Читать книгу The Behaviour Business - Richard Chataway - Страница 9

Chapter 1: Undoing Economics – A New Way of Thinking

Undoing economics

When i was at university 20 years ago, behavioural science as a field of study was virtually non-existent.

But now, things are very different. In addition to flourishing academic courses on behavioural science, behavioural economics and experimental psychology, there are over 200 behavioural insights teams operating with local and national governments around the world. Leading companies are installing chief behavioural officers, and working with businesses like my own to embed this understanding into their work.

The history of behavioural science, and how it has led us to a richer, more accurate understanding of what drives our behaviour, is really a classic underdog story. It is the story of how the 300-year-old goliath of traditional economic theory, which sees humans as rational operators, has been felled by a group of determined academics – in particular the ground-breaking work of Daniel Kahneman and Amos Tversky3 – using the slingshot of behavioural economics.

What is heartening is that this new way of thinking – that humans are not purely rational, utility-maximising calculators, as neoclassical economics often assumed – is fast becoming the norm. Forward-thinking governments around the world are embedding this approach into their policy. The world of business is actually lagging (badly) behind.

But times are changing. When running training courses in behavioural science, I like to gauge knowledge in the room by asking which of the leading popular science books on the topic (like Thinking Fast and Slow and Nudge) people have read. Ten years ago, between 10–20% of people in the room had one or more of those books. These days the ratio is usually over 50%, as the base level of knowledge has grown.

In addition to building that knowledge and understanding within a business, either by hiring those lucky enough to study it or buying it in from outside, what can a business do to ensure it is always focused on changing behaviour? And what, structurally and strategically, does focusing on behaviour mean in a business?

That is what we shall explore in this part of the book. But first, let’s examine what is new about this way of thinking, and what it means for businesses in general.4

Why is behavioural science important for business?

After the 18th century,5 academic theory about how people behaved was mostly based on a traditional economic theory of utility maximisation. That is, every human decision was based on a simple rational weighing up of the pros and cons of a particular action. Professors Richard Thaler and Cass Sunstein, the authors of Nudge, call this straw-man version of humans an ‘econ’, or homo economicus – because it is someone who only exists in the pages of an economics textbook. Like the character Spock from Star Trek, they are a totally rational operator, ungoverned by emotions.

And, like Spock, they are not human.

Let’s take an example – why people commit crime – to show the flaws of this approach. The University of Chicago economist and Nobel laureate Gary Becker devised what is known as the Simple Model of Rational Crime (SMORC) to explain why crime happens. This states that, in any given situation, a potential criminal weighs up the benefits of the crime (e.g. the financial gain) versus the potential costs (e.g. likelihood of being caught and going to jail).

According to this theory, the Enron fraudsters, for example, made this cost-benefit analysis and (wrongly with hindsight) decided the money they made was worth the risk of their actions. That risk being jail time and the future insolvency of the business.

The problem with SMORC, like most neoclassical economic theory (and financial models and management/marketing theory derived from it), is it assumes the Spock model of humans as totally rational beings who only act based on self-interest.

If this were true, all of us would be committing certain low-risk crimes on a daily basis. As Dan Ariely, James B. Duke Professor of Psychology and Behavioural Economics at Duke University writes:

“We wouldn’t make decisions based on emotions or trust, so we would most likely lock our wallets in a drawer when we stepped out of our office for a minute … There would be no value in shaking hands as a form of agreement; legal contracts would be necessary for any transaction … We might decide not to have kids because when they grew up, they, too, would try to steal everything we have, and living in our homes gives them plenty of opportunities to do so.”6

If you have ever tried to stop some form of dishonest behaviour in business – over-claiming on expenses, or stealing lunches from the communal fridge, for example – you will know this is not an accurate picture of how people behave. Increasing the chances of being caught (emailing the company saying you are checking expenses more thoroughly in future, for example)7 will not solve the problem.

This is because emotions play a key part in decision-making: our behaviour is not just governed by financial benefit. Although it fell in 2018 to 72% from normal levels of 90%,8 the murder detection rate in London is so high that no one would ever rationally consider it a wise course of action. Yet over 130 murders were committed in the capital that year, most of which had no obvious utility to the perpetrator. Clearly, there are other drivers of criminal behaviour.

Ariely’s work has shown that emotions can be effectively used to combat dishonest and illegal behaviour. In one case, he reduced the proportion of over-claiming (cheating) made on a simple insurance form by 15%.

