When we think about all the mistakes people make in decisions what, what does
it tell us. So first we can think about what does it
tell us about standard economics. In standard economics, we have a beautiful
view of human nature. Shakespeare wrote, what a piece of work is
man. How noble in reason, and so on, and so
forth. And now, while this is a very nice view of
human nature, it would be really nice to think about people as capable and able
unencumbered by emotions, able to think about all the options.
Compute everything, consider everything in a deep way and making always, always,
always the right decision. In behavior economics we are not that
generous to people. Instead we think of people as myopic and
vindictive, easily confused, don't know what they want, and so on and so forth.
In many ways this is a more depressing perspective of human nature, but I also
think it's much more useful as a perspective.
In fact I think there are three main lessons that we can take from behavior
economics. The first one is to recognize that we have
many, many faults. The many decision biases the many things
we don't do right. That's the first thing is just to realize
that we have these faults across a huge range of activities.
The second thing to realize is that we don't have good intuition.
About all of those faults. Is not, it's not as if we see them, and we
recognize them easily. And then the third point, which comes from
the first two, is that if we have faults and we don't recognize them, we need
experiments. We need not to rely on our intuition.
Instead we need to measure exactly what is going on.
In the same way that in a visual illusion, you have to measure exactly the length of
a table in a table illusion. You have to measure the color in the cube
illusion. If you rely on your own intuition you will
get it wrong, in the same way that when we set things that rely on human behavior, we
can't just rely on our intuitions. We have to rely on actual measurement.
We have to do experiments, and we have to test ourselves.
And maybe a good analogy to think about is the American FDA.
So the Food and Drug Administration forces physicians to do experiments.
They take physicians who think they have a good idea of how to do something better.
And they say before you implement it and before you force some patients to do it,
we want you to prove to us that this is going to pass through some scientific
barrier. And you know what, there's lots of things
that after doing them for many years we discover were bad idea.
For example, cough medications. For 30 years, we gave cough medication to
kids until we figure out that this was actually a bad idea.
Not a neutral idea. A bad idea.
Back surgeries, for a long time they did all kinds of back surgery for things that
they showed later on were useless. And so there's many, many exp, experiments
and things like that, that you have an intuition of why this particular
medication, this particular procedure would work.
But in fact they don't and you know what we have to force physicians with these
experiments. Because the physicians think that they
know whats good. They have a theory of what would work and
they want to give it to all the patients. But we don't let them we stop them and we
say sorry you can't just follow your intuition and do it.
And I think we need the same discipline. For governments and businesses.
I think we need the same intuition to tell people in government before you apply any
particular policy that is going to be affecting a lot of people, we want you to
test it and show us that in, it's indeed actually useful.
And to businesses too. I think businesses before they apply
something or do something, I think they should have their own barrier.
Of what is the proof that they are going to consider before they go in to apply
something and if we took a bit more modesty in what our opinions are and how
successful and correct we are. I think we would actually do things in a
better way. In, in Roman times, there was this famous
saying called Memento Mori. And the idea was that as generals had
victories in all kinds of battle fields, they would come to Rome and they would
have a parade. And people would yell at them and
celebrate, and they would wear gold and all kinds of, get gifts and showered with
presents and so on. But in the same way that they were hailed
as gods for the day... They also had a slave that was stationed
next to them, walking next to them. And saying all the time in the ear,
memento mori, memento mori, which meant, remember, you are mortal.
Remember, you are mortal, don't let get, that get into your head.
And that's, I think it's the same way to remind us of.
Remember that we're limited. Remember that we're irrational.
Remember that we have all of these decisions, problems, and we need to think
about how to test ourself and check ourself and don't trust our intuition to a
high degree. So if you start doubting yourself, what do
you do? And for me the big lesson to take is to
follow what computer hackers do. So, I have a very good friend who's a
computer hacker and I love what he's doing.
And he basically told me what computer hackers do.
And he said that what computer hackers do is they take a procedure and they write it
in exact details. They say this is server and there's a
computer, and there's a protocol that happens here.
And there's a handshake happening here, and this information passes, this
information passes and they look at the whole sequence, very, very long sequence
of things that can happen. And then they say, and where can we
interrupt? And where can we slow down and what can we
change? And how can we get a different result?
And I think from a behavioral perspective, we want to do the same thing.
We want to look at the small details of how something happens.
How do we enroll in the retirement plan? And how do you enroll in organ donation?
And how do you decide what TV to get and so on?
And then we want to say, where can we interfere in?
Where can we get things to behave differently, and where can we improve
things? And I think this is basically the recipe
for how to take social science research and make it applicable.
You make a list of the exact behavior in small details and then you think about
where you could apply different things. And as a final point, I want to go back to
my nurses. As I told you I started thinking about
this whole field by thinking about how to remove bandages from burn patients.
When I finished all my research I went back to the hospital, I gave a lecture to
the doctors and the nurses. And they listened and responded, and we
had some discussion. But when I finished, my favorite nurse,
Etty, came to me and she said two really interesting things.
The first thing that she said was that I did not think about her pain.
This was no picnic for her, either. She was standing there removing my
bandages. This was not something that she was
enjoying. Maybe she was not suffering like I was,
but this was not great for her either. But we quickly agree that, [laugh] role of
medical treatment is not to minimize the nurse's pain.
Even though for her, it would have been good to just squeeze the duration.
Make it as short as possible. And get out of there as quickly as
possible. But then I said, okay but why don't you
just try my suggestion? You don't have to accept it.
You don't have to adopt it for all time. Why don't you just do it a few times?
And what she said was really interesting. She said, every day she could have done
what she thought was the right thing to do, which is the quick removal of the
bandages. What everybody does, which is the quick
removal of the bandages. And what she thought was good for me and
good for her. Or, she could do what I suggested.
Which was not good for her. She thought was not good for me.
And nobody else did it. And under those conditions, everyday she
was just following her best intuition of what's the best thing to do.
And she was doing every day and every day. And I think it happens to us all the time.
We stand at intersection in the road every, many times a day.
And there's a path that we've taken before, that everybody else takes and our
intuition tells us to take. And then this other path that we haven't
taken before and we don't know much about it but our intuitions are pointing us away
from that. And I think that if you thought that you
might be irrational, and you might have bad intuitions.
It also means that, from time to time, it will be useful to try and take this other
path. You know?
And sometimes, you might take this other path.
And you would realize that you were right all along.
And that's perfectly fine. Then you've wasted a little bit of time,
money, and effort. But sometimes, you might take this path,
and you might realize that this was actually a better path.
And if you take the big lesson from me, from all of social science, it's to doubt
our intuitions. And if you doubt your intuition, it means
you should experiment more. You should ask yourself, why am I making
this decision? Is it because it's really better, or I
just think so? And if it's only because I just think so,
maybe it's the right time to try something else.
Maybe I should try it and figure out. And for particularly for things we are
going to make decisions over and over and over, there is huge potential payoff in
trying something out and seeing whether it leads to better efforts.
So this is it for today. I hope this was useful.
I hope you would have a bit more humility in how you...
Think about yourself and hoping for better decisions in the future.
[music].