There’s a phrase we hear all the time, and one that suggests something about our psychological makeup: we’re not just concerned with actions, but with their attendant mens rea – or lack thereof – as well. If it wasn’t intentional, then it’s not as painful.

And, as it turns out, that is quite literally true: Harvard researchers Kurt Gray and Daniel Wegner recently found that we experience greater pain when we perceive it to be deliberately inflicted, rather than by accident.

In their clever experiment, they had volunteers perform a variety of tasks, including an assessment of discomfort. This involved receiving electric shocks and then rating them on a 1 to 7 scale. When participants thought their “study partner” (who was actually a research accomplice) had selected the task for them to complete, they rated their perceived pain as higher (Mean ratings = 3.62) than when they were told the selection was computer-generated the pain was lower (Mean ratings = 3.00).

What’s more, deliberate pain was not just more acute, it also lasted longer: whereas participants rated the unintentional shocks less and less unpleasant as the experiment progressed, the intentional shocks remained just as painful.

So next time you are at the doctor try to think that he or she really cares about you.

HBR just came out with their Breakthrough Ideas for 2009.

One of my projects was selected to this list in 2008, and another was selected this year.

Here is the writeup of the project ….

Labor is not just a meaningful experience – it’s also a marketable one. When instant cake mixes were introduced, in the 1950s, housewives were initially resistant: The mixes were too easy, suggesting that their labor was undervalued. When manufacturers changed the recipe to require the addition of an egg, adoption rose dramatically. Ironically, increasing the labor involved – making the task more arduous – led to greater liking.

Our research shows that labor enhances affection for its results. When people construct products themselves, from bookshelves to Build-a-Bears, they come to overvalue their (often poorly made) creations. We call this phenomenon the IKEA effect, in honor of the wildly successful Swedish manufacturer whose products typically arrive with some assembly required.

In one of our studies, we asked people to fold origami and then to bid on their own creations along with other people’s. They were consistently willing to pay more for their own origami. In fact, they were so enamored with their amateurish creations that they valued them as highly as origami made by experts.

We also investigated the limits of the IKEA effect, showing that labor leads to higher valuation only when the labor is fruitful: When participants failed to complete an effortful task, the IKEA effect dissipated. Our research suggests that consumers may be willing to pay a premium for do-it-yourself projects, but there’s an important caveat: Companies hoping to persuade their customers to assume labor costs – for example, by nudging them toward self-service through internet channels – should be careful to create tasks difficult enough to lead to higher valuation but not so difficult that customers can’t complete them.

Finally, the IKEA effect has broader implications for organizational dynamics: It contributes to the sunk cost effect, whereby managers continue to devote resources to (sometimes failing) projects in which they have invested their labor, and to the not-invented-here syndrome, whereby they discount good ideas developed elsewhere in favor of their (sometimes inferior) internally developed ideas. Managers should keep in mind that the ideas they have come to love, because they invested their own labor in them, may not be as highly valued by their coworkers – or their customers.

Here’s a very interesting piece from the New York Times’ Review of Books: “Drug Companies & Doctors: A Story of Corruption.”

The basic story is that whereas only a few decades ago physicians generally lacked any lucrative ties to pharmaceutical companies, these days such conflicts of interest permeate the field, and debase it.

Take the example of Dr. Charles B. Nemeroff, the psychiatry department chair at Emory University. He received a NIMH grant to study drugs made by GlaxoSmithKline AND at the same time he also got $500,000 in fees from GlaxoSmithKline. Talk about a conflict of interest!

That’s not the only egregious case – there are many.  As it turns out a recent survey found that about two thirds of academic medical centers hold equity interest in companies that sponsor research within the same institution… And here is another one:  Of the 170 contributors to the most recent edition of the American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders (DSM), ninety-five had financial ties to drug companies.  The top dogs aside, many physicians accept hefty salaries to consult for drug companies, and most accept pharmaceutical gifts like pens and free lunches.

So the medical profession is teeming with conflicts of interest – but it doesn’t stop there. Look at politics, wall street, consulting — it is everywhere and I worry that unless we  understand just how big this problem is,  we are not going to deal with it.

