Month: January 2021

Stimulus Response Compatibility

Stimulus Response Compatibility

Posted on by jabittan
Have you ever had someone give you a list of words written in different colored ink and asked you to ignore the word as written and instead say the color of the ink that the word is written in? It isn’t too difficult when you see random words, but it becomes much different when you see the names of colors written in different colors, such as green written in red ink or the other way around. The difficulty with reading the color and not the word in those situations stems from poor stimulus response compatibility. The brain receives a signal in the writing of the word, and has to overcome that signal to say a different color.

 

Richard Thaler and Cass Sunstein use this as an example in their book Nudge. They also demonstrate stimulus response compatibility using an example of a door with round wooden handles in a classroom that Thaler once taught in. The handles sent a signal to student and anyone else exiting the room that indicated they were intended to be pulled in order for the door to be opened. However, the doors needed to be pushed open. Describing the confusing doors and the poor stimulus response compatibility, the authors write, “you want the signal you receive (the stimulus) to be consistent with the desired action. When there are inconsistencies, performance suffers and people blunder.”

 

Stimulus response compatibility is crucial in terms of website design, road construction, slide presentations, video games, and any other setting where cues are used to indicate a desired behavior. People need to understand where to click to add an item to a shopping cart, how to scroll through a website, and how to close out of any pop-ups. Drivers need explicit cues for when it is safe to drive through an intersection, and inexplicit cues can help drivers understand when they need to slow down. Visual, audio, and other stimuli can drive predictable responses in people, and they can be used as nudges to help encourage or discourage certain behaviors. Understanding the stimulus you are providing and whether it is compatible with the behaviors you want people to exhibit is crucial.

 

Most of us probably want to develop good stimulus response compatibility, but we should also note that it can be used to frustrate people and prevent certain behaviors or goal attainment. If you have ever tried to unsubscribe from an annoying email list or newsletter, you may have experienced the challenges of intentionally poor stimulus response compatibility. Instead of having a clear link at the end of the email to unsubscribe, the link might be a dull gray color. The link might take you to a page with unclear directions on what buttons you needed to select to unsubscribe from all future emails. You may have seen a green button prominently placed that re-subscribed you instead of unsubscribed you from the emails, thwarting your plan to declutter your inbox.

 

It isn’t quite the case that these nudges are methods of mind control, but they do influence our behavior and can shape how we behave, what we learn, and real outcomes in our lives. If we are choice architects, we should recognize what behaviors we are trying to encourage, and think about the subtle cues and stimuli we can present to encourage people to make decisions that are in the best interest of the individual making the choice – as measured and determined by them, not us. Nudges are powerful, especially when a good stimulus response compatibility is in place. Importantly, nudges are not the kinds of roadblocks and obstacles that I discussed in the example of trying to unsubscribe from an email list.
Irrational Market Cycles - Joe Abittan

Irrational Market Cycles

Posted on by jabittan
I think about markets a lot, often focusing more on market failures than on market successes. I think our country generally views markets as infallible, and that drives me (in a somewhat contrarian strain) to look at spaces where markets don’t work. I also started my career in healthcare and have some relatively expensive healthcare concerns of my own, which also drives me to look at market failures with more energy than market successes. While there are many positive aspects of markets (they certainly do create a good level of efficiency and innovation and may also be generally pacifying across the globe), I think it is important to continue to highlight irrational market cycles, tragedy of the commons type situations, and areas where a market simply can’t be established because goods are nonrivalrous and nonexcludable. This post will specifically highlight an irrational market cycle, by which I mean a cycle of irrationality supported by market forces.

 

One of the strongest points of markets is that they help to weed out poor performers and eliminate waste. Someone selling a product that doesn’t provide value shouldn’t be able to find any customers. They might dupe a few people into buying their product, but overtime, we expect the market to marginalize the seller and for his business to eventually go bust. But this market efficiency mechanism only works if people are rational, and irrationality can be manipulated and exploited in a market, creating irrational market cycles. Cass Sunstein and Richard Thaler use extended warranties (not the spam ones you get calls about for your car but real ones offered when you buy a fridge) in their book Nudge to describe irrational market cycles. They write:

 

“If consumers have a less than fully rational belief, firms often have more incentive to cater to that belief than to eradicate it.”

