Why Do We Do the Things We Do?

so a guy comes to his mother and he says mother after 40 years I finally decided to get married and the mother is so happy and she said I would love to meet your future wife he said how about Friday night for dinner their mother said great and then and then the guy said you know mother in the last four years I dated three other women why don't I bring all of them for dinner and let's see if you can guess which is the one I'm going to marry the mother is excited that guys excited frightened Friday night dinner he shows up with four women and the mother starts talking to them she talked to the first the second the third the fourth she goes back and forth back and forth for an hour at the end of the hour she points to one of them and says this is the one this is the one you're going to marry and the guy's just shocked he said mother how well you know me how well you understand me said I love all of these women I respect all of them I care a lot about all of them I'm friends with all of them but this is indeed the one this is the one I'm going to spend the rest of my life with they said what gave it away what was the the skill the attribute the characteristic that made it clear - this is the one so the mother looks at him and she says it's the only one I hate so we're going to talk a little bit about emotions and how emotions get in the way so there's lots of things in life that we kind of know what's the right thing to do but we don't behave in the appropriate way and these are called self-control problems something where something is good in principle but not right now and to get us started thinking about this I want you to reflect about your own lives a little bit so how many people in this room for example in the last month have eaten more than you think you should just kind of general okay how many of you in the last month have exercised less than you think you should okay how many of you in the last month and please be honest have texted while driving and just to be clear we include when it's in a red light and you're just starting to move that that's include the texting or driving okay how many of you in the last month have left the bathroom at least once without washing your hands but there are this a little bit honestly here on the front nice this by the way is a really interesting question because you know we know from looking at hospitals that doctors don't always wash their hands so the odds that almost all of you wash your hands all the time is very unlikely and you just admitted texting and driving which one is the most stupid things you could do but admitting that you don't always wash your hands that a little tougher last question how many of you have ever had unplanned unprotected sex somebody's proud in the back now if you think about all of those problems they all have the same characteristic and the characteristic is that there's something that we know is the right thing to do in principle but at the moment we don't free like it so think about the very general case imagine I offer you some chocolates and I had the most amazing box of chocolate and I said what would you rather have a one pound of this amazing chocolate in a week or half a pound right now a pound in a week or half a pound right now and I would pass the chocolate around and you could see it and you could smell it it was just here what would happen in those cases almost everybody says give me the half a box of chocolate right now it's not worthwhile to wait another week for another half a pound of chocolate but what will happen if we've pushed the choice to the future what if instead of saying now versus a week I would say what would you rather have a half a box of chocolate in a year or a full box of chocolate year in a week now it's the same question it's the same discount rate it's asking you whether you're willing to wait another week for another half a box of chocolate but when you ask the question this way between a year in a year and a week now everybody is patient right why because in the future we are wonderful people we will exercise we will not text and drive we will eat worm and everything in the future will be fantastic the problem is with the present think about texting and driving in principle you all know that it's a stupid thing to do it's not as if I can add any more piece of information and you say oh I had no idea now that I know that this is a stupid thing to do let me just stop no we know it's a stupid thing to do we start driving thinking we're not going to text and drive but then what happens our phone vibrates in the moment of phone vibrates we become slightly different people we become slightly different people that think differently about the consequences and outcomes we think more about our curiosity about what it is exactly this coming from our phone right now and we act in very undesirable waise and the sad reality is those temptations are getting larger and larger and they're killing us there was an analysis that asked the question what is the percentage of human mortality that is either caused by or aided by bad decisions I think about how often can you make a bad decision that would translate into an accelerated death and they estimated at about 100 years ago it was about 10% think about 100 years ago how could you make a decision that would lead to an early mortality now it's more than 40% how come what happened as we invent new technologies we also invent new ways to kill ourselves right obesity diabetes smoking texting and driving many of those things are not things that you do one time it could kill you but a long sequence of those behaviors could accelerate our death so this is the