Tag Archives: The Economist

Is “A” Really the Best Option or is it Just that It’s Better Than “B”: List of Biases in Judgment and Decision-Making, Part 18

The other day, someone was talking to me about my series on biases in judgment and decision-making and it made me realize that I was missing a rather important bias — the contrast effect! I’m not sure how this one slipped through the cracks, but I’m glad to be able to write about it for you today.

It’s been almost a year and a half since I wrote something for this series, so let me refresh your memory. Each week, I took a cognitive bias and explained it. I provided an example and then I offered some ways for mitigating that cognitive bias in your own life. So, without further adieu, the contrast effect.

What’s the contrast effect? Well, as with many of the biases, it’s exactly what it sounds like: an effect that occurs because of a comparison. That is, people are more likely to perceive differences that are bigger or smaller because of something they’ve seen first. This is something that is used in sales — all — the — time. If you’re shopping for a new car, the salesperson may show a series of cars that are way out of your price range and then show you one that’s just a little out of your price range. After having seen so many cars that are way out of your price range, the one that’s just a little out of your price range won’t seem that far out of your price range. The contrast effect.

That’s not to pick on folks who sell cars, it can even happen with smaller purchases, shoes, for instances. Let’s say you’re looking for a particular kind of footwear. The salesperson may show you a bunch of shoes that don’t quite fit your needs and happen to be priced rather cheaply. Then, the salesperson shows you a shoe that does fit your needs, but is quite a bit more expensive. As you’ve seen all these shoes that aren’t what you need and now you’ve finally come to one that meets you’re needs, you may ignore the price and buy the shoes.

One of my favourite examples of the contrast effect comes from Dan Ariely‘s book, Predictably Irrational:

One day while browsing the World Wide Web (obviously for work-not just wasting time), I stumbled on the following ad, on the Web site of a magazine, the Economist.

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I read these offers one at a time. The first offer-the Internet subscription for $59 seemed reasonable. The second option-the $125 print subscription-seemed a bit expensive, but still reasonable.

But then I read the third option: a print and Internet subscription for $125. I read it twice before my eye ran back to the previous options. Who would want to buy the print option alone, I wondered, when both the Internet and the print subscriptions were offered for the same price? Now, the print- only option may have been a typographical error, but I suspect that the clever people at the Economist‘s London offices (and they are clever-and quite mischievous in a British sort of way) were actually manipulating me. I am pretty certain that they wanted me to skip the Internet- only option (which they assumed would be my choice, since I was reading the advertisement on the Web) and jump to the more expensive option: Internet and print.

But how could they manipulate me? I suspect it’s because the Economist‘s marketing wizards (and I could just picture them in their school ties and blazers) knew something important about human behavior: humans rarely choose things in absolute terms. We don’t have an internal value meter that tells us how much things are worth. Rather, we focus on the relative advantage of one thing over another, and estimate value accordingly. (For instance, we don’t know how much a six- cylinder car is worth, but we can assume it’s more expensive than the four- cylinder model.)

In the case of the Economist, I may not have known whether the Internet- only subscription at $59 was a better deal than the print- only option at $125. But I certainly knew that the print and-Internet option for $125 was better than the print- only option at $125. In fact, you could reasonably deduce that in the combination package, the Internet subscription is free! “It’s a bloody steal-go for it, governor!” I could almost hear them shout from the riverbanks of the Thames. And I have to admit; if I had been inclined to subscribe I probably would have taken the package deal myself. (Later, when I tested the offer on a large number of participants, the vast majority preferred the Internet- and- print deal.)

Before we movie into some of the ways for avoiding the Contrast Effect, I wanted to make it clear that sales isn’t the only place where this bias can creep up on us. Another good example is in evaluations (be they interviewing job candidates or marking term papers). If one doesn’t have a rubric by which one is scoring candidates (or papers), it can be easy to slip into the contrast effect: “Well, that candidate was much better than the last candidate, let’s put them through to the next round.” It could be that the latter candidate, while better than the first, still doesn’t meet your criteria to make it the next round, so putting them through would be wasting valuable resources — both yours and theirs.

Ways for Avoiding the Contrast Effect

1) Standardized Evaluation

In our most recent case involving interview candidates or term papers, creating a rubric or standardized method of evaluation prior to examining candidates/papers will go a long way to help one avoid falling into the trap of the contrast effect. This method could also be applied when it comes to shopping (i.e. sales). For instance, let’s say you’re looking for a car. Prior to arriving at the dealership, you could create a table for how you’re going to evaluate the cars you view while at the dealership. In this way, you can guard against the salesperson knowingly (or unknowingly) showing you cars at either end of the spectrum before showing you the cars you might actually purchase.

