Dream End State - Nudge Theory: how a little psychology can go a long way

Nudge Theory: how a little psychology can go a long way
This is how you can change people’s behaviour without anyone realising.

In a perfect economy, people faced with a decision would choose the best, most rational option for them, every time. What’s more, the more choices you give to people, the better their decisions will be.

We all know the world doesn’t work like that. If it did, I would buy an apple when I’m hungry instead of half price crisps at the checkout. Therefore, the solution is to ban crisps so everyone makes better choices. Right?

Nudge theory rejects both of these extremes. Firstly, it says that the way choices are presented affects the decisions people make. Secondly, the best way of helping people make good decisions is not by restricting their choices, but changing how they are presented — nudging them.

To understand how to present choices, we need to understand how people make decisions. Richard Thaler and Cass Sunstein, the creators of nudge theory, gave a few examples of what sways us when faced with complex decisions:

Loss aversion
As prospect theory shows us, people hate losses more than they like gains. Telling someone they’ll lose hundreds of pounds if they don’t switch their car insurance is more effective than saying they’ll gain hundreds of pounds if they do.

Status quo bias
People tend to stick with default options, because that’s easier and it’s assumed the default is the best. When workplace pensions changed from ‘opt-in’ to ‘opt-out’, millions more people started saving for retirement. The choices are exactly the same, but the decisions have changed.

Following the herd
If you can convince someone that everyone else is doing something, they’re more likely to do it. It’s why adverts claiming a product is the most popular in the country are so effective. And why voter-turnout campaigners should stop loudly complaining that lots of people don’t vote.

Advertisers and the food industry have known how to influence people for decades — that’s why the supermarket puts half price crisps at the checkout instead of apples. How can nudging be used for good? Thaler and Sunstein call for nudges in situations that are “most likely to help and least likely to inflict harm.”

People will need nudges for decisions that are difficult and rare, for which they do not get prompt feedback, and when they have trouble translating aspects of the situation into terms that they can easily understand.
Richard Thaler & Cass Sunstein, Nudge, p. 72

Watch out for

Nudge theory became influential for policymakers around the world, especially in the administrations of Barack Obama (for which Sunstein worked) and David Cameron. So unsurprisingly, it’s controversial.

One of the major criticisms is that nudges may be used as a cheap and ineffective substitute for policies that are more ambitious or costly. The UK government was criticized for relying on nudges and behavioral science at the start of the Covid outbreak while other countries were locking down. Sunstein himself said in 2014 that “nudges are not a sufficient approach to some of our most serious problems”.

With thanks to Ivan Edwards who wrote most of this post. Thanks Ivan!

Resources

O’Brien, Hetty (May 2019), Cass Sunstein and the rise and fall of nudge theory, New Statesman
Thaler, Richard H. & Sunstein, Cass R. (2008), Nudge: Improving Decisions About Health, Wealth, and Happiness, Yale University Press
Selinger, Evan (July 2013), When Nudge Comes to Shove, Slate
Sunstein, Cass (April 2014), There’s a backlash against nudging — but it was never meant to solve every problem, The Guardian
Yates, Tony (March 2020), Why is the government relying on nudge theory to fight coronavirus?, The Guardian
Goodhart’s Law and the ‘tyranny of metrics’
“When a measure becomes a target, it ceases to be a good measure.”

This, in the words of Marilyn Strathern, is the most succinct summary of Goodhart’s Law. It has implications for how organizations make decisions and evaluate performance.

Over-reliance on measurements and targets causes problems for organizations, at both the top and the bottom of the hierarchy. Executives who are paid based on a stock price will try to pump it up as quickly as possible, with little thought for long-term planning, investing or taking risks. Meanwhile, employees given high-stakes targets will try to game the system to reach them.

Governments are just as guilty as businesses. Ask any teacher getting their students ready for yet another test, or a police officer not booking an incident because of crime reduction targets.

Jerry Z. Muller called this the ‘tyranny of metrics’ — the replacement of judgement (acquired through experience and talent) with standardized numerical indicators, making the data public and attaching rewards and penalties.

Here are some of the problems it causes:

Conformity
When the same targets are used across different parts of large organizations, they all have to act the same way. There can be no innovation as the target is based on doing things in the established way.

Narrow-mindedness
Most organizations and jobs have multiple purposes. Targets narrow these down, creating incentives to ignore purposes that aren’t measured by the target.

Focus on the simple and the short-term
It’s easy to set a target for how many sales you make. It’s not so easy to measure how well you work as a team, how influential your ideas are, or how much you inspire a young colleague.

Focus on measuring itself
Rather than improving performance, the focus turns to the measuring itself. A new layer of managers and administrators is created, coming up with new things to measure and diverting resources away from the front-line. Or the front-line staff get stressed over bureaucracy, rather than doing what they do best.

Watch out for

This doesn’t mean measurements and targets should be abolished. Muller argues that measurement and judgement are complementary, that measurement demands judgement of what to measure, how to do it and how to interpret the information. This means ending the myth that standardized data is a perfect, neutral arbiter.

With thanks to Ivan Edwards who wrote most of this post. Thanks Ivan!

