Archive | October, 2011

Helping you make good decisions

27 Oct

>I have recently read a very interesting book called Nudge by Thaler and Sunstein. It explores our decision making processes and extends it to application in choice architecture. The authors argue that while people are able to think rationally (economically) they not always do so. Here is why, what it means for us and how we can at least partially overcome this problem.

It is either impossible or impractical to precisely calculate the trade offs between our options most of the times. Our previous experiences (intuition) and emotions then come in play and influence what decisions we make. Our rational and emotional selves are pulling us in opposite directions; the right, emotional, side of our brain often being the more dominant one (you know that you should choose A but end up choosing B because your feelings are telling you so). This is how we make sub-optimal choices.

Behavioural economics deals with this phenomena and, unlike rest of the field, it does not pretend that people always make rational choices. If applied, we can then speak of choice architecture. Since we always make our decisions in a certain context, it is possible to influence our choices by designing our decision making circumstances. It is important to say that choice architecture is not about tricking people into certain choices which might not be in their interest. It is about making decision processes easier for people by giving people so called nudges.

Nudges are small and deliberate changes to one’s decision making context. They are designed to influence one’s emotional decision making process in a direction that the rational system would take. They help people make better judgements while leaving them with the ultimate option to choose. Bellow are six examples of nudges that help ensure people’s rational and intuitive/emotional sides are not in conflict.

As mentioned earlier, people do not always think about choices they are making. If there are multiple options, we tend to choose the default one (e.i. we do not switch to a different one). When designing a choice context, select the default option carefully as it is likely to end up being the most popular one. If you want people to make an active choice, do not offer an default one but force people to make a decision (e.g. by not allowing them to proceed before they make a selection).

Example: Much higher percentage of people agree to donate organs after their death if the organ donor form has ‘Yes I agree to be a donor’ as a default option.

Expect error
People can make bad decisions. Moreover, we tend to make the same mistakes over and over again. Try to guess therefore or, if possible, test on a sample of people what decisions they usually make in a situation you are putting them into. When designing a choice context you can then guide people away from making those mistake.

Example: People were forgetting their cards in ATM’s when taking cash. A nudge to counter this ensures that a machine does not give us money unless we take our card first. Another great example is a gmail functionality that gives you a warning message if you mentioned word attach(ment) in your email but did not attach anything.

Give feedback
Design a system that tells people if the decisions they are making are good or not. Receiving a feedback is one of the best ways to learn.

Example: Laptops warn us when the battery is low and we need to plug in the charger (e.i. if we make a decision to ignore the decreasing percentage count in the bottom corner of our display and we do not plug in the cord).

Understand mappings
This rather mysteriously called nudge suggests that you should make it as easy as possible for people to understand and evaluate potential outcomes of their decisions before they make them.

Example: Mobile operators having simple tables telling users how much it costs to use their services. This allows us to make a better choice when deciding if we should browse the internet from our mobile phone while abroad or not.

Structure complex choices
When the number of options is too big to evaluate each one individually, we need to apply certain filters. By allowing us to narrow down our domain of selection according to various criteria they make the selection simplier. Think therefore what are the most important criteria for the people you are presenting a decision with and offer them relevant filters.

Amazon allows us to search for books by genre, price or date of publication.

Let people know in as far as possible the real costs of their choices and hope it will improve their ability/willingness to think rationally. This nudge is the one closest to conventional economic theory.

Thermostats showing us the cost of energy consumption in real time hence giving us a disincentive to keep the air condition on or treadmills telling how many calories we have burned as we run in a gym.

Happy nudging!