2) Are There Other Options?

Often times, when we’re succumbing to the contrast effect, we’re looking at option A versus option B. This is why it’s so important to have some sort of standardized evaluation (see #1), but short of a standardized evaluation, it’s important to remember that almost never are those two options your only two options. “Should I get this car or that car?” Well actually, you have another option — neither of those cars. And another option, you could consider buying a bike or maybe taking public transportation. Whenever you find yourself faced with a decision between two options, it can be useful to consider other options, just in case you’ve fallen into the trap of the contrast effect.

Note: the images in this post are all examples of the contrast effect.

If you liked this post, you might like one of the other posts in this series:

How Our Culture Failed Women in 2013

I’ve written before about my affinity for the documentary Miss Representation and its “brother” film that’s coming out in a few weeks The Mask You Live In. Well, a few weeks ago, the organization responsible for those movies put out a wonderful — well, in some ways — video detailing the ways in which the media has failed women in 2013. At first, it lists some of the great achievements that women have had this year and then… the video turns a bit sour.

We see a time lapse of a woman being airbrushed on the cover of a magazine, very sexist advertising (magazine and commercial), oversexed music videos, movies, tv shows, and then it turns to how the media cover some news events. There are — seemingly — ignorant men (mostly) patronizing women either in person or talking about women in patronizing ways. However, there are some really powerful moments. There’s a segment from Rachel Maddow where she’s discussing how women can have all of these ticks in the boxes and still get talked to in a negative way. There’s also — and this is my favourite — a video from this past summer when the Texas legislature was trying to ram a bill through that severely limited the rights of women regarding abortion.

I realize that for some, this can be an issue that incites a lot of passion in one direction or the other, but my preference for the video has nothing to do with that issue and everything to do with this woman, this strong and powerful woman, standing up for herself and for women to what is a room and a profession dominated by men. I remember when the now famous Wendy Davis filibuster was first starting to take shape in June and I remember turning on the stream sometime in the evening and having it running in the background. And then as they got closer to the end when things were really getting interesting. I remember trying to understand some of the wonky ways that procedure was being applied and then I remember Leticia Van de Putte…

It was one of the most powerful things I’d ever seen live. And if I recall correctly, I think these words were enough to motivate the gallery (the visitors sitting up above watching) to make noise until the clock ran out and the filibuster worked. Again, I want to make it clear that I’m not arguing in favour or against the merits of the filibuster, but just to draw your attention to that moment when Leticia Van de Putte said those words and the crowd erupted. I wish it weren’t, but it seems an apt metaphor for so much of how the world works today.

~

On a slightly happier (?) and stranger point, in an edition of The Economist from late last year, someone pointed out that Angela Merkel, the Chancellor (kind of like a President or Prime Minister) of Germany, appointed a female defence minister. And not only was this defense minster going to be a woman, but also that she is a gynecologist, entered politics at age 42, and has 7 children.

I think it’s great that Germany has appointed a female defence minister, but I wish that it weren’t news that Germany appointed a female defense minister. I look forward to the time in my life where the fact that someone’s been appointed to high political office or has been crowned the CEO of a big corporation and happens to also be a female is not newsworthy.

Note: You’ll notice that I made the title of this post about “our culture” and not “the media” and that’s because I don’t think it’s necessarily fair to pin the failure all on the media. There’s a feedback loop between our culture and the media. Yes, the media could certainly end that feedback loop, but so could the culture. In a way, everyone deserves a bit of the blame.

Over 40% of the World’s Population Will Vote in 2014

A few days ago in a post about global museum attendance, I mentioned that there were going to be a number of people voting across the world this year. In fact, that number is almost 3 billion. That’s right — over 3 billion people will be voting in an election this year. The total world population only broke 3 billion in the 1960s.

The Economist had a great graphic showing the different elections there was going to be this year and I thought it was worth taking a closer look at.

For instance, as you might expect there are nearly no elections taking place during the summer months. In fact, from May to September, there are only 2 elections taking place, whereas, aside from December, there is only one month that has only 2 elections (January).

Any election is important and has lasting repercussions, but one of the elections that I’m most interested to see the results of is the election in South Africa in April. This past November, South Africa opened voter registration and had over 2.5 million people register. Of those 2.5 million, 1 million were new voters. There will be another voter registration taking place in February of this year. There are quite a few people expecting the current party in power (African National Congress) to lose quite a bit of their support. Since 1994, all the Presidents of South Africa have been from the African National Congress (ANC).