problem of self-control this is the problem of now versus later it's everywhere and by the way it's not all only everywhere it's getting worse why one of the principles in behavioral economics is that the environment matters that we make decisions and the font is a function of the environment around us and what is the environment around us trying to achieve are they trying to achieve our long-term well-being or are they trying to achieve their short-term well-being think about Dunkin Donuts what is their objective to get you to be healthy in 30 years from now no it's to get it one more donor today what is the goal of Facebook to get you to be a productive citizen in 20 years or to check Facebook twice more today all the entities around us actually almost all of them want us to do something now that is good for these other entities not necessarily in our long-term best interest and they're getting better at it and we're getting tempted more and more and more so what can we do what can we do in order to fight temptation and I want to present to you two starting principles about temptation to just get us thinking about it so the first one is something called reward substitution and reward substitution it's a little bit like gamification which I'm sure you know the term and I'll tell you a personal story about this so as you can see I was I was burned when I was a 18 I was in hospital for about three three years and one of the things I got in hospital was a liver disease I got the liver disease at the time they didn't know what it was they just knew I had a liver infection and it would come up and it would disappear and so on for years and fast-forward quite a few years I'm already in grad school I had another liver infection I checked myself into hospital and they tell me that I have hepatitis C and at that time the FDA was running a test to see whether a medication called interferon was going to help cure hepatitis C and they asked me if I want to join the the protocol to try this interferon and I said what happened if I don't and they described to me how it feels like to die from liver cirrhosis so I join the protocol and the thing with that protocol is that interferon is a very unpleasant medication lots of side effects headache shaking vomiting fever stuff like that not as bad as dying from liver cirrhosis by immediately and tonight so imagine you came home from work and you open the refrigerator and you have these injections and you know that if you inject yourself you'll have a miserable night but you also know that if you'll inject yourself three times a week for a year and a half you might not have liver cirrhosis in 30 years and that's the trade-off anyway I took the medications a you have later they did another liver biopsy I beat the disease that was good news the more better medications out now in the market much more expensive but also much better but my doctor dr. Killian burg told me I was the only patient in the protocol that took the medication on time the question is how come do I like my liver more than other people like theirs am i less irrational though I think differently about the future the answer is none of those the answer is that I reengineering my environment to change my incentives what I did was that I had to deal with myself my deal was based on the fact that I loved movies if I had time I would watch lots of movies I don't have that much time I don't watch that many movies but on Monday Wednesday and Friday which were Injection days first thing in the morning I would go to a video store I would read some videos I really wanted to watch I would I would carry them in my backpack the whole day I would come back from school I would put the video in I would inject myself and I would press play I did not wait for the side effects to start I connected something I did not want the injection with something I wanted which was the movies now if you think about is that it's kind of a strange story because if you ask me what's more important movies or liver the liver is clearly much more important I would give up all movies in the world for healthier liver but that's not the time consequences of these effects the effect of the liver was going to be way way in the future maybe in 20 years maybe in 30 years with the movies were right now so did I think differently about my liver no but I did something that by acting in a way that was good for me right now which meant watching the movies I also got something that was good for me for the future and that's the principle of reward substitution we take something that we should care about but we don't and we connect it to something else that would give us some reward in the present so think about something like global warming can we get people to truly care about global warming very hot in fact if you want a body the other way and you say let's find the one problem in the world that would maximize human apathy you would come up with global warming long in the future will happen to other people first we don't see it progressing we don't see anybody particularly suffering anything we will do is a drop in the bucket can you get people to truly care few people in Berkeley that's about it but can we come up with reward substitution can we say that's too long in the future can we get people to get the reward now from doing something that is consistent with being good for the future electrical cars are like that right this is an unscientific observation but when I see people driving electrical cars they seem to me that they smile more than other people and I think it's because they're basically saying to themself look at me I'm a great kind human being and other people can see me