Resources

Goodhart, C.A.E. (1984), Monetary Theory and Practice: The UK Experience, Palgrave
Muller, Jerry Z. (2018), The Tyranny of Metrics, Princeton University Pres
Strathern, Marilyn (1997), ‘Improving Ratings’: Audit in the British University System, European Review Vol. 5 No. 3
User-centered design: the art of making things easy to use
The experience of the user should be the most important consideration when designing a product.

Sound obvious? You’d be surprised. Look around the room you’re sitting in now and you’ll probably find something that’s been badly designed. Maybe a remote control with lots of buttons whose purpose is a complete mystery. Or a website that makes it impossible to find the information you need. (Please tell us if it’s this website.)

Don Norman set out the problems with how things are designed in The Design of Everyday Things, first published in 1988. Since then, an entire industry of user-experience (UX) designers has cropped up.

He argued that, even though most designers think they’re making things better for the people who will use their products, in reality, they have no idea how people use them. So they design things how they want them to be, perhaps adding lots of clever features, or making them look like a beautiful work of art that will win them a prize.

But users shouldn’t have to adapt themselves to work out how to use a product. Instead, the product should be adapted to the user, so he doesn’t even have to think about how to use it. When you walk up to a door, you should just know whether it’s a push or a pull door. If you have to read a little sign saying ‘pull’, that’s bad design. If you guess wrong and push, that’s the designer’s fault, not yours.

To design things well, we have to understand how people interact with them. Here are a few things to consider when designing something – whether that’s a new product, a website, or a way of making something work.

Mapping
The user should be able to work out in their mind what something does. A switch next to a light should turn on that light.

Affordances
How the user perceives what an item is for. A switch is for pressing, a knob is for turning.

Constraints
Make something easy to use by limiting what you can do with it. If one button does one thing, it’s hard to get that wrong. If one button does lots of things depending on how you press it, the user will make mistakes.

Feedback
When the user does an action, they should get a signal that the action had a result. If you press a button and nothing happens, you’ll probably keep pressing it. If you press a button and a light comes on, you’ll know it works.

Watch out for

Even after you think you’ve created a great user-centered design, the only way to find out is through research and testing. Create a prototype and observe how a sample of people use it. Or if you’re making a big purchase, try it out as much as possible first. You may be surprised by the problems that come up.

User-centered design thinking dovetails with some of the core characteristics that make up great innovators: understanding from first principles the “job to be done” by always questioning conventional wisdom and the status quo and observing the behaviour of customers to figure out new ways of doing things. See the Innovator’s DNA model.

With thanks to Ivan Edwards who wrote most of this post. Thanks Ivan!

Resources

Don Norman on the term “UX” (July 2016), Nielsen Norman Group
Norman, Don. (1988), The Design of Everyday Things, 2002 edition, Basic Books
Stevens, Emily. (July 2019) The Fascinating History of UX Design: A Definitive Timeline, careerfoundry.com
The expectancy vs surprise continuum: music, art, suicide, and the good life

A rule of thumb about how to live a good life and what makes good content.

There’s a thread that connects sounds in nature, music, suicide and what makes a good film: the expectancy vs surprise continuum. Understanding or at least being aware of this continuum can help us see life through a different lens and helps us make sense of why we enjoy the media we consume and the things we produce and the work we do.

Suicide

Let’s start with at the bleakest so we can move into the light. Suicide. Often regarded as the forefather of sociology Emile Durkheim wrote about suicide in his treatise Le Suicide that was published in 1897. Durkheim described four types of suicide using two sociological variables: integration and regulation. He argued that too little or too much of either creates conditions which make suicide more likely.

Along the regulation axis sits fatalistic suicides caused by excessive structure and control, such as slaves who are unable to influence the rules under which they must live. On the other side of this axis sits anomic suicide, where there are no rules or clear conventions on how to act and behave, which can lead to a breakdown of social equilibrium. For example, suicide because of bankruptcy or loss of a job or loss of close family members.

The parallels between Durkheim’s work and the expectancy vs surprise continuum are obvious. If too much or too little structure increases the likelihood of suicide, we can surmise that the conditions for the good life lie somewhere in a sweet spot between those two extremes.

Pink noise

Halfway between the entirely uncorrelated random notes of white noise and the entirely correlated drunkard’s walk of brown noise sits pink noise (or 1/f noise or flicker noise). Tunes based on pink noise are moderately correlated over short and long runs. Benoit Mandelbrot was the first to recognise that pink noise and 1/f fluctuations are everywhere in nature, from the annual flood levels of the Nile and variations in sunspots to the wobble of the Earth’s axis and currents in the nervous system of animals and ourselves.

Our perception of the world seems to cluster around pink noise.

From the cradle to the grave our brain is processing the fluctuating data that come to it from its sensors. If we measure this noise at the peripheries of the nervous system under the skin of the fingers it tends, Mandelbrot says, to be white. The closer one gets to the brain, however, the closer the electrical fluctuations approach 1/f. The nervous system seems to act like a complex filtering device, screening out irrelevant elements and processing only the patterns of change that are useful for intelligent behaviour.
Martin Gardner, p.24, Mathematical Games (1979)

The thread between pink noise and music, and the expectancy vs surprise continuum is clear.

