Richard H Thaler and Cass R Sunstein explain how we need to nudge ourselves towards making better decisions.
Nudge is a pretty forensic dissection of how we fallible humans make decisions. More specifically, it explores why, even when we know that eating healthily, saving for the future and quitting smoking are the right things to do, we often make choices based on short-term rather than long-term goals.
It was written by two big names in US politics and economics: Richard H. Thaler, economist, professor at University of Chicago Graduate School of Business and author of Quasi Rational Economics; and Cass R. Sunstein, legal scholar, professor at the University of Chicago Law School and author of Infotopia. The original smartest guys in the room.
Not at all. Thaler and Sunstein are generous and self-deprecating in their sharing of personal experiences of such bad choices. It’s refreshing, but also scary to think that even the best educated can still fall foul to systematic errors of judgement.
Just being aware of the tricks our minds play on us is a huge step towards making better decisions. But the great thing about nudge theory is that it presents ways in which “choice architects” can encourage society as a whole to do better.
It's a person or organisation who creates and presents the options available to us in any decision. The choice architecture in a supermarket, for example, is dictated by the merchandiser who chose to put the priciest options at eye level, and the producer of the bags of crisps sold only in extra-large bags.
Well, yes and no. These architects aren’t forcing us to make bad choices. They are just taking advantage of our pre-existing uselessness. People have trouble with decisions because the brain has two distinct systems; the automatic system, and the reflective system, both of which present problems.
The automatic system provides immediate emotional responses, such as smiling at a giggling baby, or grimacing in the rain. Nothing wrong with that, but it’s also the system that tells you that you deserve a chocolate bar on a bad day, even when you know an apple would be better for you. Or the instinct that (incorrectly) tells you that you probably won’t have a heart attack because no one you know has had one, as you order your third fast-food meal of the week.
The reflective system requires conscious thought, which means a whole lot of extra effort, research, attention to detail and rational balancing of options. This can be overwhelming.
Take something like choosing what type of mortgage is best for you. Comparing options is difficult when all the providers (choice architects) use different language, have different terms and fixed vs variable rate options, and different set-up fees.
Indeed. The nudge theory is a super logical and applicable answer to this problem.
A nudge is a subtle form of influence that can encourage us to make a better decision. Imagine if the shelves next to the till in the cafe were stocked with fruit instead of brownies. We’d likely all save ourselves about 250 calories a day.
And how many times have you remembered to attach the file only because your email provider asked “did you mean to attach something?”. Nudges can save time and embarrassment, too.
There are loads of mechanisms on hand for nudging us to make better choices. Apps which ask you to report your behaviour don’t just do what they say on the tin; they make us question the behaviour in the first place as we know we’ll have to ‘own up’ to it later.
Other apps exist that require you to deposit money, which you only get back if you meet your goal. As an incentive to succeed, you can decide who gets the money if you fail – your rival football team, perhaps. (Stickk.com)
The ways in which nudge theory could be employed does sometimes feel more like a personal wishlist than a viable business strategy or opportunity for societal betterment. But imagine how much money the NHS would save if the level of everyone’s general health improved just by a few percent.
They can make it easier for us to make good decisions – seeing as we are so terrible at it when left to our own devices.
A great example of this having already been achieved is the introduction of the opt-out (or default) pension scheme, where choice architects play on the fact that most people will choose to do nothing if that is an option. More people have pensions in place now than when a proactive decision had to be made to get one.
Yes:
reducing the number of options.
presenting the right amount of information at the right time.
giving past examples of how each option has turned out.
Are we on the road to utopia?
Wholesale changes around impact and sustainability will be needed in order for corporations to be motivated to ‘do the right thing’. But for government bodies and public organisations, nudges could be the key to real behaviour change.
“Listen to your head, not your heart.”
“Just go with your gut!”