 

There are products that don’t make sense. Sometimes they pop up as a fad, sometimes they are deliberate scams, and sometimes they are a new gadget that is attached to a new technology as an additional aid, but are in reality effectively useless. People can get sucked into purchasing these items, and they can be marketed as effective and must-have items, only to be irrational junk. The people selling the junk don’t have an incentive to help us think clearly about the product, they have an incentive to hide the truth and make their product appear more attractive by playing into and reinforcing irrational behaviors.

 

Using the extended warranty example Sunstein and Thaler continue, “If Humans realized that they were paying twenty dollars for two dollars’ worth of insurance, they would not buy the insurance. But if they do not realize this, markets cannot and will not unravel the situation. Competition will not drive the price down.”

 

An irrational market cycle can arise when incentives exist to encourage people to participate in irrational markets. People’s fear, lack of information, and cognitive biases can be leveraged by market actors to further irrational spending. A market on its own cannot correct this issue as Sunstein and Thaler show. Nudges can be helpful in diverting people out of the market, but it is worth recognizing that there is a role for outside forces to shape markets that fall into these irrational cycles.
Missing Feedback

Missing Feedback

Posted on by jabittan
I generally think we are overconfident in our opinions. We should all be more skeptical that we are right, that we have made the best possible decisions, and that we truly understand how the world operates. Our worldviews can only be informed by our experiences and by the information we take in about events, phenomena, and stories in the world. We will always be limited because we can’t take in all the information the world has to offer. Additionally, beyond simply not being able to hold all the information possible, we are unable to get the appropriate feedback we need in all situations for comprehensive learning. Some feedback is hazy and some feedback is impossible to receive at all. This means that we cannot be sure that we have made the best choices in our lives, even if things are going well and we are making our best efforts to study the world.

 

In Nudge, Cass Sunstein and Richard Thaler write, “When feedback does not work, we may benefit from a nudge.” When we can’t get immediate feedback on our choices and decisions, or when we get feedback that is unclear, we can’t adjust appropriately for future decisions. We can’t learn, we can’t improve, and we can’t make the best choices when we return to a decision-situation. However, we can observe where situations of poor feedback exist, and we can help design those decision-spaces to provide subtle nudges to help people make better decisions in the absence of feedback. Visual aids showing how much money people need for retirement and how much they can expect to have based on current savings rates is a helpful nudge in a situation where we don’t get feedback for how well we are saving money. There are devices that glow red or green based on your home’s current energy usage and efficiency, providing a subtle nudge to remind people not to use appliances at peak demand times and giving people feedback on energy usage that they normally wouldn’t receive. Nudges such as these can provide feedback, or can provide helpful information in the absence of feedback.

 

Sunstein and Thaler also write, “many of life’s choices are like practicing putting without being able to see where the balls end up, and for one simple reason: the situation is not structured to provide good feedback. For example, we usually get feedback only on the options we select, not the ones we reject.” Missing feedback is an important consideration because the lack of feedback influences how we understand the world and how we make decisions. The fact that we cannot get feedback on options we never chose should be nearly paralyzing. We can’t say how the world works if we never experiment and try something different. We can settle into a decent rhythm and routine, but we may be missing out on better lifestyles, happier lives, or better societies if we made different choices. However, we can never receive feedback on these non-choices. I don’t know that this means we should necessarily try to constantly experiment at the cost of settling in with the feedback we can receive, but I do think it means we should discount our own confidence and accept that we don’t know all there is. I also think it means we should look to increase nudges, use more visual aids, and structure our choices and decisions in ways that help maximize useful feedback to improve learning for future decision-making.
A Limitation on Nudges

A Limitation on Nudges

Posted on by jabittan
“Rare, difficult choices are good candidates for nudges,” write Cass Sunstein and Richard Thaler. Throughout their book Nudge, Sunstein and Thaler try to encourage limitations on nudges. They acknowledge that anytime people are in a position to influence decision-making by determining how choices are designed and structured, they will be providing people with nudges, regardless as to whether their nudges are deliberate or inadvertent. However, the authors don’t encourage people to step beyond nudges and truly limit people’s choices or prevent them from making decisions, even if those decisions are ones the individual would deem bad for themselves.

 

Nudges are helpful in rare and difficult choices because we are likely to make mistakes in those areas. We don’t make large investment decisions on a regular basis, we only enroll in healthcare plans once a year (and usually we just let ourselves roll into the same plan as last year), and we hopefully never have to make major life altering medical decisions. When we don’t get immediate feedback on a decision, when we don’t have an opportunity to practice and improve decision making in certain contexts, then we are likely to make mistakes. We won’t use appropriate discount rates, we will be influenced by irrelevant factors, and we will not consider all of the necessary information when making our selection. Nudges can help overcome all of these factors.

