1 00:00:00,953 --> 00:00:10,802 When we think about all the mistakes people make in decisions what, what does 2 00:00:10,802 --> 00:00:14,646 it tell us. So first we can think about what does it 3 00:00:14,646 --> 00:00:19,642 tell us about standard economics. In standard economics, we have a beautiful 4 00:00:19,642 --> 00:00:23,370 view of human nature. Shakespeare wrote, what a piece of work is 5 00:00:23,370 --> 00:00:26,630 man. How noble in reason, and so on, and so 6 00:00:26,630 --> 00:00:29,636 forth. And now, while this is a very nice view of 7 00:00:29,636 --> 00:00:34,424 human nature, it would be really nice to think about people as capable and able 8 00:00:34,424 --> 00:00:38,428 unencumbered by emotions, able to think about all the options. 9 00:00:38,428 --> 00:00:43,120 Compute everything, consider everything in a deep way and making always, always, 10 00:00:43,120 --> 00:00:47,176 always the right decision. In behavior economics we are not that 11 00:00:47,176 --> 00:00:50,995 generous to people. Instead we think of people as myopic and 12 00:00:50,995 --> 00:00:55,970 vindictive, easily confused, don't know what they want, and so on and so forth. 13 00:00:55,970 --> 00:01:00,642 In many ways this is a more depressing perspective of human nature, but I also 14 00:01:00,642 --> 00:01:03,804 think it's much more useful as a perspective. 15 00:01:03,805 --> 00:01:07,780 In fact I think there are three main lessons that we can take from behavior 16 00:01:07,780 --> 00:01:11,646 economics. The first one is to recognize that we have 17 00:01:11,646 --> 00:01:16,346 many, many faults. The many decision biases the many things 18 00:01:16,346 --> 00:01:19,918 we don't do right. That's the first thing is just to realize 19 00:01:19,918 --> 00:01:23,070 that we have these faults across a huge range of activities. 20 00:01:23,070 --> 00:01:26,569 The second thing to realize is that we don't have good intuition. 21 00:01:26,570 --> 00:01:30,384 About all of those faults. Is not, it's not as if we see them, and we 22 00:01:30,384 --> 00:01:34,660 recognize them easily. And then the third point, which comes from 23 00:01:34,660 --> 00:01:39,992 the first two, is that if we have faults and we don't recognize them, we need 24 00:01:39,992 --> 00:01:42,850 experiments. We need not to rely on our intuition. 25 00:01:42,850 --> 00:01:46,034 Instead we need to measure exactly what is going on. 26 00:01:46,035 --> 00:01:50,770 In the same way that in a visual illusion, you have to measure exactly the length of 27 00:01:50,770 --> 00:01:54,102 a table in a table illusion. You have to measure the color in the cube 28 00:01:54,102 --> 00:01:56,690 illusion. If you rely on your own intuition you will 29 00:01:56,690 --> 00:02:00,770 get it wrong, in the same way that when we set things that rely on human behavior, we 30 00:02:00,770 --> 00:02:04,650 can't just rely on our intuitions. We have to rely on actual measurement. 31 00:02:04,650 --> 00:02:07,971 We have to do experiments, and we have to test ourselves. 32 00:02:07,971 --> 00:02:12,072 And maybe a good analogy to think about is the American FDA. 33 00:02:12,072 --> 00:02:16,351 So the Food and Drug Administration forces physicians to do experiments. 34 00:02:16,352 --> 00:02:21,142 They take physicians who think they have a good idea of how to do something better. 35 00:02:21,142 --> 00:02:25,564 And they say before you implement it and before you force some patients to do it, 36 00:02:25,564 --> 00:02:29,919 we want you to prove to us that this is going to pass through some scientific 37 00:02:29,919 --> 00:02:32,795 barrier. And you know what, there's lots of things 38 00:02:32,795 --> 00:02:36,307 that after doing them for many years we discover were bad idea. 39 00:02:36,308 --> 00:02:40,208 For example, cough medications. For 30 years, we gave cough medication to 40 00:02:40,208 --> 00:02:43,410 kids until we figure out that this was actually a bad idea. 41 00:02:43,410 --> 00:02:46,200 Not a neutral idea. A bad idea. 42 00:02:46,200 --> 00:02:50,860 Back surgeries, for a long time they did all kinds of back surgery for things that 43 00:02:50,860 --> 00:02:55,210 they showed later on were useless. And so there's many, many exp, experiments 44 00:02:55,210 --> 00:02:58,980 and things like that, that you have an intuition of why this particular 45 00:02:58,980 --> 00:03:02,074 medication, this particular procedure would work. 46 00:03:02,075 --> 00:03:06,386 But in fact they don't and you know what we have to force physicians with these 47 00:03:06,386 --> 00:03:09,332 experiments. Because the physicians think that they 48 00:03:09,332 --> 00:03:12,243 know whats good. They have a theory of what would work and 49 00:03:12,243 --> 00:03:16,402 they want to give it to all the patients. But we don't let them we stop them and we 50 00:03:16,402 --> 00:03:19,570 say sorry you can't just follow your intuition and do it. 51 00:03:19,570 --> 00:03:22,970 And I think we need the same discipline. For governments and businesses. 