“Changing behavior is like launching a space rocket.” This article comes fromWeChat Official Account: Business Review (ID : shangyepinglun) , author: Dan Ariely (Dan Ariely), Duke University (Duke University) James B. psychology and behavioral economics Duke Chair Professor. The picture of the title comes from: Visual China

In the face of the virus, humans are not able to deal with it. Long before the epidemic hit, the gap between our actual performance and what we could have done was already a gap. After the global pandemic of new crown pneumonia, what will this gap look like? It will almost certainly be worse, but this situation will also spur us to redouble our efforts and make some changes.

In terms of public medical care, personal safety, and economic management, human potential far exceeds actual performance. So, what behavioral factors are holding us back? What methods should we use to make the pace of progress easier? Which interventions can have a profound and far-reaching impact? And where and what should leaders and legislators focus their strength and resources?

In order to answer these questions, we should look at it this way: Change behavior is exactly like launching a space rocket. There are two basic factors that determine the success of a rocket launch.

FirstThe basic factor is resistance. The more scientists and engineers have ways to reduce drag and minimize the burden on the rocket, the better the rocket can fly to the universe.

The second basic factor is propulsion. How much fuel the rocket can hold is crucial. The efficiency of the conversion of fuel to kinetic energy through combustion is another key element.

Space flight depends on the relationship between drag and fuel (propulsion). If the resistance is greater than the thrust, the rocket will stay still. If the thrust is greater than the drag, the rocket will go straight into the sky. Human progress is also determined by the same set of forces.

Personal Finance Paradox

How can we help those who are troubled by financial management? If asked this question, most people would suggest teaching these people financial knowledge, which makes perfect sense.

The fact is, teaching people about financial management will not have any effect. In fact, if you want them to improve their personal financial management, this method simply does not work.

We can’t blame our poor memory. Those who receive personal financial counseling remember very clearly what they have learned. The problem is that they did not apply what they learned. Even if they have just finished learning various financial management techniques, only 4% of the participants put these techniques into practice. In the medium term, this number will drop to zero statistically. After learning these techniques for a few weeks, only 0.1% of the mentees were able to maintain financial management habits.

appropriate medicine

If teaching people how to do it doesn’t work, what method will work? Facts have proved that reducing resistance is indeed effective. Here I want to tell the story of an American online pharmacy.

Patients with chronic diseases pay quarterly fees, and this pharmacy provides them with prescription medicines delivered to their door every 90 days.

The challenge is that most patients buy the original research drug (branded drug), but there are also generic drugs with exactly the same formulations in the store. They have exactly the same chemical composition as the original drug, but they are much cheaper.

This online pharmacy wants its customers to switch to generic drugs, because this drug is more profitable for retailers and the cost to consumers is much lower.

(generic drugs) is cheaper for you,” the pharmacy declared, “because it is also cheaper for us.” The pharmacy decided to engage in promotional activities to let its customers buy generic drugs instead. It advertises on its website to promote the possibility of saving money. It sends letters and e-mails to customers to promote this activity. The reason is also very good: you only need to spend one-third of the price to get the exact same medicine.

What was the result? It has no effect. Almost no one switched to generic drugs. Customers know that switching to generic drugs can save them money and get exactly the same service, but they just don’t change it. Tell them to do this, it didn’t work at all.

Now, we need to review the knowledge of behavioral economics. Readers may be familiar with several of my papers on “The Temptation of Free”. There is evidence that the effect of free far exceeds a substantial price reduction. If you cut the price of a dollar a can of soda to 40 cents, then there will definitely be some people who didn’t buy it. However, the increased sales cannot make up for the loss of the price cut. But if you are directly free, almost everyone will get a can immediately.

So what does the pharmacy do? It provides customers with free medicines for a whole year, as long as they sign and agree to switch to generic medicines. You might think that most people will switch: not only do they get the same medicine at a much cheaper price, but they can also use the medicine completely for 12 months.

However, less than 10% of customers have switched to generic drugs. The pharmacy was indignant because the behavioral economics did not produce the expected results, and began to write to me: “We read your article on the’free temptation’, but, we are free, they still don’t buy it.”/p>

“Ah, it may be because of resistance. They are buying original drugs. If they switch to generic drugs, they have to do something. They have to reply.” I said.

So the pharmacy launched a new plan. Instead of sending letters asking customers to sign and agree to switch to generic drugs, they sent a letter saying that if they didn’t sign back, they would automatically switch to generic drugs.