How? Simply by moving the standard ‘I promise that the information I am providing is true’ declaration from the end of the form, to the beginning. This made the honesty requirement more salient 9 – and made no difference to the costs or benefits of the crime.

This is one example of how social psychology, the discipline that looks at social interactions (i.e. how people behave in the real world as social beings) has given us insights into how external factors affect our behaviour. This gives us a better model of understanding how people make decisions – in particular that our behaviour is subject to many behavioural biases, and mental short-cuts, to help us navigate the world around us.

The genius of the work of Kahneman and Tversky (and others) was to start testing and codifying some of these biases – coining the term ‘heuristics’ to cover some of the most prevalent decision-making short-cuts – and then to devise a coherent model to explain why these heuristics lead us to often make non-rational, counter-intuitive or erroneous decisions.

In short, they told us how humans actually behave. And businesses are run for, by, and with humans – for the time being at least.

Social norms and social proof

Have you ever been in an unfamiliar place and been looking to find somewhere good to eat? Imagine you see two restaurants – both look reasonable, clean places, with good menus serving food you like.

One is busy, bustling and full of happy, laughing customers. The other has a sad-looking man in the window, eating alone. Which do you choose?

Most of us would choose the former. This is an example of how social proof (our behavioural bias to look to others like us to validate our behaviour) and social norms (our perception of what most other people like us are doing) are powerful influences on our behaviour. If something is popular with our ‘in-group’, we desire it more. Even though, in this case, the second restaurant would serve us quicker and possibly give us better service, since they might be more grateful for the custom.

There is an evolutionary logic to this, as with most behavioural biases. Seeing others like us behaving in a certain way shows that it is a safe, validated and rewarding course of action. The restaurant must be good if all those other people are using it, right?

Most people are familiar with colloquial versions of this effect, like peer pressure and herd mentality, and the restaurant trade uses the effect better than most. A TripAdvisor certificate at the door showing a 5-star rating is leveraging social proof.10

Simply showing something is popular can influence behaviour. In 2010, Facebook deployed an ‘I Voted’ button (below) showing how many users had voted as part of a campaign to encourage turnout in the US Congressional election. Versions of the button, or no button at all, were shown to 61m people in a joint study by the University of California in San Diego and Facebook data scientists. They used voting records to determine the button’s impact on real-world voting. It turns out the button’s call to action increased the total vote count by 340,000 votes.

But more interestingly, the version of the button which showed whether the individual user’s friends (i.e. people they actually knew) had voted was four times more effective than the version with just the ‘I Voted’ button and the total number. This demonstrates that to get the best out of social proof we need to consider who the most important influences are (in social psychology terms, defining the in-group).

Source: Nature (www.nature.com/articles/489212a)

Care needs to be taken that highlighting bad behaviour doesn’t have an unintended consequence of making it seem normal – known as negative social proof. For example, highlighting the amount of alcohol drunk by students on a university campus had the effect of increasing the perceived norm amongst students, leading to the average student drinking more.11 It’s not hard to see examples of this misapplication – a GP surgery putting up a sign saying that 200 people missed their appointments last month will likely increase the number of missed appointments next month, not decrease.

The solution is to use positive framing (e.g. 99% of our patients attend their appointments) or highlight the ‘injunctive’ norm (what people should do), rather than the ‘descriptive’ norm (what they actually do). Road signs say that the speed limit is 30mph – they don’t tell you that most people actually drive at 35.

So next time you go to a quiet restaurant and are encouraged by a waiter to sit in the window (so others can see you) – you have experienced social proof in action.

Two systems of thinking – designing for Homer

These heuristics and biases are important because we use them to help us make the thousands of decisions required every day.

“Many people are overconfident, prone to put too much faith in their intuitions,” wrote Kahneman. “They apparently find cognitive effort at least mildly unpleasant and avoid it as much as possible.”12

In short: we think less than we think we think. As Thaler and Sunstein put it, we are often less like Spock, and more like Homer Simpson.

Kahneman popularised the term ‘system 1’, or ‘fast’ thinking, to explain these instinctive, emotionally driven, less-conscious decision-making processes. Our more rational, ‘slow’ decision-making – which adheres more closely to the Spock view of behaviour – he called ‘system 2’. Subsequently, behavioural scientists have identified the circumstances when we are in system-1 mode when making decisions, and (to date) over 200 different heuristics and biases that come into play.