It is commonplace in musical criticism to say that we enjoy good music because it offers a mixture of order and surprise. How could it be otherwise? Surprise would not be surprise if there were not sufficient order for us to anticipate what is likely to come next. If we guessed too accurately, say in listening to a tune that is no more than walking up and down the keyboard in one step intervals, there is no surprise at all. Good music, like a person’s life or the pageant of history, is a wondrous mixture of expectation and unanticipated turns.
Martin Gardner, p.28, Mathematical Games (1979)

The same applies to all media we consume, from films and novels to newspaper articles. While the format is similar the content must be sufficiently different to pique and retain our interest. Hollywood can’t be sustained on Marvel sequels and prequels alone. As consumers get bored, new forms will replace them, much like the new schools of art that have emerged over the past 400 years.

Bore out versus burn out

What are the conditions that encourage the state of flow, when work comes easily and minutes drift into hours and we become super productive? According to Steven Kotier, a key psychological trigger is to find the balance between the challenge of the task in hand and our skills and ability to perform that task. We need to find tasks that stretch our abilities to force us into the present, but not too much that we snap.

This bore-out-vs-burn-out dichotomy maps directly on to the expectancy vs surprise continuum.

Kotier suggests that the task should be around 4% greater than the skills one brings to it as a rough heuristic for finding flow. This varies per person. High achievers may blow way past this threshold without any of the motivational reward of flow and risk burn out. While underachievers need to get comfortable with feeling uncomfortable and stretching themselves.

Watch out for

Everyone’s tolerance for structure or surprise varies. And for each of us it waxes and wanes over time.

You may boost overall happiness and fulfilment by compensating when one area of your life feels overly restrictive, or, on the other side of the ledger, disorderly. For example, a natural creative might feel stifled working for a large, bureaucratic company, but find solace in creative writing or abstract art or, indeed, writing an irreverent blog.

Resources

Gardner, Martin. (April 1978), Mathematical Games, Scientific American, Vol. 238, No. 4, pp. 16-33
Jones, Robert Alun. (1986) Emile Durkheim: An Introduction to Four Major Works. Beverly Hills, CA: Sage Publications, Inc. pp. 82-114
Kotier, Steven. (May, 2014), Create a Work Environment That Fosters Flow, Harvard Business Review
John Kotter’s 8 stages of change management
Most major change programmes fail because of a lack of proper planning, according to John Kotter. He proposed eight steps to overcome this.

Kotter’s 8-step model of change management was first published in a 1995 Harvard Business Review article and followed up in his book Leading Change. His steps comprise:

Create a sense of urgency
Find what’s going wrong or what needs to change and make it dramatic. A new competitor is a crisis, a new technology is a once-in-a-lifetime opportunity. Make a statement that communicates the importance of acting immediately.

Build a large, powerful coalition
One executive isn’t enough. Get the chairman, division managers and more on board. Build a coalition outside the normal business hierarchy — after all, if the corporate structure was working well, there would be no need for change.

Develop a vision for change
Go beyond the numbers and talk about a direction, a picture of what the future looks like and how it will be different from the past. It doesn’t have to be fully formed. Something that customers, investors and employees will understand and throw their weight behind.

Communicate the vision
This is about rallying the troops. One meeting isn’t going to do it. Make the vision part of everyday activities, appraisals and reviews, and make it exciting. Broadcast it through every channel. Leaders should walk the walk in everything they do.

Remove obstacles
These may come in the form of narrow job categories, a stubborn boss, or an incentive system that goes against the vision.

Generate short-term wins
This is not the same as hoping things go well. Plan what goals you’re going to reach and when, make them happen and celebrate them. Keep morale high to keep people on board.

Build on wins
Declaring victory prematurely kills momentum. Instead, use those short-term wins to tackle even bigger problems. Changes to corporate culture take at least five years to set in.

Embed changes into culture
Once you’ve transformed the corporate culture and values, make those changes stick. Show employees that performance improved because of the changes. Promote those who personify the new way of doing things.

Watch out for

Kotter said the two most important lessons from successful transformations are that they take a considerable length of time, and that failure in any one of these steps can be catastrophic.

He also argued that change requires leaders, not managers. (The book is called Leading Change, not Managing Change after all.) Leadership is “the engine that drives change”, taking risks and entering uncharted territory. Without disparaging the skill of management, the mindset of simply making things work as they are is doomed to failure when it comes to the transformation of a company.

Support from senior management is essential to any big change so make sure you have identified the stakeholders whose support you need, and make sure you dedicate the time and resources to persuade them to be strong advocates for your project.

With thanks to Ivan Edwards who wrote most of this post. Thanks Ivan!

Resources

Kotter, John P. (May 1995), Leading Change: Why Transformation Efforts Fail, Harvard Business Review
Kotter, John P. (November 2012), Leading Change, Harvard Business Review Press
Hamel, Gary & Zanini, Michele (October 2014), Build a change platform, not a change program, McKinsey & Company