Nudges for Unrealistic Optimism

Nudges for Unrealistic Optimism

Our society makes fun of the unrealistic optimist all the time, but the reality is that most of us are unreasonably optimistic in many aspects of our life. We might not all believe that we are going to receive a financial windfall this month, that our favorite sports team will go from losing almost all their games last year to the championship this year, or that everyone in our family will suddenly be happy, but we still manage to be more optimistic about most things than is reasonable.

 

Most people believe they are better than average drivers, even though by definition half the people in a population must be above and half the people below average. Most of us probably think we will get a promotion or raise sometime sooner rather than later, and most of us probably think we will live to be 100 and won’t get cancer, go bald, or be in a serious car crash (after all, we are all above average drivers right?).

 

Our overconfidence is often necessary for daily life. If you are in sales, you need to be unrealistically optimistic that you are going to get a big sale, or you won’t continue to pick up the phone for cold calls. We would all prefer the surgeon who is more on the overconfident side than the surgeon who doubts their ability and asks us if we finalized our will before going into the operating room. And even just for going to the store, doing a favor for a neighbor, or paying for sports tickets, overconfidence is a feature, not a bug, of our thinking. But still, there are times where overconfidence can be a problem.

 

2020 is an excellent example. If we all think I’m not going to catch COVID, then we are less likely to take precautions and are more likely to actually catch the disease. This is where helpful nudges can come into play.

 

In Nudge, Cass Sunstein and Richard Thaler write, “If people are running risks because of unrealistic optimism, they might be able to benefit from a nudge. In fact, we have already mentioned one possibility: if people are reminded of a bad event, they may not continue to be so optimistic.”

 

Reminding people of others who have caught COVID might help encourage people to take appropriate safety precautions. Reminding a person trying to trade stocks of previous poor decisions might encourage them to make better investment choices then trying their hand at day trading. A quick pop-up from a website blocker might encourage someone not to risk checking social media while they are supposed to be working, saving them from the one time their supervisor walks by while they are scrolling through someone’s profile. Overconfidence may be necessary for us, but it can lead to risky behavior and can have serious downfalls. If slight nudges can help push people away from catastrophic consequences from unrealistic optimism, then they should be employed.
Should We Assume Rationality?

Should We Assume Rationality?

The world is a complex place and people have to make a lot of decisions within that complexity. Whether we are deliberate about it or not, we create and manage systems and structures for navigating the complexity and framing the decisions we make. However, each of us operate from different perspectives. We make decisions that seem reasonable and rational from our individual point of view, but from the outside may seem irrational. The question is, should we assume rationality in ourselves and others? Should we think that we and other people are behaving irrationally when our choices seem to go against our own interests or should we assume that people have a good reason to do what they do?

 

This is a current debate and challenge in the world of economics and has been a long standing and historical debate in the world of politics. In his book Thinking Fast and Slow, Daniel Kahneman seems to take the stance that people are acting rationally, at least from their own point of view. He writes, “when we observe people acting in ways that seem odd, we should first examine the possibility that they have a good reason to do what they do.”

 

Rational decision-making involves understanding a lot of risk. It involves processing lots of data points, having full knowledge of our choices and the potential outcomes we might face, as well as thinking through the short and long-term consequences of our actions. Kahneman might argue, it would seem after reading his book, that truly rational thinking is beyond what our brains are ordinarily capable of managing. But to him, this doesn’t mean that people cannot still make rational choices and do what is in their best interests. When we see behaviors that seem odd, it is possible that the choices other people have made are still rational, but just require a different perspective.

 

The way people get to rationality, Thinking Fast and Slow suggests, is through heuristics that create shortcuts to decision-making and eliminate data that is more or less just noise. Markets can be thought of as heuristics in this way, allowing people to aggregate decisions and make choices with an invisible hand directing them toward rationality. So when we see people who seem to be acting obviously irrationally or opposed to their self-interest, we should ask whether they are making choices within an entirely different marketplace. What seems like odd behavior from the outside might be savvy signaling to a group we are not part of, might be a short term indulgence that will stand out to the remembering self in the long run, and might make sense if we can change the perspective through which we judge another person.

 

Kahneman shows that we can predict biases and patterns of thought in ourselves and others, but still, we don’t know exactly what heuristics and thinking structures are involved in other people’s decision-making. A charitable way to look at people is to assume their decisions are rational from where they stand and in line with the goals they hold, even if the choices they make do not appear to be rational to us from the outside.

