Public commitment pledges are surprisingly effective and free ways to help you reach your goals. A public commitment pledge is simply writing what you will or won't do, perhaps something you know you find hard, signing it, and displaying it publicly.

In her excellent book, How to Change, Katy Milkman describes how the simple intervention of a public commitment pledge in doctors' offices significantly reduced prescriptions of unnecessary antibiotics—just through a poster on the wall.

Commitment pledges are a form of what Katy calls a soft commitment device (of Odysseus fame). This strategy helps us stick to our commitments even when tempted to go astray.

Pledges may work through our desire for consistency and create cognitive dissonance when considering going against the pledge. The benefits of what we desire to do, say "eat cookies," are pitted against the potential guilt or discomfort we'd feel by going against what we said we'd do, not "eat cookies." You don't want to let yourself down. The pledge gives us a greater chance of sticking to our actions and a defence against our present bias.

Is there something you wish you'd do more of or less of? A simple public commitment pledge could help you on your way.

Other free ways to help you achieve your goals:

Public commitment pledge

The fundamental attribution error is the attribution of the source of behaviour to the character and personality of a person above the consideration of context. It's sometimes described as over-attributing causes to disposition over situation.

In a classic example, if a driver swerves in front of you suddenly, it's easy to attribute the cause of the behaviour to the driver being a jerk, i.e. to their character. What we may not see is that the driver is late to pick up their kids, was distracted by a challenging conversation they just had at work, and they're worried they've gone the wrong way and are driving an unfamiliar car.

If a colleague is late to meet us, we might infer that the person is lazy or disrespectful when, in fact, they may have been held up by a traffic accident, been on the phone with a sick relative, and have had trouble sleeping lately. If we are late for a meeting, well, then it's probably for all sorts of good reasons outside our control.

Like confirmation bias, the fundamental attribution error is a big one that can easily colour our interactions with others without us being aware of it.

Remember that what we see is just a tiny fraction of any other person's life and that we don't see the complete picture.

Minimise judgment, particularly around character and personality.

Where appropriate, ask if anything is bothering others.

Build empathy for others as you would for yourself.

Reflect on the positive things others do.

The Fundamental Attribution Error

Normalisation of deviance is the process where what was unacceptable gradually becomes acceptable over time in the absence of failures. So, the longer a period without incidents, a requirement to wear a hard hat may start to be taken less seriously and later ignored. The unacceptable becomes the norm, no longer seen as deviant.

The term was used by Diane Vaughan when discussing the culture and events leading to the Challenger disaster. However, it’s easy to recognise it in much more mundane examples.

Classic workplace examples where deviance may start to become normalised include:

Normalisation of deviance can be particularly tricky to avoid when failures are rare yet severe or with known but distant dangers, such as smoking.

The Normalisation of Deviance

A self-serving bias is one where we attribute our failures to external factors and our successes to our own admirable qualities and efforts.

So, a tennis player might internally credit their athleticism and skill for their victory, while the loser may blame the umpire's decisions, their racket or the court. You might have seen it in professional sports.

Self-serving bias may be rational and positive, maintaining our self-esteem and a positive view of ourselves. Conversely, it can hide reality (and give referees and umpires a more draining job) or cause us to reject negative but objective feedback.

Self-serving bias is a form of attribution bias where we misattribute behaviours or events to characteristics rather than circumstances or vice versa.

Self-serving bias is covered nicely (pdf) by Donelson R. Forsyth in the International Encyclopedia of the Social Sciences, 2nd Edition.

Self-serving bias

Attribution bias includes a set of more specific biases where we may attribute behaviour to fixed personality traits or characteristics of a person rather than specific circumstances or actions.

For example, a child may be labelled a genius or gifted when they actually had a supportive environment and worked hard, or someone may be labelled a loser rather than recognising specific circumstances that led to some failures.

Criticism — one of the four horsemen of relationship apocalypse — can become toxic when it's attributed to someone's personality traits. For example, calling someone 'lazy' rather than sharing how it makes you feel when they don't keep the place tidy.

A form of attribution bias may be applied to whole societies via the Destiny Instinct.

Specific examples of attribution bias include the fundamental attribution error and self-serving bias.

