Behavioral Economics & Emerging Economies

[ajlsloan-blog]

I’ve mentioned our proposal for a behavioral science experiment to combat drunk driving in Trinidad a few times now, but to provide a little detail: “SafeLime” would be a smartphone app that would allow users to hail transport (much like uber) to and from bars, rather than using their personal cars. Along with a host of other social features, the app would allow users who successfully completed full bar trips through the app to earn points for redemption at partnered bars and restaurants – hopefully “nudging” them away from drunk driving.

Our suggestion was that the app leverage Trinidad’s existing maxitaxi network as the transport for this program. Maxitaxis are small buses that we had heard are used heavily by commuters in the country, but not traditionally for bar transport. Our hope was to partner with maxitaxi drivers to become SafeLime drivers, adding a level of familiarity to the program (which might drive further use), and hopefully benefitting maxitaxi drivers with increased business as well.

So, upon arrival in Trinidad, we were pretty excited to see maxitaxis with our own eyes! Above you can see two of our amazing trip organizers with a maxitaxi that took us around on day one. So cool to think about how this exiting infrastructure could be put to a new use.

[ajlsloan-blog]

Behavioral science in the field

Coming in from the POS airport on our way to Tobago! Posts have been a little scattered given our lack of Internet so – more on Cuba later. But for now:

One of the absolute coolest parts of being in Trinidad has been having the chance to discuss our behavioral science project (“SafeLime,” a social, uber-like app aimed at reducing the incidence of drunk driving in Trinidad) with locals. While feedback on the idea has been mostly positive, being here has given us a better sense of the cultural and systemic issues the project would need to consider.

For example, last night we met a young professional who told us that, though parking is a total pain and the fines for drunk driving are high (the equivalent of about 2000 USD, by his estimation), nearly everyone drives to bars on “the Ave” in Trinidad (maxi taxis are mostly used by commuters). The reason, in part, is that they want the ability to have control over their own movement throughout the night – and as we learned in our research, existing public transport is limited. He was skeptical that even the emergence of the alternative we are suggesting would be able to change that entrenched behavior, or that we would be able to create a system reliable enough to gain uptake (given the timeliness of other transportation options).

Will be interesting to learn more as we count down the last few days of the trip!

[ajlsloan-blog]

Drunk driving and combating the “optimism bias”

My team’s final project, which we will be presenting this week, is an experiment to test the impact of behavioral science in preventing drunk driving in Trinidad and Tobago. 

In doing research for the project, it became clear we weren’t the first group to think about the link between preventing this particular behavior and applied behavioral science. While many of the efforts to tackle this problem in both the U.S. and Trinidad have focused solely on enforcement, we found other campaigns which sought to appeal directly to particular biases and behaviors. 

In particular, in tackling drunk driving, campaigns have to counter the “optimism bias” -- the idea that the bad things always happen to other people, and not to us. Groups like Mothers Against Drunk Driving have tried to directly counter this bias by creating campaigns which show relatable figures in relatable situations choosing to drive drunk, and facing the consequences. For example, one MADD campaign includes common phrases used to “excuse” or rationalize drunk driving (”I’m just buzzed,” or “I’ll drive slow”) against scenes of car accidents and ticker tape from resulting prosecutions. Notably, these ads remind the viewers than in choosing to drive drunk, they are endangering not only their own lives, but the lives of others on the road.

We also found evidence of some interesting partnerships along the way, like this one between Uber and MADD to promote safe driving on the Fourth of July -- which inspired us to think about the power of both partnerships and gamification in attacking this problem.

Our approach will aim to draw lessons from all of these past campaigns, as well as other tactics we’ve learned about in class, and will strive to be relevant to local norms. I’m looking forward to getting feedback from the class this week, and getting some on-ground perspective on the project in the weeks to come.

[ajlsloan-blog]

Removing unconscious bias in tech hiring

I’ve previously blogged about this article in the NYT that, among other things, talks about the pattern of biases in Silicon Valley funding. My previous post wondered if we could use our understanding of behavioral science to tackle biases like this one. This week, I’ve found an example of an attempted solution -- and from an MIT Sloan alum, no less.

Enter Stephanie Lampkin and Blendoor, which hopes to take the bias out of tech sector hiring (Lampkin is an MIT Sloan ‘13 and an alum of the Media Ventures class I’m also taking this term). Blendoor, featured on Forbes.com this week, is a recruitment tool that matches prospective applicants to companies looking for candidates on a blinded basis, in an effort to remove the unconscious bias that might typically be present in hiring. 

In the Forbes piece, Lampkin talks about “framing” her app as she pitches it to prospective company partners, noting that Blendoor seems to resonate best when the pitch is “ ‘Hey, I want to help you find the best talent. Your unconscious mind isn’t racist, sexist — it’s totally natural, and we’re trying to help you circumvent it.’”

While these tech companies are the beachhead market, Lampkin talks about eventually using Blendoor’s technology in the VC world -- directly responding to the problem raised in the initial NYT piece.

[ajlsloan-blog]

Reframing, close to home

As I’ve mentioned previously, our final project for this course involves outlining an experimental design to put behavioral science in action -- so I’m always on the lookout for examples of this in my day-to-day life. 

This week in Management of Services (15.768), we’re lucky enough to have Doug Rauch, the former president of Trader Joe’s, coming to speak. In prepping for that class, I was reading this NPR interview about Rauch’s post-Trader Joe’s project, the Daily Table, a market in Dorchester, Mass., that prepares and repackages “perfectly edible produce” that would otherwise be thrown away. In the interview, Rauch acknowledges that one of the big challenges in setting up the business is changing how people talk about this kind of food, and rethinking little behaviors (like not leaving milk out while we eat our daily bowl of cereal) that can further extend the life of various products. In other words, Rauch is focused on reeducating his customer base and reframing the way they think about food and food expiration (from a hard deadline to a more flexible or adaptive one). It’s a great example of seeking to use behavioral science principles to solve a social issue -- in this case, trying to change the fact that almost 1/3 of America’s annual food supply currently goes to waste, while many Americans still go hungry.

