Gigerenzer: on money and heuristics

Prof. Gerd Gigerenzer gave a talk at the London School of Economics the other day on the wisdom of decision making. The director of the Max Planck Institute for Human Development in Berlin offered some valuable insights into how to make decisions under risk vs uncertainty

His advice was simple: if there is risk (known options and chances of winning and losing), one should rely on models and Big Data, but if there is uncertainty (unknown risks and chances), one should follow her/his “gut instinct“. As opposed to Kahneman and others, Prof. Gigerenzer thinks it’s good to rely on heuristics. His formula:

2014-05-21 19.37.11-1

He also gave advice on how to make successful investments: instead of using Pierson Moskowitz’s complex formula, better to “allocate your money equally to each of N funds”.

Simple and easy! How successful? Will have to find out.



The power of personalised messages

Apparently UCL not only preaches, but also uses behavioural insights.

Screen Shot 2014-05-06 at 22.30.33

Well, when the Vice-Provost himself writes to you (wink, wink) and calls you by name, you cannot ignore the message, can you? I answered the call mainly to count for the success of the intervention (if they measure this), because I was happy to read between the lines they have a psychologist in the team.

Individualised messages have a significant impact on the response rate, and it would have been even better to add a social norm: *19,867 students have already completed the survey.

There are a lot of nudges inside this message: from showing empathy for my time and money spent on UCL, to being polite (a peripheral route to persuasion), yet simple – they know we don’t read long emails. I also like how personal it gets: not only I am addressed by my first name, but the email is signed by a real person, and not by a team (or, even worst, no one).

So, my dear readers with customers, this is a good example of a persuasive message.

*educated guess, plus some big numbers as anchors

Applying Behavioural Insights to change my own life II

Almost 2 months of eating vegetarian food: proud of my achievement, especially because it is more about behaviour change rather than any other reason involved.

I promised to update some of the techniques I use, and I mostly wanted to speak about a simple framework: EAST, designed by a smart team. It should be Easy, Attractive, Social and Timely.

harness the power of defaults: vegetables are always there, I don’t need to decide what to eat each time.
reduce the ‘hassle factor’: I always buy meatless products, it’s somehow more simple to eat meatless when there’s no meat around to make me crave.

attract attention: whenever my partner buys meat, I tend to do a bit of choice architecture in the fridge – the colourful, fresh vegetables are always in the front rows, and my food looks amazing all the time. It’s easy to pick it up and pleasant to eat.
– design rewards and sanctions for maximum effect: my rewards are purely motivational, as my self-esteem increases every time I choose to go meatless. Sometimes is harder than others, but this creates a positive attitude and high confidence that I can do what I want.

public commitments work! I told everyone around me I am a vegetarian, so I can’t even touch bacon without being harshly judged. I have to keep my promise to them, if not to myself!

– it’s easier to change behaviours if the habit is already disrupted, so I decided to go vegetarian immediately after I returned from a trip to Barcelona, when my eating habits were disturbed anyway.

The EAST framework is not only easy to use, but specially designed to change people’s behaviours by policy-makers. You can find more about it here.

Behaviour change: the COM-B model

Earlier this week, at the Designing and Characterising Behaviour Change Interventions event, UCL Centre for Behaviour Change launched a useful tool for those interested in behaviour change interventions: The Behavioural Change Wheel. Based on the COM-B model (capacity, opportunity, motivation and behaviour), the Wheel offers valuable insights into designing and implementing strategies for behaviour change, by synthesising 19 behaviour change frameworks and policies to a theoretical analysis of the target behaviour in context.

(source here)

The COM-B model is a new method of specifying intervention content in terms of their Behaviour Change Techniques (BCTs), and has been pioneered at UCL. More here.

Landfills in the UCL library

Sooo, exams finished, more time to read what I mostly enjoy, maybe write here more often too.

While doing some work in the library, I noticed how annoying it is that people don’t recycle. Paper, food waste, plastic cans: everything goes in the same place. I asked someone why there aren’t any bins to recycle and the answer was students don’t use them. I can hardly believe this, so I sent them an email with my request and a solution for it: to nudge people to recycle more, stick photos of landfills on the general bin. If students actually see what happens with their waste, they will probably recycle.

This is how UCL Science Library cluster room looks like now:


I’m looking forward to seeing the outcome, and hopefully post a different picture next time.

2 years of London Behavioural Economics Network

April’s Behavioural Economics Network meeting brought together two people I admire: Rory Sutherland, from Ogilvy, and George Loewenstein, from Carnegie Mellon University. I met some friends there, found others, and listened to a talk on, well, what else than the importance of behavioural economics?

For those of you who didn’t make it that evening, here are the videos (you can also read the transcript here):

Choice Architecture: the decoy effect

Also known as the asymmetric dominance effect (1), the decoy effect is a phenomenon noticed when people have to choose an option from a choice set, when a decoy is employed.

