In The Wild: Tom Wein

35b5aeaIn our first In The Wild interview of 2014, we speak to Tom Wein who is a behavioural change consultant who has led major primary research projects to tackle counter-radicalization, aid security sector reform, plan public diplomacy efforts and design communication strategies. He currently works on behavioural change for national security, principally for the consultancy SCL. He read War Studies at King’s College, London, and has also worked for the European Defence Agency in Brussels as a communications consultant.

Tell me about your work: how does decision making psychology fit in it? We conduct research projects for the US and UK militaries in fragile and conflict-affected states, and design interventions to reduce violence. The one thing we’re always trying to explain is that just asking people about their attitudes isn’t enough – you need to examine their psychology in order to change behaviour. So we measure concepts which psychologists will be familiar with, like self-efficacy, motivations and reward structures, to build up a much deeper picture of a group; that way we can come up with much more effective ways of to solve the problem.

Of course, nobody will pay us to do research in Switzerland – our projects are invariably in places where high quality research is difficult. We can partly solve those problems through good recruitment and training, and through building in redundancy, but crucial to the way we research is a process of triangulation. Some problems are inevitable, given the challenges, but two research strands are unlikely to go wrong in identical ways, so we focus on those findings that are confirmed by several sources. We generally use a mixture of semi-structured depth interviews and surveys (containing scales), plus a few focus groups and more free-form interviews with experts at either end of the process, to inform that process.

How did you first become interested in decision making psychology? Like a lot of people studying conflict, I was frustrated with the crudeness of the military’s tools in fighting the deeply complex wars in Iraq and Afghanistan – wars that were defined by our ability to win over the very people we kept accidentally killing. At the same time, I was shocked (I still am!) at how much money was being spent on projects and policies with only the flimsiest evidence base. Those two ideas were crystallized when I came to work for SCL, and found that there was a better, more intelligent way of doing things.

What type of research do you find most interesting, useful or exciting? I am always, always looking for field trials. Hypotheses are great, and laboratories are wonderful places, but I want you to prove that your thing could work in the messiness of the real world (and that doesn’t mean testing on American college students!). No doubt lots of the readers will be familiar with the work of Chris Blattman, whose work in Liberia and Uganda is magnificent stuff. The younger members of the development industry really do ‘get’ evidence and research, even if they’re still sometimes fighting their elders. When I argue that you’ve got to look at groups, rather than humans in general, constantly in the background is the work of Stathis Kalyvas, who has written powerfully about the impact of very local conditions on the conduct of wars.

Other than that, I am always more excited by elegantly written work, and by work that is open access. Those factors are much more important than the field a paper comes from. I’m also suspicious of the validity of findings in different contexts, so I’m often looking for research conducted in the country I’m studying at the time.

Do you see any challenges to the wider adoption of decision making psychology in your field? There’s an awful lot of persuading still to do. In the UK, the Behavioural Insights Team has been invaluable in persuading people that they ought to do research before taking a decision, but in the US there’s a complete focus on very simplistic attitude surveys, if they do research at all. Part of the problem is that comprehensive research projects in warzones are really expensive – it’s a lot cheaper to just do a quick poll.

How do you see the relationship between academic researchers and practitioners? We’ve been quite lucky in that respect – there is a reasonable-sized cohort of academic researchers who have been doing some exciting research in this field, and they’ve been generous with their time, especially when we’re trying to learn about and plan research in a new country. As I hinted above, I can get quite frustrated with the academic system, but that hasn’t prevented us from working well with individual academics.

What advice would you give to young researchers who might be interested in a career in your field? The first thing is to learn some quantitative skills. There are lots of people who can write essays out there; you’re far more likely to get an interesting job if you can also analyze data. The second, rather depressing, thing to say is that there are fewer and fewer full time jobs where you’ll get trained up – you may well have to fight for a series of short term projects before you get hired properly. Therefore, make contacts, network, and use your time at university effectively (including begging professors for introductions) – you’ll never have so much time again. Finally, if you’re in London, go to the monthly behavioural economics networking drinks!

