A few months ago I attended a conference held by the American Council for an Energy-Efficient Economy. One of the interesting things they noted this year was about their lunch offering.

You might be surprised to know that meat production, between raising, processing, packaging, and preserving meat uses a lot of energy. In fact, Michael Pollan, author of The Omivore’s Dilemma once asserted that “A vegan in a Hummer has a lighter carbon footprint than a beef eater in a Prius” (it turns out that this was a bit of an exaggeration).

If you’ll note in the picture below, it seems that in this meeting (2009) the council was able to convince attendees to switch to a vegetarian lunch.

The trick, as I’ve blogged about before, was making the vegetarian option the default option! For the past two years, the council did not have any default and the vast majority of the attendants picked the meat option. This year they set up the vegetarian option as the default, and this yielded a more environmentally friendly results, with a mere 20 percent insisting on having their steaks (see the column for 2009).

The other good news is that the vegetarian option was also (in this case) more tasty and healthy.

The New York Times Magazine publishes once a year the “years in ideas.”

This is the third year in a row that they are picking one of my papers, which is very nice of them.

It is also particularity nice of them that this year they picked two papers I am a part of.

One of the papers they picked this year is: The Counterfeit Self

Her is their report:
Wearing imitation designer clothing or accessories can fool others — but no matter how convincing the knockoff, you never, of course, fool yourself. It’s a small but undeniable act of duplicity. Which led a trio of researchers to suspect that wearing counterfeits might quietly take a psychological toll on the wearer.

To test their hunch, the psychologists Francesca Gino, Michael Norton and Dan Ariely asked two groups of young women to wear sunglasses taken from a box labeled either “authentic” or “counterfeit.” (In truth, all the eyewear was authentic, donated by a brand-name designer interested in curtailing counterfeiting.) Then the researchers put the participants in situations in which it was both easy and tempting to cheat.

In one situation, which was ostensibly part of a product evaluation, the women wore the shades while answering a set of very simple math problems — under heavy time pressure.

Afterward, given ample time to check their work, they reported how many problems they were able to answer correctly. They had been told they’d be paid for each answer they reported getting right, thus creating an incentive to inflate their scores. Unbeknown to the participants, the researchers knew each person’s actual score. Math performance was the same for the two groups — but whereas 30 percent of those in the “authentic” condition inflated their scores, a whopping 71 percent of the counterfeit-wearing participants did so.
Why did this happen? As Gino puts it, “When one feels like a fake, he or she is likely to behave like a fake.” It was notable that the participants were oblivious to this and other similar effects the researchers discovered: the psychological costs of cheap knockoffs are hidden. The study is currently in press at the journal Psychological Science.

Could other types of fakery also lead to ethical lapses? “It’s a fascinating research question,” says Gino, who studies organizational behavior at the University of North Carolina. “There are lots of situations on the job where we’re not true to ourselves, and we might not realize there might be unintended consequences.”

The second paper they picked this year is: The Drunken Ultimatum

Her is their report:

The so-called ultimatum game contains a world of psychological and economic mysteries. In a laboratory setting, one person is given an allotment of money (say, $100) and instructed to offer a second person a portion. If the second player says yes to the offer, both keep the cash. If the second player says no, both walk away with nothing.

The rational move in any single game is for the second person to take whatever is offered. (It’s more than he came in with.) But in fact, most people reject offers of less than 30 percent of the total, punishing offers they perceive as unfair. Why?

The academic debate boils down to two competing explanations. On one hand, players might be strategically suppressing their self-interest, turning down cash now in the hope that if there are future games, the “proposer” will make better offers. On the other hand, players might simply be lashing out in anger.

The researchers Carey Morewedge and Tamar Krishnamurti, of Carnegie Mellon University, and Dan Ariely, of Duke, recently tested the competing explanations — by exploring how drunken people played the game.

