Clearer Thinking with Spencer Greenberg Seeing through cognitive traps (with Alex Edmans)
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Sep 3, 2025 
Alex Edmans, Professor of Finance at London Business School, explores the complexities of causation versus correlation in organizational success, particularly regarding ESG criteria. He delves into the nuances of gray thinking in climate policies, arguing against binary views. The discussion touches on how cognitive biases shape understanding of diversity and company performance, countering the assumption that higher diversity guarantees better outcomes. Edmans also critiques the pressures of academic publishing and shares insights on the interplay between market dynamics and corporate responsibility.
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Correlation Isn’t Causation
- Correlation between a social mission and financial performance doesn't prove causation.
- Alternative explanations include reverse causation, third variables, cyclic causation, or data-mining luck.
ESG Mixes Different Problems
- ESG lumps incompatible things together: environmental/social impacts and internal governance.
- Governance is internal and primarily tied to shareholder value, while E and S measure external impact.
Don’t Favor Only Measurable Metrics
- Avoid treating a single measurable metric as the whole story.
- Consider both measurable outcomes (like carbon) and harder-to-measure social impacts when evaluating actions.
