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The Behavioral Way Summit II Madrid

I’m excited to be part of The Behavioral Way Summit II Madrid!

The second edition of the most important Behavioral Science event in Spain and Latin America will take place on 14th and 15th November. It promises to be an unforgettable experience!

Given my heavy involvement in industry and the application of behavioral economics, I’ll focus on some key things companies should consider as they either start or look to implement the next phase of behavioral initiatives. What have we learned in the past 15 years in the commercial space about taking science to the field? What are some business mindsets that worked when the field was younger but are no longer appropriate? What are some mindsets from business management that need to be added to make applied behavioral science even more effective?

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When Selling Consulting Services, How Can One Avoid Giving Too Much Away?

This post is an answer to a question I was posed on Quora, “How can you avoid giving too much away when selling consulting?” I wanted to repost the answer to this question as I know that there many younger professionals and former students of mine out there that either want to become more involved with business development or try to strike out with their own consulting pursuits.

Here are some thoughts on how I’ve tried to keep sales processes on track:

  1. As you are engaging the client prospect, try to envision the big picture for the solution approach to the prospect’s business problem. For example, you may see that the client needs to a) better articulate the problem statement and the key priorities (vision), b) decide on an approach (strategy), and c) execute on all the tactical operational things to carry out the strategy (tactics).
  2. Communicate the big picture approach to the client.
  3. Try to add some value by helping them to articulate and refine the problem statement and perhaps also add a detailed item or two that they should consider as part of the more detailed solution approach workstreams. Yes you might consider this giving something away, but you will need to be able to add value and show the client how you are thinking to be able to sell to them consulting services. The client prospect needs to be able to trust you.
  4. Keep your pre-sales activities pretty tight. For example you might limit your pre-sales sessions to 2 to 3 meetings of 1–1.5 hours each. This will also help to provide some separation between planning and doing the work. If you are doing a good job selling your services, you should be able to tell within say the first 1-3 sessions whether you have a serious sales prospect and what the high-level requirements are to close the deal. Note you might be able to get to a high-level proposal or conceptual approach after the first 1–2 meetings.
  5. For many deals, you should be making it clear to the prospect that you are trying to better understand the problem statement so that you can propose the right approach to solving the problem; you are not solving the problem right there as solving the problem will take days, weeks, or months of collaboration and work.

To recap, make sure that both parties understand the problem statement. Both parties should understand the approach and should appreciate that solving the problem will take both time and work. Offer some value to the client in advance of sale; this does not necessarily have to be much, but you need to establish credibility and trust. Finally, set some expectations on the cadence and timeline to get to a proposal or no-go decision.

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Tipflation + Deception: a mini-case example of ethics through a lens of behavioral economics

A few weeks ago, we covered ethics in my behavioral economics class at Cornell Tech. The case example below strikes me as tipflation + pure deception, which involve ethical issues stacked on top one another and put the end consumer in a terrible place (e.g., stating tip as 25% but providing an actual dollar tip amount that is even larger, say 38%, under the guise that it is actually 25%). First of all, the consumer has to determine what is fair and deserving to leave as a tip, and that is complicated in of itself because they often can’t judge how tips are split among the restaurant operations staff and other. Secondly, both tipflation and deception nudges likely prey on fast thinking psychological processes and may disproportionately affect those with lower numeracy (and possibly socioeconomic status). The nudge to “check your math” is likely moving in the right direction, but it takes reflective, slow thinking and a certain level of math skills and cognitive stamina (which could be additionally challenging if someone is cognitively depleted after a meal).

To recap some items we discussed in class, these include:

  • Goal alignment between the nudger and nudgee
  • Degree of control and influence of the nudge (e.g., to what extent a nudge invokes fast System 1 automatic thinking versus slower System 2 reflective thinking)
  • Fairness considerations (e.g., moral foundation theory or organizational justice principles, such as procedural justice)
  • Heterogeneous treatment effects (e.g., negative effects on those with lower socioeconomic status, numeracy, cognitive stress or depletion)

https://www.foodandwine.com/tipflation-restaurant-tipping-scams-8642517

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My Future Self Podcast on Democratizing Nudges


Podcast timeline by YoutubeDigest:

