In The Wild: Kelly Peters

kelly petersThis week in our practitioner series we’re featuring Kelly Peters, Chief Executive Officer and Managing Partner at BEworks, a behavioral economics firm based in Toronto. She has over twenty years’ experience leading strategy, technology and innovation in major companies, including RBC Royal Bank of Canada and BMO Bank of Montreal as well as an an MBA from Dalhousie University with a concentration in financial services.

Tell me about your work: how does decision-making psychology fit in it? I am the CEO of BEworks, a management consulting firm dedicated to the application of decision-making psychology to real-world challenges. The firm has been grounded in the interdisciplinary marriage of science and business since its inception in 2010 with two leading academics; Dan Ariely, and Nina Mazar, and two accomplished business strategists; Doug Steiner and Louis Ng. We also have two academic advisors: David Pizarro, a social psychologist from Cornell University and Supriya Syal, a neuroscientist working on her post-doctorate at University of Toronto. The hands-on engagement of academics in our projects is one critical thing that distinguishes us from many firms. This lets us do cutting-edge primary research in partnership with clients who want a competitive advantage.

Although our work is research intensive, we are hands-on practitioners designing experiments to change workflow and improve marketing strategies. I have an unusual analogy to explain how we bring three new techniques in the fight to improve the bottom line. The first technique is the right jab, which is the insight from behavioral science that explainswhy people make the decisions that they do; the second is a left hook which is about formulating hypotheses of what and how to influence people’s decisions; and the third is a drop-kick, which is empirical validation of the ideas through rigorous experiments.

We are finding that business leaders and policy-makers are hungry for scientifically-grounded innovation and experimention. They are starting to see how behavioral economics offers new solutions and new thinking. Our projects run the gamut of the four Ps of marketing, product, price, promotion, and place, but also process improvement work like fraud and collections. We have a diverse range of clients from around the world in financial services, retailers, news media, health care companies and even political campaigns. And we are seeing the same anomalies in rationality in every domain!

How did you first become interested in decision-making psychology? Growing up in the 1980s, I played text games on a TRS-80 and was the one who programmed my family’s early electronic devices. In university I studied philosophy, sociology, literary theory, political theory, and contemporary art. I became interested in technology and its impact on society, which is really about the behavior of adoption (remember Geoffrey Moore’s Crossing the Chasm) and attitudes towards technology (from denial to enthusiastic). Reading about Ted Nelson’s Project Xanadu led me to start my professional career in 1993 as a consultant focused on helping companies understand why and how to develop a web presence. I worked on the dotcom launch crew of the largest media properties in Canada. And though the media companies were the first to get online, I believe their business model depends on micropayments. Financial services were the first industry to have a real application for online capabilities. I took on a role as director of product development for a financial services dotcom where the goal was to fundamentally change the behavior of how people conduct their banking.

Most of my career was spent leading business strategy and innovation teams. Success depended on understanding what will drive adoption of new products and services, how to engineer a meaningful customer experience, and increase utilization of new channels like online banking. Few people realize how heavily banking relies on behavioral insights  – whether it’s understanding how to encourage customers to use new banking channels like ATMs or online banking, or from cheques to electronic transfers; to drive savings or borrowing; to engineering new products and driving their adoption; to assessing risk; and managing collections and preventing fraud.

In the 1990s, behavioral scoring data models were being developed to capture both the quantitative aspect of a person’s financial wherewithal such as their capacity for debt service and collateral, but also quantify “character.” This behavioral variable is what explains why a wealthy person could be a bad credit risk and a poor person could be a good one. On the other side of the balance sheet behavioral finance explains why a wealthy person can be a terrible saver and a poor person can be a diligent saver. Retail and commercial credit risk, behavioral finance, and enterprise risk management are theoretical constructs underpinned by models that derive explanatory power from behavioral attributes.

I gathered insights from thought leaders in economics and political theory (Hayek, Schumpeter) and risk theory and history (Against the Gods: The Remarkable Story of Risk by Peter Bernstein and Nassim Taleb’s book Fooled by Randomness). While these books provided incredible insight on how people are irrational, it was the work on “choice architecture” led by behavioral economists that provided the ah-ha, here’s how these insights can be applied to influence behavior. I devoured the research of Dan Ariely, Amos Tversky, Daniel Kahneman, Richard Thaler and Cass Sunstein along with the work of psychologists like Robert Cialdini. Businesses, and the academic programs they draw from, like MBAs and commerce degrees, ought to incorporate behavioral research and the scientific method if they want to understand their customers in non-intuitive or subjective experiential ways.

While at the RBC Royal Bank of Canada, I had the support of amazing executives and mentors to launch a series of behavioral economics projects starting in 2009. I had the joy of working with Piyush Tantia, John Balz and the ideas42 team. I also partnered with thought leaders like Nina Mazar and Dilip Soman at the University of Toronto & Rotman School of Business, which is in the process of becoming known as a global hub for applied behavioral economics research. With the support of the bank, I moved on to join Dan Ariely and our other partners to help build BEworks.

