There is a name for the addition of consumer effort to increase someone’s estimation of value. It should perhaps be called the Betty Crocker effect, since they spotted it first, but it’s instead known as the IKEA effect, because the furniture chain’s eccentric billionaire founder Ingvar Kamprad was convinced that the effort invested in buying and assembling his company’s furniture added to its perceived value. When working with IKEA I was once advised: ‘Do not, under any circumstances, suggest ways of making the IKEA experience more convenient. If you do, we shall fire you on the spot.’
We employed this effect a few years later, when asked to help promote a fabric detergent which had been designed for the developing world – it required clothes to be rinsed once, rather than three times during washing, in order to save water. Our idea was to create a more complex bucket to replace the three buckets that had been required previously, which would add a degree of gratuitous complication to the single rinse. This improvement to the detergent’s efficacy was only slight: the real point of the extra effort involved was to prevent the new process from seeming too good to be true.
A final note. When working with pharmaceutical companies, I discovered that every developer tried to make their drug as easy to ingest as possible – however, the behavioural economist Dan Ariely and I disagree with this apparently logical assumption. We both feel that the placebo effect might be strengthened if the drug requires some preparation, whether prior dilution or mixing. In additon, by creating a routine around the preparation of a drug before you take it you also create a ritual, which makes it much harder to forget. It’s easy to forget whether you have swallowed two miniscule pills, but much harder to forget whether you have mixed liquid A with liquid B before adding powder C.
6.14: Getting People to Do the Right Thing Sometimes Means Giving Them the Wrong Reason
As I mentioned earlier, the human brain to some extent automatically assumes that there are trade-offs in any decision. If a car is more economical, its performance is assumed to be more sluggish; if a washing powder is kinder to the environment, it is assumed to be less effective. This is why promoting a product as being ‘kind to the planet’ comes at a risk – might it be easier to save the planet if we talked less about doing so? The error of the environmental movement seems to me to be assuming that it is not only necessary for people to do the right thing, but that they must do the right thing for the right reasons. My own view is more cynical, and also pragmatic: if people adopt behaviours that benefit the environment, we shouldn’t really care what their motives are.
Demanding people do the right thing and for the right reason is setting the bar rather too high. When Ogilvy was asked to increase the level of waste recycling in British homes we made the suggestion of shelving all discussion of what a household thinks about the growth of landfill or the loss of polar bears; instead we suggested that the principal behavioural driver of recycling is to do with circumstances rather than attitude. Put bluntly, if you have two bins in your kitchen, you’ll separate your recyclable rubbish and recycle quite a lot, but if you have only one bin you probably won’t. Under the slogan ‘One bin is rubbish’ we focused our campaign entirely around encouraging people to have more than one bin in their household – avoiding the issue of how to convert people to be card-carrying members of the green movement.*
We were not being defeatist in this campaign, or giving up on the attempt to make people more environmentally aware – we were just solving the problem backwards. Conventional wisdom about human decision-making has always held that our attitudes drive our behaviour, but evidence strongly suggests that the process mostly works in reverse: the behaviours we adopt shape our attitudes. Perhaps someone who separates their rubbish into waste and recyclables will become more environmentally conscious as a result of having adopted the behaviour, just as Tesla drivers will wax enthusiastically about the environmental purity of their vehicles, regardless of their initial reasons for buying the car.*
Behaviour comes first; attitude changes to keep up.
We have adopted a similarly pragmatic approach in proposals to reduce the amount of uneaten supermarket food thrown out by consumers once it passes a best-before date. Again, we didn’t concentrate on the reasons people shouldn’t waste food, but instead on ways to make unwasteful behaviour easier to adopt. Our suggestions have included such childishly simple solutions as including the day of the week on ‘Use By’ and ‘Best Before’ dates on packaging. ‘Use by Friday, 12/11/17’ is a much more useful reminder than a numerical date.*
As we have seen in this section, it is only the behaviour that matters, not the reasons for adopting it. Give people a reason and they may not supply the behaviour; but give people a behaviour and they’ll have no problem supplying the reasons themselves.
Part 7: How to Be an Alchemist
7.1: The Bad News and the Good News
After landing at Gatwick Airport, the plane taxied for five minutes or so before coming to a halt, the terminal still somewhere in the distance. I heard the engines wind down and a horrible thought occurred to me: we might be about to be loaded onto a bus. I had always felt mildly resentful about being bussed to the terminal, suspecting that it was a tactic used by airlines to save landing fees by parking far away from the terminal building and avoid paying for an airbridge.
Then the pilot made an announcement that was so psychologically astute that I felt like offering him a job at Ogilvy. ‘I’ve got some bad news and some good news,’ he said. ‘The bad news is that another aircraft is blocking our arrival gate, so it’ll have to be a bus; the good news is that the bus will drive you all the way to passport control, so you won’t have far to walk with your bags.’
