Questions without easy answers abound. But we humans hate that. Our brains like certainty. Tough, complex problems without clear solutions make us very unhappy indeed. In these situations, particularly where public pressure exists to find a fast and clean answer, we’re susceptible to a type of cognitive bias called substitution. Daniel Kahneman, author of Thinking, Fast and Slow, explains it this way, “If a satisfactory answer to a hard question is not found quickly, [our brains] will find a related question that is easier and will answer it.”
Since being sure of something is our preferred condition, our brains tend to do a lot to help us feel that way. We fight hard to preserve our version of events — even when we know we’re wrong. A story about onions is a good, if odd, example of this.
In 1955 an onion farmer and commodities trader named Vince Kosuga saw a once-in-a-lifetime opportunity. He and his business partner, Sam Siegel, secretly bought up almost all of the onions in the U.S. But they didn’t stop at buying the onions already harvested, they wanted ALL of them — including the little baby onions still germinating in the ground. They made deals with farmers, a common practice then and now, to buy the farmer’s crops at a fixed price sometime in the future. This is called a ‘futures contract.’ These two dudes now owned virtually all of the onions in the U.S. And it wasn’t because they loved the crunchy tang of beer-battered onion rings.
Because the men owned 98% of the onions, they used that power to both drive prices up, because they’d bet on higher prices, and then crash the market, because they’d bet on lower ones. It got so bad at one point, the cost of a bag filled with onions was actually less than the price of the empty 20-cent bag itself.
Normally, futures contracts help farmers by allowing them to sell their expected crops at a predictable price. But when Vince and Sam stepped in, the two men made millions, while lots of devastated farmers and others went out of business, some committing suicide. A congressman named Gerald Ford (yep, the future President) decided to act. He introduced the Onion Futures Act banning the sale of futures contracts on onions. The…