O Behave! Issue 6 (September Edition)

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O Behave! is a monthly newsletter brought to you by #ogilvychange that encompasses the latest research in behavioural science. Enjoy!

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  • 1. O BEHAVE! Issue 6 September 2014
  • 2. Do You Want the Good News or the Bad News?3 Bias of the Month 4 The Economics of Reclining Your Seat5 Did Drizzle in Dundee Swing the No Vote?6 Cocaine or Social Power: Which is More Addictive?7 Real Life Nudge of the Month 8 Upcoming Events8 CONTENTS
  • 3. DO YOU WANT THE GOOD NEWS OR THE BAD NEWS? The good news is that psychologists have discovered the best way to deliver feedback; the bad news is youll have to open with the negative before moving on to the positive. Around 88% of people would rather hear the bad news first, which makes sense given our instinctive preference for improving sequences, such as wage profiles. This is also consistent with findingsthat people would prefer to expedite a bad experience, such as getting a tooth pulled, but delay a good experience, such as a kiss from their favourite movie star; an effect due to the utility gained from anticipation of a positive event, and the disutility of dreading a negative one. It follows, then, that people would prefer to receive the badnews first, therefore getting it over with early and looking forward to good news, rather than spoiling the good news with anxiety about the forthcoming bad. This is exactly what Legg and Sweeny (2014)found in a series of experiments conducted at the University of California, Riverside. They asked participants to fill out personality questionnaires, and told them the results contained both good and bad news. The participants were then asked whether they would like to receive their good news or bad news first, and 78% opted for the bad news. Unfortunately however, the order in which their news is delivered isnt up to the recipient, and the news-giver has a separate set of motivations. Legg and Sweeny found that this was reflected in different preferences when they asked one set of participants to deliver the good and bad news to another participant, with over half preferring to deliver the good news first. While most people want to spare the feelings of the person theyre delivering bad news to, they often forget how theyd prefer to receive the news themselves and deliver a feedback sandwich, opening and closing with good news, with bad news as the filling. This confuses the message, and the negative aspects may get swamped by praise and therefore not acted upon. So the bad news is you may have to experience some discomfort while doing so, but the good news is you now know how to give feedback in the kindest and most efficient way. Legg, A.M., & Sweeny, K. (2014). Do You Want the Good News or the Bad News First? The Nature and Consequences of News Order Preferences. Personality and Social Psychology Bulletin, 40 (3), 279-288.
  • 4. BIAS OF THE MONTH The Overconfidence Bias Research has constantly shown that people tend to have unjustified confidence in their abilities and decisions. For example, 80% of people think they are above average driverswhilst 87% of MBA studentsin Stanford University rated their academic performance as above average. This of course can't be true as by definition, assuming a normal distribution, 50% of drivers and MBA students are below average. This bias effects people from all walks of life such as chief executives, lawyers, nurses and students as it is bias that is in built in our psyche. Behavioural finance has shown that this bias can lead to real problems for investors as many investors fall into the trap of believing they can pick winning investments. As a result, they sometimes put too much of their wealth in a single pot, which can be very risky. Research shows that picking winning investments is incredibly hard to do even for professional investors. Investors suffering from their overconfidence bias and therefore have too much confidence in their skills have also been found to buy and sell too often, which can have a negative effect on their returns. In fact, research shows that those who buy and sell often were at a disadvantage compared to those who take a long-term view. This bias is possible to overcome by accepting a little bit of humility and allowing yourself to take advice from others. McCormick, I. A., Walkey, F. H., & Green, D. E. (1986). Comparative perceptions of driver abilitya confirmation and expansion. Accident Analysis & Prevention, 18(3), 205-208. Zuckerman, E. W., & Jost, J. T. (2001). What Makes You Think You're so Popular? Self-Evaluation Maintenance and the Subjective Side of the" Friendship Paradox". Social Psychology Quarterly, 207-223.