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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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In The Wild: Tom Ewing

tom ewingNext up in our series of practitioners embracing the world of JDM research is Tom Ewing, Chief Culture Officer at market research agency BrainJuicer, where he works in the Labs team, helping translate the findings of decision science and psychology into methods that create business advantage for clients. His background is as an Internet analyst, social media researcher and journalist. His 2012 paper for BrainJuicer, “Research In A World Without Questions”, looked at the possibilities of observational and behavioural research in a commercial context, and it recently won the ESOMAR Excellence Award for the best market research paper of the year.

Tell me about your work: how does decision making psychology fit in it? BrainJuicer is a commercial market research and behaviour change company whose mission is to take advances in human understanding and to turn them into commercial advantage. And “human understanding” means behavioural economics, psychology, and decision science.

We want to create behavioural change for our clients. For commercial clients, this means applying the behavioural sciences to a brand owner’s problems and creating opportunities for them and their retail customers. For public service clients, this often means changing behaviour for healthier outcomes. For shoppers, customers, users of services, this means making decision-making faster and easier, and often making it more enjoyable too.

So our Behaviour Change Consultancy will take a client’s brief, understand the behaviour they wish to change and create behavioural activations that we test experimentally to demonstrate their effect.

Our research approaches support our goal to change behaviour for our clients, and are designed to “reflect and predict what people will actually do”, rather than what they think they do and say they will do – the standbys of traditional research. For instance, we put people under time pressure to recreate fast, System 1 decision-making in packaging and promotions research; we harness people’s social sense to understand the likely success of new product launches; we establish how people feel about advertising to predict its efficiency. And much as we like to test iteratively in our behavioural work, we like to re-test our recommendations to clients to demonstrate the value that we can bring.

How did you first become interested in decision making psychology? On a personal level it’s a natural fit with the curiosity that inspires most market researchers. First of all, you’re curious about what other people do, then you’re curious about why they do it. And then you realise that the stated reasons aren’t actually getting you very far and you want to dig further into how things really work.

As a company BrainJuicer has had an interest in consumer psychology long before I joined – we’ve been doing emotional ad testing since 2007, and tapping crowds for concept testing since 2004. Putting behavioural economics at the heart of our offer has been exhilarating for us as a company and fits with our conviction that market research has been getting consumers wrong for years – putting too much trust in claims and norms and not being curious enough about what people actually do.

What type of research do you find most interesting, useful or exciting? There’s often a gap between the interesting and the useful! Behavioural economics is made up of such a horde of studies, biases, heuristics, and findings that it feels initially like a game of Pokemon: you gotta catch ‘em all, and it seems almost impossible. In order to make it useful you have to make it accessible and tangible to non-specialists – which means you have to streamline it. We use a “Behavioural Model” which uses broad categories of environmental, personal and social influences on decisions that make sense to clients.

The idea is always to get from theory to action as quickly and easily as possible. So the work that leaps out at us tends to be the field experiments that help us to illuminate and bring the thinking to life – real-world test sites, ideally measuring real money changing hands at some point. That’s the arena we’re looking to play in, and frankly those are the findings which get us and clients most excited.

We are fans as well as practitioners. I still love a beautifully constructed experiment or unexpected finding. But it doesn’t really match the satisfaction of being able to change behaviour for our clients; to show how we might reduce hospital infections resulting from poor hand hygiene or to demonstrate how we might reduce binge-drinking.

Do you see any challenges to the wider adoption of decision making psychology in your field? Yes. The long term challenge is pretty similar to the one that faces economists trying to turn around textbook economics thinking. You end up with lots of acclaim and a few prizes but people still make the same mistakes based on the same bad theories. Changing behaviour is hard, and it doesn’t stop being hard just because you know about behaviour change. Industrialised market research has twenty years of norms which exert a powerful and reassuring pull on decision makers, even though they’re based on completely faulty models of how decisions work. We can’t talk about fast and easy decisions without facing up to the fact that choosing the existing option is the very definition of one!

The short term issue, I think, is that there’s an awful lot of excitement at the moment around technology – the power we now have to collect behavioural data. New technology is sexy, easy to adopt and an easy incremental step to take; changing your whole worldview is difficult, breaking habits is hard and systems are in place that make change difficult. So it’s understandable that technology often seems of greater interest to the industry than decision-making science. Who needs psychology when you have big data? Well we do, and more than ever. You absolutely need a thorough grounding in psychology to explain behaviour and tell you how to change it.

