Ask The Experts - Dan Ariely ANSWERS! Part 2 (5)
A couple of months ago, we asked you what questions you'd ask world expert in irrationality Dan Ariely. Dan Ariely is the New York Times best-selling author of "Predictably Irrational", professor of behavioural economics at Duke University, and a repeat speaker at TED where his talks have been watched more than 7.8 million times.
We collected your questions for Dan, and we sent our crack interviewer Alex Tsatkin, aka the Angry Russian, to ask those questions of Dan in person in San Francisco.
And now... you have your answers!
Because the interview was massive, we've split it into parts.
Here's Part 1 of the interview, in which we learned about Dan's recommendations for entrepreneurs, social norms vs marketing norms, what mistakes most businesspeople make, and what makes you love a product.
In this part of the interview, Part 2, Dan explains the key difference in how we interact with mobiles compared to desktop, and talks about the company he thinks exploits irrationality really effectively...
Let's go!
Alex: I think we're going to try to move towards advertising a little bit more. We talked about companies that are doing things right, things wrong. You mentioned Airbnb there and Uber a little bit. Twofold: I'd love an idea if you were to pick a company and give them a big piece of advice, where you think they're doing it very wrong and likewise if you could name a company that you think is doing it really right within the context of your research.
Dan: Wrong and right are the question, from what perspective, because you could say, "Maximizing value." Let's think about something like Facebook. Facebook, I think, are just incredibly clever, yet devious, group of people. They are doing all kinds of things that tempt us to check Facebook all the time. They're basically using a feedback loop of temptation that goes along. The fact that I can comment on something that you have said and then you feel obligation to comment back creates a tremendous social loop. Then they do things like they remind you who from your friends have birthdays. It becomes a one-click thing to wish them a happy birthday. What, wouldn't you wish them a happy birthday if it's one click away, even if they're not that good friends? Would they feel the need to reciprocate later on? They're basically creating an increased number of chatter, not really meaningful exchanges, but exchanges that get you to go to Facebook more frequently. I think in the video ... How do you call it when the video starts moving when it goes through?
Alex: Autoplay.
Dan: The autoplay is an incredibly clever thing because video is incredibly tempting. When you see something starting to move the curiosity about what's happening next is really high. When I was 12 my mother had this amazing approach to educate us as kids. Are you curious now?
Alex: (laughs) Yeah, yeah.
Dan: I have nothing to say about this. I just made it up, but what happens is that when you have a story that starts you're really curious about the next part of it.
Alex: Exactly.
Dan: All of a sudden you scroll things as beginning of stories. Now, when you just have this static picture you don't know what the story is. It's just a static picture, but when it starts unfolding the temptation is incredibly high. They've basically been incredibly clever about getting people to be tempted. Now, do I think that people spend way too much time on Facebook? Yes. People's objective in life is not to be good Facebook users, but Facebook, of course, wants that. They can do lots of things with notifications and social exchanges. Another thing they did very nicely was the "like". There's no "dislike". There's no "I hate". Think about, how does a platform grow when everything is about positive reinforcement?
Now, I don't know about you but when I post videos on YouTube I often don't really want to see the comments. Why would you want to see ... Maybe now that Reddit is changing there'll be a flux of the Reddit people into other platforms, but why would you want to do it? You actually, if you think about positive reinforcement, every time people post you want to give them a boost. You want them to feel better about themselves, not worse. Facebook has created it with all kinds of stuff. It's really a very tempting platform to do things every day. Now, they're too successful. It's like the doughnut of the digital world. It's just compact fat and sugar with not many useful calories, but that's what you have. I think from what they're trying to achieve they're incredibly successful.
Alex: Yeah. Let's talk about another trend that we're seeing and maybe some of your research has touched on it a little bit, but mobile devices are becoming a very important part of our lives and I find myself doing things that don't make sense to me, but I'm wondering if the research, or from your experience, you've seen something specific where a mobile device has a predictably irrational behavior or something we're doing with it that wasn't necessarily available 10 years ago.
