Tag Archive for: behavioral economics

They Thought We Were Ridiculous

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Have you ever caught yourself doing something that, upon reflection, seemed a bit out of the ordinary? Maybe you’ve made a purchase just because it was the last item on the shelf, or perhaps you started saving more for retirement without fully understanding why. Well, you’re not alone, and there’s a fascinating explanation behind these decisions: behavioral economics.

I recently listened to a podcast series that was entertaining and enlightening when it comes to the quirks of human behavior. They Thought We Were Ridiculous is a masterpiece crafted by the brilliant minds of Tim Houlihan and Kurt Nelson from Behavioral Grooves, alongside Andy Luttrell from Opinion Science. As someone who’s had the pleasure of being a guest on both platforms, I can attest to the passion and insight these three bring to the table.

This five-part series delves into the crux of behavioral economics, a field that dares to question the age-old notion of the “rational human” that traditional economics has held so dear. It’s an exploration of how our decisions are influenced by a myriad of factors, often leading us to act in ways that defy cold, hard logic.

The charm of the series lies not just in the heavyweight interviews with pioneers like Daniel Kahneman, George Lowenstein, and Richard Thaler, but also in the captivating storytelling. Through decades of research, experiments, and real-life applications, the hosts weave a narrative that’s as informative as it is engaging.

Behavioral economics sits at the intersection of economics and psychology, offering insights into why we do what we do, even when it doesn’t seem to make sense. Concepts like loss aversion, the scarcity principle, nudges, and pre-suasion are just the tip of the iceberg. These principles influence everything from public policy to personal finance, sometimes nudging us towards better decisions without us even realizing it.

Why am I sharing this with you? Because understanding the underlying factors that guide our choices can be incredibly empowering. It’s a reminder that being “irrational” is part of the human condition, and there’s beauty in our unpredictability. This series not only sheds light on the intricacies of human behavior but also celebrates it.

So, whether you’re a seasoned enthusiast of Robert Cialdini, of behavioral economics, or simply curious about why we act the way we do, this podcast series is a must-listen. You can find it on Apple Podcasts under Behavioral Grooves or Opinion Science, or visit the They Thought We Were Ridiculous website for a deep dive into the world of behavioral economics.

As we navigate through life, making countless decisions along the way, it’s comforting to know that sometimes, the most “ridiculous” actions are just part of our beautifully complex nature. We might as well embrace our quirks because they make us who we are. And who knows, understanding them might just lead to some of our best decisions yet.

I invite you to listen, reflect, and join the conversation. What’s a decision you’ve made that seemed “ridiculous” at the time but now makes perfect sense through the lens of behavioral economics? I encourage you to share your stories and thoughts.

Written in conjunction with ChatGPT

Brian Ahearn

Brian Ahearn is the Chief Influence Officer at Influence PEOPLE and a faculty member at the Cialdini Institute.

An author, TEDx speaker, international trainer, coach, and consultant, Brian helps clients apply influence in everyday situations to boost results.

As one of only a dozen Cialdini Method Certified Trainers in the world, Brian was personally trained and endorsed by Robert Cialdini, Ph.D., the most cited living social psychologist on the science of ethical influence.

Brian’s first book, Influence PEOPLE, was named one of the 100 Best Influence Books of All Time by Book Authority. His follow-up, Persuasive Selling for Relationship Driven Insurance Agents, was an Amazon new release bestseller. His latest book, The Influencer: Secrets to Success and Happiness, is a business parable designed to teach you how to use influence at home and the office.

Brian’s LinkedIn courses on persuasive selling and coaching have been viewed by more than 700,000 people around the world. His TEDx Talk on pre-suasion has more than a million views!

An Elephant Never Forgets!

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“An elephant never forgets,” might be a familiar saying to you. Parents often use the fun visual to motivate children to do their homework. But, do elephants really have good memories? They do according to elephant ecologist Stephen Blake, from the Max Planck Institute for Ornithology. That’s because, weighing more than 10 lbs., elephant brains are the largest of any land mammal!

In psychology, many social scientists and behavioral economists use the analogy of the rider and the elephant as a visual for the interplay between your conscious and subconscious thinking. The tiny rider represents your conscious thought processes trying to direct your day. The big elephant is representative of your subconscious, which actually drives most of your day.

While the rider has the ability to direct the elephant, it’s not hard to imagine the elephant resisting or going wherever it wants when it decides to. And, when the elephant chooses to do something, oftentimes there’s very little the rider can do to change the elephant’s mind.

For instance, you know you shouldn’t eat that piece of chocolate cake. But, your subconscious takes over and convinces you to take a bite. It does so for a host of reasons; you worked out extra today, you watched your diet all week, you love chocolate, one bite won’t hurt, you deserve it, etc.

Consider how your brain functions.

Behavioral scientists estimate anywhere from 85% to 95% of your daily decisions and behaviors are driven by your subconscious. That means nine out of every 10 things you think and/or do are not consciously thought out. That’s so because your brain relegates most of what it learns to your subconscious. In doing so you don’t have to “think” about what you’re doing.

Take brushing your teeth for example. You decide to do it but the mechanics of how you brush happen effortlessly. You’ve done it for so long you no longer have to think about how to brush your teeth. Going one step further, even “deciding” to brush your teeth may be a subconscious act depending on your routine.

Not having to think isn’t bad.

