HS2 vs. the decision making bias of big things

HS2 high speed train

Big things are attractive, but also sometimes penis shaped and problematic

HS2 is going ahead – a new high speed rail connection between London and various city hubs in the North of the country. It’s a big spend, on a big project, to deliver big results. But it’s not a big new idea. The same thinking has worked in the past, all over the world… so it will work now, right? Maybe. But there’s also something else at work here, and it’s got nothing to do with economics so much as cognitive psychology. The problem is these kinds of decisions are hard to think about, because they’re all about big things: big project, big challenge, big numbers… and when it comes to making decisions, big ideas are attractive because they’re easy to understand, but they also present us with some big thinking problems.

If you consider HS2 in an historical context, you’ll recognise a pattern. Cathedrals, castles, monuments, motorways, airports… our history is full of big public works. They were expressions of power, the power of the church, the monarchy, of the economic might of nations and so on. But have you ever wondered why the big players in our society have always liked producing big things? The truth is our brains have a bias towards chasing big ideas to make statements about ourselves. Big ideas display our potency or mark a new direction in our lives, they are physical expressions of our desire to rewrite our fate – even if deep down, we realise that fate doesn’t exist within a decision making, social ecosystem.

Which means, cognitively speaking, projects like HS2 are as much an expression of our desire to change as they are meaningful attempts to stimulate real world change. But that means big ideas aren’t always good, rational decisions as much as emotional needs being met…

 

Think big about the economy?

Proponents of HS2 ask the opposition “what’s not to love?” Okay, it’s going to cost… er… hard to say, current estimates suggest £42.6 bn, but it will generate about £98 bn within the economy by stimulating growth in previously underserved, underdeveloped parts of the country. How precisely that will happen is very complicated to work out, but the people who are backing the project (including the last government and the current one) have lots of smart people working it out. But can a big transport project, still years away from laying track, make sense in a world where a decent broadband connection and the mass availability of computers and smartphones has transformed the opportunities for business, the cost of doing business and the role transport plays in our economic life?

If you’re going to consider the economic potential of this type of Keynesian inspired deficit finance project, you have to acknowledge the ballpark for public works as a vehicle to stimulate economic growth has changed. The ball park is, in fact, more like the Westfield shopping centre these days, and like a big shopping mall, you can also shop online and get your stuff delivered. In fact, you’re as likely to go there to look at things and have dinner (then go home and buy the items) as you are to come back with arms full of carrier bags. Plus a lot of the revenue for the mall owners comes from the car park and surrounding attractions.

It’s not just that the economics of the UK, and the rest of the world, have changed. Public life is more complex generally than it was back in the 1930s when Keynes was at the hight of his powers, the issues we face are more difficult to predict and control. We’ve got massive changes in the world of Banking, there’s a digital economy, pressures on education and welfare that we just didn’t have before. We’ve got more companies than ever before. More self-employed people than ever before. They’re all doing business with more people than ever before in more ways than they used to and the growth in the economy isn’t coming from industry or finance so much as small businesses and high tech companies. In fact, over half our exports (and Britain is a top 10 export economy) are from niche, high tech, small scale manufacturers, research companies and product designers.

Put simply…we don’t need trains like we used to.
 

Big ideas create big problems…

We like big ideas because they’re simple. They are the elevator pitch. The upshot. The ‘end of the day’ summary of ideas. Spend £42 bn on rail infrastructure, fix the economy. Simple. Big ideas are equated to ambitions, aiming high, setting a goal for yourself. It’s a bit like considering anything, we need an executive summary, we’re not naturally inclined to be detail focused when it comes to the world around us.

For example, where does rain come from? The sea. The sun heats it, water evaporates, and it falls our of the clouds. Simple. Actually, it’s a bit more complex than that.

Look at it like this: Rain comes from the sea… so what? Does that explain anything we need to know about water in our lives? About weather patterns, the water cycle, how to manage flooding and droughts, pollution in water sources, building processes to minimise flood risk, geological impact on water purity and availability? How the water comes out of the tap or how it gets cleaned-up when you flush the loo? Does it explain the ecosystem around us? No.

Rain is a big idea. We understand the big idea. But when it comes to actually doing anything with water, it’s not really any use. If you live in the desert, it’s not really any use. If you live in Somerset during the floods, it’s not really any use. We know fixing problems which are related to rainfall need a lot more data, and a significantly more technical understanding of a set of variables which cover off multiple branches of science, politics and economics to prevent floods or provide people in drought struck countries with clean, reliable water supplies.
 

‘Bigness’ generates problems for itself as a thinking process. It creates a greater potential for opposition, and generates decision making inertia along with it.

This is because the arguments against any big idea are fuelled by the same big issues that create it. £42 bn is a lot of money. It’s about a third of the whole cost of running the UK for a year. Now, if you look at any aspect of our public lives, you’ve got to consider what 30% more cash would do for the NHS, or welfare, or pensioners, or the armed forces, or schools, or rural broadband, or your tax bill.