As described in a working paper now under peer review, Morewedge and Krishnamurti took a “data truck” to a strip of bars on the South Side of Pittsburgh (where participants were “often at a level of intoxication that is greater than is ethical to induce”) and also did controlled testing, in labs, of people randomly selected to get drunk.
The scholars were interested in drunkenness because intoxication, as other social-science experiments have shown, doesn’t fuzz up judgment so much as cause the drinker to overly focus on the most prominent cue in his environment. If the long-term-strategy hypothesis were true, drunken players would be more inclined to accept any amount of cash. (Money on the table generates more-visceral responses than long-term goals do.) If the anger/revenge theory were true, however, drunken players would become less likely to accept low offers: raw anger would trump money-lust.

In both setups, drunken players were less likely than their sober peers to accept offers of less than 50 percent of the total. The finding suggests, the authors said, that the principal impulse driving subjects was a wish for revenge.

Lets see if this trend continues….

Sex, Shaving, and Bad Underwear
Or how to trick yourself into exerting self-control

Recently, I gave a lecture on the problem of self-control. You know the one: At time X you decide that you’re done acting a certain way (No more smoking! No more spending! No more unprotected sex!), but then when temptation strikes, you go back on your word.

As I mention in Predictably Irrational, this predicament has to do with our inherent Jekyll-Hyde nature: We just aren’t the same person all the time. In our cold, dispassionate state, we stick to our long-term goals (I will lose ten pounds); but when we become emotionally aroused, our short-term wants take the helm (Oh but I am hungry, so I’ll have that slice of cake). And what’s worse, we consistently fail to realize just how differently we’ll act and feel once aroused.

Fortunately, there’s a way around the problem: pre-commitments, or the preemptive actions we can take to keep ourselves in check. Worried you’ll spend too much money at the bar? No problem, bring just the cash you’re willing to part with. Afraid you’ll skip out on your next gym visit? All right, then make plans to meet a friend there. And so on. Pre-commitments can take many a form, and some get pretty creative.

For example, I surveyed my audience at the lecture hall for their pro-self-control tactics, and I received two noble suggestions. One woman reported that when she goes out on a date with someone she shouldn’t bed, she makes a point to wear her granniest pair of granny underwear. Similarly, another woman said that when faced with that kind of date, she just doesn’t shave.

Both are great ideas, I think, and are likely to work — well they’re certainly better than only relying on the strength of your self-control — but there is a risk. Let’s say the woman with the ugly underwear finds herself uncontrollably attracted to her date and decides that, you know what, ugly underwear be damned, there will be sex tonight! Chances are she will wake up in the morning wishing she had worn her silk lingerie after all.

Irrationally yours

Dan

p.s if you have any personal self control stories that you are willing to share — please send them my way

Change Begets Change
This is how you put a positive spin on the recession.

In a new study, Moore School of Business marketing professor Stacy Wood suggests that it’s in times of upheaval that we’re particularly inclined to leave our comfort zone and try new things.

On first thought, this sounds counter-intuitive. You would think that upon losing our job or girlfriend, we’d be more intent on crawling under the sheets with a favorite book or movie and lying low for a while – not deciding that now’s the time to quit smoking or take up sky-diving.

And yet, these are the very kinds of challenges that we’re likely to take on following a big life change, according to Wood. In her study, she ran five related experiments comparing participants’ consumer choices with the degree of stability in their lives at the time.

In the initial experiment, for instance, she had undergrads take their pick between a pack of tried-and-true Lay’s potato chips and a bag of unfamiliar and odd-flavored British crisps (Camembert and plum, anyone?). Afterwards, she handed out a questionnaire that checked for the number of changes occurring in the participants’ lives. And the result? The students who chose the unusual chips were also more likely to be experiencing lots of change at the moment.

Wood later switched up the order of the questionnaire and consumer choice task in a follow-up experiment, and in another she also expanded the choice test to include a wide range of items – and still, the results were the same. When she asked participants to think about either two big life changes or eight, those who thought of more chose the strange chips more often.

It seems that when we are confronted with one disruption to our daily routine, we become more open to other change. Or, to put it differently, when things break, we enter the right mind-frame for breaking our old habits as well. According to Wood’s rationale, this is because once something pivotal in our routine gets switched around, we’re no longer so attached to all the other habits that formed our daily script.

