be calibrated.  Using the famous relationship test, the woman probably doesn’t consider the person one of her best friends and almost everyone in the room understands that.

Now, imagine that a middle age woman is sitting in her office.  The phone rings.  It’s a man.  He calmly says any one of the three phrases from the first two examples: “I’m going to kill you”, “I’m going to rape you”.  “I’ll cut out your heart.”  Clearly, the police need to be called and security measures taken.  This is an example of calibrating communication based upon contextual clues.  Again, you are calibrating your answers even though the words themselves did not change.

Many People Cannot Calibrate Successfully

A significant minority of people do not have the ability to calibrate well, resulting in calibration errors that can cause them difficulty in their relationships and their romantic lives.  They think harmless gestures are romantic cues or don’t have the ability to look beyond words and hear the meaning.  In business, this can be enough to sink you.

Mr Magoo

Cognition errors are like the mental equivalent of Mr. Magoo’s inability to see.

The nature of my work means I come into contact with a lot of people.  I once knew a person who was so myopic they committed calibration errors to such a degree that it became a running joke.  They were unable to have successful romantic relationships because they couldn’t read between the lines and reconcile people’s words, actions, and baseline in a way that let them divine underlying meaning, intention, and motivation.

At times the calibration errors were almost comical.  Other times, they were less benign.  This person once thought a woman was in need of mental help when everyone else in the group understood what was really going on by the contextual clues (it was a complex situation but the person’s motives made sense, yet they couldn’t pick up on them even though they were plainly visible to everyone else).  This person spent months talking about and obsessing over the situation.  Due to everyone’s silence, they fell prey to false consensus bias, not realizing we were trying to spare their feelings without embarrassing them.  I still doubt they ever figured out what was really going on but it was the adult equivalent of when grown ups are discussing sex and the four-year-old kids in the room can’t pick up on the subtext.  This person ended up humiliating themselves many, many times in front of other people due to the inability to calibrate (but the upshot was, they hardly ever realized it so I suppose that is something?).

This applies to business, as well.  In business, understanding how someone operates allows you to calibrate their responses.  One person saying, “This is the greatest stock ever!” might indicate they are mildly excited about it.  Another person saying, “It looks like a very interesting opportunity.” might be the equivalent of “This is the best investment I’ve ever seen in my life and I’m putting half my net worth into it.”

It is your responsibility to learn to calibrate on your own.  You cannot take people’s words at face value.  You need to calibrate them.  It helps if you’ve been exposed to someone long enough to develop a baseline for their patterns.

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