This American Life had a show a few months ago that I just discovered.  In my mind this is the best description of the financial fiasco I’ve heard.  it is worth listening to.
You can also download the transcript as a PDF.
It is just amazing to see what we end up doing to ourselves.

Irrationally yours

Dan

A few days ago there was lots of happiness and excitement in the street and you must have wondered what was the source of this excitement.

Well, it was the publication of Peter Ubel‘s new book on behavioral economics — Free Market Madness

To celebrate, here is a web interview with Peter and you are all welcome to join in on the conversation.

Dan: You are a physician writing a book about politics and behavioral economics.  Not to get all Blagojevichy on you, but what the f%^# qualifies you to write about this topic?

Peter: I am a big fan of yours too!

Dan: But seriously.

Peter: I conduct research on the irrational forces that influence people’s medical decisions.  In addition, I take care of patients in clinic every week whose health problems arise, in large part, from their own decisions and behaviors — people with diabetes who cannot lose weight despite their best efforts, smokers who can’t kick the habit despite covering their body with nicotine patches.

Dan: What does that have to do with politics?

Peter: It means that when we leave people to fend for themselves in the free market, we can predict that they will hurt themselves by making bad decisions.  Starting from this perspective I try to expose the unconscious forces that influence our behaviors.  And then I try to show people what that means for the kind of debates we have about whether unfettered free markets deserve some, um, fettering.

Dan: All this looks a bit too general to me.  Can you give me an example of one disease, one mistake that patients make, and one policy recommendation?

Peter:  Diabetes.  We have an epidemic of adult onset diabetes in developed countries now, because people are gaining so much weight.  And the obesity that causes diabetes is a direct result of the market:  capitalism has spurred on innovation in food production, so that people now can eat tasty, calorie dense food without having to spend much time preparing or cleaning up the food (open the bag of chips, insert in mouth, yum . . .).   

What’s the mistake here?  Well, people’s appetites are influenced by unconscious forces. Change the size of my dinner plate and I’ll eat 24% more calories; tell me the food is made of “healthy fat,” and I’ll tell you it doesn’t taste good (even though, as experiments have shown the same cracker will “taste great” if I convince you it is made out of unhealthy fat.)  How much food we eat, then, and how that food tastes is far less rational than most of us believe.

Dan:  So, does this mean that the fault is with capitalism and innovation in food production?  And if this is the case what policies would you try to implement to overcome this problem?

Peter:  We need to experiment on a whole slew of policies to combat obesity: New York is requiring restaurants to post calories on their menus, a good start, but one that is likely susceptible to biases.  For example, if I was trying to sell Big Macs now, I’d add a new line of “Bigger Macs”–add a couple slices of bacon, 3 more kinds of cheese.  I’d proudly label this new burger’s calories: 50% more than the original Big Mac.  And I’d expect two things to happen:  first, some people would be drawn to this meal — risk takers, contrarians, Homer Simpson wannabees and so on; second, most people would not want this new burger, but they’d look at the Big Mac and think, “Wow, that burger is pretty darn healthy!”

I’d like to see someone try to label unhealthy food with emotive pictures, signaling that people should consider trying out another entrée.  Maybe a profile of people in varying stages of obesity?  

Ok, maybe some other symbol.

Dan: Your book is actually not much about medicine and medical related mistakes and it is largely about individuals and markets.  It seems that you believe that markets are efficient in the way that they operate, but that the outcome they arrive at is not optimal.  Can you explain this?

Peter:  Hmm, efficient wouldn’t be on my short list of words to describe markets.  Efficient sounds so uncontroversially good.  

I am a fan of capitalism. Very happy I grew up in the USA rather than the USSR.  But that doesn’t make capitalism, or free markets, perfect.  Look at all the people who bought mortgages they shouldn’t have bought, or SUVs that they mistakenly thought were safer than other cars.  (SUVs are more dangerous than minivans and even sedans, because they have a nasty habit of rolling over–very inconsiderate of them!)

Our brain can tell us that a long commute isn’t a big deal, or an adjustable rate mortgage isn’t a big risk, and the market efficiently provides us with suburban homes and fancy mortgage packages.  That doesn’t mean we picked the right home at the right price.