When it comes to our recessionary times, then, it appears that now is a good time for us to embrace all kinds of change. A tighter budget or shorter hours at work might be that catalyst you need to reevaluate your daily shot of Starbucks espresso or your aversion toward exercise. To paraphrase President Obama, (and for somewhat different reasons) now’s the time to believe in change.

We usually accept without argument the notion that man is at the top of the animal hierarchy. After all, only mammals have a neocortex – the most recently evolved part of the brain and the center of higher mental functions – and ours is the most advanced variation, so it makes sense that we’d be at a higher stage of development.

But is this true? Does the neocortex always make us more rational than other animals?

Most of the time, the answer is yes. For instance, it’s thanks to our neocortex that we are able to plan for the future, something that animals have a hard time doing. (They are even worse at saving than we are!)

Still, this isn’t always the case, as the following chimpanzee experiment suggests. In “Chimpanzees are rational maximizers in an ultimatum game,” researchers Keith Jensen, Josep Call, and Michael Tomasello looked into how chimps fare at one of the classic tests of human rationality, the ultimatum game.

In the human version of this game, a “proposer” is handed some money, say $10, and must suggest a division of the sum for himself and another participant. This other person, the “responder,” can then either accept or reject the offer. If he chooses to accept the division, both participants receive their share; if he opts to reject it, neither gets compensated.

Now, if we were to go by the traditional economic model of man as a self-interested rational maximizer, we would suppose that the proposers would always suggest a division that maximized his self-interest (an $9/$1 division) and that the responders would always accept a nonzero offer ($1 may not be $9, but it’s still better than nothing).

Except, this is not what happens. Research has shown that we human beings not only consider how best to maximize our compensation, but we also factor in such notions as cooperation and fairness when we make our decisions. For example, responders in the ultimatum game will often reject a monetary division that is particularly unfair for them (such as a $8/$2 division) – even when this comes at their own cost (they lose the $2, after all). This behavior is of course wonderfully human — but it is not part of the standard rational model.

Chimpanzees, however, go about the ultimatum game (which involves divisions of raisins in their case) without giving fairness any thought. In this experiment, the researchers found that the chimp responders tended to accept any nonzero offer, however unfair. And conversely, the chimp proposers rarely suggested a fair division, choosing instead to maximize their own share.

In this case, then, animals are more rational than we are. Whereas we’re willing to lose a couple bucks so that the other guy gets punished for his inequitable offer, chimps only act according to what will guarantee them the most raisons.

This curious turning-of-tables suggests that we might want to think differently about the neocortex. Overall, we’re better off having it, as without our sense of right and wrong, we would lack empathy and the ability to reinforce societal rules. Yet, in certain contexts, the neocortex can cause us not to maximize our self-interest. Evolution, then, is a mixed blessing: it makes us better some things, and worse at others.

The New York Times and Time Magazine have recently posted interesting articles about two new books that discuss consumer behavior: Chris Anderson’s Free and Ellen Ruppel Shell’s Cheap (see links in The New York Times and Time Magazine).

Both books reference our Hershey’s Kiss experiment that is described in Chapter 3 of Predictably Irrational. If you recall, in one trial of one study we offered students a Lindt Truffle for 26 cents and a Hershey’s Kiss for 1 cent and observed the buying behavior: 40 percent went with the truffle and 40 percent with the Kiss. When we dropped the price of both chocolates by just 1 cent, we observed that suddenly 90 percent of participants opted for the free Kiss, even though the relative price between the two was the same. We concluded that FREE! is indeed a very powerful force.

It’s important to note that we have carried out lots and lots of studies on the effect of FREE!, many of which are detailed in Predictably Irrational. Describing them all, however, would be too much for those who are trying to make just one point abut this effect, so naturally we see authors making choices about which experiments to describe and which ones to leave in footnotes, or not to mention at all. But, some  kinds of omissions are made as well — ones that are important for understanding the complexity of the effect.

For example, in one study of FREE!, we tried lowering the price from 2 cents to one cent on the Kiss to see if we observed that same level of increase in demand in the Kiss. We didn’t. In another study we also tried seeing what would happen if we lowered the price from FREE! to negative one cent, and we also didn’t see a difference in behavior. We also tried the experiment on a broad demographic–not just college students, but also on children and older adults.
Personally, I think it is perfectly fine for people to take the main point from some experiments and build on it, but as readers (and writers) we should realize that often there is more complexity to the picture and that before criticizing particular findings, or citing them as supporting evidence, we should keep in mind the nuances.

