Dan Ariely’s FICO World Keynote: Environment Matters
Blog: Enterprise Decision Management Blog
“How many of you have texted while driving?” asked Dan Ariely of the audience at FICO World, encouraging them to put up their hands.
“You know it is stupid, but in that moment are you really weighing up whether you would like to continue living verses answering an SMS? Of course not! In that moment you are making a short-term judgment that you want to see and respond to your friend’s message.”
Delving into these paradoxical moments, where humans make seemingly irrational decisions has become a professional hobby horse for Ariely, who is a professor of psychology and behavioral economics at Duke University, as well as a bestselling author.
Testing the audience further, Ariely made the point that the environment in which we find ourselves can have a significant impact on the decisions we make.
The polished raconteur asked the audience to put their hands up if, in the last week they had been to the bathroom but exited without washing. Or, if they had ever made the choice to have unplanned, unprotected sex. Not surprisingly, few owned up to those types of decisions in front of the 900 attendees at FICO World.
Ariely also outlined the importance of understanding the concept of being a ‘choice architect’. Organizations need to think carefully about the human psyche, to ensure that the action that is most desirable is also the easiest to fulfill.
Examples given for this included a Department of Motor Vehicles changing its driver’s license application form, so that the organ donor question was ‘opt-out’ rather than ‘opt-in’. Magically, the number of caring individuals willing to donate their organs sky-rocketed!
He said this is the same magic that keeps us subscribed to gym memberships we don’t use, apps we never open and cable TV shows we never watch; a sobering thought.
Ariely says it’s important to challenge your gut intuition and to experiment with the way we approach decisions.
“There is a medication that can reduce the likelihood of a repeated stroke from 24 percent to 4 percent in patients. You would think that’s a great outcome but getting people to take their daily pills can prove a large challenge.”
Ariely said he experimented with the adherence problem in many different ways. Patients were offered $3 a day to take their pills, but this had little effect. He said they could have tried offering them $1000 a day but that wouldn’t have been economically efficient.
So the challenge was how to take $3 and make it feel bigger. They tried a lottery where they would promise patients a chance to win a larger amount if they took their pills every day. This certainly worked, but Ariely improved the results by playing with the concept of ‘loss aversion’.
He created a ‘regret lottery’ where he would select patients that hadn’t been taking their pills and tell them they had won the grand prize…….but……because they hadn’t taken their medication they had lost the right to their winnings. Brutal but effective.
One of the final stories told was about an experiment that Ariely ran in Kenya trying to get a poor community to save more. In his trial they used lots of different techniques such as reminders via SMS encouraging the participants to save and dollar matching of contributions. However, the most effective technique was actually to give the Kenyans a physical coin with numbers on it representing the days of the trial. These numbers would then be scratched off when they made a savings contribution.
Ariely reasoned that the coin worked because it gave symbolism and a physical representation to the act of saving. He explained that we are surrounded in our environments with inducements to spend money, but so very few to encourage saving.
Seeing the coin in the house environment reminded the Kenyans about the goal of saving and somewhat gamified the process; showing once again that the environment matters when it comes to making decisions.
To see the keynote session in full, check the blog for the video in the coming weeks.
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