Playing Capitalism’s Long GameBehavioural Nudges in a World

of Disruptive Technologies

Geoff Riley FRSA, June 2015

You have just a few seconds to write down an answer to each of the following questions…..

In a lake, there is a patch of lily pads. Every day, the patch doubles in size. If it takes 48 days for the patch to cover the entire lake, how long would it take for the patch to cover half of the lake?

Mary’s Father has 5 daughtersThe first four are Sante, Senti, Sinto and Sontu What is the fifth one is called

A baseball and bat together cost $11. The bat costs $10 more than the ball. How much does the ball cost?

What is the 4th Emergency Service?

BoysLook away from the

screen NOW!

Estimate this ….

1 x 2 x 3 x 4 x 5 x 6 x 7 x 8

BoysLook at the screen

now

Estimate

8 x 7 x 6 x 5 x 4 x 3 x 2 x 1

Playing Capitalism’s Long GameBehavioural Nudges in a World

of Disruptive Technologies

Geoff Riley FRSA, June 2015

In a lake, there is a patch of lily pads. Every day, the patch doubles in size. If it takes 48 days for the patch to cover the entire lake, how long would it take for the patch to cover half of the lake?

47 days

Mary’s Father has 5 daughters. The first four are Sante, Senti, Sinto and Sontu What is the fifth one is called Mary

87

87

A baseball and bat together cost $11. The bat costs $10 more than the ball. How much does the ball cost?

$0.50

What is the 4th Emergency Service?

Framing as a form of re-branding

Estimate

1 x 2 x 3 x 4 x 5 x 6 x 7 x 8Median estimate = 512

Estimate

8 x 7 x 6 x 5 x 4 x 3 x 2 x 1Median estimate = 2250

Actual answer is the same!

1 x 2 x 3 x 4 x 5 x 6 x 7 x 88 x 7 x 6 x 5 x 4 x 3 x 2 x 1

Answer = 40320

Playing Capitalism’s Long GameBehavioural Nudges in a World

of Disruptive Technologies

Geoff Riley FRSA, June 2015

What are nudges?

• Nudges are interventions that preserve freedom of choice but that nonetheless influence people’s decisions

• Our decisions are often heavily affected by behavioural biases

• Instinctively we favour the default option• Choices are contextual• We are deeply affected by social norms

Source: World Bank 2015

Genres of Behavioural Nudge

• Goal gradient effects• Chunking• Changing or reinforcing social norms• Framing, Anchoring, Priming• Changing the default choice option• Commitment contracts• Nudging through price incentives• Harnessing the power of social networks

Save PaperDo Small Nudges Work?

Which of these two loyalty cards for a car wash is likely to be most effective?

A or B?

A

B

Choice Architecture Influences Us

Nudges for Homo distractusNudges to improve social graces

System 1 Thinking for Men!

78

Priming and Framing

Nudging People to be more Polite

Appealing to Social Norms

A behavioural nudge to give blood

Market share of grocery stores in UK for 12 weeks ending March 29, 2015

Tesco

Asda

Sainsbury's

Morrisons

The Co-operative

Waitrose

Aldi

Lidl

Iceland

Other outlets

Symbols and Independent

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

28.4%

17.1%

16.4%

10.9%

6%

5.1%

5.3%

3.7%

2.1%

2.9%

2.1%

Market share of total grocers

Gro

cers

Lidl knows that people hate waiting

Incentives to travel off-peak in Singapore

Humans hate uncertainty

Loss Aversion at the Supermarket

Building in a new Default Choice

Commercial exploitation of Scarcity Bias

Scarcity Bias with EasyJet – ethical?

Playing Capitalism’s Long GameBehavioural Nudges in a World

of Disruptive Technologies

Geoff Riley FRSA, June 2015

• A hardware store has been selling snow shovels for $15. The morning after a heavy snowfall, the store raises the price to $20.

• On a scale of 1-10 how fair is this?• 1: Totally unfair 10: Totally fair

Is it fair for a mostly-empty restaurant to offer a £20 discount off the lunchtime bill for a table of four customers?

Is it fair for a busy restaurant to charge a £20 surcharge for any group of people eating at 7.30pm on a Saturday?

After hurricane warnings what would you expect to happen to the price of plywood and bottled water?

Top-3 US Tech Start-Up Valuations

1. $50B Uber2. $24B Airbnb3. $20B Palantir

Nudging for Social Good and for Profit

• Many tech-savvy start-ups understand behavioural biases

• They build clever “nudges” into their marketing / pricing strategies

• But do they get the idea of playing capitalism’s long game?

• Do they risk cutting across social norms and inviting a strong regulatory response?

Genres of Behavioural Nudge

• Goal gradient effects• Chunking• Changing or reinforcing social norms• Framing, Anchoring, Priming• Changing the default choice option• Commitment contracts• Nudging through price incentives• Harnessing the power of social networks

Opinion of organ donations in U.S. adults 1993-2012

Support for organ donation among U.S. adults in 1993, 2005, and 2012

1993 2005 20120.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%93.5% 92.9% 94.9%

6.5% 4.4% 2.4%2.6% 2.7%

Strongly support/support Strongly oppose/oppose Don't know/refused

Perc

enta

ge o

f res

pond

ents

Playing Capitalism’s Long GameBehavioural Nudges in a World

of Disruptive Technologies

Geoff Riley FRSA, June 2015