95 - nudge nudge wink wink 👀😉
Hey there, !
By date, this is the 2nd year anniversary of my newsletter. Thank you for being here and letting me monopolise one of the precious inbox slots you have in your email <3 I appreciate each and every one of you - especially those who reach out to chat about things, or bring up posts in conversation, essentially providing the microdoses of dopamine to help give me the little hits of encouragement to keep going.
I hate that this second year anniversary is on #95, so I'll wait til post #100 to summarise some analytics / top posts / get soppy etc. like last time :D
This one is a long one because it's something I'm passionate about - Behavioural Economics and the journey I took to get there :D
1.
When I was little, I was a boisterous, gregarious kid, who loved to mouth off, loved to laugh, and loved to have fun. I was kinda annoying, and usually, this would get me into trouble - either something I did myself, or because I was also very reactive and got bullied easily.
A lot of my primary schooling was learning how to deal with my own emotions, and led to me being more of an observer of human behaviour. It's much easier to read someone's mood and head them off at the pass, than to react and cry because you're 11 and someone said you're short :D
In most of our classes, we learnt things about the 'right way' that people should be thinking and behaving. The 'rational' way of thinking through things, the logic and the math, was something that I really got into - it was...'right', because you always had one way of thinking about the answer, and you'd know if you were right or wrong. Riddles and math puzzles were my life, as well as getting really into chess and games. I sincerely thought that you could think your way through anything!
Interestingly, some of the most interesting riddles were 'lateral thinking' puzzles that were more like jokes. Example:
Q: You are in a room with no windows, doors or any exit. The only items are a mirror and a table. How do you escape?
A: Look in the mirror, then at the wall and back at the mirror to see what you saw. Use the saw to cut the table in half and join the two halves to make a whole. Put the “hole” on the wall and climb out.
It's ridiculous. It's stupid and makes absolutely no sense (why haven't you suffocated? a saw in a mirror????) but it was a way of looking at the world differently that you can't really 'logic' your way through.
It required creativity.
2.
If you can't tell already, I love writing. Writing was something I've wanted to do from a very young age - probably a function of hanging around libraries a lot and thinking I had some sort of knack for actually writing things well (please validate me). I loved creative writing, because my imagination always seemed to run wild anyway - daydreaming in class, thinking of new, mundane happenings, and coming up with ludicrously complex scenarios in which I would be a hero, or something extremely fairy-tale like would happen.
This kind of thinking lead me to things like fantasy and sci-fi - not as an escape mechanism from the world, but for another perspective on different ideas. How many people can create worlds in their head and then write about it in a way that is compelling, thoughtful, and shows a reflection of the human condition through dwarves, and elves, and humans, and magic?
I loved that the solution to a problem like 'what could robots do?' could come up with the Three Laws of Robotics, and then a whole series of short stories that showed how even THOSE could be flawed. Or the Discworld (as previously written about). Or something like the Lord of the Rings (which I incidentally read as a 12 year old - most of it went over my head, but it was great while I read it. I should probably read it again...)
3.
On one of my TED talk binges a long time ago, I came across this video from Rory Sutherland, an advertising executive who talks about the fact that the subjective value of a product/service is more important than we think. His most famous example is that of the train from London to France - instead of spending 60M on making the train 40 minutes quicker, they could instead hire all the top male and female supermodels around the world, walk up and down the train handing out champagne, and people would probably ask for the train to be slowed down!
I loved this talk immeasurably - he's had a few more at TED since where he discusses the fact that people in organisations don't think about the 'weird' solutions to problems, and instead are focused on the ROI, the logic, the execution, the financially appropriate solution.
And yes, don't get me wrong, it does make sense to focus on these things - you don't want to run your organisation to the ground doing a whole bunch of random shit. You get really big important things, and give them a lot of money to fix the problem.
But what about if you gave that big important thing to a group that had...no money? Many film sets and product companies work around this same problem all the time - and they are filled with creative people who just have to make it work!
Maybe the answer to your problem isn't that you need a whole new system - maybe the answer is that you just need to shift the importance of that task on the old system using any variety of methods...
...enter, Behavioural Economics (aka: psychology wrapped up in economic jargon)
4.
