How Do Behavorial Scientists Think We Should Deal With Reason And Emotion In Our Decisions?

The balancing act is tricky, and I think context and desired outcomes matter. For example:

  1. Two MindsA thirty-year old might have problems saving for retirement because they think of savings as being for stranger. The solution might be to increase emotional connection between the thirty-year old and their future self so that the right behavior of saving can be achieved.
  2. A person might be emotionally attached to their home and as a result, they might try to sell their home at too high of a price. It might be better if they can loosen their emotional attachment and feelings of endowment. Getting 3rd party perspectives might be helpful to the seller in terms of distancing themselves so they can set a reasonable market price.
  3. Sometimes it’s hard to control emotions and desire, and people may try to precommit to a state so that proper decisions are more likely to be made in spite of the situation. I have heard of behavioral economists pouring salt over desserts at dinner (after they’ve had a few bites to get the taste) so they are less inclined to eat the whole thing.

The main takeaways are that there are essentially “two minds” at work, and they work in concert in different ways. Sometimes you need emotion. Sometimes you want less of it. Sometimes you can’t really change your emotions so you need self-control devices and external perspectives. Other times you need to try to slow down thinking. There are many different approaches.

This post is based on an answer to a question posed on Quora.

What Could Be the Relationship Between Design, Behavioral Sciences and Innovation?

One concept that I describe in my recent book, Inside Nudging: Implementing Behavioral Science Initiatives, draws from Roberto Verganti. He uses the term, “Design-Driven Innovation.” I re-coin the concept as “Meaning-Driven Innovation” to ease the explanation a bit. The concept is that in order to innovate under such a framework, one needs to change the relationship between the product or service and the end user. In this framework, the designer must address the question, “what does the product or service mean to the end user?”

In my book, I describe how colleagues and I created an app to help retirees plan for their retirement journey with guidance from a financial advisor. This effort involved equipping financial advisors with some software tools (informed by the behavioral sciences) that they could use with retirees to help the retirees discover blindspots, form priorities and deal with cognitive/emotional difficulties, and reflect on risks more thoroughly. The upshot of our design approach was to try to change the relationship between the advisor and retiree. We wanted the advisor to mean more to the retiree than just a person involved with fees, funds, and fiduciary responsibility. We wanted advisors to evolve to become trusted financial and life advisors. See a figure from my book below:

Figure 4-6

The meta meaning that we played to one was about connection, creating a new connection between the advisor and retiree. There are other meta meanings to describe relationships with products and services though. For example, there can be products that help to transform people. Or there can be products whose design and meaning are to protect. Or products can be designed to make a person feel more in control.

In summary, one possible relationship between behavioral science, design, and innovation is about changing the meaning between products/services and people through use of behavioral science principles (whether these principles come from psychology, behavioral economics, or the like).

This post has been cross-posted as an answer to a question posed on Quora.

Navigating Behavioral Science Applications


The concept of nudging and more specifically the behavioral science phrase of “no neutral design” has strong historical ties to social and public sector issues. The motivation for the phrase goes something like this. We have to provide people with information and choices, such as part of governing a country and during driver’s license application processes, social security claiming processes, and hundreds (possibly even thousands) of other processes. During those processes, we present information and choices as part of designs, and there is some nudging which may influence people’s perceptions and choices in predictable ways. For example, when presenting a set of choice options in list format, a cognitive bias known as the primacy effect may be observed where people tend to be influenced more by the first option in the list. But some option has to be first in the list. So in this case we cannot totally avoid the risk of primacy effect biases. And more generally, we cannot avoid many other types of biases and influences studied in behavioral science. All forms of structure and designs affect behavior. Hence, there is no neutral design, and we need to be deliberate about the behavioral architecture surrounding the way things are designed.

These considerations also play a role in the private sector. And I see a lot of cases where companies may not be conscious about how behavioral science influences come into play simply because they weren’t thinking about them. And that’s the problem. It is a corollary to no neutral design. Because we design things in the private sector, we influence behavior. We can either be diligent to consider behavioral science considerations or not. In other words, we need to avoid accidental behavioral architecture in our designs. We need to navigate toward deliberate behavioral architecture.