52 00:03:22,970 --> 00:03:27,593 I think we need the same intuition to tell people in government before you apply any 53 00:03:27,593 --> 00:03:31,881 particular policy that is going to be affecting a lot of people, we want you to 54 00:03:31,881 --> 00:03:35,080 test it and show us that in, it's indeed actually useful. 55 00:03:35,080 --> 00:03:37,826 And to businesses too. I think businesses before they apply 56 00:03:37,826 --> 00:03:40,592 something or do something, I think they should have their own barrier. 57 00:03:40,592 --> 00:03:45,330 Of what is the proof that they are going to consider before they go in to apply 58 00:03:45,330 --> 00:03:49,905 something and if we took a bit more modesty in what our opinions are and how 59 00:03:49,905 --> 00:03:54,148 successful and correct we are. I think we would actually do things in a 60 00:03:54,148 --> 00:03:57,874 better way. In, in Roman times, there was this famous 61 00:03:57,874 --> 00:04:02,957 saying called Memento Mori. And the idea was that as generals had 62 00:04:02,957 --> 00:04:07,442 victories in all kinds of battle fields, they would come to Rome and they would 63 00:04:07,442 --> 00:04:10,142 have a parade. And people would yell at them and 64 00:04:10,142 --> 00:04:14,698 celebrate, and they would wear gold and all kinds of, get gifts and showered with 65 00:04:14,698 --> 00:04:17,979 presents and so on. But in the same way that they were hailed 66 00:04:17,979 --> 00:04:21,515 as gods for the day... They also had a slave that was stationed 67 00:04:21,515 --> 00:04:25,148 next to them, walking next to them. And saying all the time in the ear, 68 00:04:25,148 --> 00:04:29,210 memento mori, memento mori, which meant, remember, you are mortal. 69 00:04:29,210 --> 00:04:33,140 Remember, you are mortal, don't let get, that get into your head. 70 00:04:33,140 --> 00:04:36,230 And that's, I think it's the same way to remind us of. 71 00:04:36,230 --> 00:04:39,424 Remember that we're limited. Remember that we're irrational. 72 00:04:39,425 --> 00:04:44,020 Remember that we have all of these decisions, problems, and we need to think 73 00:04:44,020 --> 00:04:48,500 about how to test ourself and check ourself and don't trust our intuition to a 74 00:04:48,500 --> 00:04:52,885 high degree. So if you start doubting yourself, what do 75 00:04:52,885 --> 00:04:55,972 you do? And for me the big lesson to take is to 76 00:04:55,972 --> 00:05:00,806 follow what computer hackers do. So, I have a very good friend who's a 77 00:05:00,806 --> 00:05:03,900 computer hacker and I love what he's doing. 78 00:05:03,900 --> 00:05:06,330 And he basically told me what computer hackers do. 79 00:05:06,330 --> 00:05:11,430 And he said that what computer hackers do is they take a procedure and they write it 80 00:05:11,430 --> 00:05:14,190 in exact details. They say this is server and there's a 81 00:05:14,190 --> 00:05:16,580 computer, and there's a protocol that happens here. 82 00:05:16,580 --> 00:05:19,793 And there's a handshake happening here, and this information passes, this 83 00:05:19,793 --> 00:05:23,261 information passes and they look at the whole sequence, very, very long sequence 84 00:05:23,261 --> 00:05:27,100 of things that can happen. And then they say, and where can we 85 00:05:27,100 --> 00:05:29,645 interrupt? And where can we slow down and what can we 86 00:05:29,645 --> 00:05:32,367 change? And how can we get a different result? 87 00:05:32,368 --> 00:05:35,720 And I think from a behavioral perspective, we want to do the same thing. 88 00:05:35,720 --> 00:05:39,050 We want to look at the small details of how something happens. 89 00:05:39,050 --> 00:05:43,390 How do we enroll in the retirement plan? And how do you enroll in organ donation? 90 00:05:43,390 --> 00:05:45,809 And how do you decide what TV to get and so on? 91 00:05:45,810 --> 00:05:48,240 And then we want to say, where can we interfere in? 92 00:05:48,240 --> 00:05:52,252 Where can we get things to behave differently, and where can we improve 93 00:05:52,252 --> 00:05:55,242 things? And I think this is basically the recipe 94 00:05:55,242 --> 00:05:59,190 for how to take social science research and make it applicable. 95 00:05:59,190 --> 00:06:03,478 You make a list of the exact behavior in small details and then you think about 96 00:06:03,478 --> 00:06:10,251 where you could apply different things. And as a final point, I want to go back to 97 00:06:10,251 --> 00:06:13,597 my nurses. As I told you I started thinking about 98 00:06:13,597 --> 00:06:18,069 this whole field by thinking about how to remove bandages from burn patients. 