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  • Writer's pictureKhurram Rana

Cognitive Dissonance, economy and attrition

Leon Festering in the 1950's developed the theory of "Cognitive Dissonance". Simply put the term "cognitive" refers to thoughts, beliefs, or knowledge, while "dissonance" refers to inconsistency or conflict.

Typically when individuals experience cognitive dissonance, they feel a sense of unease or psychological discomfort.


This discomfort motivates them to reduce the inconsistency and restore internal consistency.


One of Festinger's most well-known studies on cognitive dissonance is the "Festinger and Carlsmith (1959) Study" or the "$1 vs. $20 Study".


In this experiment, participants were asked to perform a monotonous and tedious task, such as turning pegs in a pegboard. Afterward, they were randomly assigned to one of two conditions.


In the first condition, participants were paid $1 to tell a confederate (a person working with the researchers) that the task was enjoyable and interesting.


In the second condition, participants were paid $20 to deliver the same message.


Both groups experienced a level of dissonance because they had acted in a way that contradicted their true feelings about the task.


The researchers then measured participants' attitudes towards the task after their interaction with the confederate.


The results showed that participants who were paid only $1 reported higher enjoyment of the task compared to those paid $20.


This finding seemed counterintuitive because the task was objectively uninteresting and dull.


Festinger explained this by suggesting that participants in the $1 condition experienced more cognitive dissonance and thus altered their attitudes to reduce the inconsistency.


They convinced themselves that the task was more enjoyable to align their behavior (lying about enjoyment) with their belief (they wouldn't have lied for just $1 unless the task was actually enjoyable).


One of the most interesting aspects of the research by Festering to me has always been the "When prophecy fails" study. To state more accurately there were 3 researchers, Leon Festinger, Henry Riecken, and Stanley Schachter, who recounted the Seekers story in detail in their book When Prophecy Fails, published in January, 1956.


The study / book covers cognitive dissonance theory in the context of a group known as "The Seekers" led by a woman named Dorothy Martin (also known as Marion Keech or Mrs. Keech). The study, which became known as the "When Prophecy Fails" study, focused on a small group of individuals who believed in an impending apocalypse and the arrival of extraterrestrial beings to save them.


Festinger and his colleagues infiltrated the group to observe their reactions when the prophecy failed to materialize.


According to the group's beliefs, a catastrophic flood was predicted to occur on a specific date, but when it didn't happen, instead of abandoning their beliefs, the group members experienced what Festinger termed as a "cognitive dissonance crisis."


In this situation, Festinger found that the members of the group experienced an increase in their commitment to the belief system rather than abandoning it.

They engaged in various strategies, such as reinterpreting the events, seeking new converts, or emphasizing the strength of their faith, to reduce the cognitive dissonance caused by the unfulfilled prophecy.


Festinger used this study to support his theory of cognitive dissonance, showing how individuals can respond to conflicting information or failed predictions by adopting strategies that help maintain their beliefs and reduce psychological discomfort.


The study of "When Prophecy Fails" offers insights into how individuals and groups respond when their strongly held beliefs clash with contradictory evidence. It illustrates the power of cognitive dissonance in influencing people to rationalize and maintain their beliefs, even in the face of clear disconfirmation.


This phenomenon is not limited to religious or doomsday prophecies. Similar cognitive processes can be observed in other contexts where individuals cling to beliefs despite contrary evidence.

Understanding this phenomenon can provide valuable insights into human cognition, belief systems, and the mechanisms behind maintaining and changing beliefs.


While this theory may not directly explain the recent high attrition of professionals from established companies to startups, it does provide a decent framework. An analogy of sorts. To discuss some aspects:


Cognitive Dissonance: When employees leave established companies to join startups, they often experience cognitive dissonance. On one hand, they may have believed in the stability, security, and potential for growth offered by their previous company. On the other hand, they see an opportunity to join a startup that promises innovation, autonomy, and potentially higher rewards. The dissonance arises from the contradiction between their prior beliefs and the decision to leave for a less established and riskier option.


Confirmation Bias: Such individuals leaving established companies to join startups may exhibit confirmation bias by seeking information that supports their decision. They may focus on success stories of startups that have achieved significant growth or received substantial investments. They selectively ignore or downplay information about the high failure rates and challenges faced by startups. This bias helps them rationalize their decision and maintain their belief that joining a startup is the right path for them.


Social Validation: The desire for social validation plays a role in such cases as well. They may seek approval and support from peers, friends, or mentors who have successfully transitioned to startups. Surrounding themselves with individuals who have made similar choices helps alleviate the cognitive dissonance and reinforces their belief that joining a startup is the correct decision.


Anchoring and Adjustment: The theory of anchoring and adjustment suggests that individuals often make decisions based on an initial reference point and then adjust their choices incrementally. In our context, employees might anchor their decision on certain aspects such as the innovative culture, potential financial gains, or the excitement of working on cutting-edge technologies. They then make gradual adjustments in their beliefs and actions to align with the initial anchoring point, leading them to leave their current job for a startup.


Loss Aversion: Loss aversion refers to the tendency to prefer avoiding losses over acquiring gains. Transitioning professionals may perceive the potential loss of security, stability, and reputation as less significant compared to the potential gains in terms of personal growth, fulfillment, and financial rewards. They may downplay the risks involved and focus on the potential positive outcomes, leading them to justify their decision and overcome the fear of loss.


Throughout my career, I've come to realize that the economy is a lively, ever-changing beast. It's like a roller coaster ride with thrilling peaks of abundance and nerve-wracking dips of hardship. Thus, it's absolutely crucial to stay prepared for whatever lies ahead.


And how do we do that, you ask?


Well, it all boils down to a vital skill: analyzing information from every nook and cranny, exploring diverse perspectives, and gaining a panoramic view of the landscape. It's like assembling the pieces of a complex puzzle, equipping ourselves with the knowledge and insight necessary to navigate the twists and turns of economic fortunes. Remember, being well-informed and open-minded is the key to tackling the enigmatic dance of prosperity and adversity that the economy performs.


Life is a constant journey of decision-making. Each step we take is shaped by the information we choose to embrace and the perspectives we willingly explore. It's a fascinating dance between our desires and the knowledge we gather.


In this grand symphony of choices, I sincerely wish for everyone to make decisions that bring them utmost fulfillment and pave the way for a bright future.


But hey, thought to drop a little nugget of wisdom your way. Cognitive dissonance... It's like a sneaky little mind trick that can actually help you think more clearly.


So, while you're diving into the sea of information and embracing your decision-making power, don't forget to give cognitive dissonance a nod. It just might be the secret ingredient to unlocking your mind's true potential and making choices that stand the test of time.


Cheers to your journey of wise decisions and endless possibilities!

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Khurram Rana