Talking with Dan Ariely

Ahead of his appearance at our Annual Conference on Wednesday 25 November, Dan Ariely, professor of psychology and behavioural economics, Duke University tells Elen Lewis we all need to stop emailing in the morning and explains why marketers should be called behavioural economics engineers.
 

What do all marketers need to know about our thinking process?

So, everything that is relevant to what behavioural change they want to create. So if you are a marketer of electronics you need to understand how people think about electronics. If you are a marketer on healthcare, on health related products you need to understand how people think about those. So really if you think about this, every time we try to intervene and get people to behave in a different way, we need to understand how are they behaving currently, when are they open to new information, not open to new information, are they open to a behavioural change, are they not open to a behavioural change and how we might do that. So, you can think about marketers as behavioural change engineers who are trying to get people to think and act differently and for this they need to understand how people think right now, what goal they want them to think and how to create that. 
 

I’ll give you one example for this. So this was a study we did for an insurance company. People called for car insurance and of course when they called they were just interested in getting the cheapest possible car insurance but that’s not what people really want but when they call that’s all they think about. So, what we asked to people on the other line was to say before we talk about which insurance you want, tell us on a scale of 1 to 7 how important is it for you to get the kind of insurance that will let you sleep well at night. Now of course what people answered was 7 because that’s the reason they want insurance – to sleep well at night. But what also happened is that at that point they started thinking about the fact that that’s what they really wanted from insurance. They no longer thought they wanted to get the cheapest deal, they realised that there were other considerations and as a consequence they were willing to spend more on insurance. 
 

So the point is that at any point in time there are lots of things that we could be thinking about. Which ones are we going to think about? That’s a question that we want to ask and it’s a question that we want to have some control over.
 

What has been the most important achievement of behaviour economic thinking? What has it really helped us understand, that was opaque before?

So of course there’s lots of little things, little findings, social proof, the fact that we follow the herd, the fact that we don’t understand our preferences, that we have context effect and so on. But I think the most important thing is the fact that behavioural economics and social science in general is the study of little things. It basically says that when we think about behaviour we often think about goals and objectives, about big things that people are trying to achieve. But the fact is that those things don’t really describe much of human behaviour. If we want to really understand behaviour and change it we have to understand the little things, we have to understand friction, what stops people, we have to understand external motivation.

Think about something like healthcare – you know you could say how people are eating too much, let’s just tell them how much calorie information is in different food and they will immediately act better. That’s just not the case. Instead what we need to understand is what is it about people’s environment that is either stopping them or promoting particular behaviour and how do we change that environment to facilitate better behaviour?
 

Thinking about the strength of BE, are there any old ways, models, system of thinking about human decision making that BE has completely blown out of the water or disproved?

So I wouldn’t say completely blown out of the water but we used to think about people as….that we want to understand people’s personalities. That if we only understood people’s personalities, we understand what they want and how they would behave but I think the last fifty years of research has shown that yes we can measure personality but it is not a very useful tool to predicting behaviour. Instead if we understood something about people’s environment we would understand it to a much higher degree. So if I want to change your eating behaviour, getting to understanding your personality better is not going to have a big effect but if I gave you a smaller plate or started serving you half the dish on the plate and half the dish in a takeaway bag and so on those changes are going to be much more powerful. So it’s been a shift from the individual to the environment and it’s kind of good news because the environment is something we can control and we can influence so that’s the good news.
 

One of the criticisms of BE is that although it’s fantastic at giving us a taxonomy of cognitive biases that influence human decision making, it’s less good at explaining the differences between people where decision making is concerned. For example, The Power of Now says that people typically overweight the present over the future, and this is why, say, it’s such a struggle to get people to start a pension when they should. But then how come some people do take out a pension in their 20s? So I suppose, my wider question is: What do you think the limits of BE thinking are?

So first of all I think you are absolutely right, we don’t understand individual differences that well but what is crucial is to understand whether those individual differences in terms of outcomes are truly due to individual differences or different personalities and we don’t know that. So, for example, the person who starts saving in their 20’s - are they doing it because they just happened to go to a workplace that encouraged that when they were 20 or they just had a good friend who influenced them when they were 20? Or did something very specific happen in their environment at the younger age that got them on this path, or is it something inherent to them? Usually we don’t find evidence that this is likely to be something inherent to the individual and if we think about what are all the things that could happen to them - what are the rules that their parents gave them, what was the first job they had? All of those things would be important to understand and we have a very hard job doing this historical forensic analysis.
 

Now another issue is that many of our experiments are done on small scale and while small scale is perfectly fine to prove that these things matter, you change defaults in people behaving in a different way, they don’t help us understand truly the potential for individual differences but we are getting bigger and bigger studies with more samples of more varied people and I think the future would allow us to examine more those differences. For example maybe we could measure when people created their initial habits or where they got initial rules for how to eat or exercise or who to marry and so on so I think we will get more variance as we move forward.
 

