Nudge of the Week: Progress updates

How often have you been waiting around for a train, or a cab, or a friend, and you became extremely anxious as you waited? Why are they late? How late are they going to be? Are they in danger? Are they incompetent? And so on.

Your anxiety isn’t being derived from the lateness itself, but the uncertainty that surrounds it. You have no idea whether you’ll be waiting five minutes or an hour. It’s this uncertainty that drives the fear and frustration. That’s why, as a business, you should try to limit not only your lateness, but also to give as much information about progress as possible.

Take, for example, the Toronto subway system. Up until a few years ago, you would get to the station, and you had no idea if you just missed a train, or if the next train is just around the corner. You start worrying about whether you’ll make it to your appointment on time. This is anxiety. Anxiety is bad.

But the Toronto Transit Commission solved this problem with a simple clock that estimates the time of the next train. While you might be unhappy to learn that the next train is running late, but you’ll still be happier than if you were left completely out in the dark.

Another way to think of this is to go back to your high school math tests. The more you show your work, the more brownie points you’ll earn from your customers.

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Nudge of the Week: A Checklist to be illogical

Surely being logical has many benefits. Much of science and human progress owes its successes to the disciplined application of logic. Choosing logic tends to be a winning formula.

But should you ever choose to be illogical? I say yes. Consider the following.

Logic has universal rules. Aristotle wrote down a lot of them. The economist Ludwig von Mises even said that all human minds have the exact same logical structure, and to even imagine superlogic or semilogic is impossible.

So logic has rules, and all humans think about these rules in the same way. You can see where this would be helpful: for example, accounting. If someone started calculating revenues and costs in radically different ways than the norm, that would probably lead to a lot of problems. Similarly, if engineers suddenly decided that the logic of gravity doesn’t always apply, probably more bridges would fall down.

So when can we break the laws of universal logic? When it comes to dealing with people. Conventional business logic says that lower prices will lead to more sales. But it’s also possible that low prices lead to fewer sales: it all depends on how people perceive what the price says about the products in question.

Rory Sutherland points out that if an accountant tried to develop a product to compete with Coca-Cola, he would probably recommend something that would taste better and costs less. But in fact the most successful competitor to Coke has been Red Bull, which tastes awful and is much more expensive.

The only logic that applies to human decision making is that people will try to act reasonably to get what they want. But how people decide what they actually want is fundamentally, in the words of Ludwig von Mises, irrational. Trying to use logical to influence a fundamentally irrational decision is not an obviously best strategy.

If you’re trying to get ahead of the competition, using the same logical thought processes as everyone else will mean you’ll have same the same outcomes of everyone else. The only way to really get ahead of the pack is to through logic out the window.

So here is a simple flowchart of when you’ll want to employ conventional logic and when you’ll want to try to be a bit silly:

Is what you’re doing directly concerned with people’s opinions?

If no, use conventional logic just like everyone else.

If yes, try throwing conventional logic out the window and do something silly.

For more on this topic, see my (much shorter) post on math solutions vs. people solutions.

Nudge of the Week: Obvious Strategies

Economist Shengwu Li, currently at Harvard, has a new theory called “Obviously Strategyproof Mechanisms“.

The basic idea is this: there are many situations where “in theory” we expect different methods to result in identical outcomes. For example, if you want to auction off a car, theory says that having a so-called “English” auction (where the highest bidder wins) and a “second-price sealed bid” auction (where all the bids are secret, and the highest bidder wins and pays the second highest price) should both result in the same person winning.

But in practice, we don’t see this equivalence. What is the cause of this discrepancy? According to Professor Li, it is the fact that one strategy is “obviously better” better than the other.

What does an “obviously better” strategy mean? It means that the worst you can do under one strategy is still better than the best you can do under any other strategy.

Think about how the worst that your business has to offer is still better than the best alternatives for your customers.

Nudge of the Week: Visualize the Future, then Write It Down

The Olympics are starting soon, so let’s think about the training of elite athletes.

One common advice from athletes is that they visualize the future. They see themselves winning the gold, scoring the goal, or landing the jump.

Visualizing your own success is important. But even more important is to write it down, preferably on the specific date in a calendar. This way, you can now work backwards from your future goal, and understand all the specific steps you need to take starting from today.

Knowing exactly what you want, and what you need to do to get it, will put you on the path to success.

Nudge of the Week: Checklists

Pilots have been using “pre-flight” checklists for decades. Even highly experienced pilots will still defer to checklists because the checklist is more reliable than your memory.

Seeing the success of checklists for pilots, surgeons have recently taken to using checklists as well. And the results are staggering.

According to one study, the simple use of checklists cut patient mortality rates nearly in half.

Can you incorporate checklists into your business?

Nudge of the Week: People Solutions vs. Math Solutions

If you deal with people, sometimes what’s mathematically won’t be seen as being better overall.

Think of this question: how can you make a 3 hour train ride better?

A mathematical solution might be to spend a lot of money to make the trip a few minutes shorter.

A people solution might be to spend a fraction of that money to give people a more beautiful experience by using prettier cushions, cleaning up the graffiti, and maybe installing some charging outlets.

Think of it with respect to a restaurant. You can spend hundreds of dollars on a machine that makes your coffee a few seconds faster. Or you can have fresh flowers delivered once or twice a week.

People prefer beauty and comfort more than speed and power.