Attribution bias

Groupthink arises from the desire of a group to maintain harmony and consensus. Groupthink can reduce the diversity of ideas and opinions — people can seek to avoid conflict, or avoid expressing unpopular views, and end up thinking down the same path. When psychological safety is low and people feel they may experience disapproval, particularly from people with higher ranking or status within the group, groupthink can get worse.

It can be uncomfortable to express opinions different from a group. Perhaps you remember that feeling when a teacher asked a question in class and if everyone raised their hand to one answer it wasn't always easy to be the only hand up for a different one.

Fortunately, there are some solid ways to minimise the tendency to groupthink. These include:

Generating ideas separately before coming together — can be effective remotely too

Increasing psychological safety so everyone feels comfortable expressing contrarian views

Establishing the norm of a shared work product rather than individual credit/blame

Groupthink

Extrinsic motivation is the carrot or the stick — when the motivation for doing something is an IF/THEN reward or punishment. We use extrinsic motivation all the time like paying people to come into work, or issuing speeding fines to make people slow down. It can work well for simple problems, basic compliance, and short-term results.

However, when you need long-term behaviour change, when creativity is needed, or you're tackling complex problems, external rewards and the threat of punishments can even decrease performance and productivity. Rewards only go so far if you want to inspire a hit album, create the next Oscar-winning film, or create a breakthrough product. That is, for most of the important work we do in our lives, including I believe parenting, using extrinsic motivators of rewards or punishments is likely to be far less effective than tapping into intrinsic motivation — motivation that comes from inside ourselves.

I like Dan Pink's Autonomy, Mastery and Purpose framework for intrinsic motivation. His TED talk on the Puzzle of Motivation is also a fun and interesting watch.

Extrinsic motivation

It's an old study now known as the photocopier study. The experiment had the experimenter try to cut in line at a copy machine at a University campus. The researchers found that when the ask was small — just 5 pages to copy — asking to cut in line with the rather circular reason of 'because I have to make some copies' was almost as successful as asking to cut in for the valid reason of 'because I'm in a rush', and both of them beat providing no reason at all. The effect disappeared with a larger ask of 20 pages.

The theory was that with a small ask just providing any reason after the word 'because' may trigger an automatic script of 'Favour + Reason --> Comply' — if we don't really think about it we just see the pattern and act. Which suggests that a) if you have a small ask you might be better off providing a reason for it, no matter how small, and b) if we want to avoid acting mindlessly when people ask a favour it may benefit us to pay closer attention.

The study was led by Ellen Langer who has since gone on to write a host of books on mindfulness.

From: Langer, E. J., Blank, A., & Chanowitz, B. (1978). The mindlessness of ostensibly thoughtful action: The role of "placebic" information in interpersonal interaction. Journal of Personality and Social Psychology, 36(6), 635–642.

Because

"Whatever your current T-shirt budget is, double it," said Tom Kelley in his book The Art of Innovation. He was talking about what makes 'hot teams' through his experience leading the global design company IDEO.

I'm still amazed by the power of wearing the same thing to instantly unite a group. From the dressing up of bachelor and bachelorette parties, to putting on a shirt for a sports team, a demonstration, a company event, or just a night out, wearing the same thing feels good and brings people together like little else can.

T-shirts make a team

The essence of the bystander effect is that in a situation where someone needs help, if others are around who could help, then it discourages us as individuals from stepping in.

While there may be many reasons for this, and it has been replicated in many different contexts, a recent study of CCTV footage paints a more optimistic picture. In the study, they saw that although the likelihood of any individual intervening may be reduced with other bystanders present, the chances of someone coming to help increase the more people are around. In 9 out of 10 public conflicts they studied at least one person, and often several, came to help. So the lady in the sketch would probably be OK.

Given the bystander effect, I remember being taught that if you are in a motor vehicle accident, don't assume that someone has called for help already: it could help to choose someone directly and ask them to call for help to avoid everyone thinking everyone else will do it.

It reminds me of the story about four people named Everybody, Somebody, Anybody and Nobody (also known as the responsibility poem):

There was an important job to be done and Everybody was sure that Somebody would do it. Anybody could have done it, but Nobody did it. Somebody got angry about that, because it was Everybody’s job. Everybody thought Anybody could do it, but Nobody realized that Everybody wouldn’t do it. It ended up that Everybody blamed Somebody when Nobody did what Anybody could have.