What type of research do you find most interesting, useful or exciting? This is a very difficult question! Every day is interesting and exciting and presumably useful! We continue to enhance our methodology. The incredible thing about behavioral science is it is endlessly refining what is understood about humans since there is a myriad of ways people are both rational and irrational! We launched our Diagnostics Toolkit in 2010, and after extensive research we recently launched a more comprehensive version. And, of course, seeing the results of our hypotheses validated through experiments is the most exciting part of what we do.

We also recently launched our Behavioral Economics Lab. We’ve started to conduct primary research in areas that we think are important or interesting. For example, we are in the midst of a series of experiments on retail investor risk appetite. Our hypothesis was that the conventional approach to measuring investor risk appetite is fraught with biases. We were able to demonstrate with simple decoys that investor risk appetite is quite malleable and prone to framing effects. This disutility is disconcerting because it gives investors and their advisors bad information about what financial strategies to pursue. We are excited that industry partners, investor education organizations, and regulators are very interested in our research. Our next step is to design and experiment with prescriptive solutions.

Do you see any challenges to the wider adoption of decision making psychology in your field? We have criteria for the kind of client we work with! We know that it’s hard for people to change and a number of things keep business leaders and policymakers doing things the same old way. But once leaders learn how to run their own experiments instead of relying on past experience, intuition, or outside experts who say they have all the answers, strategy formulation isn’t the same. Our clients have to be ready and committed to a scientific approach – both in the knowledge we bring to the table and the empirical approach to our work.

An interesting trend will I think work in our favor. The “quantified-self” movement is encouraging people to generate data and statistics in their everyday lives – how much time is spent in REM when they sleep, how many steps they take, and miles they drive. It is much easier now to be empirical in our everyday lives thanks to incredible technology innovation. Once people start looking at things with an empirical lens, relying on intuition becomes less satisfying. Most businesses struggle to make sense on the data they are gathering and giving it a purpose. The next natural step, which is where we can help, is grappling with how to employ this data to change behavior.

How do you see the relationship between academic researchers and practitionersThis relationship is the foundation of our company. Our team is a collaboration of academics and business consultants. Each partner brings a background of successful academic/business partnerships. In addition to our core team of experienced associates, we also have a strong team of interns currently pursuing degrees in psychology, economics, and public policy, so this adds to our bench strength. Our process is a virtuous circle of learning. The academics are committed to expanding the theoretical understanding of human nature. The practitioners like to see if and how these ideas hold in the real world which in turn provides further fodder for theoretical research. This integrated approach allows us to develop ideas that are both innovative in theory and in practice. We are growing the business by adding researchers who want to try and apply their academic pursuits with willing clients, and business people who aren’t afraid to set current practices aside. Plus the academics love playing with our large data sets.

What advice would you give to young researchers who might be interested in a career in your field? Like academia, the business world has its own language with arcane words like “solutioning” and “concretize” and concepts like “value-add” and “straw-dogs.” Just hang in there! You’re saying the same thing: modulations are “tactics” and findings are “results.” And there is similar methodological thinking to problem solving that was brought into business by a fair number of folks with engineering degrees. I believe that social scientists bring the same level of analytical thinking and rigor from their work with experiments and statistical analysis, plus they bring the evolving universe of cognitive and social psychology, and neuroscience.

We are teaching many businesses what to do with social science PhDs and helping social science PhDs who don’t know how they can use their skills in commercial terms. To academics, our platform presents the classic answer to their real world questions:  I wonder if I tried this with real data and real people, what the outcome would be, and whether it could change the way people act?  Few companies currently research or experiment in the way that a PhD has been trained to do. This is the essence of how BEworks is trying to change the nature of how business and policy leaders develop their strategies.

Kelly is also one of the speakers at a dinner organised by InDecision at the annual conference of the Society for Judgment and Decision Making in Toronto. The informal dinner will follow the Graduate Student Social Event (6.45pm to 8.45pm) Saturday 16th November at Joe Badali’s restaurant, a 5-minute walk from the conference venue. 

The informal dinner is an opportunity for graduate students to hear from practitioners on how they are applying JDM research in their work – other speakers include pricing consultant and writer Leigh Caldwell from The Irrational Agency and Paul Sas, principal research scientist at Intuit. 

Places are limited so please email to secure your place in advance. Some remaining spaces may still be available on Friday at registration desk on arrival at the conference. (For more details on either event please contact elina@theirrationalagency.com)

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Research Heroes: Dan Ariely

dan ariely

This week we’re proud to feature Dan Ariely who is the James B. Duke Professor of Psychology and Behavioral Economics at Duke University and the author of three New York Times bestsellers: Predictably Irrational, The Upside of Irrationality, and The (Honest) Truth About Dishonesty.  He has also been featured in a number of popular TED Talk videos and he blogs regularly at his personal website DanAriely.com.

[The following is an abridged interview that was conducted verbally with Professor Ariely.]

I wish someone had told me at the beginning of my career… I wish somebody had helped me figure out how to emphasize the process of enjoying writing. We do lots of writing and academic writing is restrictive and unfriendly so I really wish that somebody would have helped me find the joy in writing early on in my career.

