Writing about clear thinking often offers unexpected rewards. Business leaders and investors, eager to learn from new insights, invite Rolf to deliver talks, often for considerable compensation. But here’s an interesting paradox: books, which are far more affordable, offer the same wisdom. The very act of paying for a lecture might itself be a lapse in judgment.
This ironic truth was highlighted during an event at a medical conference where he presented a lesson on base-rate neglect, illustrating the concept using a medical example. When a 40-year-old patient experiences stabbing chest pain, it could be due to several causes, with heart problems being one of them. But stress, being much more common, is a far more likely culprit. In such cases, it’s logical to test for stress first, as the base rate favors it. The doctors in the room immediately grasped the concept, intuitively recognizing its relevance to their field.
But when Rolf ventured into economics with a similar argument, the response wasn’t quite as sharp. The same pattern emerged when he spoke to investors: financial examples were met with understanding, while instances from biology left many confused. The key takeaway here is that insights do not always travel smoothly across different fields. This phenomenon is referred to as domain dependence.
The Nobel Laureate Who Couldn’t Apply His Own Theory
Harry Markowitz’s work on portfolio theory remains one of the most impactful in the world of economics. His Nobel Prize-winning research, which focused on optimizing the balance between risk and return when selecting an investment portfolio, provided a new way of thinking about investment strategies. The theory he developed proposed that investors could maximize their returns while minimizing risk by carefully selecting a mix of different assets—stocks, bonds, and other investments. Markowitz’s model relied on statistical analysis and emphasized diversification, challenging the traditional view that higher returns could only come from higher risks. It was a groundbreaking theory that made him a household name in finance.
However, Markowitz’s personal approach to managing his own portfolio was surprisingly simplistic, even contrary to the very principles he championed. Despite his profound understanding of portfolio theory, Markowitz applied a 50/50 split between stocks and bonds in his own investment strategy. He did not consider the complexities or nuances his model advocated for, nor did he apply the sophisticated risk-return analysis that had earned him his Nobel Prize. This oversight underscores a crucial aspect of domain dependence: our knowledge in one area doesn’t always translate seamlessly to personal action, even when the stakes are personal and the knowledge is highly applicable. For Markowitz, the theoretical brilliance of his work was inaccessible when it came to his personal finances. This example serves as a reminder that theoretical expertise can sometimes be at odds with practical application, and even the brightest minds can fail to apply their own wisdom when it comes to personal decisions.
When Adrenaline Meets Reason
Risk management is a concept that varies dramatically across different areas of life, and domain dependence is acutely felt when those risks are different. A friend who thrives on adrenaline and embraces extreme sports is the epitome of a risk-taker. He climbs cliffs with nothing but his hands and dives off mountains in a wingsuit. For him, risks come with a clear sense of immediacy and physical danger. The stakes are life or death—he succeeds or faces the consequences of failure in an environment where survival is not guaranteed. The thought of physical injury or death is a constant in his pursuits. His approach to decision-making, therefore, is shaped by the acute awareness of these life-or-death stakes. His definition of risk is simple: it is a clear and present danger, and the consequences are easily measurable.
However, his perspective on risk changes drastically when it comes to business. He views the possibility of bankruptcy as an almost insurmountable obstacle, akin to facing a deadly challenge. For him, business failure feels like a catastrophic failure, more akin to a life-threatening event. In contrast, I see bankruptcy as a business risk that can be managed and mitigated, but not something to be feared to the extent he fears the physical consequences of extreme sports. My understanding of business risks comes from the perspective of long-term recovery, learning from failure, and embracing setbacks as part of the entrepreneurial journey. For him, though, the concept of failure as a manageable part of the process is alien.
This disparity in how we approach risks from our respective domains illustrates the difficulties of transferring insights across different fields. While his extreme sports experience informs his view of risk as an absolute, my experiences in business have shaped a more measured, long-term approach to failure. Each of us struggles to transfer the risk management strategies from our domains—physical danger versus business risk—into each other’s world. This is a classic example of domain dependence at work, where specialized knowledge does not easily cross over to other areas of life.
The Difficulty of Skill Transfer
Skills and expertise are often domain-specific. A task that comes naturally in one area of life can be extraordinarily challenging in another. As an author, I have developed a particular set of skills that allow me to excel at creating fictional worlds. Writing novels, developing characters, and crafting intricate plots are activities I approach with ease. The blank page no longer holds any terror for me; instead, it presents an exciting opportunity to bring characters and narratives to life. My years of writing experience have given me the confidence and expertise to produce engaging stories without much effort.
However, when faced with a task that involves a different kind of creativity—such as decorating an apartment—I find myself at a loss. Despite my ability to invent entire worlds on paper, I struggle when confronted with the simple task of furnishing and styling a room. The blank canvas of the apartment feels far less inspiring than a blank page, and I often find myself standing in the middle of the room, unsure of where to begin. The principles of design and spatial arrangement that come so naturally to interior designers are foreign to me, and my creativity feels stifled.
This contrast highlights the inherent challenge of transferring creative skills from one domain to another. My writing abilities are well suited to the literary world but do not extend to interior design. The cognitive processes in creating a character or storyline are not the same as those required to envision an aesthetically pleasing living space. This disjunction in how creativity manifests in different contexts clearly demonstrates domain dependence, where even highly developed skills in one area are not easily transferable to another.