Currently, the African National Congress has almost 70% of the seats in the National Assembly. The polls are predicting the ANC to lose some of their seats. In fact, support is expected to drop nearly 10%. If this hold true, the ANC would still have a majority of seats in the National Assembly, but there are still many days between now and the election in early April. If that support were to dip below 50%, it would be the first time since 1994 that the ANC had less than 200 seats.

Global Museum Attendance has Doubled in the Last Two Decades

A little more than a week ago, The Economist published an article about museums. In particular, they drew attention to the fact that the number of museums isn’t in decline. Instead, it’s quite the opposite. Would you have guessed that today, not only are museums not in decline, but that there are more than double the number of museums there were two decades ago?

As a soon-to-be parent, I can’t help but be pleased with this fact. I’m very much looking forward to taking my little one(s) to the museum to learn about the natural world around them. It seems I’m not the only one pleased by this either, with museum attendance way up.

I suppose what’s surprising to me about this is that I figured that with the advances we have had in technology, most people would be more inclined to explore the natural world around them from the convenience of their couch. While I’m glad that this is not the case, I wish someone would do some sort of study to better understand this behaviour. The article ties in the idea of higher education. That is, more and more people are going to university and graduates are more likely to visit museums. This makes sense, but I don’t think that it explains the whole story.

Another point raised in the article is the burgeoning growth in other countries. If you look at the graph embedded above, you’ll see that there’s quite a bit of growth planned for the Southeast Asian countries. [As an aside, in The Economist’s “The World in 2014,” you may be surprised to know that over 40% of the world’s population will be voting in a national election next year.] While this growth may help explain an addition piece of the growth in museums, it still doesn’t quite feel like it’s explained the whole puzzle. Of course, in science, especially the social sciences, we know that it’s not always possible to completely explain behaviour, but I’d like to think that one aspect of this has to do with technology.

That is, I’d like to think that as a species, we’re recognizing that technology is a useful tool for helping us navigate the world around us, but that it’s not the be-all and end-all of human existence. Don’t get me wrong, I absolutely appreciate technology. Without it, I wouldn’t be able to type on this external keyboard connected to my laptop, while looking at an external monitor connected to my laptop. Beyond that, you wouldn’t be able to read this article on your smartphone or on your laptop/computer, if it weren’t for technology.

With that being said, technology, in my opinion, hasn’t been able to capture the visceral experience of being there and seeing something. Technology can’t (at least not yet) involve all five of our senses in experiencing. Until it does, I’m happy to continue visiting museums.

Motivational Redux: To Make the Obituary in The Economist

About a week ago, I wrote a post about what could be the modern day version of writing yourself a $10,000,000 post-dated check. A few days ago, I saw a tweet that made me reconsider another common motivational activity: writing your own obituary. This tweet came from @GSElevator, which purports to be “things heard in the Goldman Sachs elevators.” Having never worked at a company liked Goldman Sachs (or Goldman Sachs, for that matter), I have no idea whether this account is purely a parody or if these things are actually spoken (or could be spoken).

Anyway, the tweet:

This sounds like it was a question asked in an interview and it’s great on so many levels. To begin, it shows ambition. The people who have obituaries written for them in The Economist are certainly no slouches. These are people who have accomplished — a lot. Second, it shows that the candidate reads The Economist (or at least that the candidate wants to provide the illusion that they do). Working at a place like Goldman Sachs means that The Economist would be required reading. Third (and unrelated to the interview), it gives us another opportunity to talk about ways to motivate ourselves. If you’re having trouble committing to that project or you just can’t get started on that book, you’ve got a number of ways (write your own Wiki page, post-dating a check, writing your The Economist obituary, etc.) to try and get you going.

Take a few minutes this Monday morning and think about that To Do list you haven’t quite gotten to in a while. What grand idea have you been putting off that you just know is brilliant?

 

Political Implications of the SCOTUS Decision on the Voting Rights Act

More than a week ago, the Supreme Court of the United States rendered a decision on a case that had implications for the Voting Rights Act (VRA). The Court ruled that the formula from Section 4 of the VRA was unconstitutional. The decision has certainly enraged liberals and the political left as is clear in Justice Ginsburg‘s dissent:

[T]he Court’s opinion can hardly be described as an exemplar of restrained and moderate decision making. Quite the opposite. Hubris is a fit word for today’s demolition of the VRA.

