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DesignForAction 2014 Josh Wright slides

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Slides from the presentation by Josh Wright of Ideas42 at Design For Action 2014 (www.designforaction.org)

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DesignForAction 2014 Josh Wright slides

  1. 1. WHAT IS ©2014 ideas42 ?! 1
  2. 2. ©2014 ideas42 2 ideas42 is a nonprofit behavioral economics ideas and design lab focused on producing social good at scale.
  3. 3. FOUNDED BY VISIONARY ACADEMICS… ©2014 ideas42 Sendhil Mullainathan Harvard University AntoineCe Schoar MIT Sloan Eldar Shafir Princeton University 3
  4. 4. WITH AN AMBITIOUS GOAL 4 Academic Theory Amazing understanding about human behavior from Behavioral Psychology & Behavioral Economics research Need To Apply Real World To Solve Hard Problems in: -­‐Consumer Finance -­‐Poverty -­‐Economic Opportunity To Help Millions of People ©2014 ideas42 -­‐Health -­‐EducaIon -­‐Energy ConsumpIon
  5. 5. WE COMBINE LEADING ACADEMICS… Sendhil Mullainathan Harvard University (co-­‐founder) ©2014 ideas42 Manuel Adelino Dartmouth Tuck Kate Baicker Harvard School of Public Health Michael Barr University of Michigan Law School Richard Thaler Univ. of Chicago Booth Anuj Shah University of Chicago Booth Betsy Levy Paluck Princeton University Todd Rogers Harvard Kennedy School Eldar Shafir Princeton University (co-­‐founder) AntoineCe Schoar MIT Sloan (co-­‐founder) 5
  6. 6. ...WITH EXPERIENCED PRACTITIONERS KaTe MarTn is a Managing Director ideas42. Before joining ideas42, KaIe was the Chief Press Officer in the Prime Minister’s Office and Media Director at ONE.org. . Saugato DaCa is a Managing Director ideas42. He works with partners to design, test and scale programs and products that use behavioral economics to benefit poor people in developing countries. Marina Dimova is a Vice President at ideas42, where she works on behavioral innovaIons in consumer finance and internaIonal development. ©2014 ideas42 6 Piyush TanTa is an ExecuIve Director at ideas42. Before joining ideas42, Piyush was a Partner in Oliver Wyman’s financial services pracIce. Josh Wright is an ExecuIve Director at ideas42, with a focus with a focus on financial services, economic mobility, healthcare, and strategy for the firm. William Congdon is a Vice President at ideas42, His work covers the applicaIon of behavioral insights to topics including public finance, labor economics. For full list and bios of all 40+ staff visit www.ideas42.org
  7. 7. LET’S START WITH A PUZZLE ©2014 ideas42 7
  8. 8. REPRESENTATIONS LEAD TO SOLUTIONS 10/16/14 88 ©2014 ideas42 8
  9. 9. odd choice. ©2014 ideas42 9
  10. 10. A LITTLE STORY “EXCELLENT AIRMEN COMMIT NO ERRORS.” ©2014 ideas42 10
  11. 11. ©2014 ideas42 11
  12. 12. ©2014 ideas42 12 odd choice.
  13. 13. 10% Off -­‐ Sale No Limit 3.5 cans per customer Limit 12 Per Customer 7 cans per customer ©2014 ideas42 13
  14. 14. 24 Jams vs. 6 Jams 60% vs. 40% 3% vs. 30% CHOICE IS GOOD? Iyengar & Lepper (2000) ©2014 ideas42 14
  15. 15. STANDARD MODEL AcTons Outcome ©2014 ideas42 15 Yes Benefit > Cost No A B Yes No Decision
  16. 16. BEHAVIORAL MODEL Decision AcTons Outcome A B Yes No ©2014 ideas42 16 Yes No Failed to choose, didn’t consider at all ???
  17. 17. 17 PSYCHOLOGIES & CONTEXT è INSIGTHS BEHAVIORAL INSIGHT © 2014 ideas42
  18. 18. BEHAVIORAL MAPPING REDEFINE PROBLEM FIND ANOTHER BOTTLENECK DEFINE DIAGNOSE DESIGN TEST STATED PROBLEM CAPACITY AND SCALABILITY DISENTANGLE PRESUMPTIONS ACTIONABLE BOTTLENECKS INTERVENTION CONCEPT CONTEXT RECONNAISSANCE DEFINED PROBLEM DECISION-­‐ACTION MAP HYPOTHESIZED BOTTLENECKS POLISH SCALABLE INTERVENTION INTERVENTION DETERMINE FEASIBILITY CLARIFY OUTCOMES ROBUST EXPERIMENT IDENTIFY SIDE EFFECTS ideas42 partner consumer sequenIal iteraIve as necessary ©2014 ideas42 18
  19. 19. WHY DIAGNOSE? ©2014 ideas42 19
  20. 20. INTERVENTION: DEFAULTS ARE POWERFUL Madrian, B., & Shea, D. (2001). The Power of SuggesIon: InerIa in 401(k) ParIcipaIon and Savings Behavior. The Quarterly Journal of Economics, 116(4), 1163. ©2014 ideas42 20
  21. 21. … BUT THEY DON’T WORK EVERYWHERE • Field experiment with low-­‐income populaIon receiving EITC • Defaulted to placing 10% into savings bonds 100% 80% 60% 40% 20% 0% Opt In Opt Out Source: Bronchep, Dee, Huffman, Magenheim (2011) ©2014 ideas42 21