Motivating people is an extremely difficult and delicate task as anyone who’s ever taught, managed, collaborated with or given birth to someone knows. In business, as opposed to say, child-rearing, the debate is slightly less daunting, though not always much clearer. For instance, offering incentives to employees for improved performance is a fairly common approach to encouraging higher sales —though surprisingly unproven by data.

For the most part, the effectiveness of incentives is supported by intuition and some anecdotal evidence. Wouldn’t everyone work at least a little harder for a $100 bill on top of their usual paycheck? Certainly it can’t hurt. But one important open question is whether monetary or tangible (spa retreat, ipod, dinner for two, etc) rewards more efficacious motivators?

Those who advocate for monetary incentives claim they have the greatest appeal given that the winners can do anything with them; what if someone needs an ipod like they need another hole in their head? On the other side, those in favor of tangible incentives argued that money lacks the emotional appeal of, say, a weekend for two at a romantic country inn or swank hotel. But either way, there was nothing to back up either camp.

Thankfully, there is some data on this debate.  A few years ago Goodyear Tire & Rubber Company decided to test which method was more successful in an effort to improve sales of a new line of Aquatred tires. Their plan was simple and elegant: first they ranked their 60 retail districts according to previous sales, then divided them into two groups of equal performance and assigned one group to receive monetary incentives and the other to receive tangible incentives of equal value to the first group.

The results were very interesting; it turned out that the tangible-reward group increased sales by 46% more than the monetary-reward group. They also improved in terms of the mix of products sold by 37%. One explanation, and it seems to me a fairly good one, is that we can visualize tangible rewards (imagine yourself on a Hawaiian beach), which creates an emotional response. Money, on the other hand, is not accompanied by images as often (aside from maybe Scrooge McDuck swimming in piles of it), and lacks the emotional pull that tangible rewards have, so they’re less effective in motivating employees. I guess it’s called “cold, hard cash” rather than “future beach vacation cash” for a reason.

A few days ago Dan wrote about Don Moore’s research on how we accept advice from others. A lab experiment showed that subjects adhered to advice from confident, not necessarily accurate, sources. The findings of another research, led by Prof. Gregory Berns of Emory University, show another aspect of our reaction to advice.

Berns recorded his subjects’ brain activity with an fMRI machine while they made simulated financial decisions. Each round subjects had to choose between receiving a risk-free payment and trying their chances at a lottery. In some rounds they were presented with an advice from an “expert economist” as to which alternative they consider to be better.

The results are surprising. Expert advice attenuated activity in areas of the brain that correlate with valuation and probability weighting. Simply put, the advice made the brain switch off (at least to a great extent) processes required for financial decision-making. This response, supported by subjects’ actual decisions in the task, are troublesome, perhaps even frightening. The expert advice given in the experiment was suboptimal – meaning the subjects could have done better had they weighted their options themselves. But how could they? Their brains were somewhat dormant.

References:
Jan B. Engelmann, C. Monica Capra, Charles Noussair, Gregory S. Berns (2009). Expert Financial Advice Neurobiologically “Offloads” Financial Decision-Making under Risk.

“For the great majority of mankind are satisfied with appearances, as though they were realities, and are more often influenced by the things that ‘seem’ than by those that ‘are.'”
-16th-century Italian politician Niccolo Machiavelli

It’s something we come across regularly: presentation trumps content. Often what matters is not what we know, or what we have done, but rather how we spin it. It’s why cover letters are so important, and why the peripheral route to persuasion – one of advertising’s biggest weapons – works.

Now, Don Moore of Carnegie Mellon University demonstrated yet another way that we are heavily influenced by delivery — We tend to seek advice from experts who exhibit the most confidence – even when we know they haven’t been particularly accurate in the past.