What was the result? The lawyer was hired! And it’s a large group of lawyers. Facts have proved that it is illegal to do so. The so-called illegal things do not matter just take it for granted. In reality, there will be problems. However, in any case, the change in the method proved that the idea itself was correct.

What did the pharmacy do? It opened up another path. The pharmacy writes to the customer, telling them that they will not receive any medicine unless they reply.

If they reply, they can choose a more expensive original brand drug or a cheaper generic drug. No matter which one they choose, they must do something. In this case, most people switched to generic drugs. Once the “inaction benefit” of doing nothing was cancelled, patients changed their behavior and almost everyone chose generic drugs.

This is the story of resistance: people just don’t like to reply.

Save some money

How to promote people to save? Telling them directly to save money will not have any effect. Most people know that they should save some money in case they need it, but they still haven’t done so. The new crown virus is a crisis that few foresee. It hit the Western world with a heavy hammer, but for most people, having personal savings allows them to avoid the worst situation.

But in poor countries, every day can be a crisis. Saving a little money every day may mean the difference between life and death. herePeople can barely make ends meet, and once something happens, there is nothing to rely on. So they will borrow money, and sometimes the weekly interest is 10%. Once they step into this cycle, they will be trapped-all the cash will be used to repay interest, and things will get worse.

Our goal in Kenya is to find a system that can actually push people to save, not just make them think it’s a good idea to save money and not take action.

The core of the plan is to achieve this goal: encourage these families to save 100 shillings a week (about 1 US dollar)-so this In general, they can have some money left for the difficult days. We tried various solutions.

Which method is most effective? Most people’s guess is that a 20% savings bonus is the most effective, a 10% bonus is the second most effective, and the method of avoiding losses has little effect. People usually think that sending messages in the name of a child and engraving notes on coin props will not have any effect. Simply put, most people assume that other people are rational actors-increasing incentives will bring corresponding improvements in effectiveness.

However, people are not rational actors. The bonus plan does work, but there is no difference in the effect of the 10% bonus and the 20% bonus on savings, even though the reward for the latter has doubled.

The model of avoiding losses is indeed effective-human instinct is that avoiding losses is more important than seeking gains. When these families see money deducted from their accounts every weekend, they will have a strong incentive to terminate the “loss”-although the final result is actually exactly the same as those conventional plans, but The latter’s bonus is paid after the fact based on previous performance.

So, what is the effect of texting? It turns out that texting in the name of a child is helpful. There are two aspects to motivation. Text messages can be used as a reminder, and the reminder is very important: people easily forget to save money.

Furthermore, the emotional factor of asking your child to make a request provides a powerful motivation: most parents care about their children more than themselves. They want to give their children the best, which means that getting their children to participate more frequently has also become an incentive.

However, the most important method is obviously to mark the coin item. This approach doubled savings compared to all other methods. Why is this so? The experience on the other side of Africa gives clues.

make the invisible become visible

South Africa has a mixed city named Soweto(Soweto). There is a large slum in the city. One day, I walked into the sales office of a funeral insurance sales company in a slum. To understand why this matter is worth mentioning, you need to know that South Africans spend more on funerals than weddings. What I want to point out is that this may be a highly rational resource allocation method. After all, we are pretty sure that we will only have a funeral once in our lifetime!

When I was there, a man walked in with his son to buy funeral insurance. But he only bought insurance for one week—he could only afford so much. If he dies next week, insurance will cover 90% of his funeral expenses. But if he is still alive, there will be no such money in the family budget next week.

As soon as he bought the insurance, he solemnly handed over the certificate to his son. Why is there this ceremony? The explanation is the same as that for Kenyan coins. Buying insurance is a visible act like saving.

When someone saves money, pays off debt, or buys insurance, the only thing that can be seen is that there is less: less water at home, less fruit, less food on the table. However, by solemnly submitting certificates to our son—just like carving vertical lines on coin props in the Kenyan savings experiment—we showed what is very important for motivation: external behavior.

What we are doing is make meaningful but invisible economic behavior visible.

accelerate advancement

Let’s go back to the rocket launch pad. After the epidemic, mankind’s “rocket” has to fly far beyond what it could have done before. However, we can still work hard to narrow the gap in this regard. In order to achieve this, we have to reduce drag and provide thrust. We must try to better understand what incentives are most effective.

The good news is that if we keep in mind the two key factors of resistance and thrust, and continue to test and try, one day we will be able to make the “rocket” soar into the sky.

This article is from public micro-channel number: Business review (ID: shangyepinglun) , author: Dan Ariely (Dan Ariely), James B. Duke Chair Professor of Psychology and Behavioral Economics at Duke University