A few days ago I woke up at 5:00am to drive to the airport for a trip to Chicago. I got to the airport on time, went through security and arrived at my gate with time to spare. I went through all the motions of boarding the plane, waiting to take off, and finally leaving the ground. As we were in the air, we were informed of inclement weather in Chicago and told that we would have to land somewhere else (South Bend, Indiana). So we were diverted to wait for the weather in Chicago to clear up. When the weather eventually improved, we refueled and finally took off. I missed an important lecture and felt that I had wasted most of my day.

When I think back to my day of traveling, I can’t help but cringe at the thought that my expected two-hour trip took six hours. And even though I have taken many flights longer than six hours in the past without feeling bitter, this experience was particularly annoying for two reasons.

The first reason has to do with the nagging feeling of idleness that I experienced when I was stuck on the plane on the ground, just waiting. And this reminds me of a lesson on the design of air travel: There once was a clever engineer who noticed that the carousels for luggage are spaced at different distances from different gates – some farther and some closer to where the passengers were deplaning. And this engineer redesigned the allocation of carousels such that they minimized the distance to their gate, and therefore minimized the amount of walking that passengers would have to do to pick up their luggage. A few airports implemented this highly efficient system and patted themselves on the back. They were very pleased with their improvement – that is, until people started complaining.

Of course, everything that the engineer predicted was true. By refining the assignment of carousels to match up with their corresponding gates, people had to walk less and could get to their luggage faster. The problem was that this system worked too well, and passengers were beating their luggage to the carousels. When they arrived, they had to twiddle their thumbs while they waited for their luggage to catch up with them.

Think about these two ways to get your luggage: With the original airport design, you walk ten minutes, but when you finally get to the carousel, your baggage gets there a minute after you (taking 11 minutes). In the other, you walk three minutes, but when you arrive you have to wait five minutes for your luggage (taking 8 minutes). The second scenario is faster, but people become more annoyed with the process because they have more idle time. As Sir Arthur Conan Doyle, Sr. noted, “I never remember feeling tired by work, though idleness exhausts me completely.”

The “good news” is that airports quickly reverted to their former (inefficient) system, and we now walk farther to our suitcases just to avoid the frustrations of idleness.

Now, it’s one thing to waste time, but it’s particularly bothersome when you feel like you are backtracking. In my case of flying to Chicago, the trip took a detour that sent me in away from my final destination. This is the second reason that my flight experience was so irritating — it included an element of backtracking in the opposite direction of my goal.

Let’s think about this idea with another example. Imagine that you are taking the train from point A to point B.  You can choose between two paths, both taking four hours but with one key difference: In Trip 1, you take the slow train from point A to B.  In Trip 2, you take the fast train, but the train passes B and continues for another hour until it gets to C, and then you change trains and backtrack for an hour to B.  It turns out that the second approach is more irritating, even though we should care only about the time and not the direction of progress.

My flight had both of these annoying principles, idleness and backtracking. We wasted lots of time, and we were diverted in the opposite direction.  Now, I am positive that this will not be the last time that I experience these travel elements, so the question is how I will deal with these irritations in the future.  To overcome the feeling of idleness, I can try finding something to make me feel that the time is spent productively (maybe I should start making lists of things to do and use idle time to manage these lists on my phone). And what about overcoming the annoyance of backtracking?  Maybe ignorance really is bliss — and the only solution is not to think about the route that we are taking.

How the Start of a Month Changes Everything (or seems that way)

A couple days ago, we took advantage of the changing of the months to run a series of studies on people’s confidence in achieving their closely approaching goals.

We asked them questions about how successful they felt they would be in reaching their goals tomorrow and in the next few days and how different things would be. For some, we subtly reminded them of the upcoming May 1st.

  

We found that the reminder of “May” made people think that they and others would be far more successful. This was controlling for gender, level of current struggling, importance of the goal, and previous contentment with goal progress. And we looked at both specific and general sets of goals.

Why?  Calendar boundaries show how relatively irrelevant boundaries can drastically change how we compartmentalize events (For an example of how statelines can ‘prevent’ earthquakes see here). In this instance, a simple reminder of the upcoming month does not lead people to think that they themselves will change a lot but that the externalities that have recently been in their way will wane.

