Tag: Nudge

Too Many Options - Nudge by Cass Sunstein and Richard Thaler - Joe Abittan

Too Many Options

Posted on by jabittan
Writing specifically about new employee enrollment in retirement savings plans, Richard Thaler and Cass Sunstein in their book Nudge write, “One study finds that the more options in the plan, the lower the participation rates. This finding should not be surprising. With more options, the process becomes more confusing and difficult, and some people will refuse to chose at all.” The important lesson that Thaler and Sunstein present with this quote is that getting people to do things that they want to do and know is in their best interests is challenging, even when it shouldn’t be. Additionally, people have ideas of what they should be doing and have goals for where they want to be, but don’t often have a great sense of the best way to get there. When that is the case, such as saving enough for retirement, making the path simple is more important than ensuring that the path leads to the most optimal choice or maximizes the individual’s choices.

 

One size fits all approaches and solutions usually are not great. They typically get the job done, but usually don’t lead to the best outcomes for most people. This is true with health insurance plans, retirement savings accounts, and special event t-shirts. One size fits all health plans cover general health needs, but might not work well for someone who needs expensive asthma medicine. Generalized retirement savings accounts help people get started on the path to saving for retirement and ensure that people at least have something banked when they get to 65, but they often fall short and have minimal risk taking approaches that prevent losses, but limit growth. And unisex t-shirts fit everyone, but aren’t the most comfortable and certainly are not form fitting to match current fashion trends. However, despite their inadequacies, these examples are often good first steps in helping people make a decision and get started with a plan.

 

It would be great if every person could pick the perfect healthcare plan, could find the optimal investment strategy for retirement, and have perfectly tailored clothes for every special occasion, but it isn’t realistic everyone to make great choices in all of these situations. No one knows exactly what their healthcare demands will be for the upcoming year. Our risk tolerance and savings needs and abilities will change throughout our lifetime, and no one can mass produce special event t-shirts that are tailored to every participant. Information is lacking, preferences don’t stay the same, and resources are constrained.

 

Getting people (or products) started is the first step toward ensuring healthcare coverage, retirement savings, and having race-day t-shirts for a charity run. Given the constraints I mentioned above, the initial choices need to be simple. Presenting an individual with 20 healthcare plans is going to be confusing and frustrating. The same is true for retirement options, and people looking to coordinate clothing for a special event can’t spend the too much time arguing between thousands of combinatorial options for their shirts. Rather than making a selection, people risk dropping out if they face too many choices. When there are too many options, people become frustrated, and if they don’t walk away, might select the first option they see, making suboptimal choices.

 

A solution is to take a one size fits all approach that can be adjusted and customized at a later point. Getting people started with something simple and generalized can avoid the frustrating paralysis that presenting too many options can create. Helping people understand how to make changes and learn between selections will help people improve their decisions over time and better identify healthcare plans, retirement savings plans, and custom t-shirt options that match their needs, preferences, and constraints. It is possible to present people with a few options initially, and allow them to explore additional options later on if the initial options are not a good fit or if the individual wants to explore more nuanced and complex options.
Learning and Exploratory Nudges - Joe Abittan

Learning and Exploratory Nudges

Posted on by jabittan
So far, a lot of the nudges I have written about assume that there is a known best option for an individual and that a choice architect can help direct people toward that best option. In situations like retirements savings, healthcare benefits selection, and other complicated, structured, and somewhat formulaic choice scenarios, it is relatively easy to take a rational approach to use nudges to help people select an option that will be a good choice for them. But nudges don’t have to direct people toward an already known option. Nudges can be more exploratory in nature and directed toward learning.

 

In some situations, write Cass Sunstein and Richard Thaler in their book Nudge, “it’s good to nudge people in directions that they might not have specifically chosen in advance. Structuring choice sometimes means helping people to learn, so they can later make better choices on their own.”

 

Helping people learn can be better than always trying to give people the right answer. Libertarian paternalism accepts that choice architects don’t know everything about another person’s preferences or self-interest, but assumes someone can generally know the right direction to point other people in. Using nudges to provide more feedback, encourage people to consider appropriate information, and help people better sort through their options can help people understand how to think and approach similar choices. When the goal of a choice architect is to maintain a maximal choice level while providing people with valuable information and alternatives, nudges that encourage learning are incredibly useful.

