Pygmalion Effect In A Nutshell

The Pygmalion effect is a psychological phenomenon where higher expectations lead to an increase in performance. The Pygmalion effect was defined by psychologist Robert Rosenthal, who described it as “the phenomenon whereby one person’s expectation for another person’s behavior comes to serve as a self-fulfilling prophecy.”

Pygmalion EffectThe Pygmalion Effect, also known as the Rosenthal Effect, is a psychological phenomenon where higher expectations lead to an increase in performance. Individuals or groups tend to live up to the positive or negative expectations others have of them, creating self-fulfilling prophecies.
OriginThe term “Pygmalion Effect” is derived from George Bernard Shaw’s play “Pygmalion,” and it was first systematically studied in psychology by Robert Rosenthal and Lenore Jacobson in their 1968 book, “Pygmalion in the Classroom.”
Self-Fulfilling ProphecyThe Pygmalion Effect exemplifies a self-fulfilling prophecy, where beliefs or expectations about a person or group influence their behavior, causing those beliefs or expectations to come true.
ExpectationExpectations play a central role in the Pygmalion Effect. They can be explicit (verbalized beliefs) or implicit (demonstrated through actions). Higher expectations often result in better performance, while lower expectations can lead to poorer performance.
Teacher-Student DynamicsThe Pygmalion Effect is extensively studied in education. Teachers holding high expectations for students often lead to better student performance due to increased support, positive feedback, challenging curriculum, and improved teacher-student relationships.
Impact on EducationThe Pygmalion Effect highlights the substantial influence educators have on student outcomes through their beliefs and expectations. Effective teachers maintain high expectations, fostering a positive learning environment, while low expectations can perpetuate achievement gaps.
WorkplaceThe Pygmalion Effect applies to the workplace. When managers have high expectations for employees, they often perform better, take on more responsibilities, and exhibit increased motivation. Low expectations, conversely, lead to underperformance and decreased morale.
Rosenthal and Jacobson StudyA seminal study by Robert Rosenthal and Lenore Jacobson demonstrated the Pygmalion Effect in an elementary school. They falsely informed teachers that certain students were “academic bloomers,” resulting in those students showing significant academic improvement. This study underscored the impact of expectations.
Factors Influencing ExpectationsExpectations are influenced by various factors, including personal experiences, stereotypes, cultural biases, and nonverbal cues. These factors can lead to the formation of high or low expectations for others, impacting their outcomes.
Confirmation BiasConfirmation bias can amplify the Pygmalion Effect. Once expectations are set, individuals tend to interpret information in ways that confirm those expectations, reinforcing the effect. It leads to selective attention to information aligning with existing beliefs.
Ethical ConsiderationsLeveraging the Pygmalion Effect raises ethical concerns. Setting expectations unrealistically high or using it to favor certain individuals can be unfair and unethical. Responsible use involves acknowledging biases, providing equal opportunities, and fostering a positive environment for all.
LeadershipIn leadership, high expectations from leaders can lead to improved team performance. Communicating confidence in the team’s abilities and setting challenging goals can enhance motivation and achievement. Conversely, low expectations may result in decreased motivation.
CommunicationEffective communication is vital in leveraging the Pygmalion Effect positively. Clear expression of high expectations, along with continuous feedback and support, helps individuals or teams meet these expectations. Open communication reduces misunderstandings and improves outcomes.
Training and DevelopmentThe Pygmalion Effect highlights the importance of investing in training and development programs that focus on enhancing skills and competencies. Providing growth opportunities and conveying high expectations can lead employees to develop and excel in their roles.
Cultural FactorsCultural norms and values play a role in shaping expectations. Certain cultures may hold specific traits or behaviors in high regard, leading to expectations aligned with cultural values. Awareness of cultural influences is essential to avoid bias.

Understanding the Pygmalion effect

To study the effect, Rosenthal joined forces with a Californian elementary school principal named Lenore Jacobsen.

During the study, each student completed an IQ-test but the results were not disclosed to teachers.

However, they were told the names of students who were identified as ‘intellectual bloomers’.

One year later, the students took the test again.

While all managed to achieve a higher score, the students identified as more intellectual made the most progress.

In other words, students who had higher expectations placed on them by teachers performed better. 