The paper referenced is: Philpot, Richard & Liebst, Lasse & Levine, Mark & Bernasco, Wim & Lindegaard, Marie. (2019). Would I be helped? Cross-national CCTV footage shows that intervention is the norm in public conflicts. The American psychologist. 75. 10.1037/amp0000469. (pdf)

The Bystander Effect

There's an all you can eat buffet with all the flavours of the world, you can have whatever you want. This is going to be amazing! You love lasagna, but look at those fajitas. You go for the fajitas, but then your friend arrives with sushi which looks even better. Why didn't you get that?? You always screw up...

Barry Schwartz studied how more choice not only doesn't always help us choose better, but can also make us feel worse about what we got even if it was great. Reduced satisfaction arises from:

The opportunity cost of what we could have had and what was good about other options

Regret and anticipated regret of the choice we made

Self-blame when we think we are responsible for not doing as well as we could have

For an entertaining and educational 20 mins watch Barry Schwartz' TED talk on the paradox of choice.

The paradox of choice

A forcing function is an external stimulus that makes you get to where you want to be. 

One of the simplest and most effective behaviours that you can try to help you level up is to keep creating forcing functions for yourself. Signing up for an event so that you are forced to get yourself in shape, offering to give a talk so that you learn your material, inviting people to a dinner party so you get your house in order, paying for a personal trainer to make you turn up every week — all useful forcing functions to get you from where you are to where you want to be.

Forcing functions play, very effectively, on our fear of letting ourselves down to make ourselves do what we want us to do.

Another useful sense of forcing function is a way to help people make fewer mistakes, like putting your passport on the door handle so you can't forget it before your flight.

Forcing function

So the story goes, as told by Stephen Sigler, Nature May 1989:

"The US military studied fighter planes returning from missions to try to improve their survival rate and were considering adding heavy armour to those parts of the plane that tended to show the greatest concentration of hits from enemy fire, until statisticians pointed out the fallacy of that argument. The more vulnerable parts of the plane were those with the fewest hits; planes hit there tended not to return at all. The single most vulnerable part, the pilot’s head, was without serious scar in the sample of planes that returned."

It’s easy to draw correlations from what we see in front of us. But what we see usually represents just a small part of what has happened. Focusing on the evidence we can easily see at the expense of that we can’t leads to survivorship bias. To say it another way, when Bill Gates drops out of college and starts Microsoft it might seem like dropping out is a path to success for others too, but that ignores all the dropouts who didn’t create Microsofts and consequently you didn’t hear about.

Silent evidence — the evidence that we don’t or can’t easily choose to consider — is a term from Nicholas Nassim Talleb.

When trying to discover the veracity of the planes story I enjoyed Bill Casselman’s American Mathematical Society article on The Legend of Abraham Wald. The postscript points to some of the source behind the story including a mention of Stephen Sigler’s letter in Nature quoted above.

I covered survivorship bias before, but I like this story so much I thought it was worth doing again.

Survivorship bias

In 2016 the British Government had plans to launch a new polar research vessel. To decide on a name for it, they put it out to a public vote. Despite a number of serious, meaningful or historic names suggested, like Shackleton and Endeavour, one name put forward, Boaty McBoatface, quickly overwhelmed all the other options put together.

It turns out this is not limited to the British sense of humour, and people will vote for a joke candidate because it’s fun and subversive, and people want to see what will happen if it wins. This NYT article by Katie Rogers has some other fun examples of competitions going ‘wrong’, such as an attempt to name a bridge 'Chuck Norris’ and selecting a school for the deaf as a concert location: What you get when you let the Internet decide.

I learned about the Boaty McBoatface effect from Dr Roger Miles on the Human Risk podcast. Also see Conduct Risk Management: A behavioural approach by Dr Roger Miles.

The Boaty McBoatface effect

In Don Norman’s classic book The Design of Everyday Things, Don gives an example of how to break into an office: just turn up at the door with a bunch of unwieldy computer equipment that looks difficult to carry and ask someone if they can open the door for you. Generally, someone will.