In the video, Rory brings up the book Nudge - written by Richard Thaler and Cass Sunstein (who are incidentally now both Nobel prize winners for their work), which put me on to this field as a whole. This is one of the 'big 3' popular behavioural economics books (Thinking Fast and Slow, Nudge and Predictably Irrational) that launched a more recent revolution in how to think about human behaviour, and the disproportionate effects that certain interventions can have on human behaviour.
I devoured them all - here's a taster of each of the books, and what they looked at:
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Thinking Fast and Slow: Daniel Kahneman (Nobel laureate) and Amos Tversky on 'prospect theory' - mainly looking at the power of loss aversion (Out of 600 people who have contracted a deadly disease, would you rather save 200 people, or let 400 die?), and the fact that there is System 1 (quick, intuitive) and System 2 (measured, logical, reasoned) thinking. An example:
Participants in the experiment were told about an imaginary young woman named Linda, who is single, outspoken and very bright, and who, as a student, was deeply concerned with issues of discrimination and social justice. The participants were then asked which was more probable: (1) Linda is a bank teller. Or (2) Linda is a bank teller and is active in the feminist movement.
Overwhelmingly, people chose 2 (as did I when I first read about it). However, from a purely probabilistic point of view, 1 is more likely, because there are more bank tellers in the world than feminist bank tellers.
But even from reading that, you're still thinking "but it's just OBVIOUS". It's intuitive System 1 thinking - not the measured System 2 thinking - that's taken over.
Fascinating stuff, eh?
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Nudge: Richard Thaler and Cass Sunstein (both Nobel laureates) who did a lot of research into the power of defaults (if you make organ donation opt-out rather than opt-in, you get a much higher organ donation rate; if you apply this same tactic to retirement accounts, you get many more savings), the endowment effect (more value is put on something you own, rather than something you don't own - even if it's exactly the same product) and choice architecture (how you design a choice for a person will actually have a really big effect on how they choose something).
They introduce a concept called 'libertarian paternalism' which is to say - provide people the choices and freedom to choose, but gently guide them to the one you reckon is best. Kinda manipulative (so you can see why it's so loved by the ad-man Rory Sutherland!), and is essentially a case of 'it's a weapon in the wrong hands'. Their book was focused on how this could shape government policy, and both of them have subsequently been advisors for the UK and US governments respectively.
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Predictably Irrational: Dan Ariely (yet to receive a Nobel...) who did a bunch of research on perception and comparisons between things. This included how you plan for things (make rational decisions when calm so that you aren't flustered at the point of sale for something), the effect of 'zero cost' (people are willing to do a lot more for something that's free), and the decoy effect. Imagine the following choices for a holiday:
Choice 1: Paris (with free breakfast) or Rome (with free breakfast)
Choice 2: Paris (with free breakfast), Rome (without free breakfast), Rome (with free breakfast)
Ariely argued that in the second option, Rome (with free breakfast) seemed to be a superior option, because you could compare it instantly to the Rome (without free breakfast) as opposed to comparing the sights and sounds you might see in Paris.
But from a 'rational' standpoint, that shouldn't matter. You either want to go to Rome, or Paris. Breakfast costs nothing in comparison to the overall trip, and yet it seems more valuable?
He found an interesting thing in the Economist which was already using this 'decoy effect' with their subscriptions:
If you see on the left hand side - the 'Print' and 'Print and Web' subscriptions are exactly the same price. So what happens when you take that out? He asked if he could do an experiment by taking out that middle option...
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3 options presented: 84% bought print & web subscription, 16% went for online-only
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2 options presented: 32% bought print & web subscription, 68% went for online-only
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P.S. Read Nudge, then Predictably Irrational, then maybe Thinking Fast and Slow (it reads like an academic paper which is hard to get through but you can get the credit of sounding smart when you've said you've read it).
5.
I would be remiss if I didn't talk about some of the criticisms of the field, because you can't be believable about this sort of thing if you don't mention this stuff. There are three main arguments, and I'll put them here for your own viewing and critical thought:
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The Great Replication Crisis: A lot of these landmark studies have had difficulties being replicated. In particular, Thinking Fast and Slow has a number of assertions about the power of priming (put money-related things in a room and people are more likely to spend money), of which many of the studies were debunked. In addition, loss aversion (thought to be 2x more painful than the same amount of gain) studies have not been well replicated.