Teachers were more likely to pay closer attention to these students by providing in-depth feedback and continuing to challenge them.

The mood and attitude of each teacher toward intellectual students were also hypothesized to be a contributing factor in high performance.

How does the Pygmalion effect work?

As noted by Rosenthal, the Pygmalion effect is a self-fulling prophecy. As a result, it is helpful to consider the effect as a cyclical process:

  1. First, the beliefs and expectations of Person A affect their interaction with Person B.
  2. Then, this interaction influences the beliefs or expectations that Person B considers true about themselves.
  3. In turn, these beliefs or expectations impact Person B’s performance.
  4. Once the performance of Person B has been impacted, the initial beliefs and expectations of Person A have been verified.
  5. At this point, the cycle begins again. During the interactions between Person A and Person B, certain beliefs and expectations are reinforced by Person A to get the desired result.

Best practices for using the Pygmalion effect in business

In business, it’s helpful to consider that employees are no different from the students in Rosenthal’s original study. The same mechanisms can be used to encourage high performance to further personal and professional goals alike.

Here are some best practices for use in a business setting:

Manage expectations

It’s important to note that the Pygmalion effect works both ways.

While positive expectations contribute to high performance, negative expectations contribute to poor performance.

Leaders should therefore seek to identify strengths in their team members and not dwell on weaknesses.

Using the effect, this style of leadership primarily focuses on employee potential.

Set challenges that are ambitious

With the bar set high, overcoming these challenges increases a feeling of empowerment in employees.

Leaders who set high standards are also likely to do everything they can to help someone else reach their goal.

Ultimately, this enhances the culture of an organization.

Use positive language

Perhaps an obvious point, but one that bears repeating. Words are inherently powerful, so leaders should use them to their advantage.

Complimenting the positive attributes of an employee is vital, particularly if they typically have a low opinion of themselves.

This increases trust and commitment to the process in both parties.

Pygmalion Effect Vs Hawthorne Effect

The Hawthorne Effect refers to an inclination of some people to work harder or perform better when they know they are being observed. The effect is most associated with those who are experiment participants, who alter their behavior due to the attention they are receiving and not due to any manipulation of independent variables. Therefore, the Hawthorne Effect describes the tendency for a person to change their behavior with the awareness that they are being observed.

The Pygmalion effect is a psychological phenomenon that describes how expectations modify behavior or performance.

Similarly, the Hawthorne Effect tends to change a person’s behavior due to an awareness of being observed.

Just like the Pygmalion effect can be used in business to encourage strong leadership and higher employee performance, the Hawthorne Effect might help enhance ideation, leadership, and collaboration in young companies.

Pygmalion effect examples 

To understand how the Pygmalion effect works in business, let’s start with one of the most comprehensive illustrations of how managerial expectations impact employee productivity.

Metropolitan Life Insurance Company (MetLife)

In 1961, district manager Alfred Oberlander decided to conduct an experiment after he made two observations:

  • Exemplary insurance companies grew faster than average or poor companies, and
  • New insurance employees performed better in these exemplary companies than they did in average or poor companies – irrespective of their sales aptitude.

Based on these observations, Oberlander placed his best insurance agents under one unit to encourage high performance and also to provide an environment where new recruits would be challenged. He then assigned staff such that:

  • The six best employees worked with his best assistant manager.
  • Six average employees worked with an average assistant manager, and
  • The remainder, or those with the least output, worked with the least able manager.

Once all team members were assigned, Oberlander asked the group containing the six best employees to produce 66% of the volume achieved by the entire company the previous year.

What happened next?

Individuals in the team tasked with producing 66% of the insurance company’s output were called “super staff” by their counterparts.

They also exhibited what is known as esprit de corps, or a collective feeling of pride and mutual loyalty.

After the first 12 weeks, output from this group far surpassed even the most optimistic expectations. This proved that groups with superior ability could be motivated to perform at levels far beyond normal output when average and poor performers were removed from the scenario. 

With organizational performance up by 40%, Oberlander repeated the process in 1962 and 1963.

More assistant managers were appointed and matched with subordinates of a similar productive capacity.

The average group anomaly

The six average employees who were assigned to an average assistant manager proved to be somewhat of an anomaly.