An Upside to Irrationality?

So how should we view this new finding? Are people being rational, irrational, or strategically irrational? We know from tons of research that people ignore base rates and make egregious forecasting errors about their life.

I think that this is an upside to irrationality. The new month gives us the opportunity to refocus and pre-commit to our goals through new gym memberships or a trip to an organic grocery store (I just signed up for an organic vegetable/fruit/bread delivery service, which I highly recommend). Furthermore, these temporal boundaries fill us with self-efficacy, which have been shown to be positively related to accomplishing goals.

Industries of self-help could take advantage of these boundaries and possibly create more “meaningless” boundaries to help motivate their clients.

Irrational or not, putting the past in the past is a great way to motivate us in the present. May your May be full of success!

~Troy Campbell~

Here is a letter I got a few days ago:

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Dear Dan,

I recently had an experience that I thought you might be able to appreciate and wondered if you had any thoughts on it.

Last fall (early October) I got into a small car accident. It was my fault and I was ticketed for not controlling the speed of my vehicle. As a part of my plea with the courts I agreed to take a defensive driving course. The last time I took one of these, I selected one Saturday that worked for me and met with a teacher in a classroom for 6 hours one day. But in my state (Texas), they don’t have face-to-face courses anymore; they only have online courses. Of course, the court can’t tell you where to go to sign up for these courses, you have to find it on your own. There are LOTS of options. In addition, taking the course basically requires a commitment of 6 hours, but there are no scheduled class times. Instead, you choose whenever you want to begin your course.

I teach at a Community College fresh out of graduate school. I’ve got a family and I’m super busy. Essentially, this means that I never have a block of 6 hours to devote to anything. As a result, I put off this course for longer than I should have and am now in contempt of court and have been summoned to appear in a little over a week. Today, actually, I’m taking the course…

Anyway, I feel like this is a perfect example of how the courts think they’ve made this process easier, when in fact they have shifted a lot of the decision-making burdens on the plaintiffs, making compliance a lot more difficult. I’m not a delinquent, but I feel like the burdens of completing this task have turned me into one. I don’t have access to data, but I’d be willing to bet that delinquencies are much higher under the new system as opposed to the old.

Unfortunately, irrationally, and procrastinatingly yours,

Nathan

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Dear Nathan,

The same basic thing happened a while ago in the scientific community.  The organization that funded science in the UK decided that instead of asking people to submit grants by 2 specific dates each year  (which is that the US funding agencies do), and get people all stressed over the deadlines — they will let people submit grant at any time and they will review the grants using the same 2 times a year.  What happened?  Much like your story, fewer grants were submitted and eventually the Brits changed back to the twice a year setup.

All this is to show us how useful deadlines can be.

Irrationally yours

Dan

My own worst enemy: procrastination and self-control

My problem with “Just Say No”

One of the main difficulties I face on a daily basis is an inability to say “no.”  Sometimes my difficulties bring me back to the song in Oklahoma! Where Ado Annie sings “I’m just a girl who can’t say no,” and it looks to me that I’m basically like her (granted, she and I are responding to quite different propositions).  I have always had this problem, but it used to be that nobody really asked much from me, so this weakness didn’t pose a real problem.  But now that behavioral economics has become more popular, I receive invitations to speak almost every day. Accordingly, my inability to say “no” has turned into a real challenge.

So why do I (and I suspect many others) suffer from what we might call the “Annie” bias? I think it is because of three different reasons:

1) Avoidance of regret: Regret is a very interesting, uncomfortable feeling.  It is about not where are, but where we could be. It is too easy to imagine that things could have been better. Imagine, for example, that you missed your flight either by two minutes, or by two hours: under which of these conditions would you be more upset?  Most likely, you will feel more upset if you missed your flight by two minutes. Why?  After all, your actual state is the same:  in both cases you are stuck at Newark for five hours waiting for the next flight, watching the same news report on CNN, responding to email on your smartphone, and munching on expensive and not very good food. They key is that having missed your flight by just a few minutes, you continuously think about all the things you might have done to get on the plane on time – leaving the house five minutes earlier, checking your route to avoid traffic jams, and so on. This comparison to how things could have been, and the feeling of “almost” makes you miserable.  By contrast, a two-hour delay is not as upsetting because you don’t make these kinds of regretful, “woulda, coulda, shoulda” comparisons. (Comparing your current state to some other idealized one, by the way, is a huge source of general unhappiness, especially when comparing yourself to your likeminded peers.)

