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Every organization should create a seek-and-destroy mission for unnecessary sludge.
Seek-and-destroy sludge
A choice architect has the responsibility for organizing the context in which people make decisions.
Choice architect
The libertarian aspect of our strategies lies in the straightforward insistence that much of the time, and so long as they are not harming others, people should be free to do what they like—and to opt out of arrangements they deem undesirable if that is what they want to do.
Libertarian
The paternalistic aspect lies in the claim that it is legitimate for choice architects to try to influence people’s behavior in order to make their lives longer, healthier, and better.
Paternalistic
nudge, as we will use the term, is any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives.
Nudge = easy and cheap to avoid
You can often increase participation rates by 25 percent, and sometimes by a lot more than that, simply by shifting from an opt-in to an opt-out design.
Opt in
people save more if they get paid biweekly, because twice a year they get three paychecks in one month, and many bills come monthly.
Bi weekly pay
This process is called “anchoring and adjustment.” You start with some anchor, a number you know, and adjust in the direction you think is appropriate.
Anchoring
This is connected with the behavioral phenomenon of reactance: when people feel ordered around, they might get mad and do the opposite of what is being ordered (or even suggested).
Reactance
A good way to get people to take more precautions about a potential hazard is to remind them of a related incident in which things went wrong; a good way to increase people’s confidence is to remind them of a similar situation in which everything worked out for the best.
Availability bias
The idea is that when asked to judge how likely it is that A belongs to category B, people answer by asking themselves how similar A is to their image or stereotype of B (that is, how “representative” A is of B). Like the other two heuristics we have discussed, this one is used because it often works. Stereotypes are sometimes right!
Similarity heuristic
risks. If people are running risks because of unrealistic optimism, they might be able to benefit from a nudge. In fact, we have already mentioned one possibility: if people are reminded of a bad event, they may not continue to be so optimistic.
Unrealistic optimism
People don’t want to lose money, even if the amount is trivial.
Loss averse
The combination of loss aversion and mindless choosing is one reason why if an option is designated as the default, it will usually (but not always!) attract a large market share. Default options thus act as powerful nudges.
Defaults
In many cases, markets provide self-control services, and government is not needed at all. Companies such as Stickk.com can make money by helping Planners in their battle with Doers.
Stickk.com
confidence heuristic: people tend to think that confident speakers must be correct.
Confidence heuristic
if people wrongly think that most people are committed to a long-standing social norm, a small nudge correcting that misperception can inaugurate large-scale change.
Pluralistic ignorance
people were more likely to fulfill their goals if they had made explicit “implementation intentions.”
Implementation intentions
One interesting key to the success of such programs is to authorize everyone in the room to remind absentminded offenders.
Reminders
Both investment goods and temptation goods are prime candidates for nudges.
Investment and temptation goods
At this stage we just want to stress that difficult and rare choices are good candidates for nudges.
Rare choices
Long-term processes rarely provide good feedback. Someone can eat a high-fat diet for years without having any strong warning signs until they have a heart attack. When feedback is ineffective, we may benefit from a nudge.
Ineffective feedback
Even in less exotic locales, it can be smart to let someone else choose for you. Many of the best restaurants in the world give their diners very few choices. You might be asked whether you want the two-hour or three-hour treatment, and whether you have any dietary restrictions. The benefit of having so little choice is that the chef is authorized to serve you things you would never have thought to order.
Fewer options
It is particularly hard for people to make good decisions when they have trouble translating the choices they face into the experiences they will
Translating choices to experiences
When people have a hard time predicting how their choices will end up affecting their lives, they have less to gain from having numerous options and perhaps even from choosing for themselves. A nudge might be welcomed.
Hard time predicting
people may most need a good nudge for choices that require memory or have delayed effects; those that are difficult, are infrequent, and offer poor feedback; and those for which the relationship between choice and experience is ambiguous.
When nudges are optimal
whether competitive markets protect consumers from such scams. Sadly, the answer is no.
Competitive markets
With respect to health, romance, and money, it is not at all hard to exploit people’s lack of information. If one of those things is at stake, companies have a strong incentive to exploit behavioral biases, including availability, unrealistic optimism, and anchoring. And they certainly try to create informational cascades. Sometimes they succeed.
Health romance money
Much of the time, more money can made by catering to human frailties than by helping people to avoid them.
Frailties make money
Those doors are bad architecture because they violate a simple psychological principle with a fancy name: stimulus response compatibility. The idea is that you want the signal you receive (the stimulus) to be consistent with the desired action. When there are inconsistencies, performance suffers and people blunder.
Stimulus Response compatibility
Instead, it is possible to incorporate human factors into design, as Don Norman’s wonderful book, The Design of Everyday Things, illustrates. In fact, the idea of the book is illustrated by its brilliant cover, which has the image of a teapot with its handle and the spout on the same side. Pause and think about it.
The Design of Everyday Things
Our primary mantra is a simple one: if you want to encourage some action or activity, Make It Easy.
Make it easy
Often we can do more to facilitate good behavior by removing some small obstacle than by trying to shove people in a certain direction.
Remove vs. Redirection
Defaults are ubiquitous and powerful. They are also unavoidable in the sense that for any node of a choice architecture system, there must be an associated rule that determines what happens to the decision maker if she does nothing. Usually the answer is that if I do nothing, nothing changes; whatever is happening continues to happen. But not always.
What if i do nothing
The general rule appears to be that even Humans will reject a default if it makes them really uncomfortable.
Reject if default uncomfortable
The choice architect can force the choosers to make their own choice! This approach has various names, including “required choice,” “mandated choice,” and “active choosing.”
Own choice
effort to protect people not only against their own inattention but also against manipulation. (In fact many such policies can be understood to reflect an emerging legal right: the right not to be manipulated.)
Policy protection
We believe that required choice, favored by many who like freedom, is often the best way to go. But consider two objections to that approach.
Required choice
“postcompletion” error.7 The idea is that when you have finished your main task, you tend to forget things relating to previous steps.
Post completion error
“forcing function,” meaning that in order to get what you want, you have to do something else first.
A good system of choice architecture helps people to improve their ability to map choices onto outcomes and hence to select options that will make them better
The old expression that less is more rings true here. Good choice architects often winnow the choice set down to a manageable size.
A self-nudge can be called a “snudge,” and for most of us, life can be improved via well-chosen snudges.
Sensible architects will align the incentives of the most important decision makers. One way to start to think about incentives is to ask four questions about a particular choice architecture: Who chooses? Who uses? Who pays? Who profits?
Incentives
When lotteries are used to motivate people, it is important to get the details right. Participants are likely to find a lottery more enticing if they find out whether they would have won. The Dutch government uses this principle very effectively. One of its state lotteries is based on postal codes. If your postal code is announced as the winner, you know that you would have won had you only bought a ticket. The idea is to play on people’s feelings of regret.
If you want to encourage some behavior, figure out why people aren’t doing it already, and eliminate the barriers that are standing in their way.
if you want to discourage some behavior, make it harder by creating barriers.
We use the term to mean this: any aspect of choice architecture consisting of friction that makes it harder for people to obtain an outcome that will make them better off (by their own lights).
Sludge
Not surprisingly, only a small proportion of rebates are successfully redeemed, roughly 10 to 40 percent.
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