Which goes to show no matter how well your system is designed, how seemingly impregnable your defences are, or how robust your processes, human risk — people doing things they shouldn’t or not doing things they should — are most likely the biggest ones. Like accidentally leaning on the keyboard before sending a bank transfer.

The sketch is loosely based on a story, which is not true but illustrates the point nicely, that the Mongols got past the Great Wall simply by bribing the guards.

If you like behavioural science, cognitive biases and the like, and want to build a better understanding of human risk, take a look at the human risk newsletter run by a long-time patron of Sketchplanations Christian Hunt.

You can listen to a fun, example-packed conversation of human risk in our podcast episode on human risk with Christian Hunt.

Human risk

The Abiliene paradox is the paradox of how groups of people can take actions that no one in the group actually thinks is a good idea.

Though individually, we each may think that an idea is a bad one, we may go along with the group decision thinking that it’s just us that disagree when, in fact, no one thinks it’s a good idea.

It was coined by Jerry Harvey, a management professor, who illustrated the phenomenon with a fictional story of a family who ended up on a rubbish day out to Abilene that no one wanted to do.

On a hot afternoon visiting in Coleman, Texas, the family is comfortably playing dominoes on a porch until the father-in-law suggests that they take a trip to Abilene (53 miles north) for dinner. The wife says, “Sounds like a great idea.” The husband, despite having reservations because the drive is long and hot, thinks that his preferences must be out-of-step with the group and says, “Sounds good to me. I just hope your mother wants to go.” The mother-in-law then says, “Of course I want to go. I haven’t been to Abilene in a long time.”

The drive is hot, dusty, and long. When they arrive at the cafeteria, the food is as bad as the drive. They arrive back home four hours later, exhausted.

One of them dishonestly says, “It was a great trip, wasn’t it?” The mother-in-law says that, actually, she would rather have stayed home but went along since the other three were so enthusiastic. The husband says, “I wasn’t delighted to be doing what we were doing. I only went to satisfy the rest of you.” The wife says, “I just went along to keep you happy. I would have had to be crazy to want to go out in the heat like that.” The father-in-law then says that he only suggested it because he thought the others might be bored.

The group sits back, perplexed that they decided to take a trip that none of them wanted. They each would have preferred to sit comfortably but did not admit to it when they still had time to enjoy the afternoon.

Harvey, J. B. (1974). “The Abilene paradox: the management of agreement”. Organizational Dynamics. 3: 63–80. Excerpt as quoted from Wikipedia :) 

This is not to diss Abilene. I’m sure it’s a neat place.

The Abilene paradox

Ever had that feeling when people said "well done" or "thank you" for what you did, that you didn’t deserve it? It’s called imposter syndrome.

It’s a pernicious and pervasive feeling of doubting your accomplishments and fear of being exposed as a fraud — at any moment, everyone will wake up and realise you aren’t so great after all.

My thoughts: Hang in there, keep trying your best, stay humble, and don’t take things too seriously. And accept compliments.

Imposter syndrome

The power of streaks — achieving something on a schedule without missing a slot —  have a remarkable pull over us when it comes to helping us get things done.

As Seth Godin points out, streaks turn an activity into a game. And while we may have started out with the intention simply of completing the activity, our continued motivation can transfer to simply be the motivation of keeping the streak going.

If you’re into streaks or want to give them a try to achieve something yourself, you might like the Streaks app (which is how I knew I’d done 2 years without missing), Austin Kleon’s 30-day challenge, or the simple power of one-a-day.

Streaks can also have a dark side: if you break the chain you can think it’s not worth getting started again. For that reason, I like James Clear’s advice to never miss twice.

The power of streaks

In Dan Pink’s book Drive, he looks at scientific studies showing that the all too common approach to motivating people involving rewards and punishments, or the carrot and stick approach, ultimately doesn’t help motivate people for the tasks and work we have to do today.

Instead, we do our best work when driven by intrinsic motivation — motivation from inside us rather than imposed externally like rewards or punishments. And the 3 facets he highlights that help intrinsic motivation are:

Autonomy: being in control and able to guide both what we do and how we do it

Mastery: our desire to continually be improving and learning and bettering ourselves

Purpose: working towards something we think is worthwhile. Having a North Star to aim for and a reason it’s worth doing what we’re doing.

