-
Hi.
-
You might have noticed
that I have half a beard.
-
It's not because I lost a bet.
-
Many years ago, I was badly burned.
-
Most of my body is covered with scars,
-
including the right side of my face.
-
I just don't have hair.
That's just how it happened.
-
It looks symmetrical, but almost.
-
Anyway, now that we discussed facial hair,
-
let's move to social science.
-
And in particular, I want us to think
about where is the potential for humanity
-
and where we are now.
-
And if you think about it,
there's a big gap
-
between where we think we could be
and where we are,
-
and it's in all kinds of areas.
-
So let me ask you:
-
How many of you in the last month
have eaten more than you think you should?
-
Just kind of general. OK.
-
How many of you in the last month have
exercised less than you think you should?
-
OK, and for how many of you
has raising your hands twice
-
been the most exercise you got today?
-
(Laughter)
-
How many of you have ever
texted while driving?
-
OK, we're getting honest.
Let's test your honesty.
-
How many people here in the last month
-
have not always washed your hands
when you left the bathroom?
-
(Laughter)
-
A little less honest.
-
By the way, it's interesting how we're
willing to admit texting and driving
-
but not washing our hands,
that's difficult.
-
(Laughter)
-
We can go on and on.
-
The problem, the topic is
that there's lots of things
-
when we know what we could do --
-
we could be very, very different
but we're acting in a very different way.
-
And when we think
how do we bridge that gap,
-
the usual answer is, "Just tell people."
-
For example, just tell people
that texting and driving is dangerous.
-
Did you know it's dangerous?
You should stop doing it.
-
You tell people something
is dangerous, and they will stop.
-
Texting and driving is one example.
-
Another very sad example
is that in the US,
-
we spend between seven
and eight hundred million dollars a year
-
on what's called "financial literacy."
-
And what do we get
as a consequence of that?
-
There was recently a study that looked
at all the research ever to be conducted
-
on financial literacy --
what's called a meta-analysis.
-
And what they found is that
when you tell people,
-
you teach them financial literacy,
-
they learn and they remember.
-
But do people execute? Not so much.
-
The improvement is about
three or four percent
-
immediately after the course,
-
and then it goes down.
-
And at the end of the day,
-
the improvement is about 0.1 percent --
-
not zero, but as humanly close
to zero as possible.
-
(Laughter)
-
So that's the sad news.
-
The sad news is, giving
information to people
-
is just not a good recipe
to change behavior.
-
What is?
-
Well, social science
has made lots of strides,
-
and the basic insight is that
if we want to change behavior,
-
we have to change the environment.
-
The right way is not to change people,
it's to change the environment.
-
And I want to present a very simpleminded
model of how to think about it:
-
it's to think about behavioral change
-
in the same way that we think about
sending a rocket to space.
-
When we think about
sending a rocket to space,
-
we want to do two main things.
-
The first one is to reduce friction.
-
We want to take the rocket
and have as little friction as possible
-
so it's the most aerodynamic possible.
-
And the second thing is we want
to load as much fuel as possible,
-
to give it the most amount
of motivation, energy to do its task.
-
And behavior change is the same thing.
-
So let's first talk about friction.
-
In this particular case study
I'll tell you about,
-
there's a pharmacy, an online pharmacy.
-
Imagine you go to your doctor.
-
You have a long-term illness,
-
your doctor prescribes
to you a medication,
-
you sign up for this online pharmacy
-
and you get your medication
in the mail every 90 days.
-
Every 90 days, medication,
medication, medication.
-
And this online pharmacy
wants to switch people
-
from branded medication
to generic medication.
-
So they send people letters, and they say,
-
"Please, please, please,
switch to generics.
-
You will save money, we will save money,
your employer will save money."
-
And what do people do?
-
Nothing.
-
So they try all kinds of things
and nothing happens.
-
So for one year, they give people
an amazing offer.
-
They send people a letter, and they say,
-
"If you switch to generics now,
it will be free for a whole year."
-
Free for a whole year. Amazing!
-
What percentage of people
do you think switched?
-
Less than 10 percent.
-
At this point, they show up to my office.
-
And they come to complain.
-
Why did they pick me?
-
I wrote a couple of papers
on the "allure of free."
-
In those papers, we showed
that if you reduce the price of something
-
for, let's say, 10 cents to one cent,
nothing much happens.
-
You reduce it from one cent to zero,
now people get excited.
-
(Laughter)
-
And they said, "Look, we read these
papers on 'free,' we gave 'free.'
-
Not working as we expected.
-
What's going on?
-
I said, "You know, maybe
it's a question of friction."
-
They said, "What do you mean?"
-
I said, "People are starting with branded.