Oberlander found that the performance of this group increased significantly because of a healthy dose of competition. 

In other words, the manager in charge of the average unit refused to believe that she was less capable than her colleague in charge of the super staff. She also countered that the super staff themselves were not any more talented than her own.

During communication with the group, she challenged her subordinates to outperform the super staff.

She insisted they had the potential to do so provided they did not see their relative lack of experience selling insurance as an obstacle. 

Over the years Oberlander’s experiment ran, the average cohort increased its performance by a higher percentage than the employees containing the six best salespeople.

However, it should be noted that it could not match the sales generated by the more experienced group in dollar terms.

The poor-performing employees

Despite the beneficial outcomes seen in the first two groups, it was observed that managers nevertheless found it easier to communicate low expectations than they did high expectations. 

At the MetLife district office where Oberlander worked, one manager from a low-output group believed subordinates had zero chance of performing well.

He tried to hide this expectation, but it became evident in his actions and demeanor and some employees resigned as a result. 

Over time, employees who were assigned to that manager’s unit believed they were poor performers and expected to be terminated.

Case Studies

  • Leadership and Employee Performance:
    • Expectations: A manager believes that a new employee has significant potential to excel in their role.
    • Behavior: The manager provides guidance, mentorship, and challenging opportunities to the employee.
    • Performance: The employee consistently exceeds performance targets and takes on leadership roles.
    • Confirmation: The employee’s outstanding performance validates the manager’s initial expectations, reinforcing a cycle of high performance.
  • Workplace Promotion:
    • Expectations: An employee is promoted based on the belief in their leadership abilities.
    • Behavior: The promoted employee takes on new responsibilities with confidence and decisiveness.
    • Performance: The employee excels in the leadership role, leading the team to achieve significant goals.
    • Confirmation: The employee’s success in the leadership position validates the initial expectations, demonstrating the power of positive beliefs in leadership potential.
  • Managerial Leadership:
    • Expectations: A manager has high expectations for the capabilities of their team members.
    • Behavior: The manager encourages the team to take on challenging projects, fosters a culture of innovation, and provides resources for skill development.
    • Performance: The team consistently delivers high-quality work, meets deadlines, and exceeds client expectations.
    • Confirmation: The team’s outstanding performance affirms the manager’s expectations, contributing to a positive work environment and reinforcing the cycle of excellence.
  • Team Collaboration and Innovation:
    • Expectations: A team leader believes in the creative potential of their team members.
    • Behavior: The leader encourages brainstorming sessions, values diverse ideas, and provides a safe space for risk-taking.
    • Performance: The team consistently generates innovative solutions, leading to the development of new products or services.
    • Confirmation: The team’s successful innovations validate the leader’s initial belief in their creativity, fostering a culture of continuous innovation.
  • Sales Team Performance:
    • Expectations: A sales manager holds high expectations for the sales team’s abilities to meet ambitious sales targets.
    • Behavior: The manager provides comprehensive training, sales tools, and motivational support.
    • Performance: The sales team consistently achieves and surpasses sales quotas, resulting in increased revenue.
    • Confirmation: The team’s exceptional sales performance validates the manager’s belief in their capabilities, motivating the team to maintain high standards.
  • Customer Service Excellence:
    • Expectations: A customer service manager believes that the support team can provide exceptional service.
    • Behavior: The manager emphasizes the importance of customer satisfaction, encourages empathy, and provides training.
    • Performance: The customer support team consistently receives positive feedback and resolves issues effectively.
    • Confirmation: High customer satisfaction scores affirm the manager’s confidence in the team’s abilities, reinforcing a culture of excellent customer service.
  • Innovation and Product Development:
    • Expectations: A company’s leadership team believes in the innovative capabilities of their product development team.
    • Behavior: The company allocates resources for research and development, encourages experimentation, and supports cross-functional collaboration.
    • Performance: The product development team introduces groundbreaking products that capture market share.
    • Confirmation: The team’s successful innovations confirm the leadership’s expectations, encouraging ongoing investment in innovation.
  • Project Team Performance:
    • Expectations: A project manager believes in the expertise of the project team.
    • Behavior: The manager trusts team members to make decisions, assigns responsibilities based on strengths, and fosters open communication.
    • Performance: The project is executed efficiently, meets all milestones, and exceeds client expectations.
    • Confirmation: The project’s success affirms the manager’s belief in the team’s capabilities, promoting trust and collaboration in future projects.

