Wednesday, June 24, 2009

** Nudge by Richard Thaler & Cass Sunstein

Yes, we have free will, but often we don’t know what to do with it, and worse sometimes our choices work against us. The science ‘choice architecture’ is what this book is about. By pruning, presenting, and ordering choices in particular ways, we can maintain free will, but also avoid making more harmful choices. Read on, if you choose to ;)

Target practice

At Schipol Airport in Amsterdam, authorities have etched the image of a housefly into each urinal. It seems that mean don’t pay much attention to their aim, but if they see a target, attention and therefore accuracy are much increased. The etching has reduced ‘spillage’ by 80%. P4

It is a false assumption that almost all people, almost all of the time, make choices that are in their best interest… It seems reasonable that people make good choices in contexts in which they have experience, good information, and prompt feedback. The do less well in contexts in which they are inexperienced and poorly informed, and in which feedback is slow or infrequent. P9

History lesson via area code

Take the last 3 digits of your phone number and add 200. Write it down. Now, guess what year Attila the Hun sacked Europe? Was it before or after the year you wrote down? And what does this have to do with your phone number? When your phone number is a high 3 digit number, it drags the guesses upward, such that most answers are 300 years later than those with low numbers. P23

Vivid and easily imagined causes of death (eg. earthquakes) often receive inflated estimates of probability, and less vivid causes (eg. asthma) receive low estimates, even if they occur with far greater frequency. So too, recent events have a greater impact on our behavior, and our fears, than earlier ones. P25

How increase fear and confidence in others

A good way to increase people’s fear of a bad outcome is to remind them of a related incident in which things went wrong; a good way to increase their confidence is to remind them of similar situation in which everything worked out for the best. P26

The hot hand is just hot air

Most sports fans think that a player is more likely to make his next shot if he’s made his last shot, or even better, his last few shots (hot hand)… Turns out that the ‘hot hand’ is just a myth. Players who have made their last few shots are no more likely to make their next shot, actually a bit less likely. Really… Before announcers spoke of a player’s ‘hotness’, the players had made 80.5% percent of their 3 previous shots. After the ‘hotness’ pronouncement, players made only 55.5% - not significantly better than their overall shooting of 53.9%. P30

We’re all better than average

Less than 5% MBA students expect to be below the median (50th percentile), and more than half expect to be in the 20th percentile or higher… 90% of all drivers think they are above average. And nearly everyone thinks he has an above average sense of humor… 94% of professors think that they are better than the average professor. P32

Till death do we part

We all know that 50% of marriages end in divorce. But at the time of ceremony, almost all couples believe that there’s approximately 0% chance that their marriage will end in divorce – even those that have already been divorced! P32 2nd marriage is the triumph of hope over experience. – Samuel Johnson

People have been shown to have an accurate sense of the likelihood that other people will get divorced (50%)… But, nearly 100% believe that they are almost certain not to get divorced! P224

It is in these circumstances that people are immensely reluctant to make prenuptial agreements. Believing divorce is unlikely, and fearing that such agreements will spoil the mood, most people take their chances with divorce law, which is (not to put too fine a point on it) is a mess, often unintelligible even to specialists in the field. P224

Unrealistic optimism is a pervasive feature of human life (could it be an evolutionary adaptation to encourage us to keep going and trying despite the odds? – Ben) When we overestimate our immunity from harm, we fail to take sensible precautions. P33

Why we’re couch potatoes

Loss aversion helps to produce inertia, meaning a strong desire to stick to your current holdings. You’re reluctant to give up what you have something, because you don’t want to incur losses, so you turn down trades you otherwise would’ve made if you weren’t so rich. P34

401 Forget

Most 401k investors don’t update their allocations. Over the course of their careers, more than ½ made exactly NO changes to the way their contributions were being allocated. In fact, many married participants who were single when they joined, still have their mother/father listed as their beneficiary. P35

Can we really be that lazy?

The cause of status quo bias is a lack of attention… Network executives spend a lot of time worrying about scheduling because they know that many viewers who start with NBC, tend to stay there, despite the low cost of channel surfing…. Magazines know that autorenewal with a cancellation via phone call leads most of us to keep subscribing, because we never get around to making that call. P35

And you call yourself a doctor?

