Archive for the ‘Hyperbolic Discounting’ Category

Tales From the Kwik-E-Mart

Bob Nease, PhD — Chief Scientist; Express Scripts — is a leader in the convergence of behavioral economics and healthcare; at Express Scripts, he is responsible for advancing the understanding of consumer behavior. To this end, he closely follows emerging science around human behavior and decision making, then works to develop tools and communications that help plan sponsors enable better health and value.

At my local convenience store* the other day, I waited impatiently in line behind an older lady who purchased a gaggle of lottery tickets and a carton of cigarettes. I thought about asking her if she thought the odds were better that she’d hit the jackpot or develop lung cancer, but I decided that I didn’t feel like getting beaten up by one of Betty White’s mahjong buddies.

As the day progressed, I kept coming back to this lady and her profoundly ill-advised purchase. How could she justify wasting money like that? My judgmental tendencies ran wild until I looked at the issue through the prism of hyperbolic discounting.

Sure, the rational move would be to quit smoking and maybe gamble on an investment rather than the Powerball. But let’s face it: Behaving rationally is kind of a pain in the rump. If she walked away from the counter empty-handed, she would only realize the benefits of her decision after the protracted wait for the investment to pay dividends and some serious nicotine withdrawal.

When I put myself in her shoes, her behavior made total sense – even though it really makes no sense at all.

* If there’s a better environment for questionable consumer decision making – especially when it comes to food-like substances – I haven’t found it.

Giving It the Old College Nudge

Bob Nease, PhD — Chief Scientist; Express Scripts — is a leader in the convergence of behavioral economics and healthcare; at Express Scripts, he is responsible for advancing the understanding of consumer behavior. To this end, he closely follows emerging science around human behavior and decision making, then works to develop tools and communications that help plan sponsors enable better health and value.

The New York Times reports that savvy colleges are enjoying a 25% jump in admissions applications, despite a lagging economy.  The secret?  Using proven principles from behavioral economics and consumer marketing sciences.  This is giving little schools such as St. Rose in Albany a big boost in applications:

Last fall the college sent out 30,000 bright red “Exclusive Scholar Applications” to high school seniors that promised to waive the $40 application fee, invited them to skip the dreaded essay, and assured a decision in three weeks. Because the application arrived with the students’ names and other information already filled in, applying required little more than a signature.

This is exactly the sort of thing that hyperbolic discounting would suggest: remove as many of the upfront costs as possible (the application fee, the essay, even portions of the application) and you’ll see a big pop as you tap latent demand.

Now if they’d just waive the tuition…

To Lose It, Add Behavioral Science

Julie Adelsberger — Senior Manager; Express Scripts — As senior manager of knowledge management, Julie Adelsberger is responsible for translating scientific research into accessible communications for plan sponsors and other healthcare stakeholders.

Lose It! is an iPhone app that harnesses a couple psychological principles to increase the chances of successful weight loss.

  

We’ve written before about how tracking personal data can help stave off procrastination.  In an assessment of self-measurement and Nike+, a gadget that tracks personal workout data, Bob wrote:

 

The feedback offered by Nike+ and other self-measurement schemes offers the ability to monitor gains that might otherwise be too far in the future to enjoy.  In a sense, knowing our numbers allows us to get a little taste in the present of benefits that are to come.  And for some of us, that just may be enough to tip the scale toward behavior that benefits us in the longer term.

 

The same holds true here: Lose It! allows users to enter the foods they eat and exercise they complete, then calculates the calories in and out each day based on a few key statistics the user provides (weight, height, and so forth).  There are charts and graphs showing data such as calorie intake, nutrient intake, and calorie budget for the week.  For those who want more details, there are in-depth online reports and exportable data.

 

The application has also recently added in the principle of social persuasion, allowing your friends to track your progress and you to do the same for them.  Those extra eyes are an incentive to stay honest.

 

To top it off, the app is free.  It’s No. 32 on the top free downloads, and the company says it’s been downloaded more than 3 million times.

 

For more on Lose It!, click here.

The Science of Sock-Pairing

Julie Adelsberger — Senior Manager; Express Scripts — As senior manager of knowledge management, Julie Adelsberger is responsible for translating scientific research into accessible communications for plan sponsors and other healthcare stakeholders.

If you’re a regular reader of the blog, you know most of us can’t go about our daily lives without thinking about the behavioral sciences.  Every workout, eBay purchase, and donation is now a lesson in our behavior and decision making, and the often-irrational course it takes.