Key takeaways

  • The Pygmalion effect is a psychological phenomenon that describes how expectations modify behavior or performance.
  • The Pygmalion effect can be thought of as a cyclical, self-fulfilling process between two parties. 
  • The Pygmalion effect can be used in business to encourage strong leadership and higher employee performance. Managing expectations and the setting of ambitious goals are crucial. Positive affirmation is also important as a means of increasing trust and buy-in.

Pygmalion Effect Highlights:

  • Definition: The Pygmalion effect is a psychological phenomenon in which higher expectations placed on an individual lead to an increase in their performance. It’s a self-fulfilling prophecy where one person’s beliefs about another person’s behavior influence the outcome.
  • Rosenthal-Jacobsen Study: In an elementary school study, students were identified as “intellectual bloomers” based on random IQ test results. Teachers’ expectations about these students led to their improved performance over time, highlighting the Pygmalion effect.
  • Cyclical Process: The Pygmalion effect operates in a cycle:
    1. Person A has expectations for Person B.
    2. Person A’s behavior towards Person B is influenced by those expectations.
    3. Person B internalizes these expectations, affecting their performance.
    4. Person B’s performance confirms Person A’s initial expectations.
  • Application in Business:
    • Managing Expectations: Leaders should focus on employees’ potential, emphasizing strengths rather than weaknesses.
    • Setting Ambitious Challenges: High standards and challenges empower employees and foster a culture of excellence.
    • Using Positive Language: Compliments and positive reinforcement build trust and commitment.
  • Pygmalion Effect vs. Hawthorne Effect:
    • Pygmalion Effect: Expectations shape performance by influencing individuals’ behavior.
    • Hawthorne Effect: People change their behavior when they know they are being observed.
  • Metropolitan Life Insurance Company Example:
    • Experiment Setup: Alfred Oberlander’s experiment at MetLife placed employees into different performance groups.
    • Results:
      • Positive expectations led to increased productivity in the “super staff” group.
      • A healthy competition environment boosted performance in the average group.
      • Poor expectations resulted in lower performance and employee resignations in the low-output group.
  • Key Takeaway: The Pygmalion effect highlights the impact of expectations on performance. It’s a powerful tool in business leadership that can be harnessed to encourage high performance by managing expectations, setting challenges, and using positive reinforcement.

Connected Thinking Frameworks

Convergent vs. Divergent Thinking

Convergent thinking occurs when the solution to a problem can be found by applying established rules and logical reasoning. Whereas divergent thinking is an unstructured problem-solving method where participants are encouraged to develop many innovative ideas or solutions to a given problem. Where convergent thinking might work for larger, mature organizations where divergent thinking is more suited for startups and innovative companies.

Critical Thinking

Critical thinking involves analyzing observations, facts, evidence, and arguments to form a judgment about what someone reads, hears, says, or writes.


The concept of cognitive biases was introduced and popularized by the work of Amos Tversky and Daniel Kahneman in 1972. Biases are seen as systematic errors and flaws that make humans deviate from the standards of rationality, thus making us inept at making good decisions under uncertainty.

Second-Order Thinking

Second-order thinking is a means of assessing the implications of our decisions by considering future consequences. Second-order thinking is a mental model that considers all future possibilities. It encourages individuals to think outside of the box so that they can prepare for every and eventuality. It also discourages the tendency for individuals to default to the most obvious choice.

Lateral Thinking

Lateral thinking is a business strategy that involves approaching a problem from a different direction. The strategy attempts to remove traditionally formulaic and routine approaches to problem-solving by advocating creative thinking, therefore finding unconventional ways to solve a known problem. This sort of non-linear approach to problem-solving, can at times, create a big impact.

Bounded Rationality

Bounded rationality is a concept attributed to Herbert Simon, an economist and political scientist interested in decision-making and how we make decisions in the real world. In fact, he believed that rather than optimizing (which was the mainstream view in the past decades) humans follow what he called satisficing.