 

Personally, I am on the side that doubts human rationality. While it is useful, empathetic, and humanizing to assume rationality, I think it can be a mistake, especially if we go too far in accepting the perspective of others as justification for their acts. I think that there are simply too many variables and too much information for us to truly make rational decisions or to fully understand the choices of others. My thinking is influenced by Kevin Simler and Robin Hanson who argue in The Elephant in the Brain, that we act on pure self-interest to a greater extent than we would ever admit, and we hide our self-interested behaviors and decisions from everyone, including ourselves.

 

At the same time, I do believe that we can set up systems, structures, and institutions that can help us make more rational decisions. Sunstein and Thaler, in Nudge, clearly show that markets can work and that people can be rational, but often need proper incentives and easy choice structures that encourage to encourage better choices. Gigerenzer in Risk Savvy ends up at a similar place, showing that we can get ahead of the brain’s heuristics and biases to produce rational thought. Creating the right frames, offering the right visual aids, and helping the brain focus on the relevant information can lead to rational thought, but nevertheless, as Kahneman shows, our thinking can still be hijacked and derailed, leading to choices that feel rational from the inside, but appear to violate what would be in our best interest when our decisions are stacked and combined over time. Ultimately, the greatest power in assuming rationality in others is that it helps us understand multiple perspectives, and might help us understand what nudges might help people change their behaviors and decisions to be more rational.
Narrow Framers

Narrow Framers

I like to write about the irrational nature of human thinking because it reminds me that I don’t have all the answers figured out, and it reminds me that I often make decisions that feel like the best decision in the moment, but likely isn’t the best decision if I were to step back to be more considerate. Daniel Kahneman writes about instances where we fail to be rational actors in his book Thinking Fast and Slow, and his examples have helped me better understand my own thinking process and the context in which I make decisions that feel logically consistent, but likely fall short of being truly rational.

 

In one example, Kahneman describes humans as narrow framers, failing to take multiple outcomes into consideration and focusing instead on a limited set of salient possibilities. He writes, “Imagine a longer list of 5 simple (binary) decisions to be considered simultaneously. The broad (comprehensive) frame consists of a single choice with 32 options. Narrow framing will yield a sequence of 5 simple choices. The sequence of 5 choices will be one of the 32 options of the broad frame. Will it be the best? Perhaps, but not very likely. A rational agent will of course engage in broad framing, but Humans are by nature narrow framers.”

 

In the book Kahneman writes that we think sequentially and address problems only as they arise. We don’t have the mental capacity to hold numerous outcomes (even simple binary outcomes) in our mind simultaneously and make predictions on how the world will respond to each outcome. If we map out decisions and create tables, charts, and diagrams then we have a chance of making rational decisions with complex information, but if we don’t outsource the information to a computer or to pen and paper, then we are going to make narrow short-term choices. We will consider a simple set of outcomes and discount other combinations of outcomes that we don’t expect. In general, we will progress one outcome at a time, reacting to the world and making choices individually as the situation changes, rather than making long-term decisions before a problem has arisen.

 

Deep thinking about complex systems is hard and our brains default toward lower energy and lower effort decision-making. We only engage our logical and calculating System 2 part of the brain when it is needed, and even then, we only engage it for one problem at a time with a limited set of information that we can easily observe about the world. This means that our thinking tends to focus on the present, without full consideration of the future consequences of our actions and decisions. It also means that our thinking is limited and doesn’t contain the full set of our data that might be necessary for making accurate and rational choices or predictions. When necessary, we build processes, systems, and structures to help our minds be more rational, but that requires getting information out of our heads, and outsourcing the effort to technologies beyond the brain, otherwise our System 2 will be bogged down and overwhelmed by the complexity of the information in the world around us.
Detecting Rules

Detecting Rules

Our brains are built to think causally and look for patterns. We benefit when we can recognize that some foods make us feel sick, when certain types of clouds mean rain is on the way, or when our spouse gives us a certain look that means they are getting frustrated with something. Being able to identify patterns helps us survive and form better social groups, but it can also lead to problems. Sometimes we detect patterns and rules when there aren’t any, and we can adopt strange superstitions, traditions, or behaviors that don’t help us and might have a cost.

