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How the false consensus effect eats up your profit 

How the false consensus effect eats up your profit

We succumb to it in our private lives and at work. Whole departments and companies can fall into its clutches. The false consensus effect, discovered by Lee Ross and published with two colleagues in 1977, describes the phenomenon of a person thinking that the majority would do exactly as they do. The false consensus effect can cause entrepreneurs, professionals, managers and even entire departments and companies to be too convinced of their own products, whereas in reality the majority of customers in the market think the opposite.

In this article we explain how the false consensus effect was discovered, what it means for your product costs, profit and competitiveness, and how you can counteract its negative influence.

The 67% story

It takes place in 1977 in Stanford, California. Canadian-born psychologist Lee David Ross, who lives in the USA, has been investigating a phenomenon for several years, which he and two colleagues now finally want to prove scientifically. He’s been working on an experiment for several months that should confirm his suspicions.

The door opens and a student enters the professor’s sparsely furnished office. Stanford University is a complex of venerable buildings with a long tradition. Sandstone-colored walls, red-tiled roofs, arcades adorned with circular arches, bright blue sky, sun and palm trees. Stanford University, founded in 1891 by Mr. and Mrs. Stanford in memory of their only son who had died, is one of the best universities in the country and the world. For students, it’s an honor to be able to study here. For professors, it’s an honor to be able to teach and do research here. The two shake hands and sit down.

“I’m here for the job,” the student begins. The professor nods. “I assume you’ve already read the notice. You take this sign here.” He points to a corner of the office. A home-made sign fashioned like a sandwich board stands there. The wearer can put on the signboard and walk around with it. Written in thick black lettering on the front and rear boards are the words “Eat at Joe’s”. Professor Ross shifts his gaze from the sandwich board back to the student and continues his instructions. “Please put on the signboard and walk around the campus for 30 minutes during your next lunch break. I’ve prepared a table for you here. Please make a note of when you’re spoken to. Then write down the person’s gender and whether their comment was positive, negative or neutral. And here’s a map showing the route.” He slides the map over to the student along with a notepad. “You’re doing us a big favor with this work, and this could give you the chance to learn something interesting. When you’re done, come back and see me,” the professor finishes. They both exchange a few more words. Then the student leaves the office with the wooden signboard.

A little later at lunchtime, the campus filling up with students, Professor Ross watches contentedly as the student walks across the campus with the signboard hung around his neck, following the route they discussed.

After the 30 minutes have elapsed, the student returns to the office with beads of sweat on his forehead. “Please sit down,” says the professor. “Thanks for taking the trouble,” Ross continues, glancing through the notepad the student had duly filled in during his tour. “Can you please answer one more question for me?” The student politely agrees and nods. “What do you think? What percentage of your peers would also take on this job and what percentage would turn the job down?” Ross notes both numbers, which add up to 100%. “Thank you for your time.” They bid each other good day and the student leaves.

After the door closes, Ross turns his attention to a spreadsheet. He carefully enters the student’s statement. He looks at the distribution with interest. Evidently, the students who carried the sign assumed that 67% of their peers would also accept this job. Conversely, the students who rejected the job assumed that 67% of their peers would also reject this job. The numbers of refusals and consents balanced each other out. Out of 100 students, 50 refused the job and 50 accepted it.

The students project their own assumptions onto others and think they are in the majority… the false consensus effect was proven.

A few more experiments were to follow until Ross and his colleagues Greene and House published the results of four studies – study 3 dealt with the sandwich board sign – in the Journal of Experimental Social Psychology in 1977.

How the false consensus effect affects the success of your business

This test was repeated and published several times after it was discovered. Everyone seems to fall for it. One explanation for this is that people do not want to be different from other people. Another explanation is that people like to be in a community of other people who act, think and respond similarly. People are thought to exclude others if they believe they do not share the same opinion. The false consensus effect leads to a convinced and firm stance towards a thing or action, as the example with the sandwich board sign and the students shows. The student overestimated the proportion of people who were also prepared to carry the sign on campus. We need the courage of our convictions to feel comfortable with ourselves and get through the situation facing us. Knowing the general public is behind you is a good feeling and motivates.

It is very likely that you as an entrepreneur, professional or manager are susceptible to the false consensus effect. Of course, you need to be convinced of your product so that you can sell it and go to work motivated. As a developer, you are convinced of the product you are working on or have developed yourself. It becomes dangerous, however, when you do not question yourself. If you fall into the trap of believing that the feature you have added to the product would also please most customers, it will cost your company a lot of money. If the majority of customers do not share your view and are not willing to pay money for the additional feature, we have an uneconomical product. An uneconomical product endangers the future and survival of your company. And actually you only wanted the best by opting for the new feature.

How you can avoid the false consensus effect

I would like to identify three ways in which you can avoid falling into the trap of the false consensus effect.

  1. Firstly, you’re now aware of the effect. However, you will need to remind yourself about it time and again. Question yourself when you have a quiet minute. You can set fixed times in your diary. A few minutes of conscious reflection and critical questioning are enough to reduce the risk of succumbing to the false consensus effect. However, you shouldn’t mutate into the biggest doubter. Conviction and self-confidence are indispensable if you want to hold your own when dealing with customers or in your company. However, healthy self-reflection is invaluable and will take you further, as you will not place the company in a precarious position through your actions.
  2. Rely on market research when it comes to new products and test the minimum viable prototype (MVP) in the target group. If you’re developing existing products further, stick to the specifications or ask customers whether this additional feature or higher-quality material is really worth the extra cost. Wait with the implementation until you get confirmation from customers that they will also reimburse you for the additional costs.
  3. Get independent sparring partners for the project. They offer an outsider’s view and have the necessary distance to the product. They can bring in methods that show how much a product feature is worth to customers. They can also help to enforce costs against customers or suppliers. In the story “The Emperor’s New Clothes”, among all the adults it was the child who questioned the swindle.

An interesting observation I was able to make among my students was that after a few months of project work, tunnel vision and the false consensus effect took hold. The team calculated a self-constructed component and, during the phase in which they were supposed to create transparency, they already came up with several ideas for optimizing it. They then came to the conclusion during the official phase in which ideas were supposed to be garnered through creativity methodologies and cost optimization workshops, that the component was already optimized. They planned a workshop and invited students who had previously nothing to do with the product. In the end, with external help, the group found a measure that further reduced the component costs by a factor of 8. Customers could now choose between a fast process time with a more expensive product or a cheap product with a slightly slower process time.

You should therefore assume that in most cases you overestimate the degree to which others will agree with you. Check if this is the case, then you can avoid wrong decisions, reduce costs and increase profit.

Regards

Sebastian Möller

Scientifically, the content of this article is based on the studies published by Ross and his colleagues Greene and House in the Journal of Experimental Social Psychology in 1977.

In order to give our readers a more engaging reading experience and to package the sometimes rather dry information in a way that makes it easier to remember, we deploy elements used in storytelling. If you would like to read the full scientific article, you can access it at the following link:

https://web.archive.org/web/20150927120010/http://web.mit.edu/curhan/www/docs/Articles/biases/13_J_Experimental_Social_Psychology_279_%28Ross%29.pdf

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