  22. 22. SAVING INTENTIONS AND ACTIONS – 401(K) Typical breakdown among 100 employees 100 Employee Savings Behavior 68 24 3 120 100 80 60 40 20 0 Number of employees surveyed Number of employees who feel they saved too liqle Number of employees who plan to raise savings rate in next 2 months Number of employees who actually follow through Choi, J., Laibson, D., Madrian, B., & Metric, A. (2001). For Beqer or For Worse: Default Effects and 401(k) Savings Behavior (NBER Working Paper 8651). Cambridge, MA: NaIonal Bureau of Economic Research. ©2014 ideas42 22
  23. 23. EITC PSYCHOLOGY 0% 25% 50% 75% 100% Did not trust the government Did not feel comfortable buying bonds Did not like bonds because wanted more liquidity Did not have a baseline to compare to bonds interest rate Had specific plan for how they were going to spend refund ©2014 ideas42 23
  24. 24. BUT IF … MANY COSTS EASY ©2014 ideas42 24
  25. 25. INTENTION ACTION GAP Decision AcTons Outcome A B Yes No ©2014 ideas42 25 Yes No Failed to choose, didn’t consider at all ???
  26. 26. SEVEN BIGGIES IN INTENTION-­‐ACTION GAP ©2014 ideas42 26 • HASSLE FACTORS • OVERCONFIDENCE • INATTENTION • PROCRASTINATION • SELF-­‐CONTROL • PROSPECTIVE MEMORY • SCARCITY
  27. 27. HASSLE FACTORS ©2014 ideas42 27
  28. 28. PREVENT YOU FROM DOING WHAT YOU WANT TO DO ©2014 ideas42 28
  29. 29. PREVENT YOU FROM DOING WHAT YOU WANT TO DO “You will pay just $1 for your first 12 weeks and then $36 every three months thereater. Your subscripIon will automaIcally conInue for as long as you choose to subscribe.” ©2014 ideas42 29
  30. 30. ODD HASSLE FACTOR ©2014 ideas42 30
  31. 31. DEEPER UNDERSTANDING ©2014 ideas42 31 Hassle Factors MaCer a Great Deal A MASSIVE AMOUNT!
  32. 32. HASSLE FACTORS FINANCIAL AID ©2014 ideas42 32
  33. 33. DESIGNING SOLUTIONS: PROVIDE HELP Control Pre-­‐fill form ©2014 ideas42 33 40% 27% 56% 35% 60% 50% 40% 30% 20% 10% 0% Submit FAFSA Enrolled into College Bepnger, E., Terry Long, B., Oreopoulos, P., & Sambonmatsu, L. (2009). The Role of SimplificaIon and InformaIon in College Decisions: Results from the H&R Block FAFSA Experiment (NBER Working Paper 15361). Cambridge, MA: NaIonal Bureau of Economic Research.
  34. 34. CAN BE USED FOR GOOD – HASSLES TO STOP YOU FROM DOING THINGS YOU DO NOT WANT TO DO ©2014 ideas42 34 WITH FRICTION FOR WITHDRAWALS
  35. 35. 35 OVERCONFIDENCE ©2014 ideas42 “We place absolute confidence in the Titanic. We believe that the boat is unsinkable.”
  36. 36. OVERCONFIDENCE DIGGING DEEPER • How likely are you to get cancer at some point in your life? – Most people say: 10% – On average: 30% • How likely are you to get divorced? – Most people: 0% – On average: 40% ©2014 ideas42 36
  37. 37. DIGGING DEEPER INTO OVERCONFIDENCE Raise your hand if you’re an above average driver 93% of Americans believe they are above average! We drasIcally underesImate the likelihood of gepng into an accident ©2014 ideas42 37
  38. 38. ROAD SAFETY: THE INTERVENTION ©2014 ideas42 38
  39. 39. 39 DESIGN • Loqery ©2012 ideas42 open to “good” drivers (licensed drivers, no outstanding violaIons) • Two drawings of R25,000 ($3,000) • If you get a violaIon (speeding, drunk driving, cell phone usage, seat belt) between Dec. 17, 2012 and Jan. 21, 2013 you get a Icket, but you also lose your chance to win. OveresImaIng Small ProbabiliIes IdenIty Priming Loss Aversion
  40. 40. ROAD SAFETY: THE RESULTS 12 10 8 6 4 2 0 December 1st December 15th January 1st Road Deaths Per Day (5 Day Rolling Average) LoCery Fully Enacted Equivalent of ≈40 people saved ©2014 ideas42 40
  41. 41. ©2014 ideas42 41 SELF -­‐ CONTROL
  42. 42. SELF-­‐CONTROL LIKE A MUSCLE DEPLETION CAN TRAIN IT ©2014 ideas42 42
  43. 43. SELF-­‐CONTROL LAPSES ARE INEVITABLE ©2014 ideas42 43
  44. 44. DESIGNING TO PROMOTE SELF-­‐CONTROL odysseus? And sirens?
  45. 45. 45 SOLUTION: RAISE COST OF FAILURE Commitment devices 1 A bank in the Philippines offered a “commitment savings account” which could only be withdrawn aner: • A certain date • A savings goal was reached 28% of those who were offered it opened an account Average balances among those offered increased 81% Ashraf, N., Karlan, D. & Yin, W. (2006) “Tying Odysseus to the Mast…” http://qje.oxfordjournals.org/content/121/2/635.short ©2014 ideas42 45
  46. 46. ©2014 ideas42 46
  47. 47. ©2014 ideas42 47
  48. 48. 10/16/14 ©2014 ideas42 RAVEN’S MATRICES 48 COGNITIVE CONTROL Mani, Mullainathan, Shafir, & Zhao, Science, 2013 0.5 0.4 0.3 0.2 0.1 0 Rich Poor Easy (cheap) Hard (Expensive) SCARCITY MAKES IT ALL HARDER
  49. 49. SCARCITY MAKES IT ALL HARDER ©2014 ideas42 49
  50. 50. QUESTIONS? 1100//1166//1144 ©2014 ideas42 5500

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