How do you see the relationship between academic researchers and practitioners? For BrainJuicer, it’s been mutually beneficial. Our Behavioural Model and the thinking that underpins our products has been developed in conjunction with academics. But you can’t change behaviour through pure argument and persuasion. If we are to change the behaviour of marketers, advertisers and other people in the research industry, we need to make the case for behavioural economics as engaging and as seductive as possible. I am firmly on the side of the popularisers over the purists.

Our behaviour change projects often involve extensive literature reviews by academics. We read a lot ourselves and have a database of studies with proven real-world effects. If it wasn’t for the academic research there would be no practitioners – we stand on their shoulders and we have to do right by them. And as practitioners it’s our job to apply the theory and make it matter.

What advice would you give to young researchers who might be interested in a career in your field? I think at the moment a background in decision science would be an incredible asset for a commercial research company – particularly if you’ve got experience in setting up experiments and how to properly control them. Market research has always been a melting pot of a profession – it’s drawn in psychologists, anthropologists, statisticians, technologists, arts graduates – and while it’s slightly more professionalised these days there’s still a thirst for relevant experience among the smarter companies. But we also need creatives, illustrators, designers, statisticians, writers and speakers to apply the theory, check it works and make it famous. So jump in, it’s an exciting time!

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In The Wild: Daniel Egan

team_dan_bio bettermentNext in our series of practitioners is Daniel Egan, Director of Behavioral Finance and Investing at Betterment.com. Prior to joining Betterment he was the Behavioral Finance Specialist for Barclays Americas, and a founding member of the Barclays BeFi team in 2007. He earned his Master of Sciences in Decision Science from the London School of Economics and Political Science and his B.A. (Distinction) in Economics from Boston University, and has authored multiple publications related to behavioral economics as well as lecturing at New York University, London Business School, University College of London, and the London School of Economics. Betterment is an online financial adviser and investment manager which uses brilliant technology to ensure clients identify and achieve their financial goals. They use behavioral finance to ensure optimal saving, investing and behavior along the journey. As a part of that, Betterment is keen to collaborate with academic researchers in studying and understanding their clients’ behavior and it’s impact on achieving their goals.

Tell me about your work: how does decision making psychology fit in it? It permeates our service. We apply research findings regarding the psychology of saving, risk-taking, and investing and use it to guide how we communicate and display information to our clients. For instance trying to reduce myopic loss aversion when clients are assessing performance, and preventing narrow framing when making forward-looking risky decisions. We think about how defaults, inertia, loss aversion and hyperbolic discounting can be used to help clients make the right decisions, rather than trip them up. We even look at how social interactions and peer comparisons can be used to motivate better behavior.

And it informs how we make decisions internally. For example, when making hiring decisions we don’t let our opinions bias each others. We either agree a set of criteria to make a decision by, and do it algorithmically, or we gather opinions anonymously and independently. That way we have honest and independent feedback. We’re very careful to not let group-think run our meetings.

How did you first become interested in decision making psychology? As early as high school, it was one of the most interesting subjects to me. My father is a clinical psychologist, so since I was young I’ve I loved understanding how I made decisions, for better or worse, at all levels. From the tiny nuts and bolts of neurotransmitters to the very high order functions such as understanding probability weighting, discounting, and the genetic component of risk taking, I like psychology because it’s so applicable to my daily life.

I think I’m very lucky that psychology has grown into other fields which I’m interested in such as economics and finance, as I’ve gotten older. This means there are constantly new findings, the field is growing, and there is more and more to learn and apply.

What type of research do you find most interesting, useful or exciting? Research which shows how you can improve things, with a solid theoretical foundation. In general, I have “bias fatigue” – I know that humans aren’t perfect, and finding another “gotcha” bias is not too interesting, especially when it’s very similar to existing ones.

Diagnosing a problem is only step 1. I think step 2 – finding a solution, and showing why or how it can work, is far more interesting. That there is more and more JDM research aimed at debiasing, or using biases fruitfully, is very exciting. The “nudge” examples are obviously a good example here, and I’d like to see more work done on other ways to help people improve their decision making.