The decoy is a high-price, low-value product compared to other items in the set, expected to distort the choice towards a targeted item (1). This low-value choice is not expected to be chosen: its purpose is to be a reference point for another item which has both high-price and high-quality (2).

One of the most known studies (3) is the newspaper subscription experiment. Students were asked to choose from a set of three options a monthly subscription for a newspaper:

web subscription – $59, (chosen by 16 students)
print subscription – $125, (not chosen)
web and print subscription – $125; (chosen by 84 students)

The result is amazing: 84% of the students chose the last option. The highly expensive, low-value print subscription is a decoy that makes the last option look better.

In a second test, the decoy option was removed. The results looked different:
web subscription – $59 (68 students)
web and print subscription – $125 (32 students)

Calculating the newspaper’s revenue in these two conditions seemed to explain the use of a decoy.

Now, imagine what happens if you go in a travel agency to book a vacation. Out of the next options, which one would you choose if prices were equal?

– 10-day trip to Athens, with five dinners included
– 10-day trip to Rome, with breakfast and spa facilities included
– 7-day trip to Rome, spa facilities included

I would choose to see more options, of course.

1. Puto, C. (1982). Adding Asymmetrically Dominated Alternatives: Violations of Regularity and the Similarity Hypothesis. The Journal of Consumer Research, 9(1), 90-98.
2. Josiam, B. M., & Hobson, J. P. (1995). Consumer choice in context: the decoy effect in travel and tourism. Journal of Travel Research, 34(1), 45-50.
3. Ariely, D. (2008). Predictably irrational (p. 20). New York: HarperCollins.

Applying Behavioural Insights to change my own life

I decided to turn vegetarian. Yes, I love animals and I believe there is just a game of chances that we spoil cats and kill chickens, yet my affection for living creatures and a sort of disgust for blood are not the only reasons for this radical decision. I decided to apply behavioural change strategies on myself and this seemed a good goal.

How it works (and it works, do not bring the “discounting effect” of priming as a cons):

creating negative associations: I try to pair meat with blood. I like meat, but I’m sensitive to blood. So whenever I see a chicken breast sandwich or a burger, I try to imagine that meat being full of blood.
* to work, the association must be real. In this case, in order to have meat, for sure some blood was lost, because a living creature had to die.

the mirror technique: research shows that we are more prone to eat healthily if we see ourselves in the mirror. We usually seek positive self-knowledge, we like to see ourselves as being good and nice and deserving. Looking at myself in the mirror before going to the kitchen / out to eat will remind me that I don’t want to be bad.

creating rules: no moment of hunger. Our cognitive energy is limited during the day, if I don’t eat enough and I’m hungry and tired, I might have to fight with both hunger and the decision to refrain from meat.
* this also means eating before going out or before someone starts cooking: if I’m hungry, I’ll just eat something I find around and that something is likely to be meat.

the default option: meatless is the standard, if I crave a hamburger, I have to decide to go and buy it, or decide if it’s good or not and why it isn’t and go back to some of the stages I mentioned already. So vegetables and fruits are the norm, and the effortful decision is opting for meat.

I will gradually post other tricks I use. For now, I just started and it’s going surprisingly well.

A Beginner’s Guide to Irrational Behaviour, by Dan Ariely

I am sometimes surprised to hear people’s reactions to what I study. “Psychology, aha, unrelated to this event. What brings you here?” My honest answer is that exactly psychology brings me wherever I go. It’s hard to speak about business without considering behaviours. Yours or others, be they your clients, colleagues, managers. Whenever you say “people”, you say attitude. You say behaviour. You just said psychology.

One of the most important knowledge I ever came across is Dan Ariely‘s book, Predictably irrational. It’s one of the best works published on Behavioural Economics – psychology married to business.

Dan Ariely just started another series of “A Beginner’s Guide to Irrational Behavior”, an online MOOC on Coursera. He will cover some of the material from his 3 books: Predictably Irrational, The Upside of Irrationality, and The Honest Truth About Dishonesty.

I highly encourage everyone to take this course. It’s free, it’s fun, it’s life-changing, and you will understand why psychology is important.

Babies of the Borough

I spent my sunny Sunday in South-East London today. It’s a place renown for its high criminal activity. And I remembered a campaign created a while ago by Ogilvy and Mather which tries to decrease criminality.

In Woolwich, antisocial behaviour is reduced in an unconventional way: local baby faces are painted on the walls of shops shutters. Baby faces seem to promote a caring response in human beings and this project uses the environment to moderate behaviours.

_62351763_babyshopsposterimageSource: BBC

I felt safe today. For sure CCTV contributed to this feeling. Yet, it’s in our human nature to be careful and protective when it comes to helpless babies. It’s how we make sure our species survives. You wouldn’t hurt a baby, would you?