To quote Henry Ford, “Thinking is the hardest work, which is probably the reason why so few people engage it.” Ford was on to something because, despite only being about 2% of your bodyweight, your brain chews up around 20% of your calories in a typical day. When it’s engaged in active thought, it ramps up its use by nearly 400%! And you thought your car was an energy hog!

The routines you learn take on a life of their own and before you know it, those routines dictate much of your day. In other words, the elephant, not the rider, is deciding where to go and when. Even as you become aware, sometimes there’s very little your conscious rider can do.

Conclusion

The elephant never forgets and neither does your brain. That’s why change is so hard. If you’ve never smoked you’ve never had a craving for a cigarette and there’s nothing to forget. But, ask any smoker who’s quit and they’ll tell you the cravings and triggers never leave. The only thing you can do is replace an old habit with a new one. If you want to learn how to break old habits and form new ones look into one of the following resources because each is excellent:

Atomic Habits by James Clear

The Power of Habits by Charles Duhigg

Tiny Habits by B.J. Fogg

Brian Ahearn, CMCT®, is the Chief Influence Officer at Influence PEOPLE, LLC. An international speaker, coach and consultant, he’s one of only 20 people in the world personally trained by Robert Cialdini, Ph.D., the most cited living social psychologist on the topic of ethical influence.

** Brian’s first book – Influence PEOPLE: Powerful Everyday Opportunities to Persuade that are Lasting and Ethical – will be available for pre-sale on July 9 and goes live on August 20.

His LinkedIn Learning courses Persuasive Selling, Persuasive Coaching and Building a Coaching Culture: Improving Performance through Timely Feedback, have been viewed by nearly 70,000 people! Keep an eye out for Advanced Persuasive Selling: Persuading Different Personalities this fall.

 

The Southwest Airlines Love Affair is over and it’s Completely Irrational

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Yes, you read that correctly; my 12 year love affair with Southwest Airlines is over and truthfully, it’s irrational on my part and Southwest’s too. Perhaps you could say we have irreconcilable differences.

Dan Ariely, author of Predictably Irrational and The Upside of Irrationality, uses studies from behavioral economists to prove we humans are not the rational beings we like to think we are…at least most of the time. One such study that highlights our irrationality is the ultimatum game.

In the ultimatum game, person A is given $10 and can choose to give any amount to a playing partner, person B, and keep the rest for himself or herself. How much would you give person B? Is $1 enough? After all, that’s better than nothing. Would you give $4 or $5? That seems like something a fair-minded individual would do. How about $6 or $7? It’s a rare person who would give away more than they would keep.

There’s a catch to the game; person B can reject the whole deal – meaning neither side gets to keep any of the money – if they don’t like what’s being offered.

Things change rather dramatically under conditions of perceived fairness. Person A almost always offers $4 or $5 in hopes of being viewed as fair because that usually leads to agreement. When agreement is reached everybody wins because both parties leave better off financially than they were before the game started.

If you think about it rationally though, if you were offered $1 that’s better than nothing and yet the vast majority of people don’t view it that way. If something “fair” isn’t offered, person B will almost always reject it…even to their own financial detriment.

Consider that for a moment – people willingly subject themselves to “injury” (take no money instead of a few free bucks) just to punish the other person when they feel they’re being treated unfairly. You need look no further than divorce court to see this play out in real life!

How does this impact Southwest and me? I fly a good bit but recently learned I had lost my A-List status with Southwest. When I called to find out why, I was told I needed 25 flights in 2015 but only had…24. I thought it reasonable to ask for an exception given my loyalty, increased flights in recent years, and because I had a December business trip I needed to reschedule till this spring. I’d be hard pressed to think of a handful of times I’ve flown other airlines the past five years and when I have it’s because I traveled with colleagues who had already booked flights.

My request was rejected three times at various levels over the phone and one last time after writing a letter. The reason Southwest wouldn’t budge was “to maintain the integrity of the [frequent flier] program.” I was shocked given the level of customer service I’d experienced with Southwest and my loyalty over the past dozen years. I would have expected that response from many other companies but not my beloved Southwest!

Being a persistent guy I finally emailed CEO Gary Kelly (you’ll never hear “Yes” if don’t ask, right?). At each level Southwest dug their heels and now I have, too, because I’ve made the choice to take at least a couple of flights on other airlines this year. It’s irrational because Southwest flights are almost always on time, their flight attendants are great, and the more I fly the better my chances at getting my coveted A-List status back. But like the person who feels they were treated unfairly in the ultimatum game, I don’t care!

For Southwest’s part, they could have made a loyal customer even more loyal by saying, “Mr. Ahearn, seldom do we make an exception like this but we can see you’re a loyal customer and we appreciate your business so we’ll do it this one time. Will you still be flying with us every chance you get?” Boom! I would have been happy and would have told them I’d absolutely fly Southwest at every chance. And you know what, I would have, because they would have used the principles of scarcity, reciprocity, and consistency on me at the same time. Making such an exception would have cost them almost nothing other than letting me to accrue frequent flier miles 25% faster. That benefit equates to me getting a free ticket 25% sooner which might cost Southwest about $100 assuming a I earn a $400 round trip ticket a year.

So Southwest has made an irrational choice, too, because when I choose to fly other airlines, Southwest will lose more revenue than they would have “given up” if they’d simply accommodated my request.

Much like the ultimatum game, there comes a point when everyone loses despite their best effort to persuade the other side. In this instance I lose and Southwest loses too. But, we’re all human after all so I’m sure it’s not the last time Southwest will stick to their guns nor will it be my last time to stick to mine.