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It turned out that the workers seemed to be responding more to the attention they were receiving from management than to any physical change in their environment. With each change, the workers suspected (consciously or unconsciously) they were being observed and therefore worked harder.
This phenomenon came to be known as the Hawthorne Effect. It states that the very fact that people are under study, observation or investigation can have an effect on them and the results.
The Hawthorne Effect was discovered during a series of experiments which were conducted under the supervision of Elton Mayo, an Australian-born sociologist who eventually became a professor of industrial research at Harvard. Although the results of Hawthorne studies were interpreted more in the context of how the surrounding affect the employee performance, I see a strong connection between Hawthorne Effect and Observer Effect.
Being a doctor’s son, I have grown up seeing stethoscope and blood pressure monitoring instrument everyday. However my exposure to medical devices was limited to only those two instruments until I turned 30. That was when I first had a whole body health checkup which included an echocardiography. It’s a standard procedure these days and can give a wealth of information about one’s heart health.
The two and three dimensional images that appeared on the monitor didn’t make much sense to me but what captured my attention was my heart beat. Although I was lying down comfortably, my heart was racing at 100 beats per minute. I gave a worried look to the doctor but he returned a gentle smile. He later explained that sometimes the resting heartbeat increases because of the nervousness of the patient. Just the fact that someone is measuring the heartbeat can actually change it.
It’s called Observer Effect.
I See You
People change their behaviour in response to being observed.
In his book Seeking Wisdom: From Darwin to Munger, Peter Bevelin writes –
Things are not always what they seem,” said the 1st Century Roman philosopher Phaedrus. Our behavior can be influenced by the expectations of others- teachers, coaches, bosses, etc. For example, to please the observer, a research subject may read in a desired result. A patient may wish to respond to a treatment in what they see as the correct way. We live up to what is expected of us. Studies show that patients can have faster heartbeats and higher blood pressure when examined by a doctor compared to a nurse. We often see what we want or expect to see. A doctor may see an effect in a patient because he expects to see it. We often don’t see what we don’t expect to see.
In science, the term Observer Effect refers to changes that the act of observation will make on a phenomenon being observed. A commonplace example is checking the pressure in an automobile tire; this is difficult to do without letting out some of the air, thus changing the pressure. In thermodynamics, a standard mercury-in-glass thermometer must absorb or give up some thermal energy to record a temperature, and therefore changes the temperature of the body which it is measuring.
Daniel Kahneman, in his book Thinking Fast and Slow, describes a fascinating experiment which was conducted in an office kitchen at a British university –
For many years members of that office had paid for the tea or coffee to which they helped themselves during the day by dropping money into an “honesty box.” A list of suggested prices was posted. One day a banner poster was displayed just above the price list, with no warning or explanation. For a period of ten weeks a new image was presented each week, either flowers or eyes that appeared to be looking directly at the observer. No one commented on the new decorations, but the contributions to the honesty box changed significantly…On average, the users of the kitchen contributed almost three times as much in “eye weeks” as they did in “flower weeks.” Evidently, a purely symbolic reminder of being watched prodded people into improved behaviour. As we expect at this point, the effect occurs without any awareness.
What the change in lighting conditions did to Hawthorne workers, banner poster of “eyes” did to the users of the kitchen. One made people more productive and the other made them more honest.
There’s a subtle difference between Observer Effect and Hawthorne Effect. Hawthorne effect specifically relates to people’s behaviour where as Observer Effect has been shown to work on inanimate things too. Heard of the double slit experiment? Take a few minutes and watch this video.
Click here if you cannot see the video above.
Observer Effect can be exploited as useful life hack. I have observed that whenever I need to start an exercise routine, I just need to pick any fitness book and start reading it. It doesn’t matter how good the book is. Just the fact that I am reading something on fitness creates enough motivation to start exercising. Observation, in this case acknowledging the need for exercise, increases awareness which in turn translates into action.
In Investing
Have you heard of the joke about an oil speculator who dies and reaches at the gates of heaven to meet St. Peters? “Heaven is already full of oil speculators. No place left for you,” declares St. Peters.
“I make my own place.” With these words, the oil speculator leans through the gates and yells, “Hey, boys! Oil discovered in Hell.” A stampede of men with picks and shovels duly streams out of Heaven and enter into Hell.
“I guess you do deserve a place in Heaven. Come on in,” an impressed St. Peters waves the speculator through.
“No thanks,” says the speculator. “I’m going to check out that Hell rumour. Maybe there is some truth in it after all.”
That kind of sums up the way Observer Effect plays out in stock market. A famous investor, let’s call him Mr. X, openly talks about his recent investments. Small investors (and sometimes even big ones too) get influenced by this and start buying the stock which results in a jump in stock price, precisely because of increased buying activity. This jump in price will seem to validate Mr. X’s hypothesis. And in short term you see a positive feedback loop reinforcing the stock price. This further reinforces Mr. X’s confidence in his investment and he starts considering buying even more.
It should be obvious to any serious value investor that a stock’s attractiveness rests on its purchase price and if a good business is available at expensive valuation, it ceases to be a good investment. So in this case, just because a good business became visible (to observers i.e., investment crowd) to many, the stock’s attractiveness changed.
In other words, markets can influence the events that they anticipate. George Soros’ theory of reflexivity too is based on Observer Effect. He writes –
When we act as outside observers we can make statements that do or do not correspond to the facts without altering the facts; when we act as participants, our actions alter the situation we seek to understand.
Conclusion
For Hawthorne Effect to work, we need two entities. One who is being observed and one who is doing the observation. Do you realise that inside your mind too, there are two entities? In his wonderful book, The Practicing Mind, Thomas Sterner writes –
If you are aware of anything you are doing, that implies that there are two entities involved: one who is doing something and one who is aware or observing you do it. If you are talking to yourself, you probably think you are doing the talking. That seems reasonable enough, but who is listening to you talk to yourself? Who is aware that you are observing the process of an internal dialogue? Who is this second party that is aware that you are aware?
The one who is talking is your ego or personality. The one who is quietly aware is who you really are, the observer. The more you become aligned to the quiet observer, your true self, the less you judge. Your internal dialogue begins to shut down and you become more detached about the various external stimuli that come at you all day long. You begin to actually view your internal dialogue with an unbiased and sometimes amused perspective.
Well, that was somewhat philosophical angle to the idea of Observer Effect. Philosophy too is an important discipline and big ideas from this field should be part of your latticework of mental models.
Being able to see connections between various disciplines is a very effective way to integrate the knowledge into one’s thinking toolkit. The more connections you can find, deeper is the understanding.
The original purpose of the Hawthorne experiments was to study the effects of physical conditions on productivity. Unfortunately, all the studies done at Hawthorne were eventually recognized to be a highly flawed one, ironically because of Hawthorne effect, leaving the Hawthorne effect a victim of, well, the Hawthorne effect.
Take care and keep learning.
