The Applied Guide: How Behavioral Economics Makes Everything Better, Vol. 2, Part 1

The Applied Guide: How Behavioral Economics Makes Everything Better, Vol. 2, Part 1

Author: Jordan Birnbaum

Set The Default To SUCCESS

“Human beings are inherently lazy.”

I hear or read some variation of this point way too frequently, as I have a major problem with it. (Or at least with the word choice.)

“Lazy” conjures images of the couch, Netflix binging and pizza delivery. Somehow, that falls short for me of accurately describing the sum total of human aspiration. Nonetheless, I understand the point this platitude tries to make. It’s an effort to describe human efficiency with mental energy.

People do not possess an unlimited amount of mental energy and focus. Throughout our day, we continually must choose where to spend it. We do this by switching back and forth between automatic (“System 1”) and reflective (“System 2”) thinking, which respectively require little and much mental energy. This distinction is a major focus of Daniel Kahneman’s groundbreaking Thinking Fast And Slow.

To conceptualize the differences between automatic and reflective thinking, compare driving somewhere you’ve been 100 times with driving somewhere you’ve never been before. One takes a lot less mental effort than the other, right? (Or at least it did before GPS mercifully arrived.)

To understand people, we must recognize that the human condition causes us to revert to automatic, System 1 thinking whenever possible. Sure, it’s easier and more comfortable, which is why the “lazy” line keeps getting repeated, but that’s not the whole story.

Reverting to automatic thinking is also crucial. If you engaged exclusively in reflective thinking from the moment you woke up, you’d be useless by breakfast. (OK, maybe not that fast, but you would definitely run out of mental energy at some point during the day.)

We have to revert to automatic System 1 thinking so that we have the energy for reflective System 2 thinking when we need it. Do you remember the heuristics and biases we discussed in previous posts (Vol. 1, Part 1 and Part 2)? You got it – those are part of our preferred System 1 thinking, which is why we love to use them so much. (Oh, and by the way, thank you so much for spending some quality Type 2 thinking with me!)

That explains why practitioners try to create messages and designs that are effective through automatic, System 1 thinking – because that’s where the people are. This is what the term “intuitive design” often describes.

Alternatively, any time we communicate or design anything that requires reflective, System 2 thinking, we offer an intrinsic incentive to disengage with it. Clearly, in a complex world, requiring reflective thinking is often unavoidable. Yet even minimizing the amount of System 2 thinking can make a huge difference in engagement.

Understanding System 1 and 2 thinking lays the groundwork to introduce three important concepts articulated in Thaler and Susstein’s Nudge.

  1. Mindless Choosing – This term describes the function of making decisions and choices while engaged in automatic, System 1 thinking. This is a very common state for people, one in which they are very susceptible to the influence of biases and heuristics.
  2. Choice Architecture – It is literally impossible to offer an unbiased choice. Even the ordering of words or images can create a bias towards one option over the other. As such, every choice ought to be intentionally designed transparently to favor the desired outcome, hence “choice architecture.”
  3. Libertarian Paternalism – Even a biased choice is still a choice. The freedom to choose is crucial towards driving buy-in and engagement, hence “libertarian.” However, since those choices are unavoidably biased, choice architects have an ethical obligation to “nudge” towards choices that serve the best interests of the end users, hence “paternalism.”

A consideration of choice architecture, libertarian paternalism and mindless choosing highlights the power and potential of an incredibly effective tactic to drive human behavior: the default option, also known as “what happens when people do nothing.”

I realize that something as seemingly commonplace as “the default option” as my big reveal runs the risk of stimulating the following response: “Well…duh. Thanks for stating the blatantly obvious. And in only 650 words!” (That’s OK – I speak sarcasm.)

Yet as surprising as it may be, you will find countless situations in which the default option is not set to the desired outcome. For instance, it’s only in the last few years that companies have begun to default people into retirement savings programs (from which they can opt-out), and it has made a massive difference very quickly. If it was so obvious, what took so long?

We have now reached the portion of the post devoted to describing various scenarios in which you can use the default option to your major benefit. Yet, my propensity for verbosity has brought us once again to the reasonable limits of reflective thinking. (Sorry.)

So Part 2 of this post is soon to follow, in which I share several examples of the power of the default option, including one recent story in which the default option made a big difference in my own career. Until then, design your choices carefully, and be sure to set the default to “SUCCESS!”

Jordan Birnbaum is VP and Chief Behavioral Economist at TalentX, an ADP Venture.  In his role, Jordan is responsible for the integration of behavioral economics into software design and marketing communications of new talent-based products. Jordan has more than 20 years experience as a start-up specialist and entrepreneur, as a Founder / Senior Vice President at Juno Online Services and Founder / CEO of The Vanguad, Los Angeles.  Jordan holds a BS from Cornell University and a Master’s degree in I/O Psychology from NYU.

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