Do you see any challenges to the wider adoption of decision making psychology in your field? If things go well, behavioral finance will grow into a fairly standard role within most financial organizations, especially as data analysis and understanding how minor details can make a big difference becomes more mainstream.  I foresee two challenges to this happening.

The first is that some industry players pay lip-service to psychology and behavioral finance without systematically implementing and testing improvements. The hallmark of this is that the institution employs an “expert” (sometimes who doesn’t have a strong background in psychology), talks about biases and findings, and doesn’t produce any evidence of how they’ve improved client outcomes. In the long run it will appear that psychology in finance is vague promises based on gimmicks and parlor tricks. The lack of empirical and experimental evidence of the benefits of a behavioral and psychological expert is the biggest threat to the field in my opinion. The field must prove its value by not only criticizing, but improving things.

The second challenge (related to the first) is that very few psychology and JDM programs prepare graduates for commercial roles (there some exceptions to this, obviously) . Despite the fact that most companies would love to have someone tell them how to improve client satisfaction and client outcomes, and that these jobs give you the ability to actually improve things in the real world, few academic institutions encourage and equip psychology graduates for the commercial world. From companies’ point of view, this means there are few qualified individuals to trust to run experiments and keep both the company and the clients interests at heart.

How do you see the relationship between academic researchers and practitioners? Underdeveloped, but improving slowly.

There are tremendous gains to be had by academics and the commercial world working together. Companies have access to representative and relevant samples which it is sometimes impossible for researchers to access. They have more money to and resources to throw at solving specific defined problems. And they want to advertise how they help their clients. But the often don’t have the theoretic, statistical, or experimental knowledge to originate and execute a solution to these problems. They don’t know how to prove that they’re doing the right thing. Those are the skills a more academic background brings which are lacking.

Far too often we dwell on the zero-sum games and incentives of businesses – not wanting to use our knowledge to redistribute wealth from clients to businesses. In my experience, it’s a minority of commercial enterprises who want this – it’s a very short-term way to make money. Most often, they want to be the leader in their field, and show that they’re better than the competition. Focusing on exactly the projects which make the clients better off is a win-win.

What advice would you give to young researchers who might be interested in a career in your field? I’m very conscious, after writing out this list, it’s probably the things which people dread the most, but it’s honest.

  • Take chances and network hard: Probably the most important – ask to meet and speak with people. Pursue an internship with a company you really like, admire, or think you could help improve. Talk to people about their products. Write into companies suggesting (very specifically) how they could improve things. Remember that if your odds are 1 in 20, you only need to do about 40 such meeting before you’re extremely likely to find a great role somewhere. 
  • Get comfortable with economics & finance – Think about a company whose product, or even better, service you love. How and why do they get paid? What’s their cost structure? How could they offer a better service, and would you pay more for it? Get inside their head, and internalize their mission – that way you can think of ways to help. You can learn about the most important ideas in these subjects quickly, and they’ll be useful to you not just in work, but also your personal life. 
  • Get comfortable with lots of statistical methods (not just experimental and survey design). You don’t need prove the central limit theorem – rather, you need to know when to use logistic regression versus linear, what statistical test to use etc. Be broad rather than narrow, have a good toolkit. Check out Regression Modelling Strategies by Frank Harrell – my bible on the topic.
  • Get comfortable with programming. This is probably the one you least want to hear, but which has been most important to me. Being able to do analysis quickly, and effectively requires knowing the tools. No, Excel is not good enough. I highly recommend R for practical reasons. It is free, so you never have to convince someone to buy you a license. Many people use and contribute to it, which means it is well documented and supported. Getting good at data management and analysis in R is an investment – it requires some sacrifice up front, but will pay off high dividends later. Also, programming forces you to think in a very exact and clear manner, which is useful unto itself.

