Category: behavioral economics

Behavioral Grooves

Back in September,  I partnered with Tim Houlihan to start “a monthly gathering of curious minds” which we called Behavioral Grooves.  We thought it would be interesting to get like-minded people together to talk about applying behavioral science to life and work.

We had no idea if others would be interested in this…

We announced the meetup and were hoping to get at least a few of the friends that we had contacted to show up.  We ended up with 24 people for that first session where we talked about habits – how they are formed and what people can do to improve them.

We were thrilled!

From there, it took off.  We have over 180 members signed up to our meetup group and it is growing fast.  We have had three monthly sessions as of early January 2018 and our fourth is lined up for two weeks from today.  We have over 20 people who have made it to two or more of the sessions.

I guess we struck a nerve.

For our second session, we invited Professor James Heyman to speak and thought, hey, since he’s here, why don’t we interview him and make a podcast out of it.  Thus, our Behavioral Grooves podcast was born.  Tim and I both loved that so much that we decided that we didn’t want to wait for the next Behavioral Grooves session to record our next one – so we started to invite people and interview them – both live and over the internet.

To date, we have seven interviews recorded and three more in the works.  These podcasts mirror the Behavioral Grooves sessions in that they are conversational in nature where we geek out over behavioral science and how we can apply behavioral science insights into our daily work and lives.

They have been a blast!

In reflecting on this, it appears to me that these two outlets provide us with a way of both learning and sharing.  We want to be advocates for good, ethical use of behavioral science.  We believe that there is much to learn and we can improve our work and lives by understanding and by applying these principles in a thoughtful and deliberate manner.

We also realized that we love the community that this is creating.  A community of curious minds who are interested in science and the application of that science.  A community of people that we can bounce ideas off of.  A community of people that can push us to think about things from new perspectives.

This is ultimately what we have been building and hope that it grows and provides a place and outlet for others, as well as ourselves.

If you are ever in Minneapolis on the third Thursday of the month – please come and join us at our meetup (find out more info here) and if you can’t make that, please listen in to our podcasts (click here to find the latest).

Come and join our community of curious minds!

Thanks!

Kurt

Behavioral Observations from the Road: Denver Airport

Humans are interesting, they are quirky, they are irrational.

We think we know what is best for us. Often, we even assume that we KNOW what is best for us.

The funny thing is – our behaviors do not always align with what’s best. I recently observed an interesting example of the irrationality of human behavior while traveling through Denver International Airport on the way to meet a client.

Before we get into that though, let’s start with 2 quick questions:

  • If you see two lines moving at a similar pace between you and your destination, one long and one short, which do you jump into? I would get in the short, as I am betting you would too. Who wants to waste time waiting in line?
  • Let’s throw a wrench in the gears – the longer line is the VIP line. You paid $180 to be in it and it’s the line you jump right into every time you get here. You also get to avoid one quick and simple task that your counterparts in the short line must do. Keep in mind, the short line will still get you to your destination in less time – perhaps as much as two times quicker. Which line do you get in now?

So now let’s explore that funny little scenario I observed.

Typically, upon arriving at the airport I run into a decent line to get through security. It’s the annoying but unavoidable ritual of travel that stands between me and the pre-flight beer that will make my middle seat less miserable. Admittedly, yes, I should have woken up at 3:25 am to check in, but at the time my seat choice did not seem as valuable as sleep. I am a victim of my own time discounting. Our present-self fails to accurately predict the preferences of our future self and we at times value the ‘here and now’ over the future – even if it’s not worth more.

Usually, when I am standing in line I glance up from my ‘boredom social media surfing’ and see a smaller group of people whisking past security: no wait. I make a mental note to sign up for TSA pre-check, global entry, or CLEAR (the fast-track, pay to pass security programs). Inevitably I forget to act on it and end up in the same spot a few weeks later, lamenting my negligence.

As I walk into the airport for this trip, however, I am confronted with a far different experience. The line for the CLEAR program is long. Rounding the corner, I dread the security line I am about to see. To my pleasant surprise, I find that it is almost non-existent. Surely, I must be tired and mixing up my lines?

So here I stand, looking at an almost empty security line and a significantly backed up CLEAR line. I can’t help but wonder “why”?

I have never used CLEAR but from my research it appears that you are still required to go through regular security (e.g. remove shoes, laptops etc.). The difference appears to be that instead of waiting in line for the in-person ID and ticket check, you simply go through a fingerprint scan and then jump the line directly into the TSA screening (editor’s note – please reach out and correct me if you are a member and my understanding is incorrect).