Because of this outrage, I’ve seen some people argue that this decision was good for liberals/democrats because it will ignite those potentially disenfranchised people to vote. From Ross Douthat:

Well, to begin with, voter identification laws do not belong to the same moral or legal universe as Jim Crow. Their public purpose, as a curb to fraud, is potentially legitimate rather than nakedly discriminatory, and their effects are relatively limited. As Roberts’s majority opinion noted, the voter registration gap between whites and blacks in George Wallace’s segregationist Alabama was 50 percentage points.

… But voter ID laws don’t take effect in a vacuum: as they’re debated, passed and contested in court, they shape voter preferences and influence voter enthusiasm in ways that might well outstrip their direct influence on turnout. They inspire registration drives and education efforts; they help activists fund-raise and organize; they raise the specter of past injustices; they reinforce a narrative that their architects are indifferent or hostile to minorities.

W.W. from The Economist finds Douthat’s analysis “quite plausible.” Both articles referenced the same information I talked about yesterday: the missing white voter.

I don’t know that I necessarily agree with this assessment.

In Wisconsin a couple of years ago, citizens were pretty excited about recalling Governor Scott Walker. Some folks were really upset by Gov. Walker’s actions on collective bargaining. Democrats, Gov. Walker is a Republican, thought that they could seize this opportunity to recall the Governor. There were over 1 million signatures to recall the Governor. It seemed like there was lots of momentum and people engaged in the recall. However, during the recall election of 2012, Gov. Walker won more of the vote than he did in the gubernatorial election of 2010.

There’s another example from this past election: The Affordable Care Act. Otherwise, known as “ObamaCare.” In March 2012, when the Supreme Court heard the arguments for the case, Karl Rove wrote in the Wall Street Journal:

This week’s historic Supreme Court hearings on President Obama’s health-care overhaul will have huge political ramifications.

Then, in June, when the decision was rendered, there was this from The Weekly Standard:

In the wake of the Supreme Court’s decision upholding the constitutionality of Obamacare, the principal choice now facing Americans on November 6 will be whether to keep Obamacare or to repeal it.

Republicans and conservatives thought that ObamaCare was going to give them the chance they needed to have a Republican elected President. It’s safe to say that it didn’t turn out the way they wanted. Not only did Republicans not elect a Republican President, but they also lost seats in the Senate (when they anticipated winning more seats).

Neither of these examples perfectly map onto the VRA decision, but it seems to me that there’s a bit of an overreaction in assuming that this decision is going to be a lightning rod for Democrats. I’d say that it’s “too early to tell” how this will affect the upcoming 2014 and 2016 elections. For now, the one of the only things that can be said about the political implications of the VRA: We’ll see…

The Obesity Crisis: How Come No One’s Talking About Neuromarketing?

The Economist did a fantastic special report on obesity a few issues back. I highly recommend reading it. You may see the obesity debate in a whole new light. However, I was a bit disappointed in the closing paragraph of one of their opening articles in that issue:

There is a limit, however, to what the state can or should do. In the end, the responsibility and power to change lie primarily with individuals. Whether people go on eating till they pop, or whether they opt for the healthier, slimmer life, will have a bigger effect on the future of the species than most of the weighty decisions that governments make.

I can totally understand where this perspective is coming from, but I don’t think that this perspective accounts for neuromarketing.

The technical definition:

In recent times, ‘neuromarketing’ has come to mean the application of neuroimaging techniques to sell products.

Meaning, marketers hook you up to a machine while you watch images/video of  product and then notice when certain areas of your brain light up. With this information, they’re able to tell when your brain is active and — theoretically — determine that it’s because of what you’re watching. [Is that frightening to anyone?] So, as the title of this post asks, with regard to the obesity crisis, why isn’t anyone talking about neuromarketing? Let me make the connection a little clearer.

We know that through neuromarketing, it’s possible to determine how our brains react to certain advertisements and products. With this information, companies can then use the advertisements that are most successful in getting consumers to buy their products. If we apply what we know from this abstract scenario to the food industry (is it weird to anyone else that it’s called the food industry?) we can posit that there are probably companies out there who use neuromarketing techniques to convince consumers to buy their product. Isn’t it possible (probable?) that companies who are in the business of selling us over-the-top sugary drinks or unnecessarily sweet-tooth-inducing treats also in the business of using neuromarketing techniques to convince us that we need to be drinking these drinks or eating these treats?

Getting back to the opening quote from The Economist, my response would have to be — in part — no. While I agree that personal responsibility is important, sometimes, the environment is too compelling. In this case, the environment is neuromarketing. How can a consumer make an informed choice if her/his brain is being manipulated?

I’m not sure of the solution to the obesity epidemic (though I have an idea that I’ll talk about in the coming days!), but I know that we most certainly need to include neuromarketing in that discussion.