Now we can’t predict how everything will turn out for a design through understanding behavioral science. However, we can get a lot smarter about things and about how to manage companies that can better implement and navigate behavioral science. That’s why I’m writing the book, Inside Nudging: Navigating Behavioral Science Applications. The book is not intended to explore detailed behavioral science principals as covered in other great books like Thinking, Fast and Slow (Kahneman 2013) or The Last Mile (Soman 2015). My real focus is to shed light on how behavioral science concepts are implemented in companies and how to get an organization further along the maturity curve in terms of implementation. These management considerations sometimes require a more detailed appreciation of behavioral science. For example, it is hard to really explore management considerations of behavioral science and ethics without delving into areas like System 1 versus System 2 thinking, nudge controllability, moral psychology, and the like. To implement behavioral science more effectively, companies need grit – the ability and fortitude to succeed. Behavioral GRIT™ is a key framework that I refer to in Inside Nudging, and it represents orchestrating companies relative to Goals, Research, Innovation, and Testing.

Inside Nudging: The Excerpts is available in paperback form for talks, workshops, and academic inquiries. The excerpt version of the book includes:

  • Chapter 1: Behavioral Science Centered Design in the New Black – This chapter both sets the foundation for deliberate behavioral architecture and the lenses that we need to examine company efforts through.
  • Chapter 2: Organizations Can Package Behavioral Science for Good – This chapter describes a case of using behavioral finance in the retirement plan design space.
  • Chapter 8: Nudges Refined, Ethics Examined, Acceptability Explored – This chapter introduces Nudge Psyche, a checklist of things to think about so that you can be deliberate about how you approach nudge design and ethics.
  • Appendix A: Ideas to Introduce Behavioral Science Initiatives – This appendix explores predominant organization models (such as an innovation center) and a number of implementation elements that may play a role during execution (such as an advisory board and a behavioral science officer position).

Thanks for reading. I welcome your companionship on this journey and your feedback. Visit www.InsideNudging.com for more info.

New Resolutions and Fresh Starts

As we approach the year-end, I wanted to share some thoughts from my book, The Consulting Apprenticeship: 40 Jump-Ideas for You and Your Business. It is a technique that I’ve seen a number of operating companies and management consulting firms use effectively. I’ve usually called it the Spring Cleaning technique, to connote a sense of renewal that often comes with the pastime of cleaning and refreshing a home early- to mid-year. That said, the technique can really be applied at any time of year.

The Spring Cleaning technique consists of an executive- or management-level meeting to talk about the business in breadth, capture issues (no-holds barred), rank issues, strategize, and divide and conquer. The basic value of a Spring Cleaning management team meeting is as follows:

  • The meeting forces people to think proactively. While management may have regular weekly management meetings, it becomes easy to become caught up in the day-to-day grind and push off things that people don’t have time for but know are important.
  • The manager that oversees the functional line roles has an opportunity to reset expectations and goals. The psychology of starting fresh can re-energize the organization.
  • Involvement of a consultant can provide a third-party perspective, and in some cases, extra project bandwidth to overcome organizational inertia. The consultant may be expected to work with all of the parties above to prepare information in advance, facilitate meeting discussions, organize issues and action items, and develop a project structure for making and tracking progress. The consultant can essentially act as right-hand person to the sponsoring manager.

In the Spring Cleaning meetings that I have worked on, typical meetings may last a couple of days. The first day of meetings may involve level-setting and brainstorming on strategies. Between these days, the consultant may work to organize the notes, data, or perform analyses. The next day of meetings may be spent working through the high points, prioritizing, and identifying more detailed next steps.

While situations vary, the consultant may be retained as a both a project manager for the larger effort and as specialist to work with a specific functional group to implement change. In these change management situations, the organization may be trying to get over humps or change course while running the business. The value of the project management aspect should not be underestimated.

Two other options that I’ve seen are to include specialized workshops that can either:

  • precede the Spring Cleaning meeting (as a standalone workshop)
  • be more tightly integrated into the Spring Cleaning meeting.

As an example of the first option, I am co-hosting Behavioral Economics Workshops in conjunction with one of my colleagues and partners, Namika Sagara at Sagara Consulting. For those unfamiliar with the term behavioral economics, it is a field that has really grown and examines the psychology of how people form judgments and make decisions. Companies may apply behavioral economics to solve problems in innovative ways. More information on Behavioral Economics Workshops can be found at www.BehavioralEconomics.Info.

It’s rarely a good idea to treat business as usual. Stay on your toes, and take a moment to brainstorm and think about the possibilities of a workshop, renewal session, or Spring Cleaning meeting. Please feel free to reach out to either Namika or me if you want to set up a short call to brainstorm.