Now think of a circumstance in which you don’t feel regret at the moment, but want to avoid feeling regret in the future. Let’s say you are buying an expensive new flat-screen TV. As you are whipping out your credit card to pay for it, the salesperson offers you an extended warranty for an additional 10% off the sticker price. You don’t relish the thought of paying more for this extended warranty, but the salesperson asks you to imagine how would you feel if, six months down the road, the TV stopped working and you had passed on the opportunity for the extended warranty. To make the moment even more salient, the salesperson adds that the offer is only available to you now (and only now!). With this final push, you go ahead and purchase the extended warranty – paying a premium in order to avoid the possibility that in the future you will hit yourself over the head and tell yourself that you should have purchased the extended warranty when you had the chance.

What has all this got to do with my own inability to say “no”? My version of the extended warranty is that I get invited to all kinds of stimulating conferences and meetings in amazing places, with interesting people. And the invitations always feel as if they are my only chance to see that particular place and meet those particular people.

2) The curse of familiarity: I suppose I also suffer from a form of the “identifiable victim effect” that I described in Chapter 9.  As you recall, when a problem is large, general and abstract, it is easy for us to turn our heads away and not care too much about it. But when the problem is close to home our emotions are evoked, and we are more likely to take action. Similarly, when I receive formal invitations from people I don’t know, it is relatively easy to politely turn down their offer. But when I receive invitations from people I do know, even if only superficially, it’s a different story altogether. And the better I know someone, the harder it is to say “no, sorry, you know I would really love to come, but I just can’t.”

One of the clever ways I attempt to deal with this version of the identifiable victim effect is to ask my wonderful assistant Megan to say no for me in the cases where I have to do so. This way, I don’t have to feel the pain of saying “no”, and because she is not saying “no” for herself, she has a much easier time with it than I do.

3) The future is always greener: I also find that it’s easier to say “yes” to things in the future, particularly the distant future. If someone asks me to come to an event in the next month or two, I generally have no choice but to say “no” because I’m either traveling or fully booked — there’s just no space in my schedule. [I have to admit that sometimes when someone asks me to come to an event and my calendar says that I’m already booked, I feel relieved.] But when someone asks me to do something in a year, my calendar naturally looks far emptier. (Of course, the feeling that I will have lots of extra time in the future is just an illusion – my life will likely be just as full of myriad, often unavoidable things. It’s just that the details aren’t filled in yet.

The basic problem is this: when we look far into the future, we assume that the things that are limiting and constraining us in the present won’t be there to the same degree. For me, I somehow imagine that meetings with students and administrators and colleagues, not to mention reviewing papers and so on, won’t be part of my daily life eight months in the future.

My friends Gal Zauberman and John Lynch, who have done research on this topic, recently gave me some interesting advice. They suggested that I imagine every single event I’m asked to attend will occur exactly four weeks from the present. With this exact schedule I mind, I should then ask myself whether I find it important enough to squeeze it in or cancel something else. If the answer is “yes,” then I should accept the invitation; but if my answer is “no,” I should pass. This is easier said than done, and I have not yet been able to consistently cultivate this frame of mind, but I am starting to adapt this mindset.

Perhaps what I need is to add some technological aid to Gal and John’s advice. What if I had an advanced calendar application made just for people who have a hard time admitting out how busy they will be in the future? Ideally, such an application would take all my meetings and travel from a given period and, based on that schedule, simulate what my time would look like in a year. This would allow people like me to respond to requests in a more realistic, less hopeful way. Perhaps this advanced calendar application is something I should start working on in a few months…

***

Thankfully, my own irrationalities tell me that there is still a lot of room for research and improvement.