and you can see what the wonderful kind human being I am and they basically project their view of how wonderful they are on the rest of us by driving electrical vehicle wonderful thing to do I'm not saying they are not wonderful human beings but they take advantage of this public aspect of electrical vehicles and they basically get another part of ego from this I'll give you one more one more example there's a medication called coumadin coumadin is an anti stroke medication it's a relatively good anti stroke medication and it reduces the chance of a second stroke from about 24 percent to about 4% quite good and you would think that people who had the stroke will take humored in on time every time because they don't want the second stroke compliance rate is very low how can we use reward substitution to try and get people to take their medication on time so there's a new technology called internet-enabled pill boxes these are pill boxes they're connected online and every time somebody takes their pill we know about it so what can we do reward substitution needs two things we need to measure what people are doing and then we need to either reward good behavior or punish bad behavior the internet-enabled pill boxes allow us to measure what people are doing and now we can either reward them or punish them just for fun what kind of rewards or punishments would you try anybody raise your hand badges for doing it right very good what else sorry chocolate chocolate very good chocolate-covered pills what else social-media biscuits that's true what this is but let's let's assume it's good what else yeah money pay people yeah okay guilt very good there's the usual question for this is Jewish or Catholic arrived electric car some some else very good so we all tell you about what we've tried so we one of the easiest thing to try is money of course so we tried money what do you think happens and if you give people $3 a day to take the medication on time absolutely nothing absolutely nothing what would happen if we gave them $1000 a day well we didn't try this but yes you know with enough money you can buy people but we don't have enough money so the question is can we take 3 dollars and make it feel larger so the first thing we tried was to lose the use the principle called loss aversion loss aversion is the idea that people hate losing much more than they enjoy gaining so we said what if we took money away from people instead of giving them that works much nicer but there's an even nicer approach and that nicer approach is built on two principles the first one is lotteries if I gave you $3 a day that's not very exciting if I gave you 10% chance of making $30 that's more exciting but it's even more exciting to take lotteries and add regret to it now let's think about regret what is regret regret is a really interesting psychological finding regret is about the fact that our happiness is not driven by where we are it's driven by a contrast between where we are and where we think we could have been and if we think we could have been somewhere happier we're miserable and if we think we could have been somewhere worse we're happy it's about this contrast for example when would you be more unhappy if you missed your flight by two minutes or by two hours two minutes why you're stuck in the same Airport with the same bad food why is the two minutes so much worse because you can imagine you can imagine a world in which you would have made it and you say to yourself if the person in line in front of me understood what no liquids mean if the TSA agent had one more IQ point I'm sorry fly low and and you basically can imagine the many ways in which you would have made it and you see that plane leaving as you kind of by the gate and you imagine that you were there any fuel if you missed it by two hours you can't imagine what if those a doesn't not really nice study a few years ago in the Olympics they took pictures of people who want medals and they analyzed how big was their smile what would you think people expect gold silver bronze no gold bronze silver why is this silver person the least happy this close right imagine for four years you got up extra early and every morning you did whatever you do and 90 seconds ago you got second place what's the thought you can't help but having if only if only and what is the bronze person thinking at least I'm here whatever else and and you can probably think about many cases in your own lives in which your own happiness is not driven by actually where you are but driven by some contrast contrast your neighbors to two people at work all kinds of contrasts rather than your actual state so this is regret this contrasts how do you bring regret to our experiment so imagine all of you are in committing and all of you are taking your medica supposed take your medication people on my right are taking the medication people on the left are not if we just do the regular lottery I take the people who've taken the medication take 10% of you and give you the reward if I try to add regret I give everybody a lottery ticket whether you took the medication or not and I call you up and I say congratulation you're the winner of the coveted lottery the stars are smiling on you it's your lucky day sadly I co did not take your pill today so you're not getting the money that's the essence of regret because now you can think about this small act you could have taken earlier in the day that would put you in a very different situation and with those two things lotteries and regret compliance rate goes from about 65 percent to about 98 percent so when you think about self-control there's lots of sad things because we see people acting we are