So, today I tried one approach for office hours

We had some complexities and a learning curve, but I think this technology has a future for such “office hours”.

Tomorrow at 12 (EST) I will try this again, this time with a different technology, holding online office hours with Duke this Friday, July 31, at noon Eastern Time.

Feel free to ask questions, in advance or during the event, three ways: 1) Post a comment on this Facebook page — http://apps.facebook.com/dukeuniversitylive/. 2) Send an email to live@duke.edu. 3) Post a Twitter comment with the tag #dukelive. Or write comments on this blog in advance.
You can also watch on Ustream (http://www.ustream.tv/dukeuniversity) or Facebook (http://apps.facebook.com/dukeuniversitylive). <http://apps.facebook.com/dukeuniversitylive>  <http://apps.facebook.com/dukeuniversitylive>

After both of these attempts, we will see what approach to adapt….

This is another lovely example of people getting annoyed with companies (this time with United Airlines over breaking up a Taylor guitar), and making it into a revenge type of advertisement.

On July 30th, I’m going to hold a virtual office hour 12:00PM-1:00 PM EDT.

I’ll talk about some new research that we’ve been doing and will take some questions.

I recently started using GoToMeeting, and I am looking forward to see how it works on a larger scale.

If you want to take part, and have a question that you’d like me to try to answer, shoot me an email in advance at dan at predictablyirrational dot com.

Directions to join the office hours:

on Thursday, July 30 at 12:00 PM EDT.
1.  Click on this link
https://www2.gotomeeting.com/join/249041699

2.  Use your microphone and speakers (VoIP) – a headset is recommended. Or, call in using your telephone.
Dial 309-946-4601
Access Code: 249-041-699
Audio PIN: Shown after joining the meeting
Meeting ID: 249-041-699

Irrationally yours

Dan

I pleased to announce a new series of short fictional stories written by Duke undergraduate students who took my Behavioral Economics class this last spring.

I will post another one of these stories twice a month for the next few months.

The first story is called “A Pinch of Saffron,” which is about a business executive who redesigns her mother’s traditional Indian restaurant to monetize on people’s irrationalities. You can download it here.

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.

I found this quote in a wonderful book called 3 men in a boat.  The book was written in 1889 by Jerome K. Jerome, and interestingly it does not seem that much has changed since then.

I knew a young man once, he was a most conscientious fellow and, when he took to fly-fishing, he determined never to exaggerate his hauls by more than twenty-five percent.
“When I have caught forty fish,” said he, “then I will tell people that I have caught fifty, and so on. But I will not lie any more than that, because it is sinful to lie.”

A few people purchased the original version of Predictably Irrational since it came out in February 2008.

Now that the expanded edition is out, it seemed to me that the right thing would be to get the extra material to those who have purchased the book already.  After discussing this idea with HarperCollins, my publisher, we decided to try an honor system for distributing the extra material.

So — if you purchased the original version of Predictably Irrational and you want the extra material, please email  piexpanded@gmail.com and we will email you back the added information in 3 PDFs (a new introduction, added material about the original chapters, and reflections about the financial markets).

Irrationally yours

Dan

“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?

What if on your next coffee run, you discover that Starbucks has started running on the honor system? All the baristas are gone, and in their place, you find Tupperware filled with coins and bills. Would you pay for your daily soy Latte? Or would you “forget” to shell out the five bucks? Be honest.

This, of course, is only a thought experiment, as I doubt Starbucks will be adopting the honor policy anytime soon. But in another part of the world, it’s a real question that residents are facing on a daily basis. As the New York Times recently reported, the attorney general’s office in Indonesia has been opening thousands of “honesty cafes” as part of its anticorruption campaign.

The idea is that these cashier-free cafes will teach people to be honest and curb the country’s corruption problem (which pervades business, politics, and education) by inducing residents – especially the young – to get into the habit of practicing honesty. As the Times reports, “…the cafes are meant to force people to think constantly about whether they are being honest and, presumably, make them feel guilty if they are not.”

It’s a laudable plan, and a lovely feel-good idea, but will it work? I have my doubts.

First I think that people will also cheat to a certain extent in these honesty cafes (as they do in our experiments). In fact, according to one Indonesian student, they already do: “Some of my friends don’t pay the right amount.”

But that’s not the worst of it. I worry that these cafes won’t just fail to discourage cheating – they will actually lead to more of it. In some of our research, we found that cheating on one occasion makes it easier for people to cheat again on a later task, because it alters their self-concept. (Think of dieting as an analogy: once you break your diet once, it’s that much easier to say, “Oh what the hey, cut me a slice of that chocolate cake; I’ll count calories again tomorrow.”)

With honesty cafés widespread, residents will have more temptations to cheat, more occasion to cheat, and maybe this will make it such that they will find it easier to cheat again in other contexts.

Maybe these cafes are a good idea, maybe it will not have any effect, but I worry that it might make things worse.

I got this suggestion from Thomas Aedy in Eton College in the UK:
Dear Dan,

The final for Britain’s Got Talent was on Saturday June 30th and this final was very interesting because it involved 3 choices, 2 of which were very similar, and 1 of which was different. In our show, viewers have to vote in by telephone on the night of the show for a winner to be decided, and there was some shock when the favorite (Susan Boyle – a singer) didn’t win, and lost out to one of two dance groups (Diversity were the winners, Flawless were the other dance group) – whilst the dance group were very good, most people thought that the singer would edge win.

I think this is a case of relativism:

Option A – Singer – Susan Boyle who was generally regarded (before the final) as the favorite contender for the win

Option B – Dance group – Diverstiy

*   Probably the better of the two dance groups – more creativity and flair, and possibly more entertaining
*   That is largely my view, although their victory in the competition would suggest that they were the better of the two dance groups

Option B’ – Dance group – Flawless

*   Also a very talented dance group, but more straightforward dancing – not very many surprises from them
*   We could view them as the ‘dud’ choice of the two (although this is somewhat harsh)

General points

*   Frankly impossible to judge who were the best of all three – all of them were very talented, but it is impossible for most viewers to try and think whether Option B was better than Option A (comparing singing and dancing)
*   However, on the night, it is fair to say that Option B was better than Option B’
*   Thus whilst most found it impossible to establish who was better of A and B – it was clear that B was better than B’, and this made it easier to select an overall winner (which would be Option B)

In my mind this could be seen as an example of relativism

Very best wishes,

Thomas Aedy

PS: YouTube videos of the 3 acts if you’re interested.

Option A (singer) : http://www.youtube.com/watch?v=b2xiAQCTy2E

Option B (dance) : http://www.youtube.com/watch?v=KJIz8BgRQc0

Option B’ (dance) : http://www.youtube.com/watch?v=NY9I6pxnVpM

————-

I did not watch this show — but I find the idea plausible and interesting.

Dan