Irrationally yours

Dan

A lesson about (de)motivating employees

A few months ago an ex-student of mine, who was at the time working for a big software company, contacted me and asked me to meet with her and her team later in the summer. My student, together with a large team, had worked very hard for the previous two years on an innovation which they believed was the best new idea in the “computer world,” and the best new direction for their company.  They worked very hard on this project and were full of hope and expectations. But, between the time that she originally contacted me and the time that I arrived at their offices for my presentation, the CEO of the company looked at the project and decided to cancel it.

So there I was sitting with a group of highly creative people who were completely deflated. I’ve never seen people in the high-tech industry with a lower level of motivation. So I asked them, “How many of you show up to work later than you did before the project was shut down?” Everybody raised their hand. I next asked them, “And how many of you go home early?” All hands went up. Lastly, I asked them, “How many of you feel that you are now more likely to fudge a bit your expense reports?” In this case, no one answered the question—instead, they smiled in a way that made me think that they had first-hand experience with expense fudge.

Now, it is possible that the project was really not that good, or that it did not fit with the future direction of the company, which would mean that canceling it was the appropriate decision.  But even if this were the case, how the CEO could have behaved differently if he was also trying to keep the team members excited and interested in their work?  So I posed this question to the team and they came up with a few interesting answers:

1. The CEO could have asked them to present the project to the entire company.  The presentation would have included the process that the team followed and the final product specifications. This would allow everyone at the company to understand and (hopefully) appreciate the hard work they had done.

2. The CEO could have asked the team to write about the steps they took in the process of development, and then to use this as a template to help other teams as they developed new products. In this way, their work would not have felt wasted.

3. The CEO could have gone a step further and allowed the team to build a few working prototypes in order to let them experiment with the technology in more depth (which would have also provided a more accurate idea of the usefulness of the technology).

4. The CEO could have asked the team to redirect their efforts toward finding ways to introduce some of their new technology into other products the company was working on.

These were just a few of the team’s ideas, and of course there are many possible approaches that senior management could have taken to boost their morale. Of course, most of these morale-boosters would have required some investment of time and money. The CEO may have thought of these people as rats working in a maze, and therefore seen no reason to motivate or help them make the most out of their canceled project. But if he had understood the importance of meaning in the workplace he might have taken some of these steps, spent some money in the process, and ended up with more motivated employees.  Sadly, this was not the case. I recently heard that the main people in that particular group left the company, and that the whole group was dissolved.  Maybe this is the kind of expensive lesson that this CEO needed.  However, most likely, he will be able to tell himself a story about why he was correct and they were all petty and wrong.

I recently had an interesting meeting with a locksmith:

As I mention in the video, what’s really interesting is that this locksmith was penalized for getting better at his profession. He was tipped better when he was an apprentice and it took him longer to pick a lock, even though he would often break the lock! Now that it takes him only a moment, his customers complain that he is overcharging and they don’t tip him. What this reveals is that consumers don’t value goods and services solely by their utility, benefit from the service, but also a sense of fairness relating to how much effort was exerted.

Now imagine how much more people would pay if they knew the effort that goes into all kinds of products and services?

Here is a letter I got from Mary Kate Dilworth ….

Dear Dan,
Hello.  My name is Mary Kate Dilworth, and I am a junior at Thomas Jefferson High School for Science and Technology in Alexandria, Virginia. Last summer, I read a copy of Predictably Irrational, and now it sits on my bedside table because I reference it so often in my life.  I find the chapter on social v. market norms particularly applicable to my life (I am in several volunteer organizations that regularly do fundraising projects).

Today, for example, my school’s Russian Honors Society had an Election Day bake sale.  In years past, various goods have had set prices, but this year we chose to make it donation-based.  What a difference it made!  When one woman bought a cupcake, she reached for a one dollar bill and asked about the price.  When I told her there was no set price but donations-only, she put the one back in her wallet and pulled out a ten.  Your suggestion to switch to social instead of market norms was a great one-thank you so much!

Sincerely,
Mary Kate Dilworth

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Dear Mary Kate,

This is great, and I am delighted that you are taking lessons from the book and implementing them.

Next time think about trying both versions and measuring more directly the difference.  It would be interesting to know if the effect is driven by a few people who give much more, by many people who give a bit more, or perhaps by more people becoming interested in the bake sale (or maybe all of these).

And good luck in your next implementation.