Dunning-Kruger Effect

The Dunning-Kruger effect describes a cognitive bias where people with low ability in a task overestimate their ability to perform that task well. Consumers or businesses that do not possess the requisite knowledge make bad decisions. What’s more, knowledge gaps prevent the person or business from seeing their mistakes.

Occam’s Razor

Occam’s Razor states that one should not increase (beyond reason) the number of entities required to explain anything. All things being equal, the simplest solution is often the best one. The principle is attributed to 14th-century English theologian William of Ockham.

Lindy Effect

The Lindy Effect is a theory about the ageing of non-perishable things, like technology or ideas. Popularized by author Nicholas Nassim Taleb, the Lindy Effect states that non-perishable things like technology age – linearly – in reverse. Therefore, the older an idea or a technology, the same will be its life expectancy.


Antifragility was first coined as a term by author, and options trader Nassim Nicholas Taleb. Antifragility is a characteristic of systems that thrive as a result of stressors, volatility, and randomness. Therefore, Antifragile is the opposite of fragile. Where a fragile thing breaks up to volatility; a robust thing resists volatility. An antifragile thing gets stronger from volatility (provided the level of stressors and randomness doesn’t pass a certain threshold).


Ergodicity is one of the most important concepts in statistics. Ergodicity is a mathematical concept suggesting that a point of a moving system will eventually visit all parts of the space the system moves in. On the opposite side, non-ergodic means that a system doesn’t visit all the possible parts, as there are absorbing barriers

Systems Thinking

Systems thinking is a holistic means of investigating the factors and interactions that could contribute to a potential outcome. It is about thinking non-linearly, and understanding the second-order consequences of actions and input into the system.

Vertical Thinking

Vertical thinking, on the other hand, is a problem-solving approach that favors a selective, analytical, structured, and sequential mindset. The focus of vertical thinking is to arrive at a reasoned, defined solution.

Metaphorical Thinking

Metaphorical thinking describes a mental process in which comparisons are made between qualities of objects usually considered to be separate classifications.  Metaphorical thinking is a mental process connecting two different universes of meaning and is the result of the mind looking for similarities.

Maslow’s Hammer

Maslow’s Hammer, otherwise known as the law of the instrument or the Einstellung effect, is a cognitive bias causing an over-reliance on a familiar tool. This can be expressed as the tendency to overuse a known tool (perhaps a hammer) to solve issues that might require a different tool. This problem is persistent in the business world where perhaps known tools or frameworks might be used in the wrong context (like business plans used as planning tools instead of only investors’ pitches).

Peter Principle

The Peter Principle was first described by Canadian sociologist Lawrence J. Peter in his 1969 book The Peter Principle. The Peter Principle states that people are continually promoted within an organization until they reach their level of incompetence.

Straw Man Fallacy

The straw man fallacy describes an argument that misrepresents an opponent’s stance to make rebuttal more convenient. The straw man fallacy is a type of informal logical fallacy, defined as a flaw in the structure of an argument that renders it invalid.

Google Effect

The Google effect is a tendency for individuals to forget information that is readily available through search engines. During the Google effect – sometimes called digital amnesia – individuals have an excessive reliance on digital information as a form of memory recall.

Streisand Effect

The Streisand Effect is a paradoxical phenomenon where the act of suppressing information to reduce visibility causes it to become more visible. In 2003, Streisand attempted to suppress aerial photographs of her Californian home by suing photographer Kenneth Adelman for an invasion of privacy. Adelman, who Streisand assumed was paparazzi, was instead taking photographs to document and study coastal erosion. In her quest for more privacy, Streisand’s efforts had the opposite effect.

Compromise Effect

Single-attribute choices – such as choosing the apartment with the lowest rent – are relatively simple. However, most of the decisions consumers make are based on multiple attributes which complicate the decision-making process. The compromise effect states that a consumer is more likely to choose the middle option of a set of products over more extreme options.

Butterfly Effect

In business, the butterfly effect describes the phenomenon where the simplest actions yield the largest rewards. The butterfly effect was coined by meteorologist Edward Lorenz in 1960 and as a result, it is most often associated with weather in pop culture. Lorenz noted that the small action of a butterfly fluttering its wings had the potential to cause progressively larger actions resulting in a typhoon.