When doctors are told that 90 out of 100 patients survive, they are more likely to recommend an operation than if told that 10 out of 100 die. P36

Free is its own reward it seems

In an experiment, ½ of the moviegoers received a big bucket of free ultra stale (Styrofoam like) popcorn and the other ½ got a medium bucket. On average, the recipients of the big bucket ate 53% more – even though they didn’t like it… When asked after the movie if they may have eaten more because of the size of their bucket, most denied the possibility saying ‘Things like that don’t trick me’. They were wrong. P43

In another experiment, patrons were offered a free bowl of soup, whose bottom connected to a machine designed to refill the bowl slowly. No matter how much soup the subjects ate, the bowl never emptied. Many people kept eating, until the mercifully the experiment was ended. P44

If you want to lose weight, get smaller plates, but little packages, and don’t keep tempting things in the house. P44

Make it hurt if you want to keep it off

Wanna lose more weight – and keep it off? Make a pact with someone. Each of you should agree to lose 20, 30, or whatever you want over a period of time (6 mos, 1 year). If either fails, they have to pay $10,000. Next, on 1 day’s notice, either one could call for a weigh in. If either was found to be over the target weight, he would have to pay the other an agreed to sum. In four years, 2 grad students played this game – only once did in 4 years did either one go over the target. P47

Gambling with other peoples money is always more fun

People are more willing to gamble money that they consider ‘house’ money. This same mentality affects investors, who are willing to take big changes with their ‘winnings’… Similarly people are more likely to splurge impulsively on a big luxury when they receive an unexpected windfall, even if they had savings fully available to be spent for just such an item. P51

Yes, we’re twins

Two who live together for a long time, start to look alike. This bit of folk wisdom turns out to be true! This is partly because of shared diets and eating habits – but much of the effect is simple imitation of facial expressions. In fact, couples who end up looking alike also tend to be happier. P54

You are who you hang out with

For a quick glance at the power of social nudges consider the following:

  1. Teenage girls who see other teenagers having children are far more likely to get pregnant.
  2. If you’re best friends get fat, your risk of gaining weight goes up
  3. Academic effort is influenced by your peers, so much so that random assignments of 1st year students to a dorm or to specific roommates can have big consequences for their grades and future prospects. Parents should worry more about which roommate not which college their child gets.
  4. Judges on panels are affected by the votes of their colleagues. A Republican appointee shows liberal patterns when seated with 2 Democratic appointees, and vice versa for a democrat seated with 2 republicans.

Why is this so? One reason is that we like to conform. P55

No one really cares about you

People are paying less attention to you than you believe. If you have a stain on your shirt, don’t worry, they probably won’t notice. But in part because people do think that everyone has their eyes on them, they conform to what other people expect. P62

Women often eat less on dates, and men eat more, apparently with the belief that women are impressed by a lot of manly eating (note to men: they aren’t). p64

The power of suggestion

If you ask people the day before an election if they intend to vote, you can increase the turnout by 25%... A study of more than 40,000 people asked a simple question: Do you intend to buy a new car in the next 6 mos? The very question increased purchase rates by 35%... If people are asked how often they expect to floss their teeth in the next week, they floss more. If people are asked whether they intend to consume fatty foods in the next week, they consume less. P70

Consider a large octagonal sign that said GO. P82

Rule 1

When choice is complicated and difficult, people might greatly appreciate a sensible default. P87

Rule 2

Required choosing is generally more appropriate for simple yes/no decisions than for more complex choices… When choices are highly complex, required choosing may not be a good idea; it might not even be feasible. P87

Rule 3

Humans make mistakes. A well designed system expects its users to err and is as forgiving as possible. P87

One study found that human error (not equipment failure) caused 82% of ‘critical anesthesia incidents’... This problem was solved by designed equipment so that the gas nozzles and connectors were different for each drug. It became physically impossible to hook up the wrong drug to the wrong port. P89

Rule 4

To think about incentives is to ask 4 questions:

Who uses? Who chooses? Who pays? Who profits? P97


iNcentives, Understand mappings, Defaults, Give feedback, Expect errors, Structure complex choices. P100

Those that can’t, teach

A large employer, having offered is employees the chance to switch retirement plans, provided a free financial education program. They also measured the effectiveness of this education by administering a before/after test of financial literacy, using a true/false format, so random answers would on avg receive 50%. Before education the avg score was 54%; after education, the avg crept up to 55%. Teaching is hard! P112

Smart Mortgage

Research finds that mortgage customers who get the best deals – by a lot! – are those who pay no fees up front… The likely explanation for this result is that when the fee is zero, it is simpler for borrowers to compare terms, because the interest rate is the only thing they have to look at. P138

If you’re not a white male, buy your next car on line

Women and blacks pay the same as white males when buying a car online, but at the dealership they pay more, even after you account for other factors, such as income. P138

Using Fed Reserve data, American households may have an avg credit card debt of $12,000. At 18% interest rates, that translates into more than $2000 in annual interest. P142

People are willing to pay almost twice as much for the same item when paying via credit card as opposed to cash. P143


So do we embrace subliminal advertising? What if is as long as it is in the interest of desirable ends? What limits should be placed on private or public manipulation as such?... Compare subliminal ads to something just as cunning. If you want to lose weight, one effective strategy is to put mirrors in the cafeteria. When people see themselves, they may eat less if they are chubby. Is this OK? And if mirrors are acceptable, what about mirrors that are intentionally unflattering? And if so, what about a flattering mirror at a fast food restaurant? P244

1 comment:

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