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WEIRD populations: i.e. Western, Educated, Industrialised, Rich, Democratic populations that these studies are performed on do not easily replicate to other cultures (such as China and India). Are these kind of effects a reflection of human behaviour, or just cultural upbringing?
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Ethical considerations: what can be good for nudging people towards good behaviours, can be just as good at nudging people towards bad behaviours. If I know how to architect a choice where you're gonna drink more soft drink, or get sucked in by payday loans, or encourage harmful behaviours over time, well...that's bad too, right? Is it worth using behavioural economics to design an app that makes you addicted (like Facebook (endless scrolling = more time spent on the app), or Instagram (pulling down the screen to refresh gives you new content - variable reinforcement like a pokies machine)). Nir Eyal wrote a book named Hooked to get people using these techniques to design their apps for greater engagement, and then had to write a book called Indistractable because too many people were now extremely addicted.
6.
Social sciences are really hard to understand, since every experiment is technically n=1, as you can't have exactly the same circumstances for every single person. The average isn't as useful as we think, since the population is so varied in how they might think (e.g. the WEIRD populations above). I mean, even twins will have slightly different experiences by virtue of the fact they aren't the other twin!
However, I think that this sort of research and these types of effects are still interesting to read about, and learn about, as they provide more tools for how to examine human behaviour and understand why people might do things that are weird or irrational.
It's an ever-growing process for me - I love that you can design with these kinds of psychological techniques in mind, and I really want to do more work in this space. But it's not an easy thing to sell - even in more recent talks by Rory he's said that trying to throw out really creative ideas is extremely hard for an organisation to handle (have you tried making the product pink? no?).
All I wish is that one day, I'll be able to sit in an office and wait 'til someone comes to wise ol' me with a problem, and I can think of wacky ideas that will instantly work. A pipedream for a creative soul.
Until then...
Chat soon :)
Let me know if you have any feedback for the newsletter!
✔️ Real Life Recommendations
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Nudgestock - I initially wanted to write this whole post about this particular event, but this post was getting long so it comes down here instead. The event is run by Ogilvy, the advertising firm that Rory Sutherland hails from, and is a celebration of behavioural economics and design across the world. In particular, I wanted to draw your attention to two ideas in particular:
- Ergodicity - the most interesting talk I heard - it essentially says that for different scenarios and 'games' in your life, you should adjust your risk tolerance, which means that in actual fact, a lot of the work that was debunked above, might not actually be debunked? SUPER INTERESTING IDEA
- Decarbonisation - thought this would be boring, but again, it was one of the most insightful talks I listened to. Research out of Berkeley suggests that people's perceptions of what reduces climate change effects (like turning off lights) is actually not the most impactful. Many people actually underestimate the amount of energy heating and cooling and dishwashers and dryers are using!
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Alchemy - by Rory Sutherland (gosh I'm sounding like a fanboy). A collection of his thoughts and ideas about everything he's talked about in the TED talks above - it's using behavioural economics techniques in the real world which I really like. The practical examples help to illustrate the underlying techniques. Really good read!
🚌 Adventures on the Information Super-Highway
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High quality audio makes you sound better - which, it shouldn't right? But in a study of high vs low quality audio, a physicist's talk was rated 19.3% better, and people thought he was smarter, and liked him more. This guy's newsletter is great for bite-sized insights like this - read this regarding the IKEA effect - people like things that they have a hand in building...nearly 63% more for an IKEA storage box if they had assembled it themselves!
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Positive Deviants: Why rebellious workers spark great ideas - "Rebels may have a bad reputation, but in the right environment, and with the right motivations, they can achieve amazing things." - fair contention and interesting stories in this piece, but it's important to work out who's trying to work with you rather than against you.
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Critical Thinking isn't just a process - extremely good piece about metaepistemology - how do you know that you know what someone is telling you (or not telling you)? My favourite passage:
There is often talk of teaching people “critical thinking” thinking skills, and that’s certainly something worth doing. A mistake, though, is to think that such critical thinking skills are independent of knowledge: that there is a recipe, or a way of interrogating conclusions, that can turn into “critical thinking.” In reality, the process by itself isn’t where the magic happens.
These do not seem complicated skills in some sense—and especially not in retrospect, once the actual answer is known. But they require more than parsing of words. The institutional operation, and the status and psychological incentives of the people, matter greatly to discerning the truth.