So, with that said, why would one wait in a longer line so they can “jump” the shorter line? Here are my conjectures:

1. The Endowment Effect

We ascribe greater value to things that we own.

CLEAR is a program that you pay for, it costs $179 per year to become a member – this purchase prescribes ownership. Subconsciously there is an “I paid for it, I need to use it” attitude that drives the behavior of jumping into the longer line.

Because of this; the user neglects to weigh the ACTUAL value of the investment with the time that would be saved by hopping into the regular line. This leads to my next point.

2. We have an innate inability to value time accurately.

We easily prescribe value to things, but we have a difficult time accurately examining that same value in everyday time (unless of course we are billing and invoicing).

Imagine the CLEAR line is primarily made up of frequent business travelers. If the line for CLEAR is 20 minutes and the normal line is 5 minutes, then that makes a difference of 15 minutes (or .25 hours). let’s look at a few scenarios:

 

  • Traveler A is an Architect who bills their time at $100/hr
    • .25 X $100 = $25
  • Traveler B is a Management Consultant who bills their time at $200/hr
    • .25 X $200 = $50
  • Traveler C is a Lawyer who bills their time at $300/hr
    • .25 X $300 = $75

Typically, professionals bill by the quarter hour, so the above numbers are the value that each of them would prescribe for that additional 15 minutes of time waiting in the CLEAR line in a billable environment. For the Lawyer, if that happens 2.4 times per year, then that time is the equivalent of what they paid for the program to begin with.

3. Habits

We are habitual creatures. Charles Duhigg introduced us to the idea of the habit loop “Cue -> Routine -> Reward”. The idea is that when we come upon a specific cue, our brain automatically reverts to a routine that then provides a reward. This inevitably feeds the process, validating the cue and routine for the next go around. This loop clouds our ability to reassess that routine and break the cycle or act differently upon encountering that cue.

Could the CLEAR line be this routine?

The cue is entering the airport: the user sees the CLEAR sign, automatically walks up and enters the line, engaging in the routine. The user neglects to even assess that the normal security line is shorter because the habit takes over. The user goes through the line, is rewarded by the CLEAR agent who escorts them to the front of the screening area and is blissfully satisfied without ever recognizing that, in this case, they would have benefited from breaking that habit. Every time they get to this fork in the road they step into it without thinking. It’s automatic.

Agree, disagree? Reach out or comment with your thoughts, conjectures, or input!!

Sources:
1. Duhigg, Charles. The Power of Habit. Random House Trade, 2014.

Behavioral Observations: “On the Road Reflections” from the Hindu Kush 

Here at the Lantern Group, we specialize in applying behavioral science insights to drive organizational performance and change employee behavior.

For this article, however, I am going to take you on a journey to the other side of the world. Right now, you are wondering: “what could the Hindu Kush possibly have to do with behavioral science!?

Well, as we have been telling you, it’s everywhere!

So, bear with me and let’s have some fun while we talk about behavioral insights in action; observed from a recent adventure in northern Pakistan.

Read More

Cognitive Load – What it is and why it’s important

Back in January we introduced you to the concept of integrating Behavioral Science into Graphic Design. If you did not have a chance to read, or for a recap, click here: http://blog.lanterngroup.com/behavioral-science-graphic-design

Today we will expand a bit more on the idea of “cognitive load”.
Not only is cognitive load a valuable resource to utilize in graphic design; but it is also extremely valuable in communications, speaking engagements, presentation’s and an all-around useful tool for improving understanding.

Let’s take a quick look back at what cognitive load is:
Cognitive load refers to the total amount of mental effort being used in working memory. Rationally, we would think that the more information that a person is given, the better informed they would be; therefore, they would make more sound decisions. However, this is not typically the case.

  • Too much info and the brain can become overloaded and confused.
  • Break it down to the essentials and things just might stick!

In short, quite often: Less is More.

Read More

Don’t Be A Communications Relic – Using behavioral science to make communications more effective

Communication Relic - LGWant to make communications more effective – use behavioral science

Over the past few years, we have seen a shift in how organizations value their internal communications.  In the past, employee focused communications were often an afterthought.  Companies would spend significant time, effort and money on developing out their incentive plans, making sure they were designed to drive the right behaviors and performance, only to communicate it to the field in an e-mail with a 30-page, single-spaced legal contract attached.

Thankfully, this is starting to change.