Dan: Yeah, there's a couple of things. We did a study ... Actually this was when there were the Palm Pilots that had a modem. I don't know if you remember them. Probably you were not born but there were Palm Pilots with a modem chip and we did things. The study we did at the time was a study in which we tried people to give us sensitive personal information. These were MIT undergrads. We compared how likely would be people to give us sensitive personal information on a desktop versus on a mobile device. What we showed, what we saw, was that the mobile device was much more likely to promote people to give personal information.
I think it's because you carry it with you and it is your phone or your device in a way that your desktop never was. Maybe your laptop is somewhere in the middle. Something that you carry in your pocket for so much time, and also the screen size is such that not many other people watch it. Think about how private you feel with that screen size and proximity even when you're in public transportation or on a train and you look at the screen. There's something incredibly personal. You touch it a lot in a way that you don't touch other things. I think we're willing to reveal much more information to this. I think that's the first thing. The second thing, of course, is the notifications. Notifications and the quickness of checking it. On an average day how many times do you think you check your phone?
Alex: I don't want to know!
Dan: You don't want to know? Think about what it does. It's basically a habit that says every time you are in an elevator and you have 30 empty seconds, what's the next thing you think? Let me fill them up with something. I have lots of things to do. You're in the bathroom, you're in the dinner and somebody leaves to go to the bathroom, and almost every time you have an empty second. Then, the other thing about online in general is that it's part of what's called "random reinforcement".
B. F. Skinner, the famous psychologist, showed many years ago that if you take a rat and they press 100 times and you give them a pellet of food, 100 times a pellet of food, that's exciting, but what's really exciting, if it's random. If the number is between one and 200 and the rat never knows. They press, they press, they press, they press, they press. From time to time they get it but they never know when they get it. Skinner showed that even if you stopped the reward the rat keeps on doing it for a long time. At some point they stop but then if you give them one pellet of food they go straight back on. The internet is kind of like that. Think of email: mostly not that interesting, from time to time it's very exciting.
Facebook, all of those things, very much random reinforcement, so we check a lot. We fill empty time. There's random reinforcement. That increases that tendency. Then, of course, we use the phone in all kind of dangerous places. Texting and walking, texting and driving. We're so addicted that we don't even think about the social ramification of what we're doing. I think the intimacy, immediacy, frequency, and addiction are all unique to that platform because it goes with you. Your desktop or your laptop don't go with you in the same time. When they're shut, they're shut. They don't have notification. They don't have all of these things. You don't check them all the time.
Alex: That's a very good answer. Here's a question from one of the users that I liked. "After decades of research, what still amazes you about what you're discovering?"
Dan: First of all there's lots of new findings that surprise me. I'll tell you one of them in a second, but the other thing that surprises me is how resistant people are to accepting the fact that they might be wrong. For me the biggest lessons from behavioral economics is humility. My research center is called The Center for Advanced Hindsight. The name is both for us and for other people to remind us that in retrospect we could always say, "Yes, I knew that all along," but the fact is that our understanding of the world is really quite limited. Because of that we need to experiment and try things. If you think about the number of people and number of companies and number of governments that don't test anything it is really quite shocking. Think about Obamacare. How much of that mechanism are we willing to test versus just saying, "This is what we think is right. Let's just do it." Eighty and 90% of GDP, is that a good thing to gamble without trying? Actually, there was a big piece of the legislation that was all about evidence-based medicine but that piece went away. People are resistant to that.
It's not just government. It's everywhere. We just have very strong intuitions and we're not willing to test it. In terms of research I'll tell you about a recent piece of research we did which surprised me. We were trying to get very poor people in Kenya to save a little bit of money. These are people who live in Kibera. It's a slum. They live on about $10 a week. We were trying to get them to save maybe 80 cents a week, big percentage. The reason we wanted them to save is not because they think they will have money for retirement. That's not going to happen. What happened is that very poor people, if they get into trouble things just deteriorate.
Imagine you have a goat and the goat gives you 25% of your income and one day your goat is sick. If you live in Kibera you borrow. You live hand-to-mouth. You have no extra month. You borrow at 10% a week. Let's say in four weeks your goat is better but now you're four weeks behind plus interest. Really hard to get rid of it, pay the debt. If you had some tools you have to sell them. Basically, life just gets worse and worse and worse. We wanted to get people to save some money. The first thing we did was we teamed with a cell phone and with an investment bank. People could text money into the cell phone. Every night the investment bank would take the money and invest it in the stock market.