In his experiment, Don had volunteers guess the weight of people in photographs, and paid them for their correct answers. But before each guess, the volunteers were asked to choose one of four advice-givers (also volunteers) from whom to buy advice. Each advice-giver submitted their weight guess in percentage form, with some advisers spreading out their advice over multiple weight ranges. So, one advisor might have said that there was a 70% chance that the person’s weight was 170-179 pounds, a 15% chance that it was 160-169, and a 15% chance that it was 180-189. A more confident advisor, however, would have put all his eggs in one basket and said there was a 100% chance that the weight was within the 170-179 range.

Now here’s the really important part: in each round, before they chose their adviser, volunteers got to see each adviser’s percentage spread, but not the associated weight ranges. (See this really handy chart for more on the set-up.)

What did Moore find? Volunteers were more likely to buy advice from confident advisers (such as the 100% adviser from above) than those who spread out their percentages. What’s more, this tendency led advisors to make their advice more and more precise in subsequent rounds – but not more accurate.

These findings are troublesome. Because though confidence and accuracy sometimes go hand-in-hand, they don’t necessarily do so. And when we want confident advisors, some will exaggerate to give us what we want.  Maybe this is why so many pundits on TV for example exaggerate their certainty?

Our prehistoric ancestors spent much of their waking hours foraging for and consuming food, an instinct that obviously paid off. Today this instinct is no less powerful, but for billions of us it’s satisfied in the minutes it takes to swing by the store and pop a meal in the microwave. With our physical needs sated and time on our hands, increasingly we’re finding psychological outlets for this drive, by seeking out and consuming concepts.

Conceptual consumption strongly influences physical consumption. Keeping up with the Joneses is an obvious example. The SUV in the driveway is only partly about the need for transport; the concept consumed is status. Dozens of studies tease out the many ways in which concepts  influence people’s consumption, independent of the physical thing being consumed. Here are just three of the classes of conceptual consumption that we and others have identified.

Consuming expectations. People’s expectation about the value of what they’re consuming profoundly affects their experience. We know that people have favorite beverage brands, for instance, but in blind taste tests they frequently can’t tell one from another: The value that marketers attach to the brand, rather than the drink’s flavor, is often what truly adds to the taste experience. Recent brain imaging studies show that when people believe they’re drinking expensive wine, their reward circuitry is more active than when they think they’re drinking cheap wine – even when the wines are identical. Similarly, when people believe they’re taking cheap painkillers, they experience less relief than when they take the same but higher-priced pills.

Consuming goals. Pursuing a goal can be a powerful trigger for consumption. At a convenience store where the average purchase was $4, researchers gave some customers coupons that offered $1 off any purchase of $6, and others coupons that offered $1 off any purchase of at least $2. Customers who received the coupon that required a $6 purchase increased their spending in an effort to receive their dollar off; more interestingly, those customers who received the coupon that required only a $2 purchase to receive the dollar off actually decreased their spending from their typical $4, though of course they would have received their dollar off had they spent $4. Consuming the specific goal implied by the coupon – receiving a savings on a purchase of a designated amount — trumped people’s initial inclinations. Customers who received the $2 coupon left the store with fewer items than they had intended to buy.

Consuming memories. One study of how memories influence consumption explored the phenomenon whereby people who have truly enjoyed an experience, such as a special evening out, sometimes prefer not to repeat it. We might expect that they would want to experience the physical consumption of such an evening again; but by forgoing repeat visits, they are preserving their ability to consume the pure memory – the concept – of that evening forever, without the risk of polluting it with a less-special evening.

While concepts can influence people to consume more physical stuff, they can also encourage them to consume less. Offering people a chance to trade undesirable physical consumption for conceptual consumption is one way to help them make wiser choices. In Sacramento, for example, if people use less energy than their neighbors, they get a smiley face on their utility bill (or two if they’re really good) – a tactic that has reduced energy use in the district and is now being employed in Chicago, Seattle, and eight other cities. In this case, people forgo energy consumption in order to consume the concept of being greener than their neighbors.

We suggest that examining people’s motivations through the lens of conceptual consumption can help policy makers, marketers, and managers craft incentives to drive desired behavior – for better or for worse.

by Dan Ariely and Michael I. Norton

The full paper on which this article is based is available here.