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In The Wild: Rory Sutherland

Rory croppedNext in our series of decision making science In The Wild is Rory Sutherland, the Vice-Chairman of Ogilvy Group, one of the largest communications groups in the UK with 11 specialist companies ranging from PR, design, digital and advertising agencies. He’s the former president of the Institute of Practitioners in Advertising in the UK, and a vocal advocate for the use of behavioural economics in social policy, marketing,  advertising and market research. He’s also the founder of their newest division, OgilvyChange, that combines the behavioural academic research with the communications expertise of Ogilvy Group. 

Tell me about your work: how does decision making psychology fit in it? First of all, I should issue a disclaimer. I am not a researcher in the strict sense of the word: I have no qualifications in either psychology or economics – at university I was a Classicist. Today I occasionally describe myself as a Behavioural Science Impresario: one of my part-time jobs is to help make the best “real” behavioural scientists deservedly rich and famous. When Shlomo Benartzi’s tour-bus is overturned by screaming Japanese schoolgirls, I shall know I have succeeded.

But my main job is as Vice Chairman of Ogilvy & Mather in the UK. You would think, wouldn’t you, that the advertising industry and marketing in general would be awash with behavioural scientists and psychologists – and to an extent this was true in the 1950s in the United States, the era of the early Mad Men episodes. (The line “Plink Plink Fizz” was written at the bidding of a psychologist who suggested that, if you could create a social norm around using two Alka Seltzer tablets at a time, sales would double. The de Beers line for engagement rings “How else can a month’s salary last a lifetime?” shows an obvious understanding of the concepts of anchoring and framing.)

But, for a number of reasons, these connections broke down. In part because the advertising industry became convulsed with fear over accusations of unconscious manipulation in response to books such as The Hidden Persuaders. It’s also fair to say that the social sciences “went a bit strange” in the same period: I imagine that for a social scientist in 1970 to get involved with commerce might have been career suicide – perhaps it still is. But however noble the motives may have been for social scientists in distancing themselves from commerce, the net result was catastrophic, since their departure cleared a space for neo-classical economists, with their psychologically blind models of human behaviour, to gain a stranglehold over business and government decision-making. Because these people appeared to use clever mathematics, they were accorded a level of influence they often did not deserve.

Richard Thaler makes this point very well. As he remarks, economists are generally hostile to monopolies, but they seem to have no problem at all with the monopolistic influence they themselves enjoy in influencing decision making. In particular their narrow, normative definition of “rationality” has often led to terrible decisions being made. Not least a complete fixation with financial incentives as the only means of encouraging behavioural change. I see my job now (and for the two earlier years  whenI was president of the Institute of Practitioners in Advertising) as an attempt to break this stranglehold of naive economic thinking, and to help rebuild useful connections, in all directions, between the social sciences, business and policy making.

How did you first become interested in decision making psychology? I arrived at this field through first discovering economics. I think my first economics book was Robert H Frank’s “The Economic Naturalist”. I remain a huge fan of Frank’s: “The Darwin Economy” is a must read, especially for those prone to excessively Libertarian leanings. But, as I then read more about conventional economic thinking, in company with many devotees of the decision sciences, I found my reaction increasingly confused – “like watching your mother-in-law roll off a cliff in your new Jaguar” as one person defined “mixed feelings”. Yes, the models were elegant, the vocabulary and concepts were useful – but from my years in advertising and marketing it was abundantly clear that the theoretical people (“Econs” or “Homines Economici”) found in the models bore very little resemblance to anyone found in reality. Or anyone you’d actually like to meet, at any rate.

I was then and remain very interested in Darwinian Psychology. You don’t have to read much of this to realise that the theoretical race “homo economicus” would not be very successful as a social species. Without the propensity to punish free-riders, even at cost to themselves, without devices such as reciprocation, empathy and social copying, and without the feedback mechanism of reputation, they would rapidly disintegrate into psychopathy. A race of Vulcans would neither live long, nor would they prosper. Social rationality is very different from traditional, economic definitions of “rationality”.

When I discovered Behavioural Economics (and also Austrian School Economics, itself a great source of economic thinking which is not blind to human psychology), I found my mixed feelings about economics were resolved almost immediately. When I read about the Save More Tomorrow Pension, it was like a Road to Damascus moment. I had long believed that there was a missing link in the design of financial products, and here I had found it at last.