 

Additionally, nudges that encourage more exploration are helpful for people when it comes to things like listening to music or dining out. Nudges can direct people back toward things they already like, but they can also direct people toward new things that similar people like. Many algorithms on Amazon, music streaming services, and clothing subscription services work in these ways. While they are ultimately designed to keep you engaged or convince you to buy something else, they do employ exploratory nudges to help people find new likes. A company could continue suggesting you buy the same pair of shoes, but they might be able to get you to buy another pair if they show you one that other people also like. Helping people explore new genres of music, new authors, and new styles of clothes can provide real value to the individual, beyond the value to the company in convincing someone to buy something new. The individual still learns if they get feedback from their exploratory choices and gain new insight into finding new alternatives.
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.
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.
Confident Nudges & Strong Opinions

Confident Nudges & Strong Opinions

Posted on by jabittan
Cass Sunstein and Richard Thaler describe an experiment in their book Nudge where people were placed in a group in a dark room with a small point of light. Due to an illusion with the brain processing visual information, the small point of light appears to move slightly, even though it is stationary. The lead investigator on the study placed a member of his staff in the room who would express strong confidence in the distance that the light supposedly moved, or express doubts about the groups conclusion for how far it moved. What the study showed is that strong confidence or strong doubt from one person can greatly shape the overall beliefs of the entire group.

 

Individually, people in the study would not arrive at matching or correlating guesses for the distance that the light moved. But when in groups, individuals begin to converge over a common distance (again, the light never moved – study participants only perceived motion due to an optical illusion). When one person in the group was either very sure that the group had the right estimate, or expressed strong doubt that the groups conclusion was accurate, participants tended to agree and move toward their estimate. A high distance guess stated strongly would pull everyone’s estimates up while a low estimate would shrink them. If the group had someone who was very confident in their answer, the participants became more confident, while if someone expressed strong doubts, the remaining participants level of doubt also rose. As Sunstein and Thaler write, “A little nudge, if it was expressed confidently, could have major consequences for the group’s conclusion.”

 

Most of us probably have to work in groups on a regular basis. This study is important because it shows how much one person can set the expectations and shape the assumptions of everyone in the group. We have all had projects that start out with little coherent information. Everyone has an idea for where the project could go, what shape the final output could take, and what factors will be the most important to include. If one person is has strong opinions in any given area, they can greatly influence the group’s decision-making. The authors continue, “the clear lesson here is that consistent and unwavering people, in the private or public sector, can move groups and practices in their preferred direction.”

 

These people may be right and may have good insights, but they can also be very wrong. A strong personality expressing confident opinions can push an entire group toward conformity. They can downplay the real threats or weaknesses of a plan, and can be overconfident with the prospects of success. For these reasons it is important to build in mechanisms that check groupthink. It is important to have someone play devil’s advocate, to ask how a plan could fail, to get the group to think about the strengths and weaknesses of a plan in honest terms. Without finding a way to check overconfident or strongly expressed opinions, a group can be derailed from the very start, with everyone conforming to the strong opinions of a single individual.
Framing and Nudges

Framing and Nudges

Posted on by jabittan
“Framing works because people tend to be somewhat mindless, passive decision makers,” write Cass Sunstein and Richard Thaler in their book Nudge. “Their Reflective System does not do the work that would be required to check and see whether reframing the question would produce a different answer.”

 

Framing is an important rhetorical tool. We can frame things as gains or losses, reference numbers as percentages or as whole numbers, and compare phenomena to small classes or to larger populations. Framing can include elements of good or evil, morality or sin, responsibility toward ones family or individual greed. Depending on what we want people to do or how we want them to behave, we can adjust the way we frame a situation or decision to influence people in certain ways. Framing is not a 100% effective way to make people do what we want, but it can be a helpful way to nudge people toward certain decisions.

 

Sunstein and Thaler present an example of using framing to nudge people to conserve energy. They write,

 

“Energy conservation is now receiving a lot of attention, so consider the following information campaigns: (a) If you use energy conservation methods, you will save $350 per year; (b) If you do not use energy conservation methods, you will lose $350 per year. It turns out that information campaign (b), framed in terms of losses, is far more effective than information campaign (a). If the government wants to encourage energy conservation, option (b) is a stronger nudge.”

 

It is not the case that everyone who sees a message touting the money saved by conserving energy will do nothing while everyone who sees a message about the money they lose will take action. Some people will be motivated to take action by the message to save $350 per year, and some people won’t be motivated by the $350 loss aversion. However, on average, more people with the loss averse message will decide to take action. People tend to feel losses to a greater extent then they seek gains, so framing energy conservation methods as preventing a loss will motivate more people than framing energy conservation methods as leading to a gain.

 

This small shift in framing alters the perspective of buying energy efficient light bulbs or resealing windows from costly investments to practical strategies for avoiding further losses. Framing in this example is a simple nudge that isn’t a form of mind control, but plays into existing human biases and encourages people to make decisions that are better for them individually and for society collectively. I would argue that framing is a necessary and unavoidable choice. Messages are necessarily context dependent, and trying not to include any particular framing can make a message useless – at that point you might as well not have a message at all. Given that framing is necessary and that there are preferable outcomes, choice architects should think about framing and employ frames in a way to encourage the best possible decisions for the most people possible.