For me this relates to another important topic: how do you enjoy the process of science to a higher degree? How do you look at the small nuances that happen and find joy in it? I think often people focus on the outcomes like getting papers published. The source of happiness should really be about the research itself, but I needed some help in enjoying the process of writing and communicating and that would have been a great help early on.

I most admire academically is George Loewenstein. I think George is an incredible thinker – I think of him as someone who sits and observes the world in a very keen and astute way. He also has a huge understanding of the literature and is able to ask new and interesting questions that connect what he sees and what we know and what we don’t know and come up with new observations. He starts with something that is about the real world outside and then connects it to an interesting theory and then develops it in a very nice way.

The best research project I have worked on during my career… is probably dishonesty, partly because I’ve worked on it more than any other particular topic. That’s part of it – my own investment in my own research. It is also important because I think it connects basic research with lots of policy implications. Often when we do experiments on decision-making we find out what people do badly which gives us opportunities to fix it. However, not all of these impact policy. But in the case of dishonesty, there are strong policy implications which I think are central to how we regulate banks and think about lobbying and all kinds of other things.

The worst research project I have worked on during my career or the one project that I should never had done… There’s probably a few of them, but there is one particular project on smart agents. The project was based on an interesting idea but then I had to learn Java and programming, and the amount of work that the project required was unbelievable – not just in terms of learning how to program but it was all based in simulation. Our field does not really appreciate simulations to a high degree, so I felt I learned something from it. However, the ratio of learning to effort was something that was not a reasonable exchange rate.

The most amazing or memorable experience when I was doing research… Analyzing the data from a study we did in India. It was such a complex study and it took so much time and so much money. I think of analyzing data as almost a religious experience. Sadly, I don’t do it as much as I use to, but on that day I took a glass of wine and prepared the data set and created everything and started doing the analysis. When I do analysis I always start by looking at the means – I don’t care initially so much about statistical significance as I just want to see how things look like and want to see the patterns. That’s how I get my initial answer to the questions: was I right, was I wrong, and what’s going on? On this particular occasion it was really interesting because it was such complex data. Some of it worked as I expected which was great and some of it didn’t work as I expected which is also great because I learned something.

The one story I always wanted to tell but never had a chance… I actually learned a lot about life in general from being a long-term patient in a burn department. I learned things about bandage removal, relations between people as well as feeling part of society and not feeling part of society. Many of those experience are hard to capture in an experiment because experiments are inherently simple: they are about a few conditions and don’t capture the complexity.

I’ve also written something that I posted on my blog about my life as burn patient and I actually wished we had an outlet for that stuff more: in medicine there are experiments and then there are case studies. Maybe in medicine they put too much value on case studies but I would like to do more of them. I actually tried to submit something to a journal as an ethnographic reflection but they said it did not follow their procedures and methods, and in some sense it is a shame because if you think of research as a collection of insights, it would be nice if we could include more insights, even ones that are not the standard academic ones that we know how to do in experiments.

A research project I wish I had done… For a long time I wanted to do research on productivity in the workplace as a function of different types of rewards: financial rewards, bonuses, kind words, paying with pizzas, group rewards, or whatever you could think of. I am getting closer – we are just starting to do a few, but there are many challenges.

On one hand compensation is main thing in business – it is the main line item for any business and yet we know so little about it. I would love to do experiments to with bonuses to CEOs and bankers and so on. I would settle for small bonuses as well with strong research practices. It’s is clearly something we need to study but the problem is that the people who are getting big bonuses don’t really want to know the answers. It’s definitely an important objective to figure how to do it and how to do it well, and in general how we do research on compensation.

 If I wasn’t doing this, I would be… Hard for me to say of course, but I have a deep love for biology. I sadly haven’t had enough time to study biology in the past few years, but I look at the advances in biology and molecular biology in particular and I am just amazed. That would have been one thing I would have loved to try to do. In another direction I would have loved to been architect as I think of them as designers of human interaction. Granted, not all architects but many are: they create the environment in which people live, and in that perspective I think they are like social scientist but in a particular domain. I would have loved to try that and have an impact on how people live.

The biggest challenge for our field in the next 10 years… would be to understand the generality of the findings we have. We have lots of findings and different aspects and we have assumed for a long time that they would just carry over in different contexts and different occasions.

Of course, when we talk about the theory of mind or psychology, the context doesn’t have to be part of the theory, but as we get access to more people and more cultures, I think we’ll have to have a more nuanced understanding of our theories and we will have to learn to adjust them based on other intervening factors that might come from culture for example. We have been ignoring culture too much.

It has less to do with the theory and more to do with application: as we try to apply things and try to change human behavior, we will need to understand those nuances to a larger degree.

My advice for young researchers at the start of their career is… research in general is a lonely long term endeavor. I think before you start with it, it is important to figure out exactly what you love doing – even if other people are not particularly in favor of and it is not particularly the hot topic of the day. I think that is less important – if it is something that you deeply care about, go for it, because at the end of the day the quality of the work is something that requires that thinking and investment over days and months and years and the only way to do it is to do something you really love.

Love first – suitable with the profession second.