all acting in a way that is not in our long-term best interest but it doesn't mean we have to give up we can actually make things better we can change the environment in reward substitution we can add some money we can add regret we can add guilt we can add chocolate there's all kinds of things we can do to get people to act now in a way that is in our long-term best interest another mechanism I want to tell you about is called Ulises contracts you remember the story from the mythology Ulysses knew that if the sirens will come he will divert the boat and kill himself in the sailors so what did he do he asked the sellers to tie him to the mast this way he could hear the call of the sirens but he couldn't act on it and he asked the sellers to put wax in their ears and this way the sellers themselves could not hear the call of the sirens they were unaware that temptation exists those two mechanisms are different right because what are they they are metal that say I know that my future self is likely to be tempted and I want to do something now that will prevent my future self from being tempted right I want to tie my my hands of the master so again let me ask you to reflect for a second anybody here can think about a case in which you've implemented the reward subsidiary and ulysses contract a case in which you try to force your future self to behave better putting your phone in the glove box the moment you get in the car and you can think about two versions of this one version is when the ringer is still on so like ulysses you can hear the call of the sirens but you can't act and the other one is you turn it off so you like the sellers you honor where the temptation is coming anybody else yeah sleeping your gym clothes hopefully before yeah yeah yeah very good so you're dressed already you're reducing reducing friction for that what else yeah not going to the clothing store yeah and how many of you for example when you go to a supermarket decide not to buy chocolate cake right you can say let me buy chocolate cake I'll put in the refrigerator or even slightly small slice every other day or you could say not going to happen and yeah paying with cash actually I have a lot of research on this catch me after the talk it's it's a very interesting topic people feel the pain of pain you feel differently the agony of paying if you pay with credit card with cash which changes changes behavior I'll give you one give you a couple of examples for this one one of them is we we did this study in the medical domain again it turns out in the history of the world and nobody nobody nobody has ever woken up and said today I feel like colonoscopy so what happens when you schedule for people colonoscopy they make up stuff and they don't show up so we ask people we say would you like to give us a check when we schedule colonoscopies for people we ask them would you like to give us a check for five hundred dollars and if you show up on time you'll get your money back but if you're late for whatever reason you lose the money that's a bad deal why because you can't get money back you can only lose but more than 50% of the people take us on this offer and they show up for colonoscopy on time right sometimes we recognize that our future self might fail and we're doing all kinds of things to force that future self to behave better and when I was at MIT that one of the students in the lab and did a clock called clock II and now what happens when you have an clock is a clock with two big wheels that run in slightly different speeds now what happened usually you go to sleep and you say to yourself I'm the kind of person who wakes up at 6 o'clock in the morning and go for a run and you set up your clock for 6:00 in the morning and then 6 o'clock in the morning comes around and you are no longer that person it's like a different person on different preferences different priorities and if you have a regular clock you hit on it and it goes to sleep snooze and so on if you have clucky the clock is now running around the room in an unpredictable way and you have to get up and chase it and find it and by the time you find clocking you're awake and now you might as well go for a run by the way the fatal flaw of the first version of Crocky was that by the time people found clock e they were also pissed off so if you'll do an image search you'll see lots of people of clock is with the wheels torn off which of course makes it less so if you think about temptation in general it's really everywhere it's really everywhere and we can say oh let's just teach people to fight temptation that's going to be very very hard to do you know temptation builds on emotion our emotions get evoked by all kinds of things and when our emotions get evoked we kind of follow and but because of that it's incredibly important to figure out how do we design the world how do we design the world in a way that would not get us to fail in the same in the same ways and and I want to give you one story about that that something that we've implemented in terms of financial spending and so so this project this study we did in a slum called Kibera Kibera is aslam in Kenya these were people who live on about $10 a week very very poor people and we wanted those people to save and we didn't want them to save because we thought it would have money for retirement and we want them to save because when poor people run into negative financial shocks they have to borrow money and they borrow money it's very high interest rate so here's what happens let's say you live in Kibera and you have a goat and your God gives you 25% of your income and one day your goat is sick you already live hand-to-mouth you have no place to