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Book Review: The Halo Effect

On March 9, 2009 by Jamie Madigan

The Halo Effect

No, this isn't about the video game. The full title on this one is The Halo Effect ...and the Eight Other Business Delusions that Deceive Managers. In it, author Phil Rosenzweig sets out to take the business press and best sellers to task for a list of flaws in their thinking and chest thumping. Basically, it's a list of fallacies that you could compile from the chapter titles in most books on psychology, decision-making, and behavioral economics:

  1. The Halo Effect (inferring other traits on the basis of one trait, like performance)
  2. The Delusion of Correlation and Causality (assuming correlation means causation)
  3. The Delusion of Single Explanations (not realizing that it's all a rich tapestry; every outcome has multiple causes)
  4. The Delusion of Connecting the Winning Dots (a.k.a., selection bias; the habit of studying only successes)
  5. The Delusion of Rigorous Research (substituting research quantity for quality)
  6. The Delusion of Lasting Success (forgetting that the nature of business means very few successes are permanant or even long-lasting)
  7. The Delusion of Absolute Performance (not realizing that company performance is relative to your competition, not absolute)
  8. The Delusion fo the Wrong End of the Stick (attributing success for a trait that both successful and unsuccessful companies share)
  9. The Delusion of Organizational Physics (Failing to realize that human systems like the marketplace are too complex to predict perfectly)

I liked this book quite a bit, in part because I just like exploring these little kinks in human nature, but also because Rosenzweig fully committed himself to a no bullshit, no pulled punches critique of the silliness you see in the business press and best-selling books like Built to Last or Good to Great (which I thought was transparently terrible, too). His diatribes are replete with real-world examples, quotes, and data compilations, but also always cogent and centered around one of the delusions above (though sometimes they bleed together, as you might expect). He spends a fair amount of time splendidly savaging people like Jim Collins (of Good to Great fame and fortune), calling him on the carpet for making sure that facts, science, and sound methodology don't get in the way of telling an uplifting story. It's great to see someone with both the moxie to say stuff like this and the scientific training to substantiate his critiques. If the Journal of Applied Psychology were more like this, I'd read it cover to cover every issue.

My only substantial complaint about the book is that it's almost all criticism and has very little in the way of solutions beyond "don't fall into this faulty mode of thinking." The subtext of the book is that business performance is gosh-darn hard to measure and even harder to predict or influence. So what do you do? How DO you identify the qualities that make businesses better? Clearly, some are better than others. What are the methodologies by which we can evaluate things in the absence of truely scientific experiments? The Halo Effect isn't much help there. But at least the author criticizes the ways NOT to do it in an entertaining and enlightening way.


  Existing comments:

Posted by Bryan at March 9, 2009 7:59 PM:

So easy to understand. So frequently forgotten.

Posted by John at April 2, 2009 4:54 PM:

A mate of mine is reading it and really enjoys it, I bags it next.


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all this copyright until the sun explodes, jamie madigan