But to give economists their due, many have spotted the problems with their own field. If you need to understand why marketing and advertising (and reputation and brands) are important to the functioning of markets, Akerlof’s paper “The Market for Lemons” is essential reading. So too is his excellent and underread book “Identity Economics” written with Rachel Kranton. The problem is not with economics as practiced by great economists – it is the unquestioning adherence to the dumber assumptions of Basic Economics 101 as unthinkingly absorbed by the product of a thousand business schools.

You are particularly made aware of the pernicious influence of bad economics if you work in advertising. Even when advertising demonstrably works and is highly cost effective, people in finance and in the boards of companies don’t seem to like it very much. Since they have a mental model of the world in which everyone has perfect information, they have of course constructed in their heads a vision of the world in which marketing shouldn’t exist.

To a good decision scientist, a consumer preference for buying advertised brands is perfectly rational. The manufacturer knows more about his product than you do, almost by definition. Therefore the expensive act of advertising his own product is a reliable sign of his own confidence in it. It is like a racehorse owner betting heavily on his own horse. Why would it be “rational” to disregard valuable information of that kind?

Do you see any challenges to the wider adoption of decision making psychology in your field? I am almost insanely optimistic. I truly believe that “The Next Big Thing” is not a technology at all. Most progress in the developed world in this coming century – economic, social, hedonic – could in fact come from improvements in the social sciences. This is bigger than the Internet.

Will it ever be a perfect science? No, of course not. That attempt to model economic behaviour as though it were Newtonian physics was responsible for many past mistakes. This is closer to weather forecasting than to conventional physics as a science. But it is still a science and can still make progress like a science. And the great news is that we are starting from such a low base. If our ability to understand and predict human behaviour only improves by a few percent a decade, the benefits will be immense. And even a tiny reduction in misdirected effort (by abandoning daft, ineffectual sunk-cost-plagued endeavours such as the war on drugs or, at a more modest level, badly conceived choice-architectures in a new range of cars) all can be economically transformative. The British Government’s Behavioural Insight Team is a valuable first step in this – but it should be ten times bigger.

The problem we all face is “The physical fallacy”. All of us, even those the social sciences, have an innate bias where we are happier fixing problems with stuff, rather than with psychological solutions – building faster trains rather than putting wifi on existing trains, to use my oft cited example. But as Benjamin Franklin (no mean decision scientist himself) remarked “There are two ways of being happy: We must either diminish our wants or augment our means – either may do. The result is the same and it is for each man to decide for himself and to do that which happens to be easier.”

There is no reason to prefer one solution over than another simply because it involves solid matter rather than grey matter. This is an interesting area where the advertising industry and the environmental movement (rarely seen as natural bedfellows) sometimes find common ground. Intangible value is the best kind of value – since the materials needed to create it are not in short supply.

One other contribution the decision sciences and neuroscience can make to the commercial world is in questioning the sometimes excessive influence which market research (ie asking people to explain how they decide and what they want) has on business decision making. The insight that much of our decision-making is heuristic and instinctive, made by parts of the brain inaccessible to introspection, is of enormous importance in killing off the naive assumption that people can always tell you what they want.

How many great new ideas have been killed off because they failed in research? The Sony Walkman failed in research. Steve Jobs, interestingly, refused to research anything.

How do you see the relationship between academic researchers and practitioners? Symbiotic.

What advice would you give to young researchers who might be interested in a career in your field? If you are talented, greedy, impatient and slightly slapdash, leave academia and come and work in business. Academia is much more rigorous than business – a single misplaced decimal point in a paper can kill your whole career. But we in business have one advantage. For an idea to succeed, it does not have to be perfect, it merely has to be less stupid than your competitors’ ideas. Academia can have its disadvantages: here’s John Tooby, the father of Darwinian Psychology, writing at Edge.org:

“Because intellectuals are densely networked in self-selecting groups whose members’ prestige is linked (for example, in disciplines, departments, theoretical schools, universities, foundations, media, political/moral movements, and other guilds), we incubate endless, self-serving elite superstitions, with baleful effects: Biofuel initiatives starve millions of the planet’s poorest. Economies around the world still apply epically costly Keynesian remedies despite the decisive falsification of Keynesian theory by the post-war boom (government spending was cut by 2/3, 10 million veterans dumped into the labor force, while Samuelson predicted “the greatest period of unemployment and industrial dislocation which any economy has ever faced”). I personally have been astonished over the last four decades by the fierce resistance of the social sciences to abandoning the blank slate model in the face of overwhelming evidence that it is false. As Feynman pithily put it, “Science is the belief in the ignorance of experts.”