-
They can do nothing and end with branded.
-
To move to generic, they have to choose
generic over branded,
-
but they also have to do something.
-
They have to return the letter."
-
So this is what we call
a "confounded design."
-
Two things are happening at the same time.
-
It's branded versus generic,
-
but it's doing nothing
versus doing something.
-
So I said, "Why don't we switch it?
-
Why don't we send people a letter
and say, 'We're switching you to generics.
-
You don't need to do anything.
-
If you want to stay with branded,
please return the letter.'"
-
(Laughter)
-
Right?
-
What do you think happened?
-
Lawyers, lawyers happened.
-
(Laughter)
-
It turns out, this is illegal.
-
(Laughter)
-
By the way, for brainstorming
and creativity,
-
doing things that are illegal
and immoral, it's fine,
-
as long as it's just
in the brainstorming phase.
-
(Laughter)
-
But this was the purity of the idea,
-
because the initial design was,
the branded had the no-action benefit.
-
In my illegal, immoral design,
generic had the no-action benefit.
-
But they agreed to give people
a T-intersection:
-
send people a letter and say,
-
"If you don't return this letter,
-
we will be forced
to stop your medications.
-
But when you return the letter,
you could choose branded at this price,
-
generic at this price."
-
Now people had to take an action.
-
They were on even footing. Right?
-
It wasn't that one had
the no-action benefit.
-
What percentage do you think switched?
-
The vast majority switched.
-
So what does it tell us?
-
Do people like generics,
or do we like branded?
-
We hate returning letters.
-
(Laughter)
-
This is the story of friction:
small things really matter.
-
And friction is about taking
the desired behavior
-
and saying, where do we have
too much friction
-
so it's slowing people down
from acting on it?
-
And every time you see
that the desired behavior
-
and the easy behavior are not aligned,
-
it means we want to try and realign them.
-
That's the first part.
We talked about friction.
-
Now let's talk about motivation.
-
In this particular study,
-
we were trying to get very poor people
in a slum called Kibera in Kenya
-
to save a little bit of money
for a rainy day.
-
You know, if you're very, very poor,
you have no extra money,
-
you live hand to mouth,
-
and from time to time, bad things happen.
-
And when something bad happens,
you have nothing to draw on, you borrow.
-
The Kibera people can borrow at sometimes
up to 10 percent interest a week.
-
And then, of course,
it's really hard to get out of it.
-
You live hand to mouth,
something bad happens,
-
you borrow, things get worse
and worse and worse.
-
So we wanted people to keep
a little bit of money for a rainy day.
-
And we thought about
what is the motivation,
-
what is the fuel that we need to add?
-
And we tried all kinds of things.
-
Some people, we texted them
once a week and said,
-
"Please try to save 100 shillings" --
about a dollar -- "this week."
-
Some people, we sent a text message
as if it came from their kids.
-
So it said, "Hi Mom, hi Dad,
this is little Joey" --
-
whatever the name of the kid was --
-
"Try and save 100 shillings this week
for the future of our family."
-
Right? I'm Jewish, a little bit
of guilt always works.
-
(Laughter)
-
Some people got 10 percent.
-
"Save up to a hundred shillings,
we'll give you 10 percent."
-
Some people got 20 percent.
-
Some people got also
10 percent and 20 percent,
-
but they got it with loss aversion.
-
What is loss aversion?
-
Loss aversion is the idea
that we hate losing
-
more than we enjoy gaining.
-
Now, think about somebody
who is in a 10-percent condition
-
and they put 40 shillings in.
-
They put 40 shillings,
we give them four more,
-
they say thank you very much.
-
That person gave up six.
-
They could have gotten six more
if they gave a hundred,
-
but they don't see it.
-
So we created what we call pre-match.
-
We put the 10 shillings in
at the beginning of the week.
-
We said, "It's waiting for you!"
-
And then if somebody puts 40 in,
we say, "Oh, you put 40 in,
-
we're leaving four,
and we're taking six back."
-
So in both cases, pre-match or post-match,
-
people get 10 percent.
-
But in the pre-match,
-
they see the money they did not match
leaving their account.
-
So we have text, text from kids,
10 percent, 20 percent,
-
pre-match, post-match.
-
And we had one more condition.
-
It was a coin about this size,
-
with 24 numbers written on it.
-
And we asked them to put the coin
somewhere in their hut,
-
and every week, take a knife
and scratch the number for that week --
-
week one, two, three, four --
-
scratch it like a minus
if they didn't save
-
and scratch it up and down if they saved.
-
Now, think to yourself:
-
Which one of those methods
do you think worked the best?