Namika Sagara, namika at sagaraconsulting.com

Steve Shu, steve at steveshuconsulting.com

 

Update on Inside Nudging and Other Behavioral Science Efforts


I’ve published an update to Inside Nudging: The Excerpts (in paperback form for talks, workshops, and academic inquiries). The update includes:

  • Chapter 2: Organizations Can Package Behavioral Science for Good – This chapter describes a case of using behavioral finance in the retirement plan design space. I use this case to demonstrate one example of what a successful innovation center might look like. I also provide a summary using the Behavioral GRIT™ framework, where GRIT stands for the business functions related Goals, Research, Innovation, and Testing.
  • Chapter 8: Nudges Refined, Ethics Examined, Acceptability Explored – This chapter introduces Nudge Psyche, a checklist of things to think about so that you can be deliberate about how you approach nudge design and ethics. It attempts to help design by thinking about things from two broad perspectives: nudge design and nudgee attitudes. This chapter has been one of the most difficult ones for me to write as it draws from  a diverse set of research and literature areas including decision science, medical ethics, government, organizational behavior, behavioral science, and moral psychology. I have found the Nudge Psyche checklist to be very helpful though as implementation in the real world can get grey at times. The Nudge Psyche checklist can help one to tease apart the underlying issues.

The chapter excerpts are also complemented by Appendix A: Ideas to Introduce Behavioral Science Initiatives, which I quietly published earlier based on increasing interest by companies in learning about how to get started with behavioral science. I argue that first a company needs to identify its goals and identify what type of predominant organization model it wants to pursue. This may be an innovation center like I describe in Chapter 2. I also define four other predominant organizational models I’ve seen. I also offer that a company should consider a number of implementation elements that may play a role during execution. Example elements include an advisory board and a behavioral science officer.

As a final update, I plan to give a limited number of talks on Inside Nudging and co-host Behavioral Economics Workshops in conjunction with one of my colleagues and partners, Namika Sagara at Sagara Consulting. More information on the workshops can be found here.

Behavioral Economics and Innovation Workshops


I am co-hosting Behavioral Economics and Innovation Workshops in conjunction with one of my colleagues and partners, Namika Sagara at Sagara Consulting. The goals of these workshops are twofold. First, the workshops teach and demonstrate key behavioral economics (BE) concepts to participants. Second, the workshops provide an introduction to how companies can implement BE initiatives. In-class exercises and a mock innovation setting provide an experiential learning process for internalizing BE knowledge and skills. More information on the workshops can be found here.

A Perspective on How Behavioral Economists Think We Should Deal With Reason and Emotion in Decision Making

I thought I would re-post an answer to a question I was asked to answer on Quora, as it illustrates a conceptual flavor of how knowledge of behavioral economics can be applied to help navigate behavioral obstacles and opportunities.

The question:

How do behavioral economists think we should deal with reason and emotion in our decisions?

My answer:

The balancing act is tricky, and I think context and desired outcomes matter. For example:

  1. A thirty-year old might have problems saving for retirement because they think of savings as being for stranger. The solution might be to increase emotional connection between the thirty-year old and their future self so that the right behavior of saving can be achieved.
  2. A person might be emotionally attached to their home, and as a result, they might try to sell their home at too high of a price. It might be better if they can loosen their emotional attachment and feelings of endowment. Getting 3rd-party perspectives might be helpful to the seller in terms of distancing themselves so they can set a reasonable market price.
  3. Sometimes it’s hard to control emotions and desire, and people may try to precommit to a state so that proper decisions are more likely to be made in spite of the situation. I have heard of behavioral economists pouring salt over desserts at dinner (after they’ve had a few bites to get the taste) so they are less inclined to eat the whole thing.

The main takeaways are that there are essentially “two minds” at work, and they work in concert in different ways. Sometimes you need emotion. Sometimes you want less of it. Sometimes you can’t really change your emotions so you need self-control devices and external perspectives. Other times you need to try to slow down thinking. There are many different approaches to applying behavioral economics concepts.

What Are The Best Management Consulting Books?

There are four books that I recommend as core to the generic practice of consulting. These are:

  1. The McKinsey Way by Ethan Rasiel
  2. Process Consultation by Edgar Schein (dry read)
  3. Flawless Consulting by Peter Block (optional and highly recommended for those coming from engineering versus consulting backgrounds)
  4. The Pyramid Principle:Logic In Writing and Thinking (for managers & consultants especially) by Barbara Minto

Beyond the generic core, there are three major dimensions that come to the top of my mind when considering practitioner-level knowledge of the management consulting space:

I have developed a working reading list that attempts to cover many of the areas above. It is a list for entry-level to advanced management consultants. It can be found here.