Sciences can move at the speed of inference when individuals only need to consider logic and evidence. Yet sciences move glacially (Planck’s “funeral by funeral”) when the typical scientist, dependent for employment on a dense ingroup network, has to get the majority of her guild to acknowledge fundamental, embarrassing disciplinary errors. To get science systematically moving at the speed of inference—the key precondition to solving our other problems—we need to design our next generation scientific institutions to be more resistant to self-organizing collective delusions, by basing them on a fuller understanding of our evolved psychology.

Capitalism is in many ways rather nasty – it’s certainly far from perfect. But one virtue it does have over pure, government funded science is this: if you’re right and your peer-group is wrong, you may lose a fair bit of peer-group approval. But you do sometimes make enough money not to care.

One other piece of advice: do not feel that if you work in the advertising business you have to leave your morals at the door. You will be surprised, for a start, at how left wing many advertising people are.

Now I think it is only fair for all of us to acknowledge that it is possible to put the learnings of behavioural economics to evil ends – in displaying “only four seats left at this price” when there are in fact 28. But good brands do not do this. I would like to say that this is because they are noble endeavours deeply committed to the improvement of mankind, but in truth it is because they are afraid of being found out.

That’s one of the things that my Classical education taught me (through Plato’s story of Gyges and the ring). It’s mainly reputational paranoia that keeps us all honest. Great brands, built at prodigious expense over many years – are about the only thing that makes business (just about) work in the consumer interest (most of the time).

Reputational game theory. If I can encourage you to do work in any field, it’s that.

Website | Twitter | TED talk on behavioural economics

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In The Wild: Matthew Willcox, Draftfcb

mwillcoxFirst in our In The Wild series is Matthew Willcox, Executive Director of advertising agency Draftfcb’s Institute of Decision Making. As a part of his job at the IDM, his charge is to help the network deepen its understanding of human decision making. With a background in communications strategy, and previous role as Director of Strategic Planning of Draftfcb San Francisco, he helped companies such as Electronic Arts, Levi Strauss & Co, Del Monte, Hilton Hotel Corporation, AT&T and MTV make more interesting and effective connections with their audiences. He and his team’s work in this role has netted eight Effie awards in the last three years. Matthew is also a frequent speaker at marketing and communication events, including the Cannes Lions in 2011 and 2012.

Tell me about your work: how does decision-making psychology fit in it? I run a small group within the global advertising agency Draftfcb called the Institute of Decision Making.   We set this group up about four years ago as we realized that the emerging understanding of human decision-making is an important strategic area — perhaps as significant as the emergence of digital or mobile — in terms of where the future of marketing is headed.  But conventional marketing research has real shortcomings in terms of shedding light on intuitive or unconscious aspects of decision making so we went to the authorities in the understanding of how humans make choices (which is, after all, the heart of what marketing is):  academics or scientists in the fields of cognitive psychology, behavioral economics, neuroeconomics and marketing.   A large part of the Institute of Decision Making’s efforts goes into making ourselves familiar with the foundational and emerging work in these areas, and identifying and building relationships with the experts.  We then apply this to practical marketing problems — for existing clients and new business prospects, in areas as diverse as energy efficiency, financial services, healthcare, public policy, luxury goods and entertainment.

How did you first become interested in decision-making psychology? About six years ago, a client asked me for a definition of marketing.  The one I provided, borrowing heavily from Kotler I think, was that marketing is simply influencing consumer’s decisions in your favor.  But as I thought about this I realized that, even though I had been involved in hundreds of pieces of commercial research about how people felt about specific brands and advertising ideas, I knew little or nothing – beyond conjecture – about the bigger picture of human decision making, so I decided to start learning. The first book I read on the subject was “The Paradox of Choice”, and I was then fortunate enough to interview Barry Schwartz for a project on online retailing when he was visiting Berkeley.  He suggested the Society of Judgment and Decision Making conference as a great place to learn more, and I have been attending every year since.  I am amazed that more practitioners don’t attend conferences like the SJDM, the SCP and the ACR. They are fantastic brain food.