Have you been able to use BE principles to spot biases at work in yourself, and have you been able to moderate your own personal behaviour as a result? An example would be great.

So yes a couple of things. So of course I understand things like temptation, to check Facebook and to email, there’s something called structured procrastination where you do things where it makes you feel you are making progress when you in fact don’t. And I try to build my day taking this into account. So for example many people get into the office in the morning and spend the most two productive hours of the day when they are in high alertness responding to email which doesn’t need a lot of mental energy so I try to break away from that and schedule my time so that I use my productive hours in a better way.
 

I also try to create habits. For example, a year ago I wanted to lose a little bit of weight and increase my health a little bit and what I did was to create a rule for myself. I knew that I travelled a lot, airports are places with lots of temptation, so I basically say no bread and by having no bread I’m not gluten intolerant or anything but by having no bread I just reduced a few calories from my daily diet and by creating it as a rule I basically don’t have to think about it anymore I just do it. And by the way there were a couple of challenging weeks but then it worked very well and over time it really increased my health so having a rule not having to think about it all of the time was very good. There’s lots of other things to talk about at work of course. How do you compensate people, how do you give people autonomy, how do you give people a sense that what they are doing is important for the organisation and so on.

 

Most waves of thinking get replaced in time. Looking into your crystal ball, what could you even imagine that will come along and challenge BE or knock it off its current pedestal?

I don’t think anything will do it because behavioural economics doesn’t really have an ideology. It’s not like economics that says people are rational. It does not necessarily even have a single theory. It is basically promoting modesty, humility and experimental method. It basically says look we don’t know, so when we create a new system, a new healthcare system, a new education system, a new campaign, let’s just think about all the things that could influence it and let’s just create come tests and do it based on data. I don’t think there will ever be a time when we say we don’t need data, we know everything.

Now there’ll probably be specific things that would change. For example, I think attention is going to be a bigger issue in the future as we get more interruptions and more splitting our time and so on between different things so there’ll certainly be new understanding of how attention works and what it does and how we feel with it. I think that there’ll be differences in terms of temptation and all the things that tempt us around and we’ll probably get more and more temptation and we’ll have to understand temptation and what helps us resist it in different ways. But the essence of behavioural economics which is basically to say let’s not assume anything and instead let’s just test things I think that would not go away any time soon.
 

What do all marketers need to know about behavioural economics?

I think marketers already know a lot of little facts about behavioural economics, about context effects and attention and of course they know about emotion and, in the study of economic theory, they know emotions but of course real people have emotion and behavioural economics has that. 

But I think the important thing for marketers is to understand that it’s usually not the case where telling people directly what they should be doing is the right path for behaviour. Telling people not to text and drive for example is not going to do anything and we need to find different ways that would have other aspects of our humanity to get us to have a behavioural change. That’s where the creativity comes from because there’s one way to get people to do the right things for the right reason but there are many ways to get people to do the right thing for the wrong reason. You can use social proof, and you can use shame, and you can use reward substitution - there’s lots of things that we could do. So people need to create a toolkit of all different ways that they can take ideas and help people behave in a better way.
 

What advice would you give your 17-year-old self?

I think the world now is a world in which we need to continuously learn. It’s not the world in which we have learnt something and then we just stop learning and then we just use it. We need to continue learning. The question is how do we create the joy of learning and I think particularly at the age of 17 and on the last two years of high school there was not much joy of learning so I would think about how do you create a situation in which learning is enjoyable for the rest of our lives.
 

How do you want to be remembered?

I want to be remembered as somebody who tried to help, as somebody who takes research from social science and tried to apply it into the world in order to get us to behave slightly better.
 

What's the best advice you've ever received?

I got this from one of my professors when I was looking for my first job. I got a few job offers and I was thinking which one I should take and he said “think about the job that would make you the best person five years from now”. The idea wasn’t that he didn’t like me but life is a continuous learning process. We know very little about the world, about ourselves, about behaviour, about what motivates people and the world is changing. How do we invest in ourselves? How do we get ourselves to do things that would get us to be better versions of ourselves down the road?
 

Which historical/fictional character do you most identify with?

Maybe Arthur Dent from The Hitchhikers Guide to the Galaxy. Somebody who is travelling with the towel, puzzled about the world trying to understand what’s going on and experiencing lots of strange things. I think that’s one of my favourite characters. 

 

What are you reading?

Right now I am reading a book called 'Overwhelmed' which describes the feelings, particularly of women, in terms of being overwhelmed in the modern life. It’s a very interesting and depressing perspective.

---

Dan Ariely is just one of the speakers at our Annual Conference on 25 November.