Behaviouronomics

Doing a favour to someone, as per reciprocity principle, is a great persuasion tool. However, can asking for a favour turn a hater into a fan? Yes, it can. And this trick was pioneered by the famous eighteenth-century statesman, Benjamin Franklin.

It was a hot Sunday afternoon and I was experimenting with “diffused mode of thinking.” It’s a learning technique where you read for a while, then keep the book aside and let your mind drift aimlessly. In other words, I was dozing off in my tattered beanbag with a book on my face.

My experiment was interrupted by the doorbell. It was a young salesman.

During those days, I had recently read Robert Cialdini’s book – Influence: The Psychology of Persuasion. Cialdini, a professor of Psychology, argued that expert salespeople use many persuasion tricks to convince their customers and the best way to counter is to not give them a chance to talk to you at all.

[Read more…] about Behaviouronomics: Benjamin Franklin Effect

The moment a sperm enters the human egg, the doors are slammed shut. Our brain is like a human egg. As soon as an idea impregnates the human mind, it closes its doors for other ideas. The first explanation that comes to mind makes us blind towards other more plausible possibilities. Unfortunately, in our complex world, the first conclusions are almost always deceiving.

Recently, I was accused of being unethical and a liar.

Here’s the backstory. On a Friday before the new year eve, at 9 PM, a gentleman knocked on my door. He claimed that my car had hit his car in the common parking area. To show courtesy to a fellow resident, let’s name him Mr. M, I agreed to cooperate and find out more about the incident.

“Did it happen in front of your eyes?” I asked him.
[Read more…] about Behaviouronomics: First Conclusion Bias

When it’s easy to cheat and steal in a system, the psychological forces of incentive caused bias and social proof tendency feed each other and result in a very dangerous phenomenon where the system becomes hostile towards the honest participants.

In 2004, a US-trained young research executive joined an Indian generic drug company. In the first few months of his employment, Dinesh Thakur was not only appalled but utterly shocked to learn about the widespread unethical practices in the company. Upon further investigation, he was flabbergasted to discover the extent to which the firm, Ranbaxy Laboratories, had provided false data to the World Health Organization (WHO).

Ranbaxy had been seeking prequalification — which enables pharmaceutical companies to sell their products to WHO member countries — for drugs used by HIV patients in South Africa. The U.S. was the largest buyer of these drugs…[Thakur] discovered a company culture that not only tolerated fraud, but also apparently celebrated and encouraged it among its employees. He found that the company was playing fast and loose with its testing of drugs. The company had taken shortcuts, never tested their products before they released them to the market and fabricated data in its clinics to prove they would work in patients. (Source:Fighting a culture of fraud)

Ranbaxy board ignored Thakur’s findings and was asked to leave the company. However, the story doesn’t end there. Thakur decided to do something about this problem. He reported it to U.S. FDA (Food & Drug Administration). It took eight long years for FDA to investigate the fraud. In 2013, Ranbaxy pleaded guilty to the charges and was fined $500 million. Thakur collected $48 million for his whistle-blower role.

[Read more…] about Behaviouronomics: Serpico Effect

It’s a common fact that people respond to incentives, but the real power of incentives is often unrecognized and underestimated. Incentives influence at the subconscious level, and thus it’s the main culprit behind the immoral behaviour.

2006 was a great year for Google. Two years after its IPO, earnings were growing at 35 percent per year. The company had just bought YouTube for $1.5 billion, and Gmail was quickly becoming the most popular email service in the world. The stock was up almost five times since the IPO and Wall Street loved Google.

However, in its data-center operations, some serious issues were brewing up. Google had not yet perfected the ability to seamlessly scale up and power multiple products that it would later become famous for. Teams struggled to get resources in the data centers.

Sam Schillace, co-founder of the Docs predecessor Writely, described the situation after Google acquired his company as – “They had this crazy hand-cobbled system where there was one guy in the middle doing the planning — it was, like, put a bottle of vodka on his desk, and you’d get your machines for the service.”
[Read more…] about Behaviouronomics: Incentive Caused Bias

As human activities are made safer, it tends to make us overconfident and take higher risks. This unintended consequence of increased safety has vast implications including, but not limited to, adventure sports, road safety, and stock markets.

Question for you. How many parachutes does one need to try skydiving? One, two?

Technically, none. That is if you want to jump only once. To do it more than once you need the parachute. Don’t you?

Well, I agree this was a weak attempt of starting this post with humour. But on a serious note, I am sure you know that every skydiver jumps with a reserve parachute. And what if the both the chutes don’t open? Well…so much for skydiving!

Instead of wondering about the number of parachutes, a more interesting question to ask here is this: does an additional chute make skydiving safer? “Of course! It should,” most people will argue, “When a skydiver knows that there’s a backup for the emergency, wouldn’t he feel safer? Isn’t that the reason skydiving, as a sport, has become so popular that hundreds of thousands of people indulge in it every year?”

But if you dig deeper into above statement, you’d realise that there lies the paradox of safety. Statistics reveal that even though skydiving equipment has made huge leaps forward for improving reliability, the fatality rate has stayed roughly constant when adjusted for the increasing number of participants.

The backup parachute and other safety measures seem to reduce the risk only for a short while until the skydivers start feeling safer and, unfortunately, overconfident. This overconfidence promotes the skydivers to attempt even riskier manoeuvres which defeats the purpose of having the additional safety.

Skydiving pioneer Bill Booth observed – “The safer skydiving gear becomes, the more chances skydivers will take, in order to keep the fatality rate constant.”

This phenomenon isn’t limited to skydiving alone. Take skiing for example. Recent studies indicate that skiers wearing helmets go faster on average than non-helmeted skiers, and that overall risk index is higher in helmeted skiers than non-helmeted skiers. Moreover, while helmets may help prevent minor head injuries, increased usage of safety headgear has not reduced the overall fatality rate.

So, am I arguing that people should stop wearing helmets and jump with a single chute only? No. That would be a defeatist view. My intention is to draw your attention to a less known behavioural bias called Peltzman Effect.
[Read more…] about Behaviouronomics: Peltzman Effect