I find it a useful framework to think through whenever I’m not feeling motivated or when I want to help make sure the people I’m working with are motivated.

Also see: flow at work, Goldilocks tasks, the zone of proximal development, on parenting

What drives us: autonomy, mastery, purpose

I like the spotlight effect because it basically shows that most of us can just relax a bit and not stress about what other people think — because they’re probably not thinking about us, they’re probably thinking about themselves.

I probably only remember it because of the effect effect

The spotlight effect

The effect effect is the undoubted extra stickiness and shareability of an idea by calling it an effect.

There’s something about summing up a piece of research or an observation with the name effect that makes it a whole lot easier to communicate and remember.

The more solar panels installed in a neighbourhood the greater chance of a growth of solar panels in that neighbourhood

And, for those of you wondering why it’s not the affect affect, here's a sketch explaining when to use affect vs effect

Perhaps because of the effect effect, I've covered a lot of effects already in sketches (though there are many more to do). See all "effect" sketches

The Effect Effect

It turns out when our body gets excited about something, we can’t reliably tell what caused the excitement.

In David McRaney’s brilliant article, he explains how we routinely misattribute physiological arousal and how the most common target of misattribution is other people. It’s part of why doing challenging or exciting activities with your partner can help strengthen your relationship, and why roller coasters and scary movies can make great first dates — when we reflect on the time, we often assume that it was the person we were with that helped get our heart racing rather than the excitement of the activity.

The misattribution of arousal

Nine-enders are people in the last year of a decade, say, 29, 39, 49, 59. Adam Alter and Hal Hershfield, who introduced the term, propose that as we approach the end of a decade we are more likely to do a kind of "meaning audit" of our lives. And in the years just before the end of a decade, if we may have fallen short or feel there’s something else we want to accomplish, we’re much more likely to do it then than in any other year of a decade.

In practice, as Dan Pink shared in his book When: The Scientific Secrets of Perfect Timing, these are, therefore, the times when we’re more likely to do something extreme like running a marathon for the first time and, sadly, also committing suicide.

Read more in Dan Pink’s Atlantic article: You’re Most Likely to Do Something Extreme Right Before You Turn 30, Dan Pink, The Atlantic

When: The Scientific Secrets of Perfect Timing, Dan Pink

People search for meaning when they approach a new decade in chronological age, PNAS, vol. 111 no. 48, Alter and Hershfield, 2014.

This sketch, updated and polished, features with a number of others in my book Big Ideas Little Pictures.

9-Enders (nine-enders)

That annoying feeling after you’ve bought something where you’re just not sure if you did the right thing. Darn it.

Buyer’s remorse

The singularity effect is the name for how we care disproportionately about an individual as compared to a group.

Think Saving Private Ryan, where an enormous effort is launched to save a single soldier in the Second World War.

It turns out that even as you add a second person, there’s some justification for something known as compassion fade. The addition of more people doesn’t increase our willingness to help proportionally — our compassion fades as more people are involved.

The singularity effect

Psychic numbing is the phenomenon where we find it increasingly hard to empathise with the plight of larger numbers of people.

A story about a family who needs help is much easier for us to relate to than, say, a story about 1000s of people displaced or dying. As the number increases, the situation gets more abstract, and we just can’t connect with it.

See the work of Paul Slovic or this super article by Brian Resnick: A psychologist explains the limits of human compassion

Other contexts where we see psychic numbing are the general withdrawal of people and societies from potentially major catastrophes that seem unlikely to happen. Individually, it may also be reduced engagement with a past traumatic experience.

I read in Murphy's Law Book Two, by Arthur Bloch, Fuller's Law of Journalism, which goes, "The further away the disaster or accident occurs, the greater the number of dead and injured required for it to become a story."

Psychic numbing

It turns out that, when considering how enjoyable, or indeed how painful something was, we don’t mentally do an average enjoyment check to decide if it was good or bad. Instead, our minds are swayed by the peak and end levels.

