THE POWER OF SIMPLICITY

What if I told you that you could predict the success or failure of stocks in the first few weeks after their IPO, knowing nothing about the company other than their name? What if you only knew the ticker symbol? A team of psychologists investigated this question and determined that you can, in fact, predict early stock success on name alone [1]. Specifically, the fluency of a name matters, in a positive way. Companies and ticker symbols that are fluent, or easy to read and pronounce, outperform those that are not. For example, with all else being equal, Sprint, with the simple ticker symbol S, will outperform Pfizer, symbolized by PFE.

The psychological reason: humans prefer simplicity. This same effect has been found in various areas of impression formation and human interaction. We like people with easily pronounceable names more than those with difficult to pronounce names [2]. Spurious statements that rhyme (e.g., “If the glove doesn’t fit, you must acquit.”) are more likely to be believed than similar statements that do not rhyme (e.g., “If the glove doesn’t fit, you must find him not guilty.”) [3]. Even attorneys with fluent names are more likely to become partners (and more quickly, too) than similarly performing attorneys without fluent names [2].

Additional research on the role of simplicity in causal explanations has found that simple explanations (one cause) are judged to be both better and more likely true than complicated explanations (more than one cause) [4]. Furthermore, when a simple explanation is pitted against a complicated explanation, the complicated explanation requires a disproportionate amount of evidence supporting it before it will be accepted over the simpler explanation. In other words, people need to be told there is more certainty to a complicated explanation in order to favor it over a simple explanation.

These findings have a variety of implications for litigation. For example, simple trial themes are more likely to be adopted and remembered by your audience. Also, less complicated graphics are more likely to be persuasive. Finally, when presenting your case, keep in mind that a simple story is almost always going to be more readily accepted than a complicated story.

Citations:

1. Alter, A, & Oppenheimer, D. (2006). Predicting short-term stock fluctuations by using processing fluency. Proceedings of the National Academy of Sciences, 103, 9369-9372

2. Laham, S., Koval, P., & Alter, A. (2012), The name-pronunciation effect: Why people like Mr. Smith more than Mr. Colquhoun, Journal of Experimental Social Psychology, 48, 752-756.

3. McGlone M., & Tofighbakhsh, J. (2000). Birds of a feather flock conjointly (?): rhyme as reason in aphorisms. Psychological Science, 11, 424–428.

4. Lombrozo, T. (2007). Simplicity and probability in causal explanation. Cognitive Psychology, 55, 232-257