 

This practice is now spreading to our colleagues and friends.  For example, I have a friend who gets the laundry through the wash, then tends to leave the clean loads in baskets rather than put the clothes away.  She says that when she’s looking at a basketful of socks that need pairing, she can think of scores of things to do rather than match them.  But when it’s 8:45 a.m. and she’s running late to work, she wishes she would have sat on her bed, watched some bad television, and sorted those socks.

 

In the past, she called it laziness, or procrastination, or being a good mother rather than obsessing about the whites.  Today, she calls it hyperbolic discounting.  She tells me she really does intend to pair those socks — tomorrow.  But when tomorrow comes, the benefit (that is, quickly finding and pulling on a pair of socks in the morning) is in the future.  So she looks at the basket and decides to pair the socks — tomorrow.  And so on.

 

It might sound a bit silly, applying science to sock-pairing.  But the next time you trip over that basket in the hall, or wear mismatched socks to the office, don’t blame yourself; blame your brain.

Holiday Thoughts on Getting Fat

Bob Nease, PhD — Chief Scientist; Express Scripts — is a leader in the convergence of behavioral economics and healthcare; at Express Scripts, he is responsible for advancing the understanding of consumer behavior. To this end, he closely follows emerging science around human behavior and decision making, then works to develop tools and communications that help plan sponsors enable better health and value.

I know it’s rude to bring this up during the holidays, but it’s not that dress or those pants that make our collective rumps look big.  We all know we’ve gotten fatter, and it’s happened remarkably fast.

Although many reasons have been offered, the epidemic of obesity remains a bit of a puzzle.  As Cutler and colleagues note in their excellent analysis of why we’ve gotten so chunky, our collective weight gain is consistent with an average daily increase of 150 calories.  Such a dinky number could be the result of any number of causes, which is part of the reason we’re still a bit in the dark about what’s up with our fat.

Cutler et al rule out a number of factors as likely causes of the obesity surge:

  • The cost of calories has dropped. True enough; food inflation has lagged behind non-food inflation.  However, obesity is negatively associated with income (especially for women), and has increased significantly among the poorer groups despite a relatively flat income.
  • Fast food. Studies in this area go both ways; for example, a 2003 Yale study concluded that kids who visit fast food restaurants eat about 187 more calories daily.  This sounds bad, but we have to remember that it’s extremely likely that families that eat more are overrepresented among fast food clientele.  In other words, it’s possible that fat people cause fast food. Other clever studies have failed to find an association between access to fast food restaurants and obesity, and the most recent thorough review of the literature concluded that the question remains open.  Cutler et al use food diaries to show that increases in consumption of fast food are pretty much offset by decreases in calories of food prepared elsewhere.  Tellingly, those diary studies show whopping increases in snacking, however.
  • Inactivity. Kids these days, right?  Cutler and team looked at activity diaries and poo poo this one as well.  Although overall energy expenditure (calories burned) dropped between 1965 and 1975, it’s been pretty much flat since then.  We do watch more TV (and surf the web), but we also sleep less and engage in more sports and walking.  (By the way, this doesn’t let you off the hook for exercise — it just means that a sedentary lifestyle may not be the main cause of obesity in the US.)

So if it’s not access to cheaper, faster food by sedentary, lazy people, what’s making us fat?  Here are some possibilities:

  • Meal preparation is easier than ever. This is Cutler’s main argument; as the cost associated with food preparation drops, the number of meals (i.e., snacks) increases and the type of meal shifts.  (I wrote about this earlier this year.)  Microwave ovens make it easier to eat popcorn (or worse), so we do.  Frozen tater tots are a snap as a side dish with that meat loaf but not worth the effort if you have to make them from scratch.  If you think this is hooey, consider this: nature’s ready-made snacks are fruits and veggies.  Better food preparation technologies have made it just as easy to open a bag of chips as to peel a banana.
  • Fat is the new black. Okay, that’s an overstatement.  But as the prevalence overweight and obesity increases, the chance your weight makes you the outlier in your social group drops.  In other words, the social cost of being heavy has decreased over time.  Christakis and Fowler’s network analysis of the Framingham data suggest that having an obese friend is a bigger risk factor for obesity than having an obese wife or sibling.  This is exactly the kind of effect that could explain changes in rates of overweight and obesity that look like an epidemic: you “catch” it from your friends.
  • An unhealthy lifestyle is cheaper than ever. The widespread use of medications to treat hypertension, high cholesterol, diabetes, and heartburn have fundamentally changed how we manage these conditions.  And the ability of these medications to prevent heart attacks, stroke, kidney failure, and other serious problems is a godsend.  But these medications also make it possible to achieve better health outcomes without relying on better diet and more exercise.  It’s quite possible that we’ve unintentionally made unhealthy lifestyles less of a problem, and that weight gain is a side effect.