 

But we don’t necessarily need direct nudges in every decision situation, and we don’t need people to go beyond nudges and actually limit choices in most of our decisions. Buffets can nudge us by placing salad at the front of the line, so that we load our empty plate with more salad and have less room to pile on the tri-tip at the end of the line. This can be a useful strategy for buffets to save money by encouraging people to eat cheap fillers and could be a useful strategy for school cafeterias to encourage more healthy eating. But placing tri-tip under a cover that requires that we press a lever with one hand and open the lid with a second hand is beyond a reasonable nudge. Sunstein and Thaler believe that nudges should be easy to avoid or bypass for those determined to make their own choices, even if it isn’t what is generally understood to be in their best interest. A limitation on nudges, in the authors view, is a good thing, and helps protect nudges for situations where they are truly helpful and meaningful.
The Time for Nudges

The Time for Nudges

Posted on by jabittan
One of the most common examples for why nudges should be used by governments, employers, parents, and grandparents is the example of using nudges to encourage financial savings, especially for retirement. People don’t save enough for retirement, and are often quick to spend their money before they even have it, leaving themselves financially vulnerable to job losses, car breakdowns, and severe weather events. Governments can offer tax breaks for savings, employers can default employees into retirement savings accounts at high levels, parents can teach children to save allowances, and grandparents can start long-term savings vehicles for young children and nudge them to use the money wisely at a reasonable age. What the retirement nudge examples all show, is the importance of thinking about time when considering nudges and behaviors.

 

In their book Nudge, Cass Sunstein and Richard Thaler write, “Self-control issues are most likely to arise when choices and their consequences are separated in time.” Nudges, the authors explain, are incredibly valuable when time is an important factor. When our behaviors and actions provide small immediate rewards at the cost of larger later returns, then nudges can play a huge role.

 

Teaching children self-control, and encouraging them to show restraint and save their weekly allowance for a larger purchase that will last longer than some gum or candy does the same thing as helping employees contribute more than 5% of their paycheck to a retirement account. In the present moment it would be nice to have a dopamine hit from a candy bar, but a new Gameboy game is going to provide hours of entertainment after the candy bar is gone. Similarly, a lease on a new sports car might be affordable, but an earlier retirement, sending a kid to college without saddling them with debt, and surviving a costly MRI during an unemployment spell in an economic downturn is much more important than impressing the neighbors.

 

Self-control is easier when there is a short time period between our action the consequences we will face. If I know that yelling at someone on the phone while I’m in the presence of my boss could cost me my job, I’ll probably be able to hold back. But many of our self-control requirements have much longer time spans for the benefits or costs to become apparent. While it doesn’t feel like we lose anything by scrolling through Twitter for a few minutes after lunch each day, those minutes add up, and could be the difference between a promotion a year from now and missing out on a big break for career advancement.

 

Nudges are helpful because they can help us better understand costs, use better discount rates for the future, and make the difficult decisions that payoff in the long run.  This is why the retirement examples are so common when discussing nudges, because they are the precise examples of where our brains make cognitive errors that could harm us in the future, and they are spaces where small actions can help us overcome poor decision-making, impulsive behaviors, and short-term thinking to behave in ways we would chose if we were acting more rationally.
Facilitating Behaviors Through Nudges

Facilitating Behaviors

Posted on by jabittan
Plans held within our own head don’t seem to mean that much. I have had tons of plans to get things done around the house, to stop snacking on baked goods, and to read more, but I often find the time ticking by while I waste time reading news stories that don’t mean much to me or checking twitter. Having plans just in my head, that I convince myself I will accomplish, isn’t an effective strategy to making the changes I want. However, there are strategies that can be used for facilitating behaviors that we actually desire.

 

My last post was about the mere measurement effect. Just by measuring what people plan to do, simply by asking them if they plan to vote, plan to buy a new car this year, or intend to lose weight, people become more likely to actually follow-through on a stated behavior. But, there is a way to nudge the mere measurement effect even further, by asking people how they are going to enact their plans. When you ask people how they plan to vote, where they plan to buy a new car, and what steps they plan to take to lose weight, people become even more likely to follow-through on their intentions.