Today, organizations realize that they need to invest time and resources into their internal communications to optimize their value and impact.  As companies make this investment we are seeing a significant improvement in the design and visual appeal of internal communications – from incentive compensation to benefits to operations; the production value of employee communications has risen.

However, merely making a communication look pretty and appealing isn’t sufficient in today’s hyper-competitive world.  Organizations need their communications not just to inform, but also to spur new behavior and actions.

When companies communicate about programs that require employee action, they often only see a small change in employee behaviors (or no change at all) – even when these actions have clear benefits for the employee (i.e., increasing their contribution to their 401K plan, using a flexible health care spending account, or changing their selling behavior to align with the new incentive plan to maximize their own earnings).

This is where behavioral science comes in.

Behavioral sciences such as psychology, sociology, and behavioral economics help improve organizational communication and drive both action and behavior change.  These cutting edge scientific concepts are currently being used heavily in consumer marketing with positive results – and now they are being implemented by many companies as part of their internal employee communications to achieve similar results inside the company.

Read further to make sure that you’re not being left behind. 

Read More

A bike, some lights and motivation: what a stationary bike hooked up to an LED panel of lights can teach us about motivation!

Kurt Nelson, PhD and Ben Granlund

IMG_4449

As part of our exhibit booth at the World at Work 2016 Total Rewards Conference, we designed a method for giving away our promotional t-shirts that simultaneously acted as an experiment to help us understand what motivates people.

What we found out was intriguing and reinforces some key behavioral insights about intrinsic and extrinsic motivation, recognizing accomplishments and having specific goals.

Our process involved a stationary bike that was hooked up to a bank of LED lights1 – the faster and longer you peddled, the more lights lit up, sounds basic enough right?

The six LED light panels set up on a vertical pole that lit up from the bottom to the top – once all six lights were lit up, all the lights flashed and the process was over.

We set our process up a little differently

To earn a very cool “Behavior Matters” t-shirt, all people needed to do was get on the bike and light up one of the lights.

We did not require that people light all six lights, and we did not assign a time length for peddling to earn a t-shirt.  All they had to do was light up one light – a relatively easy process.IMG_4473

Additionally, people could get their name written on our leader board if they were one of the five fastest people to light up all the lights.  This white board with hand written names on it was updated whenever someone earned one of the top five spots.

Our original concept was to have people read one of two sets of written rules – one positive and encouraging; the other bland and discouraging.  The intent was to see if the different messages impacted how people performed or felt about the activity.  We quickly realized that our original plans were not working – too many people wanted to ride the bike and the process ended up being us telling participants the rules instead of them reading them thus invalidating the initial study.

Luckily for us, this is where things got interesting!

Results

While the original communication experiment didn’t pan out, we were still able to gather very interesting findings.  Specifically we were intrigued by some of the insights we gained into extrinsic and intrinsic motivation, the power of leader boards, and the impact that specific goals have on performance.  First, let’s look at the overall results:

A total of 103 people rode the bike over the two days the exhibit hall was open (some participants rode multiple times).  Their performance is shown in table below.

Highest number of lights lit up 1 2 3 4 5 6
# of people achieving level 1 0 6 14 34 48
% of people achieving level 0.9% 0.0% 5.8% 13.6% 33.0% 46.6%
Average time to reach level
(in seconds)
15 0 68.7 46.1 32.5 20.6

The average ride time was 31.7 seconds – with the fastest time being 4.8 seconds and the longest time being 80 seconds.   There is some obvious differences based on physical fitness here as shown by the inverse time required to reach the different levels of lights (i.e., more time on average to reach 3 lights than 4 lights, etc.) which played out in how well people did.

Insights

Do you just want a shirt or are you looking for something more? 

We needed to have an incentive to get most people on the bike.  True, there were some who just wanted to get on the bike and see how many lights they could get, but the vast majority of the people got on the bike to earn the t-shirt.  In other words, they needed an extrinsic reward to participate.

But that’s not the interesting part…

The interesting part was that only one person stopped at the first light (1 out of 103, that’s less than 1%)!  Once they were on, the majority of participants moved past the threshold for earning a t-shirt and continued peddling to see what they could do.  This was not easy – we had the settings on the bike be rather hard. This meant that peddling for more than 15 seconds was difficult for most non-athletes.

We believe once they started the activity, they intrinsic motivation of the bike  kicked in.  The lights tracked their progress immediately and they could directly see how they were doing against the goal.  They wanted to see what they could accomplish.  They no longer worried about the t-shirt – but instead, focused on the event.

