What happens when there is a conflict between what we see and what we hear? Apparently, instead of getting confused, our brain has a strange ability to construct a story which resolves the conflict. Unfortunately, that story is usually far from reality.
Who charges a hundred bucks for a ten-second magic trick?
In my case, it was a petrol pump attendant. He turned five 100-rupee bills into four bills in under ten seconds. Interestingly, I didn’t realize that he was showing me magic and was pocketing that missing 100-rupee note for his unsolicited magic services. In other words, he cheated me.
Demonetization was still a few years away and I didn’t like paying the fuel surcharge on my credit card, so cash was my favourite mode of payment in those days. When the vanishing money incidence happened 3-4 times in a row within a span of few months, and when I read an email forward about how some petrol pump attendants were scamming unsuspecting customers with their sleight of hand, I decided that I would keenly observe my next transaction at the petrol pump.
Before we move ahead with the story, let’s first understand a strange loophole in our neural machinery which is freely exploited by con artists. To best understand, I would urge you to first watch this video.
Click here to watch this video.
Wasn’t it freaky? It blew my mind when I saw this.
For the benefit of those who are in a hurry and didn’t click on the video link, here’s a quick description of what’s going on in the video. In fact, following excerpt is from Scott Adams’ book Win Bigly, where I first read about this illusion.
Near the start of the clip, you see a close-up of a man’s mouth while he repeats, “Bah, bah, bah, bah, bah.” You recognize his lips as forming the B in “bah,” (observe the face on the right in the image above) and it all makes sense. Then things get weird.
The soundtrack stays the same, but the man moves his lips as if he is forming the sound “fa, fa, fa” instead of “bah, bah, bah.” (look at the left face in the image above) And while you watch, as if by magic, your brain turns the sound “bah” into “fa.” You know this is an illusion, and you know how they are doing it. And yet it still works. You can go back and forth between the lips that seem to be saying “fa” and the ones that seem to be saying “bah.” In reality, the sound is “bah” all the way from start to finish, but your brain will instantly translate the “bah” into “fa” when the lips on the video are moving as if they are creating an F sound.
This is known as McGurk Effect. It’s a great example of how visual perception can distort the auditory perception. Our visual sense changes what we are hearing in real time, even when we know the illusion.
Try this. At the “fa fa fa” segment, close your eyes. You’d hear “bah bah bah.” The moment you open your eyes, the sound will magically transform to “fa fa fa.” You cannot help it. The illusion is so strong that no matter how hard you try, you just can’t shake it off.
Wikipedia defines McGurk Effect as:
The McGurk effect is a perceptual phenomenon that demonstrates an interaction between hearing and vision in speech perception. The illusion occurs when the auditory component of one sound is paired with the visual component of another sound, leading to the perception of a third sound. If a person is getting poor quality auditory information but good quality visual information, they may be more likely to experience the McGurk effect.
In McGurk Effect, our auditory perception is altered by the visual cue. But the reverse is also possible under certain conditions, i.e., the what we see is modified by what we hear. Let’s call it The Reverse McGurk Effect. Watch this video which, along with McGurk Effect, demonstrates few other examples of Reverse McGurk Effect.
The guy at the petrol pump was using the Reverse McGurk Effect. Although it’s difficult to explain a sleight of hand trick with words and the best way would be to show you, but unfortunately, I couldn’t find any video demonstration. Nevertheless, let me attempt to describe it.
They trick you with their skill full counting. The guy starts counting the notes in front of you by transferring bills from his one hand to another, but he does it so fast that it’s impossible to follow the count just by watching. However, with each movement, a sound is produced (sounds something like ‘ksshhttt’) when the 100-rupee note slides between hands. Now, your mind will unconsciously fall back to counting the ‘ksshhtt’ sound because it can’t follow the fast visual cues. This is how the petrol pump guy cleverly and subtly forces your brain to shortcut the visual and rely on audio cues. He does the counting twice. The first counting is for you to realize that you can’t follow the count visually and you will have to rely on audio cues. The second pass is when your ears confirm that there were 5 ‘kshhttt’ sounds. In reality, the guy slid only four notes from one hand to other but made the sound five times. This is where his dexterity comes into picture. Any magic trick takes a lot of practice.
Next, he folds the notes and hands them over to you. But what if you decide to count it again?
He would be caught, right?
But don’t forget they’re con-men. They have already thought about all possible scenarios and keep their safety net ready. If he sees any indication from your body language that you are going to verify the returned money, he will immediately reach out to his bag/counter and give you the remaining amount (as if he was anyway going to give it to you), so that you don’t get a chance to catch him or blame him. But if you just take the money and keep it in your wallet, he’s just made his profit.
McGurk Effect doesn’t work for everybody. Some people are wired differently. People who have gone through extensive music training or speech therapy are usually immune to such illusion. But for a majority of the crowd out there, McGurk Effect is real.
If you don’t have time to watch the video right now, make a point of doing it later. You won’t fully appreciate the power of this behavioural quirk until you do.
Learning about McGurk effect was a paradigm shifting experience for me.
We experience the world through our five senses. The primary purpose of these five senses is not to perceive the reality as it is. That’s secondary. The main reason evolution gave us these five senses was to increase our chances of survival as a species.
However, as the world around us changed rapidly, our senses never got time to adjust and evolve further. Which means, in the modern world, the absolute reality could be different than what our eyes and ears inform us.
McGurk effect is a behavioural bias and all behavioural biases are like mirages. A mirage is a strange illusion. Even if your brain is convinced that the mirage isn’t real, your eyes refuse to cooperate. You cannot make your eyes not see the mirage. When a mirage is staring at you, it’s impossible to know if it’s real or fake. Similarly, all behavioural biases are notoriously hard to shake off. Like a hungry predator, they keep coming for you, again and again.
It’s unfortunate that even if you know that you’re prone to falling for these cognitive errors, your brain doesn’t attain any immunity against them.
We bounce from one illusion to another, writes Adams, “all the while thinking we are seeing something we call reality. The truth is that facts and reason don’t have much influence on our decisions, except for trivial things, such as putting gas in your car when you are running low. On all the important stuff, we are emotional creatures who make decisions first and rationalize them after the fact. If you are normal, or anything like normal, you probably think I am exaggerating about how irrational we human beings are. Perhaps you don’t feel irrational. As a general rule, irrational people don’t know they are irrational.”
So what can investor learn from McGurk Effect?
The first lesson is to understand that the gap between what’s true and what we see could be mile wide. The attempt shouldn’t be to bridge the gap for, by design, it’s notably hard to pull that off. Our goal, as investors, should be to assume sufficient margin of safety in our investing decisions.
For some companies, no matter how their management’s lips move, bullshit comes out. Charlie Munger calls it the Twaddle Tendency.
When you are looking at a financial statement, the numbers tell you a story. When you listen to the management speaking in an analyst call or in an AGM, he too tells you a story. What matters is not if those stories are same or different, what matters more is if you have thought through all scenarios and taken that into account before making a decision.[/show_to] [hide_from accesslevel=’almanack’]
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