 

Asking people the how and when of a behavior they plan to adopt or an action they plan to do is a powerful and simple nudge. It is also something we can harness for ourselves. If we really want to make a change, we can’t just tell ourselves that tomorrow we will behave differently. Doing so will likely lead to letdown when the cookie temptations kick in around 2:30 in the afternoon, or when we fail to get up at our early alarm, or when we are tired in the afternoon and put on a tv show. But, if we have asked how we plan to make a change, then we can look ahead to the obstacles in our way, and plan for a healthy snack when cravings kick in, set thing up to make it easier to get out of bed, and hide the remote so we don’t turn on the TV without thinking.

 

Nudges don’t have to be external, they can be internal. We can use them to set a default course of action for ourselves or to push ourselves out of a default that we want to change. The quote that inspired this post is from Cass Sunstein and Richard Thaler’s book Nudge, where the authors write:

 

“The nudge provided by asking people what they intend to do can be accentuated by asking them when and how they plan to do it. This insight falls into the category of what the great psychologist Kurt Lewin called channel factors, a term he used for small influences that could either facilitate or inhibit certain behaviors.”
The Mere Measurement Effect - Joe Abittan

The Mere Measurement Effect

Posted on by jabittan
I listen to a lot of politics and policy podcasts, and one thing I learned over the last few years is that asking people to vote and encouraging them to vote isn’t very effective. What is effective, is asking people how they plan to vote. If you ask someone where their polling place is, how they plan to get there, when they plan to complete their mail in ballot, and if they will sit down with a spouse to vote, they actually become more likely to vote.

 

This seems like a strange phenomenon, but it appears that getting people to talk through the voting process helps cement their plans in their mind. The process seems to be related to the mere-measurement effect, which Richard Thaler and Cass Sunstein write about in their book Nudge. Writing about individuals who participate in surveys and their behavior after being surveyed they write,

 

“Those who engage in surveys want to catalogue behavior, not influence it. But social scientists have discovered an odd fact: when they measure people’s intentions, they affect people’s conduct. The mere-measurement effect refers to the finding that when people are asked about what they intend to do, they become more likely to act in accordance with their answers.”

 

The mere-measurement effect, just like the questions about how and where a person actually plans to cast their ballot, is a nudge. The brain is forced to think about what a person is doing, and that establishes actual plans, behaviors, and goals within the mind. It is very subtle, but it shifts the thought patterns enough to actually influence behavior. Once we voice our intention to another person, we are more likely to actually follow through compared to when we keep our inner plans secret. This can be useful for a supermarket trying to sell a certain product, a politician trying to encourage supporters to vote, or for charitable organizations looking to get more donations. The mere-measurement effect is small, but can be useful for nudging people in certain directions.
Social Influencers

Social Influencers

Posted on by jabittan
Donald Trump frequently employs a rhetorical strategy built on the power of social influencers. We pay attention to what happens around us, and adjust our behaviors and even our beliefs relative to the groups that surround us. When we are around people who cuss a lot, we might cuss more. When we are around people who exercise every day, we might start exercising more. Whatever the trend in the groups of people around us, we follow suit, learning from the social influencers in our company. What President Trump does is use suggestive language to indicate a trend or a social movement that may not exist. The president frequently says things like, “many people believe,” “lots of people are saying,” or “most people think.”

 

President Trump doesn’t live in a world governed by reality and when he uses the rhetorical devices listed above, there is almost never any actual substance to his claims. But nevertheless, his statements can be influential. He is taking advantage of our susceptibility to nudges based on social conformity.

 

In Nudge Cass Sunstein and Richard Thaler write about this approach toward nudges. When people employ these techniques, the authors write, “they try to nudge you by telling you what most people are now doing.” The nudge works because we care about people around us and want to doing what others are doing. We might not want to admit it, but we follow the cues of social influencers and pick up on what the majority opinion is.

 

We want to be in the know and keep up to date on trends and news so that we appear to be good allies to the people in our tribes. We want to be like others so that they empathize with us and want to help us if we ever need it. Doing what most people do, emulating what most people determine to be socially desirable will help ensure that we have people around who have resources to help us. This is why it is so powerful for advertisers, politicians, and people in positions of authority to tell us what most people are doing. We don’t want to be an outcast, and if most people are moving in a certain direction, then surely we should as well.
Predictable Outcomes

Predictable Outcomes

Posted on by jabittan
“In many domains people are tempted to think, after the fact, that an outcome was entirely predictable, and that the success of a musician, an actor, an author, or a politician was inevitable in light of his or her skills and characteristics. Beware of that temptation. Small interventions and even coincidences, at a key stage, can produce large variations in the outcome,” write Richard Thaler and Cass Sunstein in their book Nudge.