you have no cushion and now you have to borrow in Kibera you borrow at about 10% interest a week a week and let's say that four weeks later your goat is healthy again good news but still you're four weeks behind plus interest rate how do you get out of it very very hard to get out of it so we wanted people to save a little bit of money for a rainy day now what would happen if we gave people a saving account in the front pocket of their pens it would spend it they would spend on good things right water fruit more food I mean lots of things to spend even even in Kibera so we wanted the money in the same way that we talked about self-control to be out of reach so we teamed up with m-pesa the the payment Safari coms electronic payment a company and we investment bank and we created a system where people could text money into their account but every night the investment bank will take the money from the empresa account and put it in the stock market and you can argue about the logic of putting money in the Kenyan stock market but you know that's what we did now this system what happened was it was very easy to text money in very hard to get it out because to get it out you couldn't text it out you had to take a bus go to the city fills a piece of paper wait an hour get the money and take the bus back maybe it will take four or five hours and we did this intentionally because we wanted a system that is easy to put the money in and hard to get it up okay so we gave that system to lots and lots and lots of people and then in addition to having this system we had all kinds of conditions all kinds of ways to try and encourage people to save money so some people just got that system what we call the control condition some people got that system plus a weekly text that said try to save 100 shillings about 90 cents this week another group got the same text message but it was framed as if it came from their kids so we knew the name of their kids and we say hi mom hi dad did this little Johnny whatever the name of the kid was try and save a hundred shillings this week with another group that we gave them a ten percent match we say save up to 100 shillings we'll give you ten percent match another group got a twenty percent match two other groups also got ten percent match and twenty percent match but they got what we call pre-matching I mentioned before loss aversion the idea that people hate losing more than they enjoy gaining so in the regular match people save and then we match at the end of the week in the pre matching condition we get in the match in the beginning of the week and we said if you save you get to keep it if you don't we take it back and we thought that taking it back would get people to be quite miserable and very quickly they would save more and we had another condition which we made a coin about this size and it had 20 phone numbers etched on the edges and we said please put this coin somewhere visible in your heart and then we said every week please take a knife and scratch the number for that week if you saved that was it so think about all of those methods text text some kids 10% at the end of the week 20% the end of the week 10% the beginning of the week 20% the beginning of the week and the coin which one do you think work the best let's get the vote and I this is not the political election you have to vote here how many people think that the plain text work the best plain text one okay how many think that by the way just adding a plain text helps at all compared to nothing absolutely reminding people helped how many people think that text from the kids work the best text from the kids okay and 10% at the end of the week 20% at the end of the week 10% the beginning of the week 20% the beginning of the week only people think the coin worked the best okay here the results giving this system to people without reminders already created substantial savings reminder once a week helps 10% at the end of the week help some more 20% at the end of the week just like 10% no difference 10% the beginning of the week helped some more 20% the beginning of the week just like a 10% and kids by the way were just like 10 and 20 percent plus loss aversion so you know it's kind of powerful from a kid's perspective right that just a reminder from kids is just like having ten or twenty percent plus loss aversion but the coin was the big surprise for us and the coin was the big surprise because it doubled savings compared to everything else and the question is why now I see some of you nodding you know we call our research center at Duke we call it the Center for advanced hindsight and it's a little harder to get grants this way but but it's a we use we use this name because you know after the fact you can always tell yourself a story about why you actually always anticipated these results but we try to remind ourselves that we don't always predict these results but but now that we know the results why do you think it happened what's what's the cause for this involvement is one theory people actually scratching what else see progress by the way we we really try to kind of get the coins back people love those coins we couldn't get them back so so we had the hard time there what else okay so like you want to see streaks you want to see streaks again we wanted you look at this we couldn't what else the pleasure of checking something else yeah and other thoughts yeah other people can see now it's that's interesting in Kibera by the way it's not as if people invite neighbors to their huts that much but there is the family and then somebody behind there was later the same thought okay great and okay so let me tell you about another study what do you