 

Daniel Kahneman demonstrates this in his book Thinking Fast and Slow by showing a series of letters and asking us to think about which series of letters would be more likely in a random draw situation. If we had a bag of letter tiles for each letter of the English alphabet, and we selected tiles at random, we wouldn’t expect to get a word we recognized. However, sometimes through random chance we do get a complete word. If you played thousands of Scrabble games, eventually you might draw 7 tiles that make a complete word on your first turn. The reality is that drawing the letters MGPOVIT is just as statistically likely as drawing the letters MORNING.

 

For our brains, however, seeing a full word feels less likely than a jumble of letters. As Kahneman explains, “We do not expect to see regularity produced by a random process, and when we detect what appears to be a rule, we quickly reject the idea that the process is truly random.”

 

We can go out of our way trying to prove that something is behaving according to rule when it is truly random. We can be sure that a pattern is taking place, even when there is no pattern occurring. This happens in basketball with the Hot Hand phenomenon and in science when researchers search for a significant finding that doesn’t really exist in the data from an experiment. Most of the time, this doesn’t cause a big problem for us. Its not really a big deal if you believe that you need to eat Pringles for your favorite sports team to win a playoff game. It only adds a small cost if you tackle some aspect of a house project in an inefficient way, because you are sure you have better luck when you do your long approach versus a more direct approach to handling the task.

 

However, once we start to see patterns that don’t exist in social life with other people, there can be serious consequences. The United States saw this with marijuana in the early days of marijuana prohibition as prejudice and racial fear overwhelmed the public through inaccurate stories of marijuana dangers. Ancient people who sacrificed humans to bring about rain were fooled by false pattern recognition. We see our brains looking for rules when we examine how every act of our president influences political polls for the upcoming election. Our powerful pattern and rule detecting brains can help us in a lot of ways, but they can also waste our time, make us look foolish, and have huge externalities for society.
How to Think It Out

How to Think it Out

Our thoughts are a jumbled mess. Things tend to repeat with subtle variations and they tend to jump around at random points in an inconsistent manner. Keeping our mind on a single thing is hard and our thoughts are not as logically consistent as we might think, despite the fact that our thinking and though processes feel perfectly rational and deliberate to us. We don’t think in a steady, rational, and linear way, even though we usually think that we do. Our thoughts are often incomplete, pick up right to the middle of an idea rather than at the start, and sometimes are just nebulous and hazy.

 

It is funny how often you can pick up on people having trouble with their thoughts, revealing this inner jungle gym, if you look for it. Podcasts and every day conversations are great places to hear people start to organize the thoughts flying through their head. They are not reading from a perfect mental bullet point list, they don’t have an essay prepared in their mind, and their thoughts don’t flow logically in order from point A to point B and down the line. Podcasters will often say things like, “I’m still trying to work this out in my head, so this might not come out right.” In conversation, you may have had the experience where you are talking to someone about something, and they bring up a starting point factor that you had never considered. Often, for me at least, it is a huge factor that I knew about, but just hadn’t quite connected to my larger point and seriously thought about.

 

The reality for people is that our thoughts cannot be orderly and cannot be made sense of if we don’t do something to think our thoughts out. Speaking and writing are great ways to think something out. You have to take your ideas, put actual words to them, and then think about how the words will convey the idea in your head so that the ideas will make sense in the mind of another. You have to start thinking about order and logic, and how you will present what you think and feel for someone else. It is a complicated effort, and if you break down this seemingly natural process, you see how difficult each step can be.

 

Different forms of thinking it out have different advantages. In writing, the great part is that you can do practice messaging in writing, editing and deleting what doesn’t quite fit or doesn’t best communicate your thoughts. Speaking is faster than writing, which is helpful, but leads to more mistakes and isn’t as friendly for trial and error. Nevertheless, it helps us take what is in our head as incomplete and often disconnected thoughts and ideas, and begin to align them in a more stable and rational manner. Sometimes we don’t really know exactly what we think until we go through this process, either speaking or writing out our thoughts to get them out of our head, but also to make sense of them in our head for no audience other than ourselves. As Seneca wrote to his friend Lucilius in Letters From a Stoic“I am admitting you to my inmost thoughts, and am having it out with myself, merely making use of you as my pretext.”