The importance of this is twofold: one, we have chronically under-estimated just how much of our decision-making is of this instinctive type, with some estimates indicating that it accounts for between 90–95% of our daily behaviour; two, that only by understanding these heuristics and biases can we effectively explain, influence and change behaviour.

We are more like Homer Simpson than we care to realise or admit. These behavioural biases are hugely important in determining how we behave, and perform an important function – not least because of our increasingly complicated lives, where we are often over-burdened with information and stimuli. Over the course of this book, we will see examples of how understanding biases can help us successfully address behavioural challenges.

This melding of psychological and economic thinking about behaviour, which became known as the discipline of behavioural economics, is the closest thing we have to a unifying theory of decision-making. In 2002, it earned Kahneman, a psychologist, the Nobel prize for economics.13

This work has shown that when considering influencing behaviour in business it is important to think about whether you are dealing with Homer or Spock. Because you will be dealing with Homer more often than you might realise.

Availability bias and saliency

Availability bias is a phenomenon that explains a lot of human behaviour, particularly aspects that are obviously irrational. It reflects how our worldview is determined largely by the information available to us. As Daniel Kahneman puts it: in psychological terms, ‘What You See Is All There Is’ (WYSIATI). As a result we often overestimate the likelihood of events because they are more mentally available – that is, easier to bring to mind because they are easily remembered or particularly relevant to us.

The most obvious manifestation of this is phobias. What are you afraid of? Snakes or spiders perhaps? Arachnophobes like myself will explain our fear in all sorts of ways. Snakes are slimy (they’re not), spiders are big and hairy and menacing (many are, but not the sort you meet in Uttoxeter).

The wealth of information now at our fingertips through the proliferation of news channels, the growth of the internet and so on has enhanced some of these biases. Unfortunately, humans tend to give more credence to information that confirms their existing views (as a result of confirmation bias, see page 143), and our demand for that information dictates the information available, in a vicious cycle of fear-mongering.

Have a look at the data overleaf. There is a huge difference between what actually is likely to kill us and what we think will kill us (and therefore worry about). The chart at the bottom shows what the media actually tells us to worry about. ‘If it bleeds, it leads’ as the old journalistic mantra has it – even in reputable news sources like the New York Times and Guardian. And so, our perceived risk of death by terrorism (for example) is unrealistically high as a result.

Source: Aaron Penne

Saliency is an important, related concept – things that are more relevant, noticeable and recent are more emotionally striking, and therefore more mentally available. “If you have personally experienced a serious earthquake, you’re more likely to believe that an earthquake is likely than if you read about it in a weekly magazine,” say Thaler and Sunstein in Nudge.

For businesses, mental availability is hugely important. If your products and services are easy to bring to mind, and you build the right associations with them, then you can more easily influence how people behave in relation to them. As we shall see in part six, this goes a long way to explaining how marketing and advertising actually works.

How behavioural science changes how we think about business decision-making

When Kahneman was in the Israeli Air Force during the turbulent 1960s (when Israel was in frequent, bloody armed conflict with its neighbours), he was working in a role commonly taken by psychologists in business today.14 He was designing training and assessment to achieve the best possible performance from their staff – in this case, fighter pilots.

Instructors told him they believed criticism worked better than praise as a strategy to influence their students’ behaviour. As Michael Lewis writes, “The pilot who was praised always performed worse the next time out, and the pilot who was criticised always performed better. Danny [Kahneman] watched for a bit and then explained to them what was actually going on: the pilot who was praised because he had flown exceptionally well, like the pilot who was chastised after he had flown exceptionally badly, simply were regressing to the mean. They’d have tended to perform better (or worse) even if the teacher had said nothing at all.”15

That critical insight led Kahneman and Tversky to one of the key theories behind their model of how humans make decisions, specifically the representativeness heuristic.16 Their psychologically informed way of looking at behaviour shows us how behavioural science can change the way businesses approach problems, and the value of psychology in solving them.

Firstly, it tells us a lot about data. The data seemed to confirm that the actions of the teacher were working. They criticise, then the student performs better. But, as any statistician can tell you: correlation does not equal causation. In business, we too frequently use data to support an existing viewpoint of what works, and not to challenge it.

Secondly, the teachers were so convinced they were right, they had not sought to independently verify if they were correct.17 There was no incentive for them to challenge this received wisdom. Most of us would probably have done the same, and believed that praise and criticism work in this way.