-
Text, text from the kids,
10 percent, 20 percent,
-
beginning of the week,
end of the week, and the coin?
-
I'll tell you what
the average people think.
-
We've done these studies of prediction,
-
both in the US and in Kenya.
-
People think that 20 percent
will get a lot of action,
-
10 percent less,
-
the rest of it will do nothing --
-
kids, coin, doesn't matter.
-
People think loss aversion
will have a small effect.
-
What actually happened?
-
Sending a text reminder once a week
-
helps a lot.
-
Good news!
-
This program lasted six months.
People forget. Reminding people is great.
-
Ten percent at the end
of the week helped some more.
-
Financial incentives work.
-
Twenty percent at the end of the week --
just like 10 percent, no difference.
-
Ten percent in the beginning of the week
-
helps some more.
-
Loss aversion works.
-
Twenty percent in
the beginning of the week,
-
just like 10 percent in the beginning
of the week, no difference.
-
And the text message from the kids
was just as effective
-
as 20 percent plus loss aversion --
-
which is amazing, right?
-
It's amazing how motivating
messages from kids were.
-
And one conclusion is,
we don't use kids enough.
-
(Laughter)
-
And, of course, I don't mean
in a child labor sense.
-
But if you think about
parents and their kids,
-
we are the best that we can for our kids,
-
and we think about the future,
-
and I think we should think
-
about how to use that amazing
source of motivation
-
to get parents to behave in a better way.
-
But the big surprise
of this study was the coin.
-
The coin basically doubled savings
compared to everything else.
-
And now the question is: Why?
What was it about the coin?
-
So I'll tell you how I started
thinking about the coin,
-
and then we'll come back to it.
-
So you know, when I do research
on, let's say, buying coffee,
-
I don't need to go anywhere.
I can sit in my office.
-
I've bought enough coffee.
I know how it works.
-
The details, I'm familiar with.
-
When you do research in some
of the poorest places in the world,
-
you have to go and visit
and see what's going on
-
and get some insight
about how the system works.
-
And on that particular day,
-
I'm in a place called Soweto
in South Africa,
-
and I'm sitting in a place
that sells funeral insurance.
-
You know, in the US people spend
crazy amounts of money on weddings?
-
In South Africa, it's funerals.
-
People spend up to a year
or two years of income on funerals.
-
And I sit in this place --
-
by the way, before you judge the South
Africans as being irrational with this,
-
I just want to remind you
-
that spending a lot of money
on funerals compared to weddings,
-
at least you know for sure
you only have one.
-
(Laughter)
-
OK, so I sit in this place
that sells funeral insurance.
-
And this guy comes in with his son --
his son is about 12 --
-
and he buys funeral insurance for a week.
-
It will cover 90 percent
of his funeral expense
-
only if he dies in the next seven days.
-
Right? These are very poor people,
they buy small amounts of insurance
-
and small amount of soap and such.
-
And he gets that certificate,
-
and in a very ceremonious way,
he gives it to his son.
-
And as he gives it to his son,
I think to myself, why the ceremony?
-
What is this father doing?
-
Now, think about the breadwinner
that decides on that particular day
-
to direct some money
into insurance or savings.
-
What is the family going to see tonight?
-
They're going to see less.
-
Right? At that level of poverty, there'll
be less food, less kerosene, less water --
-
something less tonight.
-
And what his father was doing
and what our coin was trying to do
-
is to say, yes, there's less
food on the table,
-
but there's another activity.
-
You see, what happened is, there are
many good, important economic activities,
-
like savings and insurance,
that are invisible.
-
And now the question is:
How do we make them visible?
-
So let's go back to our rocket model.
-
We have to, first of all,
look at the system
-
and see where there's little things
we can fix, with friction,
-
where is there
that we can remove friction?
-
And then the next thing we want to do
is to think broadly about the system,
-
and say, what other motivations
can we bring in?
-
And that's a much more difficult exercise,
-
and we don't always know
what would work best.
-
Is it going to be money?
Is it going to be loss aversion?
-
Is it going to be
something that is visible?
-
We don't know, and we have
to try different things.
-
We also have to realize that
our intuition sometimes misleads us.
-
We don't always necessarily know
what would work the best.
-
So if we think about this gap
-
between where we could be
and where we are,
-
it's a really sad thing to see this gap
and to think about it.
-
But the good news is,
there's lots we can do.
-
Some of the changes are easy,
some of the changes are more complex.
-
But if we'll attack each problem directly,
-
not by just providing
more information to people
-
but trying to change the friction,
-
add motivation,
-
I think we can ...
-
Can we close the gap? No.
-
But can we get much better?
Absolutely, yes.
-
Thank you very much.
-
(Applause)