 

People are poor judges of the past. We lament the fact that the future is always unclear and unpredictable. We look back at the path that we took to get to where we are today, and are frustrated by how clear everything should have seemed. When we look back, each step to where we are seems obvious and unavoidable. However, what we forget in our own lives and when we look at others, is how much luck, coincidence, and random chance played a role in the way things developed. Whether you are a Zion Williams level athlete, a JK Rowling skilled author, or just someone who is happy with the job you have, there were plenty of chances where things could have gone wrong, derailing what seems like an obvious and secure path. Injuries, deaths in our immediate family, or even just a disparaging comment from the right person could have turned Zion away from basketball, could have shot Rowling’s writing confidence, and could have denied you the job you enjoy.

 

What we should recognize is that there is a lot of randomness along the path to success, it is not entirely about hard work and motivation. This should humble us if we are successful, and comfort us when we have a bad break. We certainly need to focus, work hard, develop good habits, and try to make the choices that will lead us to success, but when things don’t work out as well as we hoped, it is not necessarily because we lack something and are incompetent. At the same time, reaching fantastic heights is no reason to proclaim ourselves better than anyone else. We may have had the right mentor see us at the right time, we may have just happened to get a good review at the right time, and we maybe just got lucky when another person was unlucky to get to where we are. We can still be proud of where we are, but we shouldn’t use that pride to deny other people opportunity. We should use that pride to help other people have lucky breaks of their own. Nothing is certain, even if it looks like it always was when you look in the rear view mirror.
Conforming to What We Think People Expect

Conforming to What We Think People Expect

Posted on by jabittan
This last election season was not a great one for political polls. The presidential election polls were off for the second straight presidential election, leaving many with doubts about the effectiveness of polling. Many state senatorial polls were also off, leading to expectations that were not met by the actual election outcomes. I spent a lot of time listing to the 538 Politics Podcast heading into the election and spent a good amount of time thinking about and reading about likely election outcomes. In the end, the election was within the expected range of the polling average, but toward a tail end, and it left many people asking why we spent so much time thinking about polling, setting our expectations in certain directions, and whether polls are a useful exercise at all.

 

The reality is that polls are important, and they reflect a part of our psychology that is always in action, even if we are not actively sampling American’s for their views.

 

Politicians are often criticized for changing their positions, but in reality, we all have fluid positions on everything regardless as to whether we are thinking about what clothes we like to wear, marginal tax rates, and whether current public health measures are effective or just for show. Politicians, like all of us, are eager to conform to majority, but they don’t always have perfect polling on what is the most preferred course of action or opinion. Our recent polling experiences show us how difficult it can be to figure out what the majority want. As Cass Sunstein and Richard Thaler write in Nudge, “in part because people think that everyone has their eyes fixed on them, they conform to what they think people expect.”

 

The difference between most people and politicians is that politicians really do have more eyes on them than any average person. Their efforts to figure out what people expect is more visible, as are their changes in opinion or stated beliefs. But like politicians, most of us are trying to figure out what people expect of us, and most people are trying to match those expectations (at least in most areas). We are not actually in everyone else’s heads, but we can talk to them, observe the stickers they put on their cars, read their social media posts, and get an idea of what other people believe and what they think is cool. We can do our best to emulate that example, and the spotlight effect puts pressure on us to conform to that inferred identity, belief, or behavior.

 

We don’t actually know what everyone thinks and believes. We can all follow trends and fads (like the Paleo Diet) that we don’t really like, but that we think everyone else likes and expects us to follow. We are all trying to figure out what everyone else thinks, and find a way to go with the flow for most aspects of our lives. For most of us, we are not really being watched all the time while this process plays out. But for political figures, this process can be very public and highly scrutinized. So even though our polls have had some frustrating misses the last few presidential cycles, accurate and timely polling is important. And while we might not like the idea of a flip-flopping political figure, we probably all prefer a political figure who understands what their constituents want and expect, and polling can be a helpful way for them to better understand their constituents and better adjust to their views while representing them.