The interview was from 2013, so I was curious to see how the project turned out. According to this updated piece from NBC News, that reframing seems to have been pretty successful -- the Dorchester location has attracted a loyal following, and Rauch is hoping to expand to other Boston area locations. Great food for thought (pun intended) as we finalize our own ideas for presentation this week.

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Cognitive biases abroad and close to home

As our capstone project for this course, we’ve been challenged to develop ideas that will allow behavioral science to encourage positive behavioral change in one of the countries we’re focused on. While I’ll save an update on that project for a later post, it’s been interesting for me to apply that kind of thinking in the domestic sphere as well.

For example: there’s a great article in the NYT this week that reviews the realities of life in Silicon Valley, particularly for female founders, and the extent to which many of us have a skewed perception of what goes on there. Given the survivorship bias, we tend to think in terms of success stories like Facebook, rather than recognizing the facts -- that, as the article notes, “venture capital firms invest in 1 percent of the companies that pitch them,” and even most of those that receive funding are dead in an average of 20 months.

Beyond the biases that color our outside view of Silicon Valley, the article also reviews the cognitive biases that limit success for some within it: that, for example, investors “tend to finance people who have succeeded before, or who remind them of those who did” -- and often favor pitches by men above those by women (even when the content is held constant). Investors also tend to favor pitches about products they can individually relate to, rather than those that might appeal to a different segment of the population -- regardless of how large that group might be.

Our upcoming class session will include a guest lecture by Josh Martin from Ideas42, a group focused on applying behavioral science to policy problems and affecting social change. I’m looking forward to getting his take on how we can address issues of diversity and inclusion like those cited here using behavioral science -- which might in turn spur my team’s thinking about our final project. More to come!

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From nations to brands: brand associations in action

Last week in class, we had the amazing chance to hear from Guido van Garderen, a strategy director at Interbrand and thought leader on nation and city branding. Despite the fact that it was something like 3 a.m. local time for him in South Africa, Guido kept us riveted for two hours.

During the discussion, Guido challenged us to review our immediate associations with countries like Cuba, T&T, and France, and then to think through how those associations fit together, and where we had left gaps (for example, no one mentioned healthcare in association with Cuba, though it’s arguably an important defining factor for the country). Guido then encouraged us to think about how countries could be intentional in building these associations. If Cuba or T&T could add one association, what would it be? How could a country’s tourism materials or efforts influence these kind of associations? What would that look like?

After class I found myself researching more about Interbrand’s work, and came across this cool review of the company’s work with the Korean Tourism Organization, helping KTO to better communicate the country’s message to potential tourists (with the particular goal of differentiating it from other East Asian countries). In reviewing this presentation in particular, it struck me how much nation branding is really just an extension of product branding -- and of personal branding as well. Korea’s effort to communicate its value proposition and reframe itself in the mind of potential tourists is not so different from any brand’s effort to position itself in the eyes of potential consumers.  

For example – last week, Under Armour dropped a new ad focused on the U.S. gymnastics team. While the ad obviously has other motives (namely, to sell UA apparel), it’s also an effort to reframe the sport of women’s gymnastics in the eyes of consumers. While an uninformed viewer might simply associate gymnastics with leotards or high ponytails, after watching this ad, it’s impossible not to add muscle, strength, grit, and determination to that list. 

[ajlsloan-blog]

Loss aversion in finance

This term, in addition to my study tour class with @professorgosline, I’m also enrolled in Investment Management (15.439), and so have been spending a lot of time in the last few days thinking about investment decisions (and mutual funds, in particular). 

Reading for that class led me to this WSJ article about mutual fund ratings -- ratings provided by companies like Morningstar with the intention of helping investors make informed decisions. 

New research, however, has revealed that the ratings aren’t as helpful as they seem, because they assume that everyone has the same preferences around loss -- which behavioral economics tells us is not the case. While most of us subscribe to loss aversion -- which means we feel losses more acutely than we feel gains (about twice as acutely on average, in fact), the “coefficient” on that loss aversion is different for each individual. The article links to a pretty nifty loss aversion calculator, which you can use to find your own loss-aversion coefficient by choosing between a series of “gambles” with equal probabilistic outcomes. The idea is that, just as Amazon personalizes its recommendations for you, someday widely accessible investment advice (like mutual fund ratings) should be equally tailored to your own preferences and historical behavior. A pretty interesting application of behavioral science in action!

[ajlsloan-blog]

Behavioral science -- it’s everywhere

I’ve been having a bit of the Baader-Meinhof phenomenon this week: that thing where you learn something new, or see something for the first time, and then start seeing it seemingly everywhere. At its essence, the phenomenon is just another example of the power of patterns and biases -- in this case, the “recency effect.” 

So it’s perhaps a little ironic that the thing I seem to see everywhere now is mentions of behavioral science, the topic of our study tour to Cuba, Trinidad, and Tobago this semester. As we at MIT focus in on cognitive biases and how they influence behavior (for better or worse), my own cognitive biases have led me to discussions on how behavioral science (and the exact type of heuristics we’re reviewing in class) can play a role in everything from politics (and particularly Iowa caucus voter turnout) to Super bowl ads. Thanks to @professorgosline and my fellow study tourists, I can’t unsee this stuff.

Over the next few weeks, I’ll be using this space to document my thoughts as we further investigate the potential of behavioral science as it relates to Cuba and T&T. Stay tuned!