Decision making trickery

nudge12This blog post attempts to cover some diverse territory and quite a few books. If you want to jump straight from how our decisions can be influenced to what we need for good energy efficiency decisions, click straight through to Shaping the Path for energy productivity & procurement.

The first book was Nudge which I read a few years ago and was very taken by. The book introduced me to the two ways of deciding and covered the main ways that our decisions are biased despite thinking we’ve been rational. It used the term “choice architecture” to advocate for policy makers etc to spend time designing, with some care, the path of least resistance that decision makers often take.

Other more recent books also introduce us to the two thinking modes – most comprehensively in Daniel Kahneman’s, Thinking Fast and Slow. The automatic, intuitive and speedy judgements led by the ‘Fast’ system – so often setting the course for decisions that you might intend to make rationally. And the deliberate, effortful, focused ‘Slow’ system that can tire easily but can also be responsible for the wonderful feeling of flow that we experience when wholly engaged with a task. Kahneman argues that while the ‘Slow’ system thinks it is in charge, it remains naive to the true influence of the ‘Fast’ system – and indeed Nudge comes to the same conclusion.

Switch – ‘How to change things when change is hard’ is another book with the two thinking styles at it’s core. The beauty of this book is that it creates a simple frame for action. Even with the risk of oversimplifying the issues involved, this may be the best way of using what we’ve learnt from behavioural economics:

  1. Direct your rider (logical, reflective, slow system)
  2. Motivate your elephant (intuitive, emotional, automatic system)
  3. Shape the Path (choice architecture)
switch

Picture credit: Switch neatly summarised by Rachel Smith @ninmah Flickr

In Nudge, the authors make the case for nudging people to make better decisions and cover territory from savings plans to food choices. When do we need nudging?

  • when we see the benefits now but the costs later
  • when encountering decisions we make infrequently
  • when feedback is not immediate
  • when its hard to imagine the possible outcomes

Many complex decisions lead to a non-decision, because it is just hard work finding the time, getting one’s head around the information and then optimising the decision for ones own circumstances. And so we take short cuts or don’t make a decision at all. The idea of choice architecture is that the default decision state would be a pretty good one – even if not perfect, and the decision maker always has the agency to make a different decision. Thaler and Sunstein use examples of savings plans in the US. The authors argue that signing people up for something is better than failing to sign up to save and automatically increasing payments whenever people receive a payrise is also a good idea.

Both authors got a chance to pursue their ideas further. Sunstein went to work in the Obama administration streamlining regulations and wrote about it in his next book Simpler. Thaler set up a nudge unit in the UK Government looking at little nudges within programs that could make a big difference to program effectiveness and Australia’s Prime Minister, Turnbull has recently announced a similar unit to operate in DPMC. They are not without their critics and choice architecture is not for every decision making context but I like the idea that we must think about it. In Switch the Heath brothers see shaping the Path as a key step and it’s easy to imagine the elephant blundering along the path regardless of what the Rider might see as a logical step.

I always thought choice architecture would be a good fit with procurement – lots of decision makers being offered too many choices and sometimes being completely outside their realm of expertise to make the decision. I have seen many long term considerations such as energy consumption trumped by the short term consideration of cost despite various procurement rules to try and put longer term considerations into the frame.

Here are the main biases that ‘Nudge’ people in certain decision making directions:

  • Anchoring can lead your estimates to much higher or lower outcomes depending on whether your brain starts from a higher or lower example.
  • The Availability Heuristic can lead you to overstate the occurrence of something because an example is readily brought to mind.
  • The representativeness heuristic means we notice patterns where there are none and this leads us to expect certain outcomes.
  • Unrealistic optimism means we always think we are better than average.
  • Loss aversion means we don’t want to lose something twice as much as we want to gain it.
  • Status Quo bias means we keep doing the same thing even when the original decision needs to be changed. Overcoming inertia is hard.
  • Framing of a decision can change our choice – same data, different frame.
  • Priming before a decision influences it too.
  • We predictably succumb to temptation.
  • We run many decisions on autopilot – ie as we have always made them, mindlessly eating food in front of us etc.
  • and finally the herd mentality means we will often look around for social proof of how to act.

These themes repeat in other books I have been reading and it’s worth casting them in the positive for a moment from the father of persuasive techniques, Robert Cialdini. In his book Influence – an oldie but a goodie he covers the six key ways to influence decision makers as summarised below. You will recognise many of these strategies in classic sales techniques but I was introduced to Cialdini in the context of making my own policy making work more influential with the suggestion to use it on my senior management. (An APS resource exists here)

influence

To some extent the six tools of persuasion rely on triggering automatic responses from decision makers and also changing the nature of the transaction. I am reminded of the four transactional frames from my blog on customer focus:

  • The financial framework which tends to limit our relationship to a value for money one.
  • The us vs them framework which may work for your sports team, political flavour and other tribes you belong to.
  • The loved one framework defines the rules of transactions between family and friends (and, as you know, is quite different from financial transactions even when the services on offer have a value in the market – eg cooking someone dinner or driving them to the airport)
  • and finally the ‘authority figure’ framework.

And finally to leap from marketing to Community Based Social Marketing, I’d like to snapshot some of the work of Doug Mackenzie Mohr whose workshop I thoroughly enjoyed many years ago but whose approaches to sustainable behaviour changes we really haven’t systematically implemented (with the exception perhaps of our travelsmart program). CBSM is used to engage whole communities in new ways of doing things. The cognitive tools that Mackenzie Mohr employs are:

  • commitment
  • social norms
  • social diffusion
  • prompts
  • well framed communication
  • incentives and
  • convenience

So you can see an element of repetition throughout all these works. I am going to dedicate a second blog post to the design of programs and choice architecture by again revisiting some of these books. Click here to read about Shaping the Path for energy productivity and procurement.

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About Heather

I am an energy and climate change specialist with a background in industrial energy efficiency and climate change policy.
This entry was posted in Booknotes, Changemaking, Random and tagged , , . Bookmark the permalink.

3 Responses to Decision making trickery

  1. Very well written post about interesting books, thanks for sharing!

  2. Pingback: Shaping the Path | changing weather by Heather Smith

  3. Pingback: The Small Big | changing weather by Heather Smith

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