So, an experience that may have been dull for most of it, if it had a cracking bit in the middle and ended on a high, will generally be remembered as more enjoyable than something that was decent all the way through but never reached those highs.

Here’s a classic study of the pain side of the phenomenon from Dan Kahneman:

"Kahneman and his associates showed, in 1993, that participants exposed to 30 seconds of 14-degree ice water (very cold!) rated the experience as more painful than participants exposed to 90 seconds of exposure to 60 seconds of 14-degree ice water plus 30 additional seconds of 15-degree ice water.

In other words, participants found the 90 seconds of ice water exposure less painful than those exposed to 60 seconds of nearly equally cold water because the 90 seconds ended with exposure to a “warmer” stimulus.

We will rate an experience as less painful then if it ends on a slightly less painful way. The “peak-end” in this case was a one-degree difference in water temperature."

From Susan Krauss-Whitbourne PhD, Happiness: it’s all about the ending, Psychology Today.

The peak-end rule

The sweet spot for flow and mastery where the task is not too easy, not too hard — it’s just right. 

Also, just the right spot for learning similar to Vygotsky’s zone of proximal development. In that model when you’re out of your comfort zone, and not in your anxiety zone you’re in the learning zone.

And yet another way of looking at it, still without as catchy a name as Goldilocks tasks, is getting the right match of challenge to your skills to avoid anxiety and boredom to be in flow.

 I learned the name from Dan Pink’s excellent book Drive.

Goldilocks tasks

The IKEA effect is the increase in value we feel towards self-made products—products that required our effort to create them. Or, less formally, we love it more if we made it.

The effect is named after the odd sense of satisfaction many of us feel after spending more time and sweat than expected putting together IKEA's famous flat-pack creations. Yet not only does more effort equal more love. If we've put effort into something ourselves, we're also more likely to, often mistakenly, think that others will value it more, just as we do.

Together with others, Dan Ariely, a professor of behavioral economics, conducted several experiments leading to these conclusions.

Ariely also points out that kids are the ultimate expression of the IKEA effect: they're very hard, don't come with instructions and take a lot of effort.

Watch Dan Ariely do a great job explaining some experiments that lead to this conclusion, or read the full paper, The “IKEA effect”: When Labor Leads to Love (pdf), Norton, Mochon, Ariely HBS working paper, 2011.

The Betty Crocker Effect, or ‘the egg theory.’

The IKEA effect

The reason, generally, is simply that all those times previously, we weren’t tuned in to notice what’s top of mind now. The frequency likely hasn’t changed a bit, but our noticing of it has.

Also known as the Baader-Meinhof Phenomenon.

The frequency illusion: we notice what’s top of mind

These terms come around a bit, and I wanted to get them clear in my head so I understood the difference.

Cognitive biases are predictable patterns of thought and behaviour leading to incorrect conclusions. Things like anchoring, where we are predictably led astray by the presence of a previous number we have seen.

A heuristic is a mental shortcut to solve common problems. Things like social proof, how if others seem to like something that’s a shortcut for "we’ll probably like it."

A logical fallacy is a flaw in our reasoning, leading to a faulty argument. Things like the sunk cost fallacy, where we will sometimes make ourselves unhappy in the future because of something we’ve already done that we can’t change. The logical step would be to choose the path that would make you happiest in the future regardless of any sunk costs up to now. Turns out that’s hard.

Cognitive bias, heuristic, logical fallacy: hidden features of the mind

As giving makes people happy, what better way to make someone happy than to give something they can give to others. Not all the time maybe, but I reckon it’ll be a hit.

Give gifts others can give

Update: More recent research has brought into question the captivating notion of ego depletion with difficulties reproducing some key experiments and suggesting other factors may be at work.

In his book You are now less dumb, David McCraney explains an concept called ego depletion with the basic idea that our brains require fuel, particularly the decision-making and glucose hungry pre-frontal cortex. Every time you have to make decisions or deal with difficult situations it tires you such that we have a sort of finite amount of will power. If you spent the morning battling to get the kids dressed and out the door, then jostling your way through a crowded commute, by the time you get to work you’re more likely to say ‘whatever’ to any decisions that come your way. Making decisions is hard work.