It was only by independently verifying this through experimentation that they found it was a false assumption. If a business does not value the scientific method, then its understanding of what really influences behaviour will always be limited – because why challenge what you intuitively think works?

Kahneman later wrote: “it is part of the human condition that we are statistically punished for rewarding others and rewarded for punishing them.”18 It is only if you accept that it is also part of the human condition that we make these systemic, system-1-led errors, and are frequently flawed decision-makers as a result, that you arrive at the often counter-intuitive insights and solutions that deliver business success.

Thirdly, what the teachers reported was happening was not what was actually happening. Because a greater proportion of our actions than we realise are subject to the unconscious heuristics and biases studied by behavioural scientists (i.e. we are Homer more often than we think), simply taking at face value what people say about their behaviour only gives you part of the answer. Or, as in this case, a completely wrong one – because they were focusing on one isolated data point, which was not representative. They were concerned with the output of this process (the next flight), not the overall desired outcome (delivering a consistently successful pilot).

The Israeli Air Force subsequently changed its approach to assessing and feeding back on performance as a result of this research – no longer reviewing based on isolated incidents and biased perceptions, and providing feedback accordingly.

If, as a business, you want to get to the truth about behaviour, you need to look at the data based on observed, actual (and not claimed) behaviour over time. And focusing on accurate measures of actual behaviour – rather than other metrics that focus on attitudes, awareness, or opinion – is the only way to truly become a behavioural business.

In the remainder of this part, we will look at what we can learn from this approach to build a behavioural business – and how the correct use of observable data on actual (not claimed) behaviour, via the scientific method, can give a competitive advantage. But first, we shall look at what we can learn from how governments have been applying science to change behaviour.

3 If you are interested in that story, and the people behind it, then I’d strongly recommend reading Michael Lewis’s account of the work and friendship of those two pioneers: The Undoing Project.

4 If you have read Thinking Fast and Slow, Nudge or other books, or have an academic background in behavioural science, then much of the following paragraphs will be familiar.

5 Largely based on the work of Swiss mathematician Daniel Bernouilli and expected utility theory. There is a lot of lively academic debate about how the seminal 18th-century economist, Adam Smith, was actually well aware of the irrationalities of human decision-making and incorporated it into his theories – what he called the ‘passions’ versus the ‘impartial spectator’ in The Theory of Moral Sentiments. But whether he was truly the first behavioural economist is outside the scope of this book.

6 The (Honest) Truth About Dishonesty, Ariely D, Harper Collins (2012).

7 In this case, this possibly creates a negative social norm, explained on page 10.

8 www.theguardian.com/uk-news/2018/dec/12/london-homicides-now-highest-in-a-year-for-a-decade

9 Explained on page 14.

10 Such is the influence of online review sites that restaurants, hotels etc. have become somewhat obsessed, and the system has been gamed by some unscrupulous practitioners. This was hilariously demonstrated in 2017 by Vice journalist Oobah Butler, who created a fake restaurant called The Shed at Dulwich, based at his garden shed in south-east London. Using his experiences writing fake reviews for £10 for real restaurants, he got his friends to write fake TripAdvisor reviews in sufficient volumes to become rated in the top 2,000 restaurants in London. As part of the hoax, he shot fake Instagram pictures of the food (including a ham hock that was actually a close up of his ankle) and created made-up dishes such as vegan clams. He leveraged scarcity bias (explained on page 29) by creating a phone number and website for appointment-only bookings (which was never answered). Despite not actually existing, it became the top-rated restaurant in London in 2017. Butler staged an opening night for the restaurant, serving thinly-disguised £1 ready meals to ten customers. Despite having been blindfolded and then led down the alley past his house to the end of the garden and the shed, some said they wanted to come back and would recommend it. (www.theshedatdulwich.com)

11 citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.470.522&rep=rep1&type=pdf

12 Thinking Fast and Slow, Kahneman D, Penguin (2011).

13 Undoubtedly his long-time friend and colleague Amos Tversky would have jointly been awarded this prize also, but he sadly died in 1996.

14 I am a board member for the Association for Business Psychology in the UK, and the majority of our members are business psychologists whose role at least partly involves assessing performance of people and teams in work.

15 The Undoing Project, Lewis, M, Penguin (2018).

16 This is where an event is assumed to be more likely because it shares characteristics of its category – even though this has no effect on likelihood. In this case, criticism led to a better performance, so the assumption was this was the cause and effect.

17 An example of confirmation bias, explained on page 143.

18 The Undoing Project.