18 4 e-01-understanding-predictably_irrational_influences_on_saving_energy_and_the_planet


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18 4 e-01-understanding-predictably_irrational_influences_on_saving_energy_and_the_planet

  1. 1. Understanding “Predictably Irrational” Influences on Saving Energy and the PlanetBehavior, Energy & Climate Change ConferenceSacramento, CA: November 16-19,2008 Linda Dethman Dethman & Associates
  2. 2. In Memoriam, 19XX-2008?“Buildings would work perfectly if itweren’t for the people occupyingthem.”-- Anonymous, ACEEE presenter, circa1993 Dethman & Associates
  3. 3. Mea Culpa“I made a mistake in presuming thatthe self-interests of organizations. ..were such as that they were bestcapable of protecting their ownshareholders and their equity in thefirms.”– Alan Greenspan, mid-October,2008 Dethman & Associates
  4. 4. A Behavioral Revolution?“So perhaps this will be the moment when we alter ourview of decision-making. . . this financial crisis isgoing to amount to a coming-out party forbehavioral economists and others whoare bringing sophisticated psychology tothe realm of public policy.”-- David Brooks, New York Times Op-Ed, October 28, 2008 Dethman & Associates
  5. 5. Default Rational Decision- Making AssumptionsPerceive the situationConsider possible courses of actionCalculate which course is in yourbest interestTake action Dethman & Associates
  6. 6. “What a piece of work is man? how noble in reason! how infinite in faculty!” -- Act 2, Scene 2, Hamlet, W.ShakespeareAccording to BehavioralEconomists Dethman & Associates
  7. 7. Today What this talk is based on Key ideas from behavioral economics Possible energy program applications Possible energy policy implications Conclusions Dethman & Associates
  8. 8. What this talk is based onFrustration and elationSpecial thanks to four recent books Predictably Irrational – Dan Ariely Nudge, Richard H. Thaler, Cass R. Sunstein Habit, Neale Martin Sway, Ori Branfman and Rom Branfman And various articles and crises Dethman & Associates
  9. 9. Key Ideas Two states of mind Anchoring Fear of loss The power of FREE Inertia and status quo The power of norms Relativity and comparisons And more. . . Dethman & Associates
  10. 10. Two States of MindAutomatic/Habitual Reflective/Executive Lizard/puppy brain New/adult brain Unconscious Self-aware Uncontrolled Controlled Associative Deductive Rapid fire Slow Skilled Rule-following Multi-tasking Single minded Dethman & Associates
  11. 11. Who’s in Charge? Who do we like?Mostly the habitual mind rules/hasto rule The underlying “operating” system we try to avoidBut we’re most aware of/comfortable with the executivemind Dethman & Associates
  12. 12. Who do we design for/market to? How to Read The Energy Guide Label Manufacturer, model number and appliance type • Information about features, capacity, and size so you can compare brands • Estimate of appliance’s annual energy use. The lower the number, the more energy efficient the appliance, and the less it costs to run it. • If the appliance is an ENERGY STAR appliance the ENERGY STAR symbol will appear on the ENERGYGUIDE label • The range of energy use for similar models. Use this scale to see how a particular model measures up to the competition. • Estimate of how much it can cost to run this model for a year. Note that the estimated yearly operating cost is based on the national average cost of electricity ($0.0824 per kWh). Dethman & Associates
  13. 13. AnchoringWe are tied to “starting points” Prices – how much for a cuppa joe? • In Taipei Sizes – how big is Las Vegas? • How big is your town? Charitable contributions • “You’re crazy, I can’t afford $500” The power of random numbers • Wheel of Fortune and Social Security numbers Dethman & Associates
  14. 14. Fear of Loss “Losing something makes you twice as miserable as gaining the same thing makes you happy” (T&S) Do people still equate conservation with loss? • Thank you Jimmy Carter • CFLs etc. Should we talk about losing $ versus saving or gaining? Dethman & Associates
  15. 15. The power of “free” My dad Hersheys kisses and Lindt truffles Amazon Be careful what you ask for Dethman & Associates
  16. 16. Time One Time Two Kiss 1¢ Lindt 14¢ 27% 31% Lindt 15¢ Kiss FREE 73% 69% Dethman & Associates
  17. 17. Amazon Insights and ConfessionsIf you buy a second book, shipping is free Dramatic sales increase except in FranceBuy Amazon “Prime” and get all yourshipping free and fasterAdd to your order to meet a minimum andget FREE Super Saver Shipping Dethman & Associates
  18. 18. Be Careful What You AskFor Consumer response to PPL Electric Utilities’ compact fluorescent light bulb program was overwhelmingly positive. “After running out of power strips. . .” Dethman & Associates
  19. 19. Status Quo & Inertia Same seats? Same investments? Opting in versus opting out? How we create our own benefits and traps Curves, Weight Watchers, Pro Active Green Energy Dethman & Associates
  20. 20. Program ImplicationsHow do we simplify? What about those labels?Pricing How do we capitalize on FREE? Are we giving the right/any comparisons?What anchors do we need to set? Howdo we reset anchors? Dethman & Associates
  21. 21. Program ImplicationsCan we use fear of loss constructively?How do we give better feedback?Pre-mortem thinking – write the historyof a disaster Dethman & Associates
  22. 22. Policy Implications If you remember one thing from this session.. .let it be this one: There is no way ofavoiding meddling. People sometimes havethe confused idea that we are pro meddling.That is a ridiculous notion. Its impossible notto meddle. Given that we cant avoidmeddling, lets meddle in a good way.—Richard Thaler Dethman & Associates
  23. 23. Policy IdeasSupport behavioral economics research in energyefficiency, climate change We really don’t know enough We need to educate and convince ourselves (it’s hard to abandon our anchors)Support technology & feedback mechanisms that Simplify Anchor Honor human reality Dethman & Associates
  24. 24. Policy IdeasEnable programs where the default is“opting in” to efficiencyHelp build stronger communities(norms)Support more youth education (earlyanchoring, values, transformative?) Dethman & Associates
  25. 25. A conclusion is simply the placewhere you got tired of thinking.Out of intense complexities, intense simplicities emerge. - Winston Churchill Dethman & Associates
  26. 26. THANKS! Contact: Linda Dethmanldethman@speakeasy.net26 Dethman & Associates