McCraney brings up a remarkable, and slightly disturbing, study by Shai Danziger which followed eight Israeli judges as they decided on over 1,000 parole applications. The findings show that prisoners were most likely to be granted parole first thing in the morning, after a snack break, and right after lunch. If you were unlucky enough to be up for parole just before lunch, bad luck.

If you want the most control over your own mind so that you can alter your responses to the world instead of giving in and doing what comes naturally, stay fresh. Take breaks. Get some sleep. And until we understand what ego depletion really is, don’t make important decisions on an empty stomach.

Here’s a nice summary of Shai Danziger’s parole study in the Economist including a remarkable chart.

Don’t make important decisions on an empty stomach

Dan Kahneman and Amos Tversky’s behavioural economics theory modeling how we make decisions. It illustrates, among other things, some of the non-rational decisions we make as we are guided by emotion and heuristics in decisions. The sketch points out a few of the key points:

Loss aversion - the different shape of the curves as we make gains or losses (either side of the centre) represents how a loss of £100 annoys us much more than a gain of £100 gives us pleasure.

Diminishing sensitivity - the levelling off of the curves represents that we’ll enjoy winning £100, if we only have £100, much more than we’d enjoy winning £100 if we had £900.

Adaptation level - We don’t evaluate from some absolute level - we evaluate whether something is good or bad from a neutral reference point that we adapt to. So, by the end of a movie the movie theatre doesn’t feel dark, yet walking out feels blinding. Your reaction to the £100 example above was probably affected by whether you think £100 is a lot of money or a little, which is all to do with your adaptation level.

Prospect theory

Unfortunately, there are studies to show that this is generally true, and prices written smaller are seen as more affordable than those written larger.

What with decoy prices, anchoring, the age-old susceptibility to 99s and a host of other biases, we’re at the mercy of many factors when it comes to trying to make vaguely rational pricing decisions.

For plenty more see William Poundstone’s, Priceless: The Myth of Fair Value (and how to Take Advantage of It), Scribe, 2010.

Prices written smaller seem more affordable

The technique of adding a significantly more expensive option in order to instantly make the other options look reasonable by comparison. These kinds of manipulations have been shown to be scarily effective.

Pricing decoys are another way retailers get you to part with more money than you planned on. In his book Predictably Irrational, behavioural economist and professor Dan Ariely demonstrates how a large magazine successfully employed a strategy called the “decoy effect” to increase revenue from subscription sales. Prospective subscribers were given three choices:

1.       Web-only subscription for $59
2.       Print-only subscription for $125
3.       Web + print subscription for $125

At first glance, the middle price point appears to be superfluous. Why would anyone buy a print-only subscription for $125 if they could get a web and print for the same price? Ariely tested the price points with MIT students and found that 16% of students chose option 1 and 84% chose option 3; not surprisingly, none chose option 2.

Then Ariely did something really interesting; on the assumption that having a decoy price (option 2) was influencing people’s choices, he removed the decoy and retested the price points. This time, the subscription choices were as follows:

1.       Web-only subscription for $59
2.       Web + print subscription for $125

With the decoy removed, the option that had previously been the most popular – the more expensive print + online access subscription – suddenly became the least popular choice. Only 32% of those surveyed chose the more expensive option, with 68% selecting the online-only subscription. Clearly the middle price point wasn’t superfluous; it was smart marketing that made option 3 look more attractive to subscribers.

Avraham Byers, Here’s why you should always pay full retail price, Financial Post, April 22nd 2014

The decoy price

Where “all the children are above average.” From the intro by Garrison Keillor to the News from Lake Wobegon on the radio show A Prairie Home Companion. Also known as illusory superiority. From the popular studies where, for example, 80% of people think they are above average drivers, when asked to estimate the % of chores done in the household it adds up to more than 100%, and we overestimate our input to project work and it’s impact on its success. For the best treatment I’ve read, and references, see Thinking Fast and Slow by Dan Kahneman.

The Lake Wobegon Effect

Dividing up money in your head. Nutmeg, where I work, is, among other things, designed to help out with this.

PS
It’s been a long absence. A new child, moving house and all sorts of fun has happened. I’ll try to keep at it at a more leisurely pace. Thanks again for following.

Behavioral psychology sketches