Business and Domain Dependence
In business, domain dependence is a pervasive challenge that can stymie professional growth and organizational success. Consider the scenario where a software company recruits a highly successful salesperson from the consumer goods industry. The skills that made this individual a top performer in selling physical products may not translate well into intangible services like software. Selling a physical product requires understanding the customer’s tactile needs, addressing objections based on product features, and demonstrating the physical utility of the product. In contrast, selling software often involves explaining abstract concepts, understanding technical specifications, and building trust in a service that lacks a physical form. The transition from selling tangible products to selling digital services requires a significant shift in mindset and approach that many fail to make successfully.
Similarly, within organizations, individuals who excel in one domain may struggle when asked to take on broader roles. A marketing genius who has consistently developed successful campaigns may be promoted to the role of CEO, only to find that their skills do not equip them for the strategic leadership required to steer an entire company. As a CEO they must understand financial forecasting, long-term business strategy, and complex organizational dynamics—skills that may not come naturally to someone whose talents were confined to marketing and consumer engagement. The skills that make someone an excellent marketer do not automatically translate to running a company, and without adaptation and new learning, the transition can be rocky.
This difficulty in transferring expertise highlights the importance of recognizing domain dependence when promoting individuals or hiring for new roles. The talents that make someone successful in one position may not be the same ones that will ensure their success in a completely different context. This is why many businesses struggle with leadership transitions or with individuals who are promoted beyond their areas of expertise.
The Struggle to Transfer Knowledge to Personal Life
One of the most intriguing aspects of domain dependence is how it affects personal life. Professionals who excel in their fields often struggle to replicate their success in their personal lives. CEOs skilled at managing teams and making high-stakes decisions in the boardroom often find themselves at a loss when managing their home lives. Their ability to lead a company with charisma and authority does not always translate to being effective parents or spouses. The strategies that make them successful in the office do not necessarily work in the emotionally charged and more complex realm of family dynamics. This struggle to apply professional knowledge in a personal context is a prime example of domain dependence.
Despite their expert knowledge of health and wellness, doctors often fail to lead healthy lifestyles. Smoking, poor diet, and high-stress levels are common among healthcare professionals, highlighting a gap between their professional expertise and personal habits. This paradox is especially striking, considering that doctors spend their careers advising others on health and wellness. The people who dedicate their lives to promoting healthy living often fail to practice it themselves, a stark reminder that professional knowledge does not always translate to personal behavior.
Similarly, police officers who are trained to maintain law and order are statistically more likely to exhibit violent behavior in their personal lives than the general population. The skills they use to manage conflict and de-escalate situations in their professional lives may not be the same skills they can apply in personal relationships. These examples illustrate the difficulties in transferring knowledge and skills from the professional domain to the personal realm. While individuals may be experts in one area, this expertise does not always equip them for success in their personal lives.
The Gap Between Theory and Practice
The gap between theory and practice is perhaps most pronounced when transitioning from academic knowledge to real-world decision-making. Barry Mazur, a well-known mathematics professor, experienced this firsthand when faced with a personal decision. Mazur, an expert in decision theory, spent much of his career advising others on how to make optimal decisions by weighing the costs and benefits of various options. Yet, when deciding whether to move from Stanford to Harvard, Mazur was paralyzed by the same decision-making process he had taught others to navigate. His friends, recognizing his expertise, suggested that he apply his decision theory model to the situation. But Mazur balked, responding, “Come on, Sandy, this is serious.” Mazur could not apply his theoretical knowledge to a real-life decision despite his academic prowess.
This anecdote underscores the difficulty of transferring abstract, theoretical knowledge into practical decision-making. In the real world, decisions are often fraught with emotions, uncertainties, and complexities that are difficult to quantify. Even the most brilliant decision theorists can find themselves at a loss when faced with life’s messiness. This gap between theory and practice highlights the limitations of academic knowledge when making decisions in the unpredictable world outside of the classroom.
The Difficulty of Transfer in Everyday Life
The challenge of transferring knowledge from one domain to another is not confined to academia or business—it is a universal issue that affects all of us. Whether we are navigating personal relationships, making decisions in our careers, or even managing our health, the skills and knowledge we develop in one area of life do not always translate seamlessly to other areas. The ability to excel in one domain does not guarantee success in another, and the transition from theoretical knowledge to practical application can be arduous. Even for experts, transferring knowledge across domains is fraught with difficulties.
This reality reminds us that expertise in one area does not automatically equip us for success in other areas. Domain dependence is a pervasive challenge affecting everyone, from Nobel laureates to individuals. It requires humility, awareness of our limitations, and a willingness to learn and adapt. We can only begin to navigate the complexities of transferring knowledge and skills from one area of life to another by acknowledging the challenges of domain dependence. It is this adaptability that allows us to grow and evolve, both personally and professionally.
Conclusion: A Universal Challenge
Domain dependence is a ubiquitous challenge affecting everyone, from Nobel Prize winners to individuals. The difficulty of transferring knowledge from one domain to another is a reminder that expertise in one area doesn’t guarantee success in others. Whether applying academic knowledge to real-life decisions or transferring professional skills to personal life, the process is fraught with difficulties. The key to overcoming domain dependence lies in recognizing the limitations of our knowledge and being open to learning and adapting to new situations. Only by acknowledging these challenges can we begin to bridge the gap between theory and practice and between different domains of expertise.
This article is part of The Art of Thinking Clearly Series based on Rolf Dobelli’s book.