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Behavioural economies of scale

Category: Blog & News

I swear, it's not that I'm lazy. It's just that there are such great economies of scale in behavioural economics that you can learn once and apply forever. Let me explain.

I've just finished a 6 city tour with CPA Australia as part of their 2014 congress, and I've been presenting on two topics;

  • Why rational argument fail (and what you should be doing instead) and
  • The how of habits - making and breaking habits with behavioural science

When putting the content together I was again reminded of the flexibility and tantalising economies of scale when it comes to behavioural economics. You see by understanding the behavioural principle underpinning what people do, we can apply it to any circumstance - a website, a pitch, a customer service call, a marketing campaign... even our own habits.

That has meant that I have drawn on some of the same examples in both presentations even through at first glance, getting a stakeholder to agree to your proposal has little to do with how you change your eating and exercise habits.

By way of illustration, in both presentations I use the following two examples.

1. We act for now not later

Short-term Bias is our tendency to prioritise good stuff now and defer bad stuff till later. Kelly McGonigal in her book "The Willpower Instinct" put it beautifully when she said we have two versions of ourselves; 'now me' and 'future me'.

'Now me' will happily eat cake and promise that 'future me' will eat healthily for the rest of the week and 'now me' wants to buy shoes, leaving 'future me' to worry about retirement savings.

For stakeholders it means you have to work out a way of making them feel good now rather than relying on some far away payday. For instance, does making a decision get their boss of their back? Does it mean they have certainty in a market that may become volatile?

It also means we have to work out how to minimise immediate term costs (money, time, effort, credibility), looking for ways to defer the pain your stakeholder may feel. "Buy Now, Pay Later" is a classic strategy.

For habits this means we have to convince 'now me' to forgo instant gratification for the benefit of our future self. Not easy, but it starts with asking yourself to envisage what your life would be like in 6 months and 5 years if you were to start the healthy habit (or break the unhealthy one), effectively forcing 'now me' to be accountable for 'future me'(1). If I start meditating everyday for 2 minutes, for example, in 6 months I will have a much calmer mind and in 5 years, be living a more fulfilled life.

2. Fatigue impacts our decisions

Think of yourself like a battery - everyday you have a certain allocation and once it's depleted, your decisions tend to be less effective. Snickers, in their well known Betty White ad captured this well by in their tagline "You're not you when you're hungry". Indeed. Being hungry or tired can mean we opt for impulsive choices...say grabbing a chocolate bar when we'd promised to be healthy!

For stakeholders this means you need to be aware of their state of fatigue and plan accordingly. If you have a complicated decision for them to make and you want them to change from what they currently do, then it's best they be well rested and firing on all cylinders. If it's a complicated decision but instead you want them to roll with the status quo, then a fatigued state may make them more inclined to stick with how things are.

For habits this means we have to plan for our most exhausted version of ourselves. Don't expect you will have the energy to run for miles or cook a lavish organically sourced meal every night after work. Instead, set out your running clothes so they are right there when you need them and pre-cut or store healthy food so they become your default even when you are tired and prone to impulsive sugar-hits.

Isn't it great that by learning the underpinnings of human behaviour, we can be better at influencing other people as well as ourselves? Talk about economies of scale, these are techniques you can use for life.

P.S. Here are some more recent articles from me just to keep you occupied.