Dan

If you practice kicking a soccer ball with your eyes closed, it takes only a few tries to become quite good at predicting where the ball will end up. But when “random noise” is added to the situation — a dog chases the ball, a stiff breeze blows through, a neighbor passes by and kicks the ball — the results become quite unpredictable.

If you had to evaluate the kicker’s performance, would you punish him for not predicting that Fluffy would run off with the ball? Would you switch kickers in an attempt to find someone better able to predict Fluffy’s involvement?

That would be absurd. And yet it’s exactly how we reward and punish managers. Managers attempt to make sense of the environment and predict what will result from their decisions.

The problem is that there’s plenty of random noise in competitive strategic decisions. Predicting where the ball will go is equivalent to deciding whether to open a chain of seafood restaurants on the Gulf Coast. The dog running off with the ball is the BP oil spill. When the board reviews the manager’s performance, they’ll focus on the failed restaurants. The stock is down. The chain lost money. Since the manager’s compensation is tied to results, he’ll incur financial penalties. To save face and appear to be taking action, the board may even fire him—thus giving up on someone who may be a good manager but had bad luck.

The oil spill example is an extreme case. In the real world, the random noise is often more subtle and varied—a hundred little things rather than one big thing. But the effect is the same. Rewarding and penalizing leaders based on outcomes overestimates how much variance people actually control. (This works both ways: Just as good managers can suffer from bad outcomes not of their own making, bad managers can be rewarded for good outcomes that occur in spite of their ineptitude.) In fact, the more unpredictable an environment becomes, the more an outcomes-based approach ends up rewarding or penalizing noise.

In the last year I’ve asked many board members how much of a company’s stock value they think should be attributed to the CEO’s strength, and the answer is surprising. They estimate that you’ll get about 10% more stock value, on average, from a good CEO than from a mediocre one. Implicit in that estimate is the understanding that many outcomes are outside a leader’s control.

We can’t entirely avoid outcome-based decisions. Still, we can reduce our reliance on stochastic outcomes. Here are four ways companies can create more sound reward systems.

1. Change the mindset. Publicly recognize that rewarding outcomes is a bad idea, particularly for companies that deal in complex and unpredictable environments.

2. Document crucial assumptions. Analyze a manager’s assumptions at the time when a decision takes place. If they are valid but circumstances change, don’t punish her, but don’t reward her either.

3. Create a standard for good decision making. Making sound assumptions and being explicit about them should be the basic condition for getting a reward. Good decisions are forward-looking, take available information into account, consider all available options, and do not create conflicts of interests.

4. Reward good decisions at the time they’re made. Reinforce smart habits by breaking the link between rewards and outcomes.

Our focus on outcomes is understandable. When a company loses money, people demand that heads roll, even if the changes are more about assuaging shareholders than sound management. Moreover, measuring outcomes is relatively easy to do; decision-based reward systems will be more complex. But as I’ve I said before, “It’s hard” is a terrible reason not to do something. Especially when that something can help reward and retain the people best able to help you grow your business.

This post is based on my column at HBR

The Magic of Procrastination

Oscar Wilde once said, “I never put off till tomorrow what I can do the day after.” As a university professor, I constantly see Wilde’s words put into action. Each fall students arrive to the first day of class determined to meet deadlines and stay on top of their assignments. And each fall the human weakness to procrastinate gets the best of them. After a few years of witnessing this behavior, my colleague Klaus Wertenbroch and I worked up a few studies hoping to get to the root of this problem. Our guinea pigs were the delightful students in my class on consumer behavior.

As they settled into their chairs that first morning, I explained to them that they would have to submit three main papers over the 12-week semester and that these three papers would constitute a large part of their final grade. “And what are the deadlines?” asked one student. I smiled. “The deadlines are entirely up to you and you can hand in the papers any time before the end of the semester,” I replied. “But, by the end of this week, you must commit to a deadline for each paper. Once you set your deadlines, they can’t be changed. Late papers,” I added, “would be penalized at the rate of one percent off the grade for each day late.”

“But Professor Ariely,” asked another student, “given these instructions wouldn’t it make sense for us to select the last date possible?” “That’s an option,” I replied. “If you find that it makes sense, by all means do it.”