99 00:06:18,069 --> 00:06:22,658 When I finished all my research I went back to the hospital, I gave a lecture to 100 00:06:22,658 --> 00:06:26,728 the doctors and the nurses. And they listened and responded, and we 101 00:06:26,728 --> 00:06:30,133 had some discussion. But when I finished, my favorite nurse, 102 00:06:30,133 --> 00:06:33,470 Etty, came to me and she said two really interesting things. 103 00:06:33,470 --> 00:06:37,397 The first thing that she said was that I did not think about her pain. 104 00:06:37,398 --> 00:06:40,492 This was no picnic for her, either. She was standing there removing my 105 00:06:40,492 --> 00:06:42,335 bandages. This was not something that she was 106 00:06:42,335 --> 00:06:44,756 enjoying. Maybe she was not suffering like I was, 107 00:06:44,756 --> 00:06:50,353 but this was not great for her either. But we quickly agree that, [laugh] role of 108 00:06:50,354 --> 00:06:55,060 medical treatment is not to minimize the nurse's pain. 109 00:06:55,060 --> 00:06:58,360 Even though for her, it would have been good to just squeeze the duration. 110 00:06:58,360 --> 00:07:01,460 Make it as short as possible. And get out of there as quickly as 111 00:07:01,460 --> 00:07:05,576 possible. But then I said, okay but why don't you 112 00:07:05,576 --> 00:07:08,240 just try my suggestion? You don't have to accept it. 113 00:07:08,240 --> 00:07:12,077 You don't have to adopt it for all time. Why don't you just do it a few times? 114 00:07:12,078 --> 00:07:15,864 And what she said was really interesting. She said, every day she could have done 115 00:07:15,864 --> 00:07:20,328 what she thought was the right thing to do, which is the quick removal of the 116 00:07:20,328 --> 00:07:23,017 bandages. What everybody does, which is the quick 117 00:07:23,017 --> 00:07:26,244 removal of the bandages. And what she thought was good for me and 118 00:07:26,244 --> 00:07:30,497 good for her. Or, she could do what I suggested. 119 00:07:30,498 --> 00:07:33,840 Which was not good for her. She thought was not good for me. 120 00:07:33,840 --> 00:07:38,070 And nobody else did it. And under those conditions, everyday she 121 00:07:38,070 --> 00:07:41,560 was just following her best intuition of what's the best thing to do. 122 00:07:41,560 --> 00:07:46,890 And she was doing every day and every day. And I think it happens to us all the time. 123 00:07:46,890 --> 00:07:50,565 We stand at intersection in the road every, many times a day. 124 00:07:50,565 --> 00:07:55,173 And there's a path that we've taken before, that everybody else takes and our 125 00:07:55,173 --> 00:07:58,779 intuition tells us to take. And then this other path that we haven't 126 00:07:58,779 --> 00:08:02,712 taken before and we don't know much about it but our intuitions are pointing us away 127 00:08:02,712 --> 00:08:06,432 from that. And I think that if you thought that you 128 00:08:06,432 --> 00:08:09,363 might be irrational, and you might have bad intuitions. 129 00:08:09,363 --> 00:08:13,924 It also means that, from time to time, it will be useful to try and take this other 130 00:08:13,924 --> 00:08:14,480 path. You know? 131 00:08:14,480 --> 00:08:16,200 And sometimes, you might take this other path. 132 00:08:16,200 --> 00:08:18,387 And you would realize that you were right all along. 133 00:08:18,388 --> 00:08:21,161 And that's perfectly fine. Then you've wasted a little bit of time, 134 00:08:21,161 --> 00:08:24,130 money, and effort. But sometimes, you might take this path, 135 00:08:24,130 --> 00:08:27,419 and you might realize that this was actually a better path. 136 00:08:27,420 --> 00:08:33,132 And if you take the big lesson from me, from all of social science, it's to doubt 137 00:08:33,132 --> 00:08:36,200 our intuitions. And if you doubt your intuition, it means 138 00:08:36,200 --> 00:08:39,755 you should experiment more. You should ask yourself, why am I making 139 00:08:39,755 --> 00:08:42,830 this decision? Is it because it's really better, or I 140 00:08:42,830 --> 00:08:45,990 just think so? And if it's only because I just think so, 141 00:08:45,990 --> 00:08:49,054 maybe it's the right time to try something else. 142 00:08:49,055 --> 00:08:53,120 Maybe I should try it and figure out. And for particularly for things we are 143 00:08:53,120 --> 00:08:57,140 going to make decisions over and over and over, there is huge potential payoff in 144 00:08:57,140 --> 00:09:00,696 trying something out and seeing whether it leads to better efforts. 145 00:09:00,696 --> 00:09:04,816 So this is it for today. I hope this was useful. 146 00:09:04,816 --> 00:09:09,843 I hope you would have a bit more humility in how you... 147 00:09:09,844 --> 00:09:16,316 Think about yourself and hoping for better decisions in the future. 148 00:09:37,634 --> 00:09:58,943 [music].