So what can we do?  The basic in-out equation still holds: if you want to lose weight, you need to decrease calories in and/or increase calories out (i.e., activity).  So watch what you eat and exercise more (check with your doctor about what’s right for you).

Beyond that, consider the following:

  • Cook more meals from scratch. I know this takes time and effort… that’s the point.  Increase the cost (i.e., time and effort) of the meals you eat, and you will eat fewer meals.
  • Load up on nature’s snacks. You’re wired to minimize upfront costs.  Don’t fight it; make sure you have fresh fruits and ready-to-eat veggies on hand.  Make them easier to get to than prepared snacks such as chips and cookies.  (And consider stapling those bags of chips and cookies shut - anything you can do to create a hesitation factor is to your advantage.)
  • Get rid of your microwave oven. I know, you only use it to heat water for your organic chai tea and to defrost your frozen edamame.  But do you remember how awesome you looked in the late 70s?  Back then, only 8% of American households had microwaves; in 1999 that number had risen to 83%.  Obesity is far less common in Italy than in the US and the UK; less than 14% of Italian households have microwave ovens, but 66% of British households do.
  • Hang out with people who look the way you want to look… especially if it’s awkward. Do what you can to increase the social costs of being overweight.  Be careful not to overdo this; your happiness and sense of belonging are worth a lot.  But consider getting a bit outside your comfort zone.  (By the way, all of my social interactions are awkward, so I shouldn’t have a problem here.)
  • Use your medications as one of several tools, not a shortcut. ALWAYS take your medications as prescribed by your physician: better to be a bit chunky and avoid the heart attack than to be thin and dead.  But take seriously your role in managing any health conditions you might have using all the tools at your disposal: better diet, more exercise, less booze, better sleep habits.  Ask your doctor about whether and how healthier behaviors can work to your advantage.  I bet you find you’ll drop some weight in the process.
  • Do whatever it takes to make exercise as fun as possible. Buy a Wii Fit.  Get rid of the TVs in your house except for the one in front of your treadmill.  Watch mindless drivel but only when you’re working out.  Find a guilty (but calorie-free) pleasure and figure out how to embed it into your workout.  Not a treat you give yourself afterward; something you can include as part of the workout.
  • Lower your exercise goals. Actually walking one mile four times a week is much better than planning on walking three miles every day.  Lower the bar: you’ll find you’re more likely to get going, and once you’re going you can always do a little more.
  • Admit that this will take time. You’ll feel all the costs of your discipline upfront and the benefits will come a lot more slowly.  There’s no way around this.  We’re wired for an environment of scarce calories and an uncertain future, which means we tend to eat as though there’s no tomorrow.  You’ll try, you’ll succeed, but you’ll also fail.  Keep at it, and I swear you’ll lose some weight.

Happy holidays.  And here’s to a wonderful 2010 for you and your loved ones!

Calling Don Redelmeier

Bob Nease, PhD — Chief Scientist; Express Scripts — is a leader in the convergence of behavioral economics and healthcare; at Express Scripts, he is responsible for advancing the understanding of consumer behavior. To this end, he closely follows emerging science around human behavior and decision making, then works to develop tools and communications that help plan sponsors enable better health and value.

I met Don when he was a fellow at Stanford and I was a grad student. He is one of the most intelligent, funny, and interesting people I know.

When he was in high school, he made movies… a couple of which were shown on Saturday Night Live. As a young academic physician, he determined that memories of uncomfortable events (e.g., colonoscopy) are mostly related to peak level of discomfort and how the event ended. (This involved asking patients undergoing a colonoscopy every 30 seconds or so how they were feeling. And if there’s nothing more uncomfortable than having a colonoscopy, it’s got to be having a colonoscopy while an overeager researcher is asking you how it feels twice a minute.) The implication of that study is that you can make a colonoscopy more attractive by — get this — leaving the colonoscope just barely in place at the end (of the procedure, that is) and lengthening the procedure. He then went on to prove this to be the case with a randomized controlled trial. (Isn’t science fun?)