 In other words, they challenged themselves to see how many lights could they light up?

They had already committed to participate in order to acquire a t-shirt (the reward) – now they were pushing beyond what was required for the shirt because of the challenge that they were presented with.  If we think about the 4-Drive Model of Employee Motivation (for more info see here, here, here) we see that the Acquire component was instrumental in the motivation to initiate the event, but the ongoing motivation was propelled by the intrinsic drive to Challenge oneself and see how they could do.

Application:

The idea of using an extrinsic motivator to entice people to participate in programs or activities that they are not excited about and then allowing their natural Challenge drive take-over should not be undervalued.  Additionally, the more that a program uses a measure of goal progression, highlighting an individual’s progress, the more a participants Challenge drive is activated.  In other words, the design of your extrinsic incentive program can impact the intrinsic motivation that is activated. Finding cohesion between these extrinsic and intrinsic motivators can certainly help drive the right behaviors.

What’s up with the leader board?

We had a leader board where riders got their name featured if they were one of the five fastest people to light up all six lights.  They did not earn any additional extrinsic reward for being on the leader board – no fancy give-away, no grand prize, not even an extra t-shirt.

So did it make a difference?

Read More

Our new commercial

Behavioral Economics and Change

brain - left and right

Rational vs Emotional

For the past 20 years, I have been exploring how people change their behavior.  This exploration has led me down many different paths and lines of inquiry.  One of the most fascinating areas of research that I’ve investigated surrounds the now hot topic of behavioral economics.

I often describe behavioral economics as the “fusion of psychology and economics in order to gain a better understanding of human behavior and decision making.”

So what do we find out when we fuse psychology and economics together?

“Humans often act in very irrational ways.”

Now that is not ground breaking news for most of us.  Even when I graduated with an economics degree, I knew that people didn’t always act in rational ways – or at least I didn’t  (otherwise why would I stay up watching bad T.V. until 2:30 AM when I knew I had to get up by 7:00 AM for a meeting or why would I spend a hundred dollars on a dinner out but fret over buying a steak that was over $10 at the grocery store?).

However, for many economists, that statement was hearsay.  Many economic models are based on the fact that people act in rational ways to maximize their own utility (i.e.,  happiness).  These theories stated that we might make irrational choices in the short-term, or when we don’t have enough information, or that at least your irrational behavior would be vastly different than mine so that on average, we would be rational.

The truth discovered by behavioral economics is that is not often the case.  We don’t act rationally – in fact, we sometimes act exactly opposite of how an economist would think we should act.

For example, research has shown that we will judge the value of an unknown item using totally irrelevant data to help us in that decision.  Dan Ariely ran a wonderful study where he asked people to bid on a wireless keyboard (something that they were not very familiar with at the time), but before they answered, they had to write down the last two digits of their social security number (a totally irrelevant piece of data).   The results of the bid were fascinating (top 20% being SSN that ended in 80 or above, the bottom 20% being SSN that ended in 20 or below):

Anchoring results

This is a significant difference in how much they bid – entirely based on the last two digits of the SSN.

Here’s another one.

Would you work harder for a set amount (say $10) or for an uncertain amount (say 50% chance of $10 or 50% chance of $5)?  Most rational people would say that they would work harder for the guaranteed payout of $10…that isn’t the case.

In a study that looked at drinking a large amount of water in two minutes – some people were offered a $2 fixed amount for finishing it – the other group was told they would earn either $1 or $2 (random chance of either).  So what was the result?

Behavioral Econ Uncertainty

43% completion rate for the certain award versus 70% completion rate for the variable?  Not what you would think right?

Note – that this doesn’t apply to people choosing to participate – existing research suggests that we prefer certainty over uncertainty when deciding if we should opt-in for a goal.  However, uncertainty is more powerful in boosting motivation en-route to a goal.

So what does any of this have to do with change?

We so often want to drive change in ourselves or our organizations and think through the process of this – in a rational and systematic manner.  I’ve worked with companies who are baffled that they don’t see a long-term increase in employee productivity and satisfaction after they increase their wage (Hedonic Treadmill Effect).  I know people who have mapped out their exercise routine for the next day, only to hit the snooze button instead of getting up and going for their morning run (Hyperbolic Discounting).

Too often we try to implement a change program based on a belief that we are rational beings.

Behavioral economics highlights that this just isn’t the case.

Read More

Powered by WordPress & Theme by Anders Norén