IKEA Effect

The IKEA effect is a cognitive bias that describes consumers’ tendency to value something more if they have made it themselves. That is why brands often use the IKEA effect to have customizations for final products, as they help the consumer relate to it more and therefore appending to it more value.

Ringelmann Effect 

Ringelmann Effect
The Ringelmann effect describes the tendency for individuals within a group to become less productive as the group size increases.

The Overview Effect

The overview effect is a cognitive shift reported by some astronauts when they look back at the Earth from space. The shift occurs because of the impressive visual spectacle of the Earth and tends to be characterized by a state of awe and increased self-transcendence.

House Money Effect

The house money effect was first described by researchers Richard Thaler and Eric Johnson in a 1990 study entitled Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice. The house money effect is a cognitive bias where investors take higher risks on reinvested capital than they would on an initial investment.


As highlighted by German psychologist Gerd Gigerenzer in the paper “Heuristic Decision Making,” the term heuristic is of Greek origin, meaning “serving to find out or discover.” More precisely, a heuristic is a fast and accurate way to make decisions in the real world, which is driven by uncertainty.

Recognition Heuristic

The recognition heuristic is a psychological model of judgment and decision making. It is part of a suite of simple and economical heuristics proposed by psychologists Daniel Goldstein and Gerd Gigerenzer. The recognition heuristic argues that inferences are made about an object based on whether it is recognized or not.

Representativeness Heuristic

The representativeness heuristic was first described by psychologists Daniel Kahneman and Amos Tversky. The representativeness heuristic judges the probability of an event according to the degree to which that event resembles a broader class. When queried, most will choose the first option because the description of John matches the stereotype we may hold for an archaeologist.

Take-The-Best Heuristic

The take-the-best heuristic is a decision-making shortcut that helps an individual choose between several alternatives. The take-the-best (TTB) heuristic decides between two or more alternatives based on a single good attribute, otherwise known as a cue. In the process, less desirable attributes are ignored.

Bundling Bias

The bundling bias is a cognitive bias in e-commerce where a consumer tends not to use all of the products bought as a group, or bundle. Bundling occurs when individual products or services are sold together as a bundle. Common examples are tickets and experiences. The bundling bias dictates that consumers are less likely to use each item in the bundle. This means that the value of the bundle and indeed the value of each item in the bundle is decreased.

Barnum Effect

The Barnum Effect is a cognitive bias where individuals believe that generic information – which applies to most people – is specifically tailored for themselves.

Anchoring Effect

The anchoring effect describes the human tendency to rely on an initial piece of information (the “anchor”) to make subsequent judgments or decisions. Price anchoring, then, is the process of establishing a price point that customers can reference when making a buying decision.

Decoy Effect

The decoy effect is a psychological phenomenon where inferior – or decoy – options influence consumer preferences. Businesses use the decoy effect to nudge potential customers toward the desired target product. The decoy effect is staged by placing a competitor product and a decoy product, which is primarily used to nudge the customer toward the target product.

Commitment Bias

Commitment bias describes the tendency of an individual to remain committed to past behaviors – even if they result in undesirable outcomes. The bias is particularly pronounced when such behaviors are performed publicly. Commitment bias is also known as escalation of commitment.

First-Principles Thinking

First-principles thinking – sometimes called reasoning from first principles – is used to reverse-engineer complex problems and encourage creativity. It involves breaking down problems into basic elements and reassembling them from the ground up. Elon Musk is among the strongest proponents of this way of thinking.

Ladder Of Inference

The ladder of inference is a conscious or subconscious thinking process where an individual moves from a fact to a decision or action. The ladder of inference was created by academic Chris Argyris to illustrate how people form and then use mental models to make decisions.

Goodhart’s Law

Goodhart’s Law is named after British monetary policy theorist and economist Charles Goodhart. Speaking at a conference in Sydney in 1975, Goodhart said that “any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.” Goodhart’s Law states that when a measure becomes a target, it ceases to be a good measure.

Six Thinking Hats Model

The Six Thinking Hats model was created by psychologist Edward de Bono in 1986, who noted that personality type was a key driver of how people approached problem-solving. For example, optimists view situations differently from pessimists. Analytical individuals may generate ideas that a more emotional person would not, and vice versa.