But Don’s work goes beyond discomfort and invasive procedures. He’s shown that winning an Academy Award increases life expectancy if you’re an actor, but shortens it if you’re a writer. He’s discovered that medical school class presidents are more successful professionally than their non-presidential peers, but that they live 2.4 years less on average. He’s cracked the code on why the other lane of traffic always appears to be moving more quickly than the one you’re in. He’s shown that presidential elections kill about two dozen people (due to driving, not arguments over dinner), but that marathons on the whole save lives (i.e., the sudden cardiac deaths caused by the event are more than offset by the reduction in traffic deaths due to roads being closed).

Importantly, Don has also studied the use of cell phones on traffic accidents. (I am a fan of my cell phone — especially when I am driving — and I have to begrudgingly admit that the study was very well done. You might reasonably decide that the benefits of using the cell phone outweigh the risks, but it’s hard to argue that those risks are nonexistent.) Interestingly, the issue seems to be one of distraction rather than mechanics. The human brain has a limited bandwidth, so the whole “hands free” thing may not solve the fundamental problem: Regardless of whether you do the dialing or it’s voice activated, our minds seem to be somewhere else when we’re engaged in a conversation.

So it was with interest that I read the same New York Times piece that Julie highlighted in the previous blog. The original article noted that a handful of companies have services that use GPS and other methods to determine when you’re in a moving car, and turn off your phone for you. (This means you can sign up for an anti-service service, I suppose.)

As I read the piece, I noted several features relating to the application of behavioral economics:

  • Intuition has significant limits, especially when it comes to intuition about thinking. In thinking through a solution to the cell phone problem, we conclude that the risk associated with cell phone use is one of coordination, and that a hands-free approach will solve the problem. When we think about thinking, we engage the part of our brain that’s rarely in use when we’re actually behaving. Driving and engaging in a conversation apparently draw on a common cognitive resource, and one that’s not obvious when we think about it.
  • Self-control is inherently challenging. During planning, the benefits (e.g., getting through a boring commute by talking to a colleague) and costs (e.g., risk of slamming into that car in front of you) are both in the future and therefore weigh equally. While driving, however, the benefits are certain and loom large.
  • Precommitment may help. During the planning phase, new technology (i.e., the companies cited in the article) make it possible to alter set of available options (or the payoffs associated with them) in the future. That is, you can tie yourself to the mast (metaphorically) to avoid bad behavior in the future.
  • Sticks (losses) are more powerful than carrots (gains). The article noted that some insurance companies are offering discounts for people who use the precommitment devices. My guess is that they would get more people to enroll in the services if they imposed a premium increase on those that didn’t sign up for the services than a discount for those who did.

P.S. Don: if you’re out there, give me a call. I’ll be in my car with my cell phone handy.

When Long Drives Cause the Flu

Julie Adelsberger — Senior Manager; Express Scripts — As senior manager of knowledge management, Julie Adelsberger is responsible for translating scientific research into accessible communications for plan sponsors and other healthcare stakeholders.

A friend and colleague provides an example of hyperbolic discounting with her search for the H1N1 vaccine. She has two children, one under 5, and so is among the group the government recommends for first-line vaccination. After taking her children to their pediatrician for the vaccine, she sought the shot out for herself, anxious about the discomfort of the flu and the complete disarray it would bring to her family and work life — that is, until she discovered that the closest clinic that will vaccinate her is miles away.

That upfront cost — a drive from our office on the campus of the University of Missouri - St. Louis to the city — is enough to deter her. The hassle of the drive (and the wait at the clinic, and the shot itself) in the now is enough that it outweighs the possibility of the flu later. Remember that we discount future events by half, so she’s not giving it the full weight of its misery.

No doubt, there’s plenty of latent demand there for the flu shot, and it’s a drive she’ll wish she’d made if she gets H1N1.

What’s the Cost of an Extra Letter?

Bob Nease, PhD — Chief Scientist; Express Scripts — is a leader in the convergence of behavioral economics and healthcare; at Express Scripts, he is responsible for advancing the understanding of consumer behavior. To this end, he closely follows emerging science around human behavior and decision making, then works to develop tools and communications that help plan sponsors enable better health and value.

Behavioral economics tells us that people get hung up over upfront costs for downstream benefits. Exercise, weight loss, switching to Home Delivery… all these behaviors offer benefits that outweigh the costs, but only after getting through the immediate costs.

But “downstream” apparently doesn’t have to mean months or years in the future. Cutler and colleagues, for example, assert that the reduction in meal preparation time (due to better food processing and storage) has caused people to add additional meals to their days. As the cost of preparation (upfront cost) diminishes, people engage in the behavior (making a meal) to achieve the downstream benefit (yummy goodness). This occurs even though the costs and benefits are separated by minutes rather than months.

And so it is with typing in a URL, apparently. I noticed that GoDaddy.com’s renewal pricing varies by domain extension. My first reaction is that this must be due to the popularity of the extension, but closer examination suggested a negative correlation between the length of the extension.

gd_priceschartgd

Even though there are only eight extensions, the correlation is sizeable (68% of the price variation is explained by the length of the extension) and statistically significant (p = 0.007). Does typing one more letter into the URL box really matter? Apparently it does, at least enough for GoDaddy to charge a premium on the shorter extensions. (Perhaps they ought to promote GoDaddy.us instead of .com?)

Who Wants Popcorn?

As an editor for the Corporate Database team, Eric Ferguson is responsible for writing and editing strategic language for Express Scripts' Sales & Marketing department.

As the beef jerky wrappers in my car would indicate, I’m not a man with particularly high standards when it comes to food. Still, when my absolutely adorable nephews hit me up for their fundraiser, I couldn’t help but be disappointed that they were hocking assorted flavors of popcorn.

Of course, I couldn’t say no. Whichever evil entity lurks behind this fundraising racket (I suspect it’s the same organization that invented the Snuggie), it seems to have taken its cues from those cookie-pushing masters of behavioral economics known as the Girl Scouts.

Consider the order form: You can’t ignore the donations of others when they’re presented to you in a handy little spreadsheet. Imagine if such a system existed at Target or Best Buy – would you be more likely to spend $50 if you knew that the previous five customers had topped that amount? I know I would.

I couldn’t even use the old “I left my wallet in my other pants” routine – I could simply pay when they delivered the popcorn. With payment still way off in the future, the natural decision was to pledge a donation to the cause.

Which cause exactly? You know, I couldn’t tell you. When a couple kids ask you for a donation, you give one. As Robert Cialdini writes in Influence, “we most prefer to say yes to the requests of people we know and like,” which means that I will continue to fall prey to my nephews’ requests … at least until they hit that obnoxious teenager phase. 

In the meantime, I’ll keep ordering stuff I don’t want to support causes that may or may not deserve my money. Either that, or I’ll figure out how to say “no.”

Yeah, like that will ever happen …

Oil Change Lunch Day

Bob Nease, PhD — Chief Scientist; Express Scripts — is a leader in the convergence of behavioral economics and healthcare; at Express Scripts, he is responsible for advancing the understanding of consumer behavior. To this end, he closely follows emerging science around human behavior and decision making, then works to develop tools and communications that help plan sponsors enable better health and value.

When wrapping up a conversation the other day, my colleague said she had to run; she didn’t want to be late for Oil Change Lunch Day.

I was stumped.  The first place my brain went was a new line of automotive-themed salad toppings: Thousand Mileage, 20W50 and vinegar, Ranch Wagon, and (dare I say it) Rushin’ dressing.

But I was off just a bit.  Oil Change Lunch Day involves four or five people (I think in this case they were all women) who drive to a local oil-change shop, drop off their cars, and walk to lunch across the street.  They do this on a regular basis… roughly every 3,000 miles, I suspect.  The men at the oil change shop are reported to be very courteous, and give every indication that they look forward to Oil Change Lunch Day as well.

“This is genius,” I say, an assertion that my colleague affirms a bit too quickly.

Oil Change Lunch Day is a beautiful example of behavioral economics in action.  It recognizes the danger of procrastination, and then whips it into submission.  The left jab is the use of social norms – if you say no to the invitation of Oil Change Lunch Day, are you saying you’re too busy for the oil change, or too busy to enjoy your friends?  And if that’s not enough, Oil Change Lunch Day offsets the upfront hassles of getting an oil change with the upfront fun of having lunch with friends.

But one question: How did five people all get synchronized to have the same oil change need at the same time?  I didn’t ask, but my bet is that before OCL, there was a whole lot of procrastinatin’ going on… and there were plenty of people who needed that first Oil Change Lunch.