Now what that created was, it was easy to put money in but hard to get it out. That's an important thing. If you wanted to get it out you had to take a bus, go to the city, fill a form, wait, take the money, come back. You could do it, but it would take a long time because if you were very poor and they gave you money in your pocket you will just feel like spending it on food, water, whatever it is. If it was a little further away, more difficult, you would only spend it on emergencies. That was the first thing. Everybody got this.
Then for different people we incentivized them to save. Some people got nothing, just the system. Some people got the system plus a text every Thursday, "Hey, it would be a good idea to save 100 shillings this week." Some people got a text message but as if it came from their kids. "Hi Mom. Hi Dad. This is little Joey. It would be a good idea to save." These people knew it was not coming from their kids but we just reminded them. Some people got 10% to match. "If you save up to 100 shillings we'll give you 10% match." Some got 20% match.
Some people got pre-match. What is pre-match? Pre-match is using the principle of loss aversion. The loss aversion is the idea that we hate losing more than we enjoy gaining. We said, "What if we put the money in their account up front, 10 shilling or 20 shilling, and if they save they get to keep it and if not we take it back." We thought that would get people to be more incentivized. The last condition is we created a coin that had numbers on the edges, 24 numbers for the 24 weeks of the program. We asked them to put it somewhere in their hut and every week to take it out and if they saved to scratch it one way, if they didn't save to scratch it another. Take a knife and scratch the coin. Which one of those methods do you think worked the best?
Alex: The loss aversion.
Dan: The loss aversion, yeah. That's what most people think. Here's the results. Giving the method to people helps a little bit. Reminding helps more. Ten percent at the end of the week helps a bit more. Twenty percent is like 10%. Ten percent at the beginning of the week, the loss aversion, helps more. Twenty percent is just the same as 10. Kids are basically the same as 10% at the beginning of the week in that regard. The coin doubled savings compared to everything else. The question is, why? Let me tell you about another study and I'll come back to this.
There was a study in which you took kids in Oklahoma and you randomly opened college savings account for them on the day that they were born. When they were four they checked their cognitive and social skills and they found that the kids that had college savings account performed better at age four. How can that be? Do the kids know they're going to college? No, they're four, but their parents know. Imagine what happened if you're a parent and once a month you get a statement that says, "This kid has a few dollars set for college savings." It's not enough to pay for college but you think about the kids differently. Maybe you read to them a bit more. Maybe you buy them another book. Maybe you do something else. Over four years that's a big difference.
The same thing happened in the coin. If you do the analysis and you say, "Let's look at all the days of the week." When did people save? Thursday, a little bit on Friday. In the coin condition they also saved on the other days of the week. Now, this is actually a very interesting thing about the apps world because when do you think about an app? Only when you think about an app, it comes from inside of you, or when there's a notification. When were you thinking about savings if you had the coin? Every time you saw it. Now, it might not be a big thought, you saw the coin and said, "Yes, my goodness, I have to do it," but it penetrated your thoughts to some degree. That's something that the digital world is really not doing very well.
Think about it. Digital world, how does it remind you about how you want to live? Not that much. It's only constrained to that world but, in fact, if we thought about how we go beyond that and how we represent things in the physical world we might actually get higher reminders. Let's remind people to exercise. Let's remind people to eat better. Let's remind people to take their medication on time. If we're constrained to the digital world that's one type of solution, but if we understand that we might want to have other reminders that might actually create other types of interventions.
Coming up in Part 3: we show Dan a classic Rules Lander and ask his opinion on why it works, and how he would make it work better!
Excellent interview ... can't wait for part 3!
Very interesting, thanks a lot for this! 
Yes its here!
*edit* or more like finally saw the part 2 is out 
I thought the parts about mobile were particularly interesting here.
Very relevant for adult or dating in general, in particular - may even explain the phenomenon that folk like Maynzie have commented on where web Adult offers sometimes do better on mobile than on Web.
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