After decades of flying, I suddenly realised that what he had said was not just true on that occasion – it was always true! The bus drops you off exactly where you need to be, meaning that you don’t have to lug your carry-on bags through miles of corridors before you can get to the exit – this was a revelation. We soon arrived at passport control, and were all rather grateful for the bus. Nothing had changed objectively, but we now saw the bus not as a curse but as a bit of a bonus. The pilot’s alchemical approach had redirected my attention to a different judgement.*
7.2: Alchemy Lesson One: Given Enough Material to Work On, People Often Try to Be Optimistic
One characteristic of humans is that we naturally direct our attention to the upside of any situation if an alternative narrative is available, minimising the downside. By giving people good news and bad news at the same time, you can make them much happier than they would be if left with only one interpretation: that pilot was perhaps cleverer than he knew.
One of most amusing and telling stories in the recent history of behavioural economics appears in Richard Thaler’s memoir, Misbehaving (2015), when he describes what happened when the University of Chicago Economics Faculty was required to move to a new building. These people are, in theory, the most rational in the world, who should have had at their disposal every possible strategy for collective decision-making in allocating the offices, which varied slightly in size and in status (a corner office being more desirable than an office with one window). Some of them suggested an auction, but this idea was quickly rejected – it was regarded as unacceptable for elderly Nobel Laureates to have smaller offices than their younger colleagues just because the latter had lucrative consulting practices and could afford to pay for the best offices. There was a great deal of feuding and obsessing over tiny differences in size.*
I suggested to Professor Thaler that there might have been a simpler way to solve the problem by using a little psychological alchemy: why not rank both the offices and the faculty parking spaces between 1 and 100 in order of desirability before allocating them by lottery, with the people who received the best offices receiving the worst parking spots, and vice versa? Under these conditions, people allocate greater importance to the part of the lottery in which they have come out best, while those in the middle ref
rame the result as being a happy compromise.
I was familiar with this system because it was how rooms had been allocated at my university college, a practice that I believe has gone on for centuries. In their first year, everyone is allocated a fairly standard room in college – none of the markedly good ones are given to first-year students. In their second year, a ballot is run, with the person at the top receiving the first pick, the second the second, and so on; and in the third year, the positions on the ballot are reversed. I never met anybody who was unhappy with the result.
This seems to offer an extraordinarily valuable psychological insight into the best way to divide unequal resources between a random collection of people – when presented with either good plus bad, bad plus good or average plus average, everybody seems equally content. In fact, we seem well-disposed to explicit trade-offs. A sentence which contains bad and good news, along the lines of, ‘Yes we admit downside x, but also think of upside y,’ seems particularly persuasive. Robert Cialdini has observed that, as you are closing a sale, the admission of a downside oddly adds persuasive power: ‘Yes, it is expensive, but you’ll soon find it’s worth it,’ seems to be a strangely persuasive construction – explicitly mentioning a product’s weakness enables people to downplay its importance and accept the trade-off, rather than endlessly worrying about the potential downside. If you are introducing a new product, it might pay to bear this in mind.
When you think about it, it is rather strange how explicit low-cost airlines are about what their ticket prices don’t include: a pre-allocated seat, a meal, free drinks, free checked luggage – such deficiencies help to explain and destigmatise the low prices. ‘Oh, I see,’ you can say, when you see a flight to Budapest advertised for £37, ‘the reason that low price is possible is because I won’t be paying for a lot of expensive fripperies that I probably don’t want anyway.’ It’s an explicit, well-defined trade-off, and one that we feel happy to accept.
Imagine if cheap airlines instead claimed: ‘We’re just as good as British Airways, but at a third of the price.’ Either nobody would believe them, or else such a claim would raise instant doubts: ‘Maybe the only reason they’re cheaper is because they don’t bother servicing the engines or training the pilots, or because the planes are scarcely airworthy.’
So, marketing can not only justify a high price but it can also detoxify a low one. Make something too cheap without sufficient explanation and it simply might not be believable – after all, things which seem too good to be true usually are.
7.3: Sour Grapes, Sweet Lemons and Minimising Regret
My airport bus transfer experience illustrates a simple truth about human psychology that was spotted over two thousand years ago by a wise storyteller called Aesop. It appears in several of his fables including, most famously, the story of the fox and the grapes. A fox gazes longingly at a beautiful bunch of grapes hanging from the high branch of a tree, his mouth watering. He jumps to reach them, but misses by a long way. He tries again and again, but each time it is in vain. Sitting down, he looks at the grapes in disgust. ‘What a fool I am,’ he says, ‘wearing myself out to get a bunch of sour grapes* that are not worth the effort.’
The moral of the fable is that many pretend to despise and belittle that which is beyond their reach. This seems fair enough, though it is worth asking how our lives would feel if we did not play this mental trick on ourselves – we might go about in a constant state of resentment because we were not the billionaire recipient of a Nobel Prize.