  • 5. Frequent travellers will be familiar with the eternal dilemma of whether or not to recline your seat on a plane, with some ofthe opinion that paying for the seat gives you the right to, while others feel it is kinder to the person behind to keep yourseat upright. A recent spate of recline rageforced several flights to make unscheduled stops to resolve disputes over the four inches of space, and prompted economists Christopher Buccafusco and Chris Sprigmanto ask: who should that space belong to, and does the happiness gained by the recliner exceed the unhappiness inflicted on the reclinee? THE ECONOMICS OF RECLINING YOUR SEAT The answer, it appears, is heavily influenced by the endowment effect, where the perceived value is much higher for the person allocated the right to the space by default. This was demonstrated in the classic Kahneman, Knetschand Thaler(1990)study, where students allocated mugs valued them much more highly than the mug-less students who were asked how much they would pay for one. In an online survey, Buccafusco and Sprigman(2014)found that the person behind would be willing to pay the person in front $18 not to recline, while the recliner would not accept less than $41 to relinquish their right to recline. However, when it was framed as paying for this right, with the person behind selling the space, this effect reversed; the person behind now wanted $39, while the recliner would only pay $12 for the privilege. The influence of the default option remained even when participants had to consider the problem bilaterally, both as a recliner and a person to be reclined upon. Interestingly, people seem to be averse to creating a monetised transaction of the situation, and were in fact more likely to agree not to recline, and to ask the person in front not to recline, when the incentive offered would be a gift of a drink ora snack, rather than a cash amount of equivalent value. This may be related to evidence that monetary incentives can crowd out altruistic motives; for example blood donation, where offering a cash reward reduces the number of people donating. Perhaps people would happily not recline if the person behind them asked nicely, based on purely altruistic motives, whereas money changes the nature of the transaction. As the jury is still out on who it belongs to, think carefully next time youre on a plane about whether you need that extra four inches or at least offer the person behind you a drink before you encroach on their personal space. Buccafasco, C., & Sprigman, C. (2014). Who Deserves the Space: The Airplane Seat Recliner or Reclinee? Slate.
  • 6. DID DRIZZLE IN DUNDEE SWING THE NO VOTE? Thursday 18th September was a historic day for Scotland. Living up to the British stereotypes, the media got typically excited about the extent to which rainy weather might reduce turnout. We were treated to images of pensioners battling through the rain to cast their vote and ballot boxes being shipped across stormy seas. Bassi, A. (2013). Weather, Mood and Voting: An Experimental Analysis of the Effect of Weather Beyond Turnout. Available at SSRN 2273189. The media missed the more dramatic relationship between the climate and peoples propensity to make cautious or risky decisions. Building upon Kahneman and Tversky(1979), theoretical and empirical studies have demonstrated that weather affects an individuals mood, which in turn affects their decision-making activity (Gomez et al., 2007). As you might expect, findings suggest that sunlight and good weather have a positive impact on the likelihood of voting for riskier candidates, while voters rely more heavily on less risky candidates in bad weather. This result holds for both objective and subjective measures of weather conditions. This conduct has been identified in the literature as mood-risk tolerance channel. Professor Anna Bassi(2013) conducted a sophisticated voting experimentat the University of North Carolina by alternating her test between sunny and stormy days. She found that in marginal elections in which a voter is likely to consider whether to switch from a riskier to the safer candidate, bad weather resulted in up to a twice-as-large probability of choosing the safer candidate over the risky one. What does this mean for Scotland? Well, last week we had a perfect storm of inclement weather and a risky decision in the balance. The nation experienced mixed weather; the big cities in the South were mild and cloudy but the North was rainy and windy, all while Deputy First Minister, Nicola Sturgeon, acknowledged 'Scottish independence lies in the hands of risk averse women. As political commentator Chris Dillowpointed out, we know from the stock market that risk appetite is seasonal; it's high in the spring and low in autumn -which is why the "sell in May, buy on Halloween" rule usually works so well (its called the Halloween Indicator). If Alex Salmondhad a behavioural science advisor, perhaps hed have been better to wait until a sunny day May to call the vote.
  • 7. COCAINE OR SOCIