What we know matters. But what we know others know can make or break a deal. Professor Steven Pinker joins host Brett Hendrie to talk about common knowledge — what everyone knows that everyone knows, why it’s crucial to business and negotiation, and how shared understanding helps people get work done.
What we know matters. But what we know others know can make or break a deal. Professor Steven Pinker joins host Brett Hendrie to talk about common knowledge — what everyone knows that everyone knows, why it’s crucial to business and negotiation, and how shared understanding helps people get work done.
Show notes:
[0:00] Brett Hendrie on moments of shared understanding
[0:58] Meet Harvard professor Steven Pinker, who joins the episode to talk about his new book When Everyone Knows That Everyone Knows.
[2:28] What is common knowledge?
[3:49] Steven was drawn to the topic because so much of language is what we don’t say… and he began to wonder why we don’t say it.
[4:20] “Netflix and chill” is the perfect example of common knowledge in practice.
[5:33] How common knowledge can shape advertising and marketing
[7:59] It can also influence markets — think speculative bubbles, bank runs and trust in financial institutions.
[11:01] Negotiations are often only successful because of common knowledge.
[14:57] Complete openness and transparency can backfire — see Bridgewater Associates — and this is where things left unsaid (but still understood) can fill the gaps.
[18:01] What do we lose with less common knowledge in a remote or hybrid work environment? Those physical social cues — blushing, glaring, staring — communicate a lot in the end.
[19:51] In a world of information bubbles, common knowledge is getting fractured.
[21:09] What’s left unsaid has lots of value. “I think the genteel hypocrisy and innuendo and euphemism makes social life possible — but that sometimes gets in the way of actually transacting the business of life. And that balance is, I think, what we call tact, savoir faire, social skill — not being too far along one end of the spectrum. And what I think a lot of that consists of is knowing what to put in common knowledge and what to keep out of common knowledge.”
If you enjoyed this episode, why not give some of our back catalogue a listen? If you want to dig deeper into the psychology of the world around us, check out our discussions with Malcolm Gladwell on how our shared stories shape our world, or Michael Bungay Stanier on the secrets to coaching others.
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Brett Hendrie: You’ve probably had this moment: you’re in a meeting, and someone says something highly questionable, and across the table you lock eyes with a colleague.
No words, just that flash of recognition that says, “You caught that too.”
In that instant, it’s not just that you both know the remark was dubious — it’s also that you know your colleague heard it too, and they know you heard it, and you know that they know that you know, and so on.
That kind of silent coordination is referred to as “common knowledge,” and it shapes almost everything we do.
It’s not about shared assumptions or accepted truths — it’s about that next level of awareness: what everyone knows that everyone else knows.
You can see it everywhere, shaping how teams work together, how entire markets behave, even how consumer behaviour is influenced.
Our guest is Harvard professor and celebrated cognitive psychologist Steven Pinker. He explains why so much of human interaction depends not just on what we think, but on what we think others think we think.
We talk about how this idea shapes everything from the most effective ads and negotiation techniques, to how we use common knowledge to avoid awkward conversation, and how understanding it might just help us communicate — and cooperate — a little better.
Welcome to Visiting Experts, a Rotman School podcast for lifelong learners, exploring transformative ideas about business and society with the influential scholars, thinkers and leaders featured in our acclaimed Speaker Series. I'm your host, Brett Hendrie, and today we're excited to welcome Steven Pinker back to Rotman. Steven has been named one of Time’s 100 most influential people in the world today. His new book, When Everyone Knows That Everyone Knows, unpacks how we think about others’ thoughts and what that means for our social, economic and political lives. Steven, welcome back to the Rotman School and to the podcast.
Thank you. Congratulations on the new book. I really enjoyed it. It's a very revealing look at modern life, and it helps us decode and understand how we persuade and how we understand each other. And at the heart of it was this idea that there's a difference between what everybody knows and common knowledge. Can you help us understand what you mean by common knowledge?
Steven Pinker: Yeah, I'm using it in a technical sense, which is a bit different from the way we use it in ordinary conversation. Ordinarily, when we talk about common knowledge, we refer to something that everyone knows — sometimes even open secrets, like, “Oh, it's common knowledge around here you can bribe the police.” But in the technical sense that I borrow from logic, from game theory, from economics, it refers to not what everyone knows, but what everyone knows that everyone knows, and what everyone knows that everyone knows that everyone knows. Ad infinitum, right? So it refers to things that are public, that are out there, that you know, that everyone knows that you know — and it makes a big difference.
One of the first things that you learn about when you study language is that an awful lot of it does not consist of people saying what they mean. And that's one of the reasons it took so long to get computers to understand ordinary human language. The classic examples are sexual come-ons — the classic one is, “Would you like to come up and see my etchings?” Now it’s “Netflix and chill,” I'm told. But again, any grown woman knows what that means, right? But it's still a lot more comfortable than, “Hey, do you want to come up and have sex?”
I was curious as to why we don't just kind of cut the crap and say what we mean. And the solution that I came to is that we're always mindful of our social relationships. Are we platonic friends? Are we lovers? Are we colleagues? Are we in a hierarchical relationship where one of us defers to the other? Are we transactional partners?
And those relationships — whether you're friends, whether you're lovers, whether you're in a hierarchy — they are determined by common knowledge. What does it mean for two people to be friends? It's not as if they sign a contract. If I'm your friend, it means, well, I know that you're my friend, and you know that I know that you know that I'm your friend. That's what friendship consists of, right?
And so when you say something that violates that common understanding, that gives rise to awkwardness — it threatens the relationship. But if you slip your meaning in an innuendo, and the outward form of the language is perfectly compatible with the relationship, you haven't threatened the relationship. So in the case of a sexual come-on: if they start out as friends, they can end up as friends; if they start out as colleagues, they can end up as colleagues. Whereas if he just blurted it out, no grown woman could be in doubt as to what “Do you want to come up for Netflix and chill at 11:30 p.m.?” means, right? But she doesn't know that he knows that she knows. She can still think: “Well, okay, of course I know what he means — let's be real. He knows obviously what he intended. But does he know that I know that he knows? Maybe he thinks I'm naïve, and as far as I'm concerned, I was just turning down etchings.”
And he can think, “Well, maybe she thinks I'm dense and that I just understood her as turning down the etchings.”
Well, the lack of common knowledge of the relationship-threatening proposition allows them to go back to being platonic friends — to restoring the fiction that they're nothing but platonic friends — without surrendering their claims to rationality.
BH: I was wondering if you could share some examples of how people have applied this idea of common knowledge to help influence consumer behaviour in advertising or branding?
SP: Yeah. So there are some products that are not just consumed individually in private, but they inherently depend on other people also consuming them. So one example is a technology that depends on network effects, like a brand-new kind of computer.
And this was a problem that actually faced Apple back in 1984, when they had to introduce the Macintosh. So they came out with this insanely great new product — it had windows and icons and menus and a pointing device. The problem being, no one wanted to be the only one who’d buy this weird new technology. So how do you sell a product when you can’t just sell it to one person — you’ve got to sell it to everyone at the same time?
What they did was they figured: the Super Bowl. Now, the American Super Bowl is uniquely an event where the whole country is watching, and crucially, everyone knows that it's a big deal. It's like a religious holiday. If you are watching the Super Bowl, you know that tens of millions of other Americans are watching what you're watching, and that they know that you know everyone's watching because it gets so much hoopla and coverage.
So Apple introduced the Macintosh in the most expensive ad ever run in the history of television. It ran exactly once. They hired the hottest Hollywood director at the time, Ridley Scott, who directed Blade Runner and Alien, and he came up with an ad that didn't even mention the Macintosh. It played off the theme of 1984 — the title of George Orwell's novel — and it had a grim, dystopian corporate meeting, and a young athletic woman bursts into the hall, hammer-throws a mallet onto the screen, which explodes, and then the crawl says: “On January 23, Apple will introduce the Macintosh, and you'll see why 1984 won't be like 1984.”
So nothing about windows, nothing about icons, no menus — none of that. What they were advertising was common knowledge.
This is an insight that I owe to Michael Chwe, the political scientist, who shows that it's not just tech products. Other products that require networks, like a new credit card — the Discover Card — no one’s going to apply for Discover if they don't think a lot of stores are going to take it, and no store is going to take it unless they think a lot of customers are going to try it. How do you cut that knot? Well, they introduced that on the Super Bowl, right?
It's not just the number of eyeballs, but the knowledge that the eyeballs see the eyeballs, so to speak.
The speculative bubble is another application of common knowledge to business and economics. This goes back to a paper that John Maynard Keynes wrote back in the 1920s on speculative investing. Often, people buy stocks because they think they'll be able to sell them to, as they say, “greater fools” who want to pay more than they paid.
Keynes compared this to a beauty contest where the object isn't to pick the prettiest face; the object is to pick the face that the most other contestants are picking — each of whom is entering the contest with the same goal.
And he noted that people buy stocks because they think that other people will want to buy the stocks, and they'll make a profit selling it to them.
The reverse of that is when people are afraid that other people want to sell some security, and they run for the exits, and they want to sell it before everyone else sells it — before the price plunges.
Or in the case of a bank, the bank goes bankrupt, right? And that's when you get a bank run — and that's where you can pull down the entire economy. You can get a depression. But it's all driven by expectations about expectations — fears about fears.
And when Roosevelt said in the depth of the Depression, “The only thing we have to fear is fear itself,” he was identifying the phenomenon of common knowledge.
Roosevelt introduced central deposit insurance — rarely needed — but every person who walks into a bank sees a big gold seal on the window: FDIC, Federal Deposit Insurance Corporation, which tells them that up to $250,000, if the bank goes bankrupt, the government will bail them out.
Now, the point of that is not to rescue failed banks — it's to prevent banks from failing in the first place because people won't panic and take their money out of fear that they'll never get it back.
Prior to deposit insurance, banks tried to generate this confidence — this common knowledge — by often being conspicuously opulent. So even in small towns, the bank was the most splendid building on the main street. It had big marble columns and gold lettering and spacious lobbies. Some people resented this — as if they were insulting the hard-working miners and farmers. But actually, it worked for their benefit, because it broadcast the news: “We're solid. We're not going to fail. You can sleep at night. You don't have to pull your savings out at the first sign of trouble.”
BH: I was curious about the idea of negotiations and how common knowledge factors in.
But first, to our listeners — if you’re enjoying this conversation, you might also like The Executive Summary, our other podcast where we unpack the latest research shaping leadership and business. You can find The Executive Summary wherever you get your podcasts.
Now, back to negotiations: It seems to me that negotiations often hinge on each party knowing what the other party knows. How can leaders use common knowledge in negotiations to get to smarter or better outcomes?
SP: Negotiations are a case of — to use a little bit of jargon — multiple equilibria. And that's when common knowledge comes in. What that means is: there's more than one way of doing things; as long as everyone does it the same way, they're better off than if they don't meet.
If you're negotiating in the first place, it generally means that there's a range of prices for which it's to the advantage of both parties to do the transaction.
So let's say your car — there's a range of possible prices where the dealer makes a profit and the buyer is willing to fork over that amount of money. But of course, the lower within that range they go, the better for the buyer, and the higher, the better for the seller.
How do they ever decide? Why don't they just argue forever?
Well, one possible solution is what's called a “focal point,” and this is an idea that goes back to Thomas Schelling, the Nobel Prize–winning economist who first laid out many of these ideas, where he noted that if there are multiple equilibria, if one just pops out for whatever reason — it doesn't have to be better, it doesn't have to be fairer, it doesn't have to be the just answer — but just that, of all the zillions of options, it stands out. And it stands out in my mind, and since we're kind of birds of a feather, I know it's going to stand out in your mind.
That at least gets you to yes.
So in the case of negotiation, often it's splitting the difference. Now, that's not necessarily a fair price, but it's a price — and it's something you could both agree to.
Or settling on a round number. Schelling notes: if a salesman says, “The rock-bottom price for this car is $30,027.56,” he’s kind of pleading to be relieved of $27.56, because the customer will say, “Ah, come on, cut the crap — make it a round number.”
Exactly.
Now, another whole set of solutions is what Schelling calls a paradoxical tactic. That is when you actually come out ahead if you are the stubborn one, the crazy one — the one whose hands are tied.
So your hands being tied can sometimes be an advantage in bargaining.
Going back to our car showroom: if the salesman says, “You're right, you're offering me a fair price, but the sales manager just won't let me sell it for less than $40,000 — I mean, I know that's crazy, but he's a hard-ass, he's a stubborn SOB, and he just won't let me do it,” well, it works to his advantage, right?
He doesn't have that freedom.
Then the buyer can say, “Well, you're right — the car is really worth $40,000, but my bank won't lend me a penny more than $35,000, and what can I do? I'd be willing to pay more, but I can't get the money.”
Then the advantage goes to the buyer.
So the question is: Why aren't we all stubborn all the time?
Well, if both parties are stubborn, then they don't consummate the deal, and they're worse off. If one of them walks away, the other is… you really don't want to deal with someone who's a stubborn SOB who says, “It's my way or the highway.” And the future casts a shadow over the present — you can say, “I'm not going to negotiate with that guy, he's impossible.”
So that's why not all of us are stubborn all the time.
BH: And there's an intrinsic value in knowing that they know, and you know, that you're both better off if the deal happens, as opposed to both walking away from it?
SP: Well, indeed. And in all of these situations — this is what game theory is all about, the branch of mathematics that deals with: what's the best thing to do if it depends on what the other guy does, and he's thinking the same thing.
But in most of those scenarios, the payoffs — that is, what happens if they settle in one place or another — are common knowledge, and each other's rationality is common knowledge.
That is, if you're trying to outsmart the other guy, you have to have a mental model of how he works — namely that he's rational. He'll respond to the incentives you lay out for him, and vice versa.
BH: How should we think about honesty and tact in the workplace, especially between managers and employees?
SP: It's probably not the case that you want everything to be transparent and open all the time.
There was one notorious company that did that — Bridgewater Associates, the world’s largest hedge fund — where, under the direction of their visionary leader Ray Dalio, they had a strategy of radical candour. Everyone in the company was supposed to say what was on their mind. If they thought that one of their co-workers was being an idiot, they'd say, “You're being an idiot.” Supervisors would criticize employees in public meetings, and they would spare no words if they thought someone was screwing up — they'd say, “You're screwing up.”
Anyway, it was kind of a hellhole — people left. When Dalio stepped down, his successor got rid of the policy.
The reason is that each one of our relationships depends on certain common understandings. As I said: what it means to be friends is, you're friends — and what friends do is they'll do anything for each other. They share; they spare no expense; they spare no favour; everyone’s equal.
Now, literally, that's a fiction — in any set of friends, one’s bound to be smarter, richer, more respected than the other, and there are limits as to what you'll do for a friend. But you don’t want to say that. If you say, “Well, I've enjoyed talking to you, but you know, about 20 minutes is about all of you I can take, and now I think I'd rather watch TV” — now, that might be true, but if you say that, even if your friend at some level knows that, you’ve polluted the common knowledge that makes a friendship a friendship.
And so it is with other kinds of relationships. If you think your boss is an idiot, you'd be ill-advised to tell your boss that you think he's an idiot. Even if the boss might suspect that you think that he's an idiot, putting it out there can change everything. It changes the relationship.
And I think all of human social life is a tension between the need to get honest information out there — in negotiation, in coordination — and the need to preserve our human relationships.
And the reason so much of human social life is politeness, genteel hypocrisy, white lies, euphemism, innuendo — rather than just blurting out what's on your mind all the time — is that we're balancing the need to get information out there with the need to preserve our relationships.
There's no single answer as to, you know, should you always be honest? Well, no. But should you never get to the point and suffer under a bad relationship because you just don't want to fight? Well, you don't want to do that either.
BH: It's such an interesting perspective, because there's obviously such a need to let people save face and have plausible deniability. For leaders — many of whom are muddling through this situation of: do we bring people back to the office? Do we work remotely?
Do any of these theories manifest themselves in terms of trying to figure out what path makes sense? And by having people together, there are opportunities for conspicuous signals and group meetings.
SP: Well, yes — there's a trade-off.
Of course, the obvious advantage of remote work is it saves time commuting, saves fossil fuels, saves office space.
The disadvantage is that you don't get the nonverbal signals that are — I argue in the book — common knowledge generators. I have a chapter called “Laughing, Crying, Blushing, Staring, Glaring,” how each one of those signals is a way of showing that you know what the other person knows, that you know it, and so on.
So let's take blushing. When you blush, you feel the heat in your cheeks from the inside, at the same time that you know that people are seeing your cheeks turning red from the outside, and they know that you're feeling it from the inside, and you know that they see it from the outside, and you know that they know that you know that you're blushing — all the worse when someone says, “You're blushing,” which makes you blush all the redder.
It's a self-fulfilling loop.
BH: Exactly.
SP: And blushing is common-knowledge generating. It's saying: “Okay, I know that you think that I've screwed up. I've committed a faux pas, I've erred, I've blundered. You know — whether or not I have — I know that you think I have, right? And so the signal you're sending is: you and I are following the same rules. I may have just broken one of the rules, but at least I know what the rules are. I'm not a psychopath, I'm not a loose cannon, I'm not a weirdo.”
These are the kinds of things you miss — including the all-important signal of eye contact.
BH: I wanted to get your thoughts on where we are now, in terms of digital and online platforms. We have access to more information than we ever have before, but it's arguably more fragmented and siloed than it may have been historically.
What does that mean for common knowledge? Is it easier or harder for it to take root in the population — because we've got access to more information, or harder because it's more fragmented?
SP: Well, common knowledge is always something that's defined relative to some network of people sharing information. So you can have common knowledge with as few as two people, or it could be the entire country — in the case of the old days, when everyone watched the CBC, knew that everyone else was watching the CBC, and everyone knew that you knew that.
Now, when we have cable network news like Fox News, AM talk radio — especially in the United States, where there are many private stations, often with a strong political orientation — and then websites and social media fragmented the audience even more.
So it's not that there's no common knowledge — but the common knowledge is within self-contained pods.
And when you're in one of those pods, you may not even know that what is common knowledge within that pod is not common knowledge across the whole country. It may just be a reality that you think is shared by everyone — like: was the 2020 election stolen?
BH: As we wrap up here, I'm just curious — on your own journey in terms of exploring all this literature, when it comes to common knowledge, is there one aspect or angle that's been most resonant for you as being useful and interesting in our everyday life?
SP: I think the genteel hypocrisy and innuendo and euphemism makes social life possible — but that sometimes gets in the way of actually transacting the business of life.
And that balance is, I think, what we call tact, savoir faire, social skill — not being too far along one end of the spectrum.
And what I think a lot of that consists of is knowing what to put in common knowledge and what to keep out of common knowledge.
BH: Perfect place to wrap up our conversation. And I totally agree, because I think that is an angle that so many of us take for granted in our everyday interactions, but don't necessarily process everything that's happening “under the hood,” so to speak, between us.
Steven, thank you so much for being on the podcast. I hope I can safely say that all of our listeners know a little bit more about what our other listeners know about the human condition after listening to this.
So thank you for being here.
SP: Thanks for having me.
BH: Our guest has been Professor Steven Pinker, and his new book is When Everyone Knows That Everyone Knows.
This has been Visiting Experts, a Rotman School podcast for lifelong learners, exploring transformative ideas about business and society with the influential scholars, thinkers and leaders featured in our acclaimed Speaker Series. To find out about upcoming speakers and events here at Canada’s leading business school, please visit rotman.utoronto.ca/events.
If you enjoyed this episode, why not give some of our back catalogue a listen? If you want to dig deeper into the psychology of the world around us, check out our discussions with Malcolm Gladwell on understanding how our shared stories shape our world, or Michael Bungay Stanier on the secrets to coaching others.
Make sure you subscribe to this podcast on Apple, Spotify, YouTube or wherever you get your podcasts, and please consider giving this series a five-star rating.
This episode was produced by Megan Haynes, recorded by Dan Mazzotta, and edited by Damien Kearns. For more innovative thinking, head over to the Rotman Insights Hub and subscribe to our biweekly newsletter.
Thanks for listening.