What type of research do you find most interesting, useful or exciting? The work I find most exciting is often that which doesn’t appear to have direct application to marketing.  I think this is because it enables me to make the connections to practice, which is of course personally very satisfying!  But I think it is also because I believe that marketers tend to forget that consumers are humans before they are consumers, and understanding decision-making at a human level allows for broader rather than specific or tactical applications. I’m particularly interested in a number of topics at the moment – the effects of time and distance on decision-making, the effects of self-efficacy and the area of closure.  I’m intrigued by the latter because one of the perpetual challenges to marketers is getting people to switch brands, and it seems that some way of creating a sense of closure with their old or existing choice could be a very interesting approach.

Do you see any challenges to the wider adoption of decision making psychology in your field? The biggest challenge is moving from the lab to practice, and this is of course also the biggest opportunity.  A lot of the recent public discourse about problems replicating priming, about embodied cognition and about biases revealed by IATs shows the importance to researchers of being able to point to real life examples where the findings and ideas of lab experiments have had an effect on behavior.   Which brings me neatly onto the next question…

How do you see the relationship between academic researchers and practitioners? There is a wonderful opportunity for symbiosis.  Marketers can learn huge amounts from academia, and I honestly believe that many of the areas being researched in JDM related areas can and should lead marketers to modify some of their traditional marketing theories and conventions and practices.  We are seeing this happen especially in public policy communication, where programs are being developed with behavioral principles as their inspiration.  In the UK, the impact of the Cabinet Office’s Behavioural Insight Team (known as the “Nudge team”) is broadening, and their approach is often simply to take existing principles, have those guide the design and development of messages and experiences, and test and learn from the output. Other government bodies around the world have set the goal of translating insights from the social and behavioral sciences into improvements in policy and practice.  While the public sector seems to be taking a more systemized approach, there are some good examples in the private sector. We see more and more use of behavioral principles in financial services, and in general marketing agencies.  For instance, our agency has hired Applied Behavioral Economists and pretty much every day we are applying JDM learnings to more and more clients.  If these developments continue and become more widespread, then there will be an abundance of market data and cases that can complement data from lab experiments. The truth is that all marketing activities should be considered experiments, because I have to tell you that in over 25 years in practice, I have never really known how a program or campaign will turn out.

And practical application has to be a good thing for academics. Beyond the satisfaction of seeing your ideas at work, I would love to see the debate shifting from whether ideas such as priming (to take a topical example) replicate in lab experiments, to how they fare in real life experiments. 

What advice would you give to young researchers who might be interested in a career in your field? Two things.  One don’t be shy.  If you are studying a topic  — say for example the relationship between disfluency and luxury – reach out to people in that industry, people who manage luxury brands.  They may be more receptive to your ideas, experiments and findings than you think.  Second, develop a knack for explaining what you are doing in everyday language, or with relatable examples.  Practice explaining things to lay people.  It will help you if you start working with practitioners like me who know little about the science of things.

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New series: In The Wild

This month we’re introducing a new interview series ‘In The Wild’ where we speak to practitioners who apply decision making science in their work in a range of industries.

Decision making science is becoming increasingly popular in both the commercial sector as well as influencing public policy. Well-known recent examples include the Obama campaign which employed behavioural scientists as a part of its strategy and of course the British Government’s Behavioural Insights Team (or the ‘Nudge Unit’ as they are also known) that has been so successful it has even been ‘exported’ to Australia.

While savvy marketers have probably always intuitively known some of the  quirks about human behaviour academics have now proved, decision making science has also attracted significant interest in the commercial sector in advertising, market research and user experience.

But how much do we really know about how our research is being used? What parts of our work do practitioners use most? What are the challenges that they face in taking our work and applying it in the ‘real world’? How do they the relationship between them and us, the scientists? And what advice would they give to young researchers?

Tune in to find out.