In fact, pretty much anything else that’s also big could benefit from the bigness of the money that’s being spent. Which means a bigger number of people could potentially benefit, from spending the same money on something else, than those who are directly or indirectly standing to benefit from the HS2 project. But would they benefit for a long time or would it just be a one-off windfall that would get spent and lost?

That’s another big question. So the argument for and against the HS2 big idea, creates more big arguments about big stuff. This means backing the idea, and opposing it, call upon people to make a big decision. And big decisions are hard to make, because they have big consequences. Actually, humans are better at making small decisions. Consider it like this. Deciding to go on holiday abroad is a small decision, easy to make. Deciding to go on holiday abroad, meet someone, get married and start a new life as a bartender in Maui is a very big decision and hard to make. In fact, both choices could be the same choice, but the conceptualisation of one is small, the other, life changing.

That’s why thinking big creates decision making inertia.

 

What’s wrong with BIG ideas?

Big ideas create big arguments, for and against, implying big consequences. However the truth of the matter is, we still favour them because the alternative is lots and lots of small things, which are more complex to understand.

For example, rural broadband provision in the UK is poor. The government is spending an extra £530 million on it. It’s important because broadband provision improves access to everything from shopping and work to education and entertainment. All those things benefit the economy, some immediately (spending money) and some further down the line (better educated workforce). There’s no doubt it could reach a lot more people than the HS2 trains could carry, too. But it’s an argument that takes lots of small numbers, applied to lots of small, complex issues, to define a lot of small outcomes. That’s harder to explain to people, harder to sell to the electorate to win votes… etc. Small doesn’t make for headlines, nor does it make for easy, digestible arguments between politicians and pundits.

What about £600 million for free school meals? Another small number (relatively speaking) for another set of smaller, less chunky arguments. No doubt, it would have an impact on poverty and health outcomes, probably influence school results and so on, but again, those aren’t easy arguments to assemble and digest in a simple, big argument for or against.

Combine those things and you’ve got (all things considered) maybe £2 bn spent. That leaves another £40 bn to invest in other things… like improving existing transport infrastructure, or health care. Spend half on better trains in the area and the other half on tackling obesity and again, we see lots of potential outcomes. Or use the money in smaller slices on apprenticeships, tax breaks for small businesses, pensions contributions for self-employed workers… you could find a lot of uses for it.

There’s no doubt the aggregate of a bundle of smaller spends on smaller issues would deliver big results, but it’s not a simple A + B = C kind of equation, more like a book of logarithmic tables. And so then we see the real challenge of big ideas. Another big idea was the “Millennium Dome”. And how did that turn out? Badly. That’s the problem with big ideas, they create the opportunity for big disappointments.
 

BIG is actually small

So here’s the problem for your brain. Big arguments are small, cognitively speaking. They are simple. Multiple small, complex arguments are, as far as your thinking processes and decision making brain is concerned, much more data to handle, I.e. They’re bigger sets of things to think about. So we all have a natural cognitive bias towards favouring smaller workloads for our brains, which means things that require less thought. This is why we favour the idea of the supermarket, because it’s a big thing compared to a high street of little shops that requires more thought. It’s why we like bundles, like phone and broadband, or set 3 course menus, or two for one offers in stores… we like aggregates. We construct rational arguments to justify our choices based on how easily we can make a collection of smaller choices into one big decision.

This is, in fact, not just a cognitive issue, it’s now an economic force. If you get your TV from a provider like Sky, you’re also more likely to get your phone and broadband from them too. If you have a bank account, that bank probably gets your mortgage and credit card business as well. In fact, in the case of all major services and utilities, consumers have a tendency to get everything from one source rather than shop around for the best deal on individual items. Or at least, we used to. But now we can go online and configure much more complex sets of suppliers for different items, from food to clothes to energy and financial services, that picture is changing. This is why department stores who used to sell everything are competing with online portals that bring together everything under one simple digital roof. It’s why Amazon can compete simultaneously for your toiletries, books, clothes, computer equipment, washing machine, toys, garden furniture and golf clubs… when the high street can’t.

When it comes to assessing the benefits of HS2, you’ve got to consider how many things have to happen to make it pay off. Investment is needed in local services, local business rates, local transport infrastructure, local housing… in fact, there’s a vast array of local issues to be addressed to make the big national project succeed. That means policy initiatives at a national and local level, requiring political support and participation from businesses, unions, and individuals to make it succeed. Cognitively speaking, like Amazon, you start to realise the big idea is just an interface for a whole load of interconnected issues, from disconnected sources, involving the interaction of many variables to deliver a big result.
 