Mandela Effect

The Mandela effect is a phenomenon where a large group of people remembers an event differently from how it occurred. The Mandela effect was first described in relation to Fiona Broome, who believed that former South African President Nelson Mandela died in prison during the 1980s. While Mandela was released from prison in 1990 and died 23 years later, Broome remembered news coverage of his death in prison and even a speech from his widow. Of course, neither event occurred in reality. But Broome was later to discover that she was not the only one with the same recollection of events.

Crowding-Out Effect

The crowding-out effect occurs when public sector spending reduces spending in the private sector.

Bandwagon Effect

The bandwagon effect tells us that the more a belief or idea has been adopted by more people within a group, the more the individual adoption of that idea might increase within the same group. This is the psychological effect that leads to herd mentality. What in marketing can be associated with social proof.

Moore’s Law

Moore’s law states that the number of transistors on a microchip doubles approximately every two years. This observation was made by Intel co-founder Gordon Moore in 1965 and it become a guiding principle for the semiconductor industry and has had far-reaching implications for technology as a whole.

Disruptive Innovation

Disruptive innovation as a term was first described by Clayton M. Christensen, an American academic and business consultant whom The Economist called “the most influential management thinker of his time.” Disruptive innovation describes the process by which a product or service takes hold at the bottom of a market and eventually displaces established competitors, products, firms, or alliances.

Value Migration

Value migration was first described by author Adrian Slywotzky in his 1996 book Value Migration – How to Think Several Moves Ahead of the Competition. Value migration is the transferal of value-creating forces from outdated business models to something better able to satisfy consumer demands.

Bye-Now Effect

The bye-now effect describes the tendency for consumers to think of the word “buy” when they read the word “bye”. In a study that tracked diners at a name-your-own-price restaurant, each diner was asked to read one of two phrases before ordering their meal. The first phrase, “so long”, resulted in diners paying an average of $32 per meal. But when diners recited the phrase “bye bye” before ordering, the average price per meal rose to $45.


Groupthink occurs when well-intentioned individuals make non-optimal or irrational decisions based on a belief that dissent is impossible or on a motivation to conform. Groupthink occurs when members of a group reach a consensus without critical reasoning or evaluation of the alternatives and their consequences.


A stereotype is a fixed and over-generalized belief about a particular group or class of people. These beliefs are based on the false assumption that certain characteristics are common to every individual residing in that group. Many stereotypes have a long and sometimes controversial history and are a direct consequence of various political, social, or economic events. Stereotyping is the process of making assumptions about a person or group of people based on various attributes, including gender, race, religion, or physical traits.

Murphy’s Law

Murphy’s Law states that if anything can go wrong, it will go wrong. Murphy’s Law was named after aerospace engineer Edward A. Murphy. During his time working at Edwards Air Force Base in 1949, Murphy cursed a technician who had improperly wired an electrical component and said, “If there is any way to do it wrong, he’ll find it.”

Law of Unintended Consequences

The law of unintended consequences was first mentioned by British philosopher John Locke when writing to parliament about the unintended effects of interest rate rises. However, it was popularized in 1936 by American sociologist Robert K. Merton who looked at unexpected, unanticipated, and unintended consequences and their impact on society.

Fundamental Attribution Error

Fundamental attribution error is a bias people display when judging the behavior of others. The tendency is to over-emphasize personal characteristics and under-emphasize environmental and situational factors.

Outcome Bias

Outcome bias describes a tendency to evaluate a decision based on its outcome and not on the process by which the decision was reached. In other words, the quality of a decision is only determined once the outcome is known. Outcome bias occurs when a decision is based on the outcome of previous events without regard for how those events developed.

Hindsight Bias

Hindsight bias is the tendency for people to perceive past events as more predictable than they actually were. The result of a presidential election, for example, seems more obvious when the winner is announced. The same can also be said for the avid sports fan who predicted the correct outcome of a match regardless of whether their team won or lost. Hindsight bias, therefore, is the tendency for an individual to convince themselves that they accurately predicted an event before it happened.

Read Next: BiasesBounded RationalityMandela EffectDunning-Kruger EffectLindy EffectCrowding Out EffectBandwagon Effect.

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