And for those readers seeking books and information on getting a job with a consulting firm, there are a number of other books out there. One site that sells such a book (“The Consulting Interview Bible“) is ManagementConsulted. As an aside, back in 2009 Kevin Gao (ex-McKinseyite) interviewed me for ManagementConsulted’s Life as a Consultant series.

The best historical account of the consulting industry I’ve read is The Lords of Strategy: The Secret Intellectual History of the New Corporate World by Walter Kiechel

Finally, I just released a book entitled The Consulting Apprenticeship. The book focuses on nuances passed on during apprenticeship and complements the four books I mention at the beginning of this post or can be read standalone. More info at ConsultingApprenticeship.com.

The Consulting Apprenticeship is available for purchase at Amazon.

Edit (November 28, 2017): I just completed a new book, So What Strategy by Davina Stanley and Gerard Castles. The two authors began their consulting careers at McKinsey & Company (communications specialists). The book is thematically aligned with the books above, and I’ve written a review of the book here: The So What Strategy – A Highly Recommended Book for Business Communications. I also recommend considering their online courses here.

My Behavioral Science, Design, and Business Book Reading List

As I was gathering my thoughts for my Inside Nudging project (www.InsideNudging.com), a project that I envision tying together the application of behavioral science in business contexts and providing more of an inside look at innovation, strategy and implementation, I wanted to take stock of books that have probably influenced (liberally interpreted) the way I look at behavioral science.

Perhaps you’ll find something of here of interest to you for your weekend read. I am also open to getting more book recommendations. Thanks!

Psychology, Behavioral Economics and Finance

  • Phishing for Phools (Akerlof and Shiller)
  • Drunk Tank Pink (Alter)
  • Predictably Irrational (Ariely)
  • The (Honest) Truth About Dishonesty (Ariely)
  • The Upside of Irrationality (Ariely)
  • Save More Tomorrow (Benartzi and Lewin)
  • The Smarter Screen (Benartzi and Lehrer)
  • Thinking Smarter (Benartzi and Lewin)
  • The Foundations of Behavioral Economic Analysis (Dhami)
  • Risk Savvy (Gigerenzer)
  • Stumbling on Happiness (Gilbert)
  • The Why Axis (Gneezy and List)
  • The Happiness Hypothesis (Haidt)
  • The Righteous Mind (Haidt)
  • Inside the Nudge Unit (Halpern)
  • Decisive (Heath and Heath)
  • Made to Stick (Heath and Heath)
  • Thinking, Fast and Slow (Kahneman)
  • The Undoing Project (Lewis)
  • Dance with Chance (Markridakis and Hogarth)
  • The Irrational Economist (Michel-Kerjan and Slovic)
  • Scarcity (Mullanainathan and Shafir)
  • Democracy Despite Itself (Oppenheimer and Edwards)
  • Irrational Exuberance (Shiller)
  • The Last Mile (Soman)
  • Simpler (Sunstein)
  • Misbehaving (Thaler)
  • Nudge (Thaler and Sunstein)

Design

  • Hooked (Eyal)
  • Designing with the Mind in Mind (Johnson)
  • The Design of Everyday Things (Norman)
  • Envisioning Information (Tufte)
  • Designing for Behavior Change (Wendel)
  • Design-Driven Innovation (Verganti)

Business and Strategy

  • Negotiating Rationally (Bazerman and Neale)
  • Freakonomics (Dubner and Levitt)
  • Blink (Gladwell)
  • The Tipping Point (Gladwell)
  • Yes! (Goldstein, Martin, and Cialdini)
  • Blue Ocean Strategy (Kim and Mauborgne)
  • Insurance & Behavioral Economics (Kunreuther, Pauly, and McMorrow)
  • Behavioral Economics and Policy Design: Examples from Singapore (Low)
  • Drive (Pink)
  • Absolute Value (Simonson and Rosen)
  • Wisdom of Crowds (Surowiecki)

Communication

  • The Pyramid Principle (Minto)
  • The Sense of Style (Pinker)

On My Future Reading List

  • The Power of Noticing (Bazerman)
  • Happy Money (Dunn)
  • Switch (Heath and Heath)
  • Irrationality in Health Care (Hough)
  • The Art of Choosing (Iyengar)
  • The Organized Mind (Levitin)
  • King William’s Tontine (Milevsky)
  • The Marshmallow Test (Mischel)
  • Antifragile (Taleb)

PS. Here is a teaser video based on Chapter 1 of my book, Inside Nudging.