Small agile thinking vs. Big slow thinking

The whole thing is a bit like considering the most successful smartphones and tablets against big thinking giants like Sony and Microsoft. If you take Apple’s iPhone and Samsung’s Galaxy, we’ve seen a lot of incremental improvements, model to model, but relatively little substantive change with each new version. They still look the same, they still do the same stuff… just better here and there. When you stand back and view the original version compared with the latest one, you see a lot of differences. That’s a big change managed in small chunks. Compare that with Microsoft/Nokia’s journey over the same period. We’ve seen many big differences between models. We’ve seen some big changes every time a new device emerges. And who’s winning? The small change thinking. By a big margin.

The problem there is agility. And that’s a big challenge for HS2. Spending a lot of money to make a new thing takes a lot of time… and whilst you wait for the delivery of the new thing, you’re stuck with the old one. Getting any improvement out there, and then engaging on an ongoing project to make little improvements regularly doesn’t transform anyone’s life in the same big moment, but over time delivers lots of small improvements which, when you look back, are big. There’s a reasonable argument to make that, if that £ 42 bn was spent on lots of small changes over the same period that the big project takes to deliver, we’ll see a return sooner – not as big (in the one go) but if considered over time – given the way there is a cumulative, knock-on effect of each small change – the results could be bigger.

It’s a real thinking challenge. But here’s the big picture. The longer you wait for a change, the longer you have to wait to feel the benefit. Making a big change later on might deliver big benefits, but the downside is until the big change happens, you see no benefits at all. Compare that with getting a little benefit, then a little more, then a little more… but much more regularly over the same time period. By the time the big idea is ready to give you a big payoff, you’ve had years of accumulating lots of benefits already. Much smaller, but with a compound effect that means in real terms, you’re better off than waiting for a big change.
 

We all want a fresh start

The bottom line is these kinds of economic arguments are futile compared with our emotional need to start over sometimes. Everyone does it. Problems, nitty gritty, same old same old (and more clichés like that) are commonplace cognitive baggage. We all share an intuitive understanding of what it means to make a break with the norm, to try something new, to boldly make a fresh start. In some respects this is logical. Your life within society is represents the functions of an ecosystem, and when you change one element of an ecosystem it has a cascading effect on other elements. However, again, that’s a big idea describing a simple argument. Actually, you need to address a variety of factors to make a sure a change is effective, otherwise all that happens is the one new, fresh thing you do becomes absorbed by the same problems you wanted to escape.

To put that into perspective, we all know that money doesn’t make you happy. That getting divorced doesn’t erase the relationships that belong to your old married life. That deciding to try something new off the menu at your favourite restaurant (as opposed to the same old thing you always have) won’t suddenly transform your experience of life. A new car won’t fix the traffic to stop you getting caught in a jam. A new haircut won’t make you younger or more successful. In each of those cases, you’re focusing on one significant new development, you might even attribute other changes in your life to it, but we all know, deep down, that any meaningful change requires you to start making different decisions and affect a systemic change in many aspects of your life, not just one. It’s like dieting, it doesn’t matter which individual foodstuff you give up, or whether you replace Pizza with tofu, if you want to lose weight and live longer through moderating the food you consume, it’s requires a wholesale adoption of different eating habits. Changing your eating habits requires looking at the context in which you make food choices, emotions, locations, goals and so on. It’s never about the food in your fridge so much as the mind that put it there.

Fresh start thinking is like big idea thinking. It’s compelling. It’s convincing. It’s easy to grasp the concept and make it happen. However whether or not it brings meaningful benefits and change requires a much broader vision and significantly more work than you first thought.
 

HS2 – put it all on red?

Which brings us back to the HS2 project. Will it work? The answer isn’t simple. The answer is yes, if it becomes the single event that describes a much more systemic set of changes, economically speaking, to the factors that effect local economies in a range of locations. Without those, it’s just like giving up Pizza and beer and expecting to lose weight… asking too much of a simple change to a complex ecosystem.

If you consider the complexity that ecosystem change presents, and combine it with the time we’ll wait to get the benefits from it, plus the relative need for more resources to be expended on other systemic issues that affect our national economic health, such as education, equality of access to online services, growing the digital economy, growing small businesses, the increasing financial burden of lifestyle related health problems (like obesity) on the NHS… (it’s a long list) the answer seems to be even more remote.

Add to those concerns the certain knowledge that the human brains deciding whether or not it’s a good idea have all got a cognitive bias towards favouring this kind of concept over small, agile projects that are more effective but don’t play well with voters or the newspapers, and it feels very much like this might be a bad decision.

Finally, we have the bottom line. Small things make a small impact and can be measured effective or not sooner than grand schemes. Grand schemes take longer and you can’t know they’ll succeed because it takes a lot of time to work out. Consider the recent report by the IEA on the overestimation of the effect of high speed rail on local economies, plus an earlier paper they produced estimating the £42 bn cost could nearly double before the project is delivered and it feels less like a big idea and more like a big gamble.