think happens if you randomly open two kids college savings account on the day that they are born you take a group of kids randomly assign some of them to get college savings account some of them not and you put 500 dollars in their savings accounts what do you think happened to these kids at age four the results showed that the kids would call it savings account have higher social and cognitive skills how can that be do you think that call a four-year-old kids know that they have college savings account no their parents know and once a month their parents get a statement that says this little kid while still in diapers has a college savings accounts account and it's true that it's less than five hundred dollars or about five hundred dollars but it doesn't matter because it's not about the amount of money it's about the framing and what happens the parents treat the kids a bit better they read to them a bit more and you don't have to do a lot if you think about four years we were just able to convince actually quite a few places now San Francisco is doing it the Israeli government is doing it the state of Maine is likely to do it lots of places are taking these results and opening a college savings accounts to kids on the day that they are born again from a mindset perspective so let's go back to our experiment if you think about the days of the week we texted everybody on Thursday to save and indeed people saved on Thursday the benefit of the coin did not come from Thursday it came from all the other days of the week why because the coin was something visible in the environment and from time to time people saw it and from time to time people thought about savings and from time to time they took an action we react to our environment we make decisions as a function of the day environment that we're in in your environment what reminds you about savings nothing everything that you see reminds you about what spending the same thing is true in kubera nothing about their environment reminds me about saving all of a sudden we create something do they think about all the time nor do they think about it every day of course not but for time to time we thought about it they thought about it and this is actually an interesting point here about thinking about the digital world think about apps when do you think about an app you can think about it when it notifies you of something unless you turn it off but unless you've unless you have notification you think about an app only when you think about an app it has to come from the inside where as the physical environment has another possibility which is to basically create thoughts in us and there's lots of opportunities like that so what is the the overall point I want to say the world is actually very tough and the world is getting tougher and tougher to make decisions about it's harder to make decisions about our long-term financial well-being it's harder to make decisions about our health everything is more complex more difficult computation is increasing and I think the key to human freedom is not about empowering people with necessarily more reasoning at each point but it's about helping us create a different environment if I came to your office every morning and I layered your desk with donuts how healthy would you be at the end of that year certainly less healthy you don't have to fail every day you don't have to fail every time but if we design the environment this way you will certainly fail and certainly life will be worse off the point is we don't have to design life like this we can design things to be to be better we can actually design things to be more more in line with our human skills and I'll give you one last example based on your question earlier so there's the principle we call the pain of pain and the pain of pain is the idea that we when we think about payment as we pay we enjoy things less so if you go out to dinner today and it's an expensive meal it's $200 and you pay with either cash or credit cards the cash would feel much worse and it would feel much worse because you see their money leaving your account imagine I own the restaurant and I figure out that people each 50 bytes and pay $50 and I came to you and I said it because you're such a wonderful person I'll cut your cost in half I'll charge you 50 cents per bite and not only that I'll charge you only for the bites you eat the bites you don't need you don't need to pay and I'll serve you your dish I'll step back and I'll mark a check every time you take a bite how much fun will that meal be you'll be miserable when I teach my students about the psychology of money I bring pizza and I charge them 25 cents per bite what do you think happened huge bites huge bite and and they take site change by that they suffer from the whole thing now think about where we go in technology we have Apple pay we have Android pay are we minimizing the pain of pain we certainly are it's as if we're imagine that the right world to drive toward is a world in which people don't think about money at all when they consume that's actually not a good choice if you think about people's long-term well-being so I think we do need to think about for example the decision of electronic wallet what kind of electronic quality we want to create do we want to create one that would tap into our instinct and get us to not think about the future and get us to spend more or do we want to create something very different that will get us to think more about the future and maybe make better decisions and thank you very much you

Channel: Ford Media

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Length: 40min 25sec (2425 seconds)

Published: Mon Sep 12 2016