The opposite phenomenon to sour grapes is often called ‘sweet lemons’, where we ‘decide’ to put a positive spin on a negative experience. Both these mental tricks are types of ‘regret minimisation’ – given the chance, our brain will do its best to lessen any feelings of regret, though it does need a plausible alternative narrative to do this. Thinking back to my experience at the airport, the reason I had previously hated being bussed to the terminal was not because it was intrinsically bad, but because there didn’t seem to be anything that would help me frame it in a more positive light. Once I knew of an upside, I was able to choose to see the bus as a conveyance and not an annoyance. As Shakespeare wrote, ‘there is nothing either good or bad, but thinking makes it so’.
A few hours before I sat down to write this chapter, I received a parking ticket. It was only for £25 and I was completely to blame, but it nevertheless annoyed me to an extraordinary degree – and it is still annoying me now. Perhaps a parking ticket is made even more annoying because we can see no way of reframing it in a positive light.
Could the local authority that issued me with the ticket give me a chance to play the same mental trick on myself as the easyJet pilot – a reason, however tenuous, to feel slightly upbeat about the fine? For instance, how different would I feel if I was told that the money from my fine would be invested into improving local roads or donated to a homeless shelter? The fine would have the same deterrent effect, but my level of anger and resentment would be significantly reduced. How would that be a bad thing?
7.4: Alchemy Lesson Two: What Works at a Small Scale Works at a Large Scale
Why don’t we take the insight gained from our experiences of easyJet and parking tickets and apply it to something larger? Public services are sometimes disliked by the people who use them not because they are worse than private sector services, but because the link between what you pay and what you gain is so opaque that it prevents people from creating a positive narrative about the taxes they pay.*
I once examined a breakdown of what my local taxes are spent on: it seemed that I paid £25 per year for weekly refuse collection – reframing this as 50p per week, I was struck by what good value it was. For less than the cost of a stamp, someone would come to my house and remove and dispose of several bags of refuse; suddenly the council seemed more impressive than they had before.
One problem with governments is that they generally hate hypothecation, the system whereby taxes are ring-fenced and spent on a pre-defined area of activity. Instead, taxation tends to go into one pot, before being spent wherever it is needed. As a result, we end up resenting taxation more than expenditure that goes towards something we can see, feel or even imagine.
By contrast, consider for a second the success of private organisations in securing philanthropic donations when they can offer the donor something in return – even something as trivial as naming rights to a building. The taxation we give to the government doesn’t provide us with the opportunity to create a narrative that might make us happy about what we pay. Taxes, like parking fines, are seen as wholly bad, but a little alchemy could solve this problem quite easily. In ancient Rome, wealth taxes were levied to fund military campaigns or public works, and since the names of the people who paid them were displayed on a monument, with the money dedicated to a specific end, rich people were happy to pay, with those initially deemed too poor to be liable volunteering themselves, saying ‘Actually I’m much richer than you think.’
People who are happy to spend £300 on a pair of designer sunglasses* feel resentful when they are required to pay that amount on funding healthcare, policing, the fire brigade or defence, yet many of us would voluntarily pay more tax if it were possible to specify which service would receive the money.* If you allowed people to tick a box on their income tax form whereby they paid 1 per cent extra to improve healthcare, many people would happily do so. And if you then gave them a car sticker to display the fact that they had paid more, as the Romans effectively did, even more people would join in. How would that be a bad thing? And yet, for some reason, government institutions and businesses seem to shy away from such solutions. Perhaps they think of them as cheating; maybe they are cheating, but the fact remains that, if emotional responses have such an influence on our brain, we have no choice but to at least try to present things in a way that it finds least emotionally painful.
Remember, no one will buy a fish, however tasty, if it’s called the Patagonian toothfish.
&nb
sp; And similarly, perhaps no 26-year-old will ever buy a financial product, however advantageous it may be to them, if it is called a pension. At present the UK Government spends over £25 billion each year on tax rebates for pension contributions, a staggeringly generous incentive to save for retirement by any standards, and yet it is staggeringly ineffective. I was recently part of a group that met to discuss what the government could do to make paying into a pension more appealing, particularly to younger people, without requiring such a high level of financial subsidy. We were all impressed by the work that Richard Thaler and Shlomo Benartzi had already performed in this field: together, they conceived a new mechanism for pension-saving that acknowledges one of the central principles of behavioural psychology – loss-aversion, the mental mechanism that causes us to experience more pain from losing £100 than pleasure from winning £100.*
A typical pension works like this: if you buy a pension plan for £250 a month, every month thereafter you are £250 poorer, until your retirement, when you can redeem the annual salary which that pension provides. By contrast, Thaler and Benartzi’s ‘Save More Tomorrow’ pension worked differently: you signed up for a pension at a certain rate (let’s say 20 per cent) but instead of starting immediately, your contributions would only represent a proportion of any future wage rises. So if you were given a £500-a-month pay rise, 20 per cent of it (if that is what you had chosen) would go towards your pension. The same would apply to further pay rises: if, in your fifties, you were earning £50,000 more annually than when you took out the pension, you would by then be paying £10,000 each year into a retirement fund. The result was that people taking out a ‘Save More Tomorrow’ pension would never be poorer because of it – they would just be ‘less richer’. To an economist these two states are identical, but to the evolved human brain they are very different.
Alchemy Page 24