Now a perfectly rational student would set all the deadlines for the last day of class—after all, they could submit papers early, so why take a chance and select an earlier deadline than absolutely necessary? From this perspective, delaying the deadlines to the last day of he semester was clearly the best decision. But what if the students succumbed to temptation and procrastination? What if they knew that they are likely to fail? If the students were not rational and knew it, then they might set early deadlines and by doing so force themselves to start working on the projects earlier in the semester.

You would most likely predict that the students would succumb to procrastination (not a big surprise there)—but would they understand their own limitations and would they commit to earlier deadlines just to overcome their procrastination?

Interestingly, we found that the majority of students committed to earlier deadlines, and that this ability to commit resulted in higher grades.  More generally, it seems that simply offering students a tool by which they could pre-commit publically to deadlines can help them achieve their goals.

How does this finding apply to non-students? When resolving to reach a goal—whether it is tackling a big project at work or saving for a vacation, it might help to first commit to a hard and clear deadline, and then inform our colleagues, friends, or spouse about it with the hope that this clear and public commitment will help keep us on track and ultimately fulfill our resolutions.

The dark side of “Productivity Enhancing Tools”

Email, Facebook, and Twitter have greatly enhanced the ways we communicate. These handy modes of communication allow us to stay in touch with people all over the world without the restrictions of snail mail (too slow) or the telephone (is it too late/early to call?). As great as these communication tools are, they can also be major time-sinks. And even those of us who recognize their inefficiencies still fall into their trap. Why is this?

I think it has something to do with what the behavioral psychologist B. F. Skinner called “schedules of reinforcement.” Skinner used this phrase to describe the relationship between actions (in his case, a hungry rat pressing a lever in a so-called Skinner box) and their associated rewards (pellets of food). In particular, Skinner distinguished between fixed-ratio schedules of reinforcement and variable-ratio schedules of reinforcement. Under a fixed schedule, a rat received a reward of food after it pressed the lever a fixed number of times—say 100 times. Under the variable schedule, the rat earned the food pellet after it pressed the lever a random number of times. Sometimes it would receive the food after pressing 10 times, and sometimes after pressing 200 times.

Thus, under the variable schedule of reinforcement, the arrival of the reward is unpredictable. On the face of it, one might expect that the fixed schedules of reinforcement would be more motivating and rewarding because the rat can learn to predict the outcome of his work. Instead, Skinner found that the variable schedules were actually more motivating. The most telling result was that when the rewards ceased, the rats that were under the fixed schedules stopped working almost immediately, but those under the variable schedules kept working for a very long time.

So, what do food pellets have to do with e-mail? If you think about it, e-mail is very much like trying to get the pellet rewards. Most of it is junk and the equivalent to pulling the lever and getting nothing in return, but every so often we receive a message that we really want. Maybe it contains good news about a job, a bit of gossip, a note from someone we haven’t heard from in a long time, or some important piece of information. We are so happy to receive the unexpected e-mail (pellet) that we become addicted to checking, hoping for more such surprises. We just keep pressing that lever, over and over again, until we get our reward.

This explanation gives me a better understanding of my own e-mail addiction, and more important, it might suggest a few means of escape from this Skinner box and its variable schedule of reinforcement. One helpful approach I’ve discovered is to turn off the automatic e-mail-checking feature. This action doesn’t eliminate my checking email too often, but it reduces the frequency with which my computer notifies me that I have new e-mail waiting (some of it, I would think to myself, must be interesting, urgent, or relevant). Another way I am trying to wean myself from continuously checking email (a tendency that only got worse for me when I got an iPhone), is by only checking email during specific blocks of time.  If we understand the hold that a random schedule of reinforcement has on our email behavior, maybe, just maybe we can outsmart our own nature.

Even Skinner had a trick to counterbalance daily distractions: As soon as he arrived at his office, he would write 800 words on whatever research project he happened to be working on—and he did this before doing anything else. Granted, 800 words is not a lot in the scheme of things but if you think about writing 800 words each day you would realize how this small output can add up over time.  I am also quite certain that if Skinner had email he would similarly not have checked it before putting in a few hours of productive work.  Now if we could only learn something from one of the world’s experts on learning….