Confession: I live in the suburbs (barely), drive a sedan (because I don’t feel manly enough for an SUV), based the last decade of my savings and spending behavior on the assumption that my stock holdings (retirement accounts in mutual funds) would grow at 10% a year, and that my house’s value would grow faster than inflation.

At age 46, I have lots of time to rejigger my retirement plans.  But my fingers are crossed that my kids don’t get into college!!

Dan: So now that we know we should not take any advice from you, what are you hoping is the main thing that readers will learn from your book?

Peter:  This may be too personal but if they can go home at Christmas armed with good arguments to take on their insanely libertarian older brother, who really does think the market can solve all the world’s problems (“we need more free market in medicine, schools . . .”), then I will be happy.  

So — here is the summary of 2008 honors for Predictably Irrational

1) “New York Times Best Seller” for Non-fiction

2) Amazon Best Books of 2008, Customers’ Bestsellers: #23

3) Amazon Best Books of 2008, Customers’ Bestsellers in business category: #1

4) Hudson books — #1 book in business category

5) Business Week: The Best Business Books of 2008

6) 100 Notable Books of 2008 (NYT)

7) BNET’s Best Business Books of 2008

8) One of the top 8 Books of 2008 for Church Leaders!

9) Barnes And Noble: Best books of 2008 on Our Modern World

10) Seed Magazine, Book picks for 2008

— not a bad list….

Best

Dan

A new mac vs PC — my personal favorite — it is about planning…

An interesting story out of the BBC: one priest, Father Tim Jones, recently gave an incredibly provocative sermon where he offered controversial advice–to shoplift. His argument is basically that those who are less fortunate may often turn to illegal means: they can rob, they can become prostitutes, etc… Jones is arguing that of these “evils,” shoplifting, especially from large corporations, has the least impact on society, and thus, somehow, is the least immoral. Of course from a psychological standpoint this is our intuition. It is easy to do harm to large corporations because we think that we are spreading our damage out evenly among more individuals, and, moreover, those individuals are faceless people wearing suits. However, giving this more thought, we can also sense that if we were to allow this to happen as a society (or be more forgiving of poor people who steal from big corporations to get by), we could very quickly slip into a system of mutual distrust. Before you know it, we will all be having to have our bags checked at entrances and exits, with costs going up for everyone. On the whole, this might leave fewer people with jobs, and the cycle could continue to spiral out of control. As we know, many of the biggest financial blunders of the recent years had to do with tiny misjudgments that added up to larger and more catastrophic costs, with the resulting mutual distrust freezing credit and badly hurting the economy. One thing we must beware of is the allure of thinking that our tiny, seemingly inconsequential decisions won’t matter much in the long run. As history and research have shown us, it’s the little decisions that we gloss over that end up hurting us most in the end.

In a recent New Yorker article, James Surowiecki proposes that many people want to be forced to pay higher prices for gas.

Surowiecki starts by describing a very important observation made by Thomas Schelling about the N.H.L:

“At the time, players were allowed, but not required, to wear helmets, and most players chose to go helmet-less, despite the risk of severe head trauma. But when they were asked in secret ballots most players also said that the league should require them to wear helmets. The reason for this conflict, Schelling explained, was that not wearing a helmet conferred a slight advantage on the ice; crucially, it gave the player better peripheral vision, and it also made him look fearless. The players wanted to have their heads protected, but as individuals they couldn’t afford to jeopardize their effectiveness on the ice. Making helmets compulsory eliminated the dilemma: the players could protect their heads without suffering a competitive disadvantage. Without the rule, the players’ individually rational decisions added up to a collectively irrational result. With the rule, the outcome was closer to what players really wanted.”

In the rest of the article, Surowiecki tries to make the case that we all feel the same about cars with higher fuel-economy — and that we want to be forced into this situation.

I am not sure I agree.  There are clearly situations where we want to be forced into a better social equilibrium (for example, I want other people to drive safer), but this strikes me more as a situation that we want others to start driving more fuel efficient cars and less about a social coordination.

What do you think?

From taxes to golf — many people cheat just by a little bit ….

This video was produced by spark creative and Diamond consultants — thanks