Our Mind Seems Counterproductive

I listen to a lot of science podcasts, and really love the discoveries, new ways of thinking about the world, and better understandings of the world that we gain from science. Science is a process that strives to be rational and to build on previous knowledge to better understand an objective reality. What is also interesting about science, is that it operates against the way our brains want to work. As much as I love science and as much as I want to be scientific in my thinking and approaches to the world, I understand that a great deal that shapes human beings and the world we build is not rational and seems counterproductive when viewed through a rational lens.

 

Part of the explanation for our minds being so irrational might be explained by Kevin Simler and Robin Hanson in their book The Elephant in the Brain. The authors describe one reason for why our brains evolved to be as complex and irrational as they are: we evolved to be political and deceptive creatures, not to be rational and objective creatures with a comprehensive view of reality. “Here’s the puzzle:” write Simler and Hanson, “we don’t just deceive others; we also deceive ourselves. Our minds habitually distort or ignore critical information in ways that seem, on the face of it, counterproductive. Our mental processes act in bad faith, perverting or degrading our picture of the world.”

 

We act so irrationally and have such an incorrect view of the world according to Simler and Hanson because it helped our ancestors to be more deceptive and to survive. If you wish to tell a white lie to someone or if you really want to appear sincere in your thoughts and actions, it is much easier if you believe the things you are lying about. If you know you are lying and acting in bad faith, you have to be a really good actor or poker player to convince everyone else. We actually benefit if our brains fail to recognize exactly what is driving us and help us systematically not recognize inconvenient truths.

 

For example, I use Strava, a social media platform geared toward runners and cyclists. The app allows us to upload our GPS data from our runs and bike rides and to compare our routes and see who went the fastest along a particular street or who ran up a trail the fastest. At a base level I know that I am using the app because it allows me show off to other people just how good of a runner I am. But if you asked me at any given point why I upload all my workouts to Strava, I would tell you a story about wanting to keep up with friends, wanting to discover new places to go running, and about the data that I can get to analyze my performance. The first story doesn’t look so great for me, but the second one makes me sound social and intelligent. I am inclined to tell myself that is why I use the app and to deny, even to myself, that I use it because I want to prove that I am a better runner than someone else or to show off to my casual running friends who might log-in and see that I went on a long run.

 

Our brains are not the scientifically rational things I wish they were, but in many ways that is important for us as we try to build coalitions and social groups to get things done. We connect in ways that are beyond rationality, and sometimes we need the generous (though often false) view of ourselves as good actors to help us get through the day. We can strive for more rationality in our thoughts and actions, but we should accept that we will only get so far, and we shouldn’t hate ourselves or anyone else for not always having the nice and pure motives that we present.

Respecting the Well-Being of Others

Peter Singer focuses on the ideas regarding our interactions with others throughout his book The Most Good You Can Do, and he continually returns to the idea of how we value our life relative to the lives of our family members and the lives of those beyond our family.  Singer argues that the effective altruist movement would not be able to spread if people did not have the ability to empathize with others, and if people could not find ways in which they recognized that all human life holds the same value.

 

Singer references Richard Keshen, a Canadian philosopher, to explain the ways that effective altruists may view other people in the world. “At the core of the reasonable person’s ethical life, according to Keshen, is a recognition that others are like us and therefore, in some sense, their lives and  their well-being matter as much as our own.” Prior to this quote Signer quotes Keshen to explain that a reasonable person is someone who makes decisions and develops beliefs that are backed by evidence which can be defended. Their evidence may still be criticized and challenged by others, but the evidence can be used in a rational way to reach a real conclusion.  The base mindset of a reasonable person is that their thinking is unbiased, and the unbiased nature of their thought means that it is not influenced by personal factors and takes a more objective view of the world.

 

As I write this I am absolutely able to understand the importance of viewing the lives of others as equal in value to our own, but I am conflicted with Keshen’s views of reason and do not feel as though they completely add toward the point he is making.  I question whether or not we are able to take a truly objective view of the world regardless of the reason behind our thinking and regardless of how well we try to live without biases.  While I agree that living with the principal that the lives of all members of society are equal in value, I feel as though there are personal biases that have pushed me in this direction. I have been guided by more than just  rational thought, and I know that I am affected by my biases even if I don’t notice them.
I also wonder if the same argument presented by Keshen in support of effective altruism can be used to demonstrate the differences between the lives of those in society and ultimately used to show the importance of keeping wealth and resources within a close family unit.  I do not argue with Singer’s main point, but I am conflicted with Keshen’s view of a rational person, and I am not sure that his definition helps us truly understand the thought process and identity of an effective altruist.