  • 00:15   Exploring the democratization of nudges to enhance organizational awareness and accessibility of behavioral science, shedding light on various models and ethical considerations.
  • 05:02   Initiating a behavioral finance institute and delving into the intersection of psychology and economics, highlighting the importance of understanding behavioral economics in navigating financial decision-making.
  • 09:26   Analyzing the multifaceted aspects of retirement planning, including decomposing the problem, aligning goals, and acknowledging uncertain outcomes, while tracing the emergence of behavioral science from foundational work to its current application in various sectors.
  • 14:04   The expansion of behavioral decision-making groups in academic institutions has led to increased labor in the market and the emergence of boutique consultancies, advocating for the incorporation of behavioral economics principles across various business sectors, suggesting a gradual implementation approach starting with anchor areas to foster organizational learning and maximize effectiveness.
  • 18:41   Addressing retirement preparation as a marathon with potential hazards, emphasizing the importance of simplifying choices, enhancing financial literacy, and reframing savings concepts, while advocating for pension system adaptability to accommodate evolving work dynamics and longevity.
  • 23:27   Advocating for a balanced approach in encouraging smarter savings behaviors, addressing the diverse perspectives on longevity and health, advocating for increased research and collaboration, and fostering leadership that prioritizes sustainability and inclusivity in pension systems.
  • 27:56   AI, like ChatGPT, presents opportunities for automating tasks but requires human oversight to mitigate biases, particularly in decision-making processes where AI may inherit similar biases to humans, highlighting the importance of careful framing and consideration of alternative explanations.
  • 32:39   AI platforms exhibit strengths and weaknesses, offering insights into when to integrate them into decision-making processes while also emphasizing the importance of democratizing access, raising awareness, and simplifying usability to ensure broader adoption and equitable benefits for all.
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Example, Early Results from Generative AI and Behavioral Economics Testing

As a follow-on post to summer 2023 exploratory work that is happening with the Behavioral Economics Research and Education (BERE) Lab, we’ve started to compile early results. Here are some test result summaries of different AI platforms based on the conjunction fallacy test (Linda problem). Note that platforms vary based on degree of live access to the internet and incorporation of slower System 2 thinking influences (although these characteristics are also confounded with platform implementation). Here we test ChatGPT 3.5, Bing Chat AI (based on GPT 4), and Google Bard.

Interesting questions to reflect on:
– How do AI platforms differ?
– Which gets things right?
– Which do you trust?
– To what extent will AI adoption get impacted by use case, accuracy, and trust?

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The Behavioral Economics Research and Education (BERE) Lab by Stephen Shu

For the past two summers, I have personally volunteered to spend time helping a limited number of students pursue interests in behavioral economics and build their resume of experiences. For this summer, I will expand my efforts somewhat, although I hope to eventually find a more sustainable and scalable model in terms of funding, operations, and potential synergies with other organizations.

Here’s the natural extension of what I’ll be doing for the summer of 2023.

The Behavioral Economics Research and Education (BERE) Lab by Stephen Shu is an effort geared toward helping college students and young professionals with either the empirical or applied practice of behavioral economics. BERE efforts are in support of open science and the advancement of education. Where possible, students or young graduates may be supported by grants, and BERE welcomes opportunities to help students and young graduates obtain grants or corporate sponsorship.

Students and young graduates may pursue exploratory replication studies, expansion research studies, and corporate-focused research (for use in educational settings). Where possible, students are encouraged to develop empirical or professional skills (e.g., R or Stata statistical software, Python programming, communications, writing).

The research theme for 2023 includes exploratory work around the intersection of generative artificial intelligence (AI) and behavioral economics, such as similarities and differences between AI and human decision making across different platforms.

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Jump-Start Books for Consulting Project Classes

I teach a couple of consulting projects-type courses at Cornell. One is a Grand Challenges capstone-class for Dyson undergraduates in helping companies and organizations address one or more of the 17 UN Sustainable Development Goals. The other is a flagship-project class that is part the Masters in International Management program as part of the global CEMS Alliance, and it involves student collaborations and exchanges with 33 other top business schools and universities.

Each of these cohorts has different team compositions, problem statements, and situations to address for their client. Projects can involve diverse topics like addressing sustainability of the food supply chain and manufacturing capacity, promoting economic development and greater social equality in another continent, customer and market fit of a new product, workforce evolution given Gen Z, or marketing, branding, and product strategy for an international company.

Although projects are diverse and hard to find common bases of foundational knowledge, I have found it helpful to have bite-sized jump start material to help students get grounded. As part of the core, I have provided excerpts from my own book on bread and butter consulting concepts (for free), references to The So What Strategy for consultative communications, and a breathtaking short pocket reference to Scrum. These are all quite short books as evidenced by the spine thickness. People don’t have a lot of time to read given the heft and time pressures of projects.

Given that quite a few projects involve customer discovery, market fit, and/or diverse constituent interviews, I have decided to also add “Talking to Humans” as part of the reference books that I’ll draw from for these courses. It is a quick read book that can be completed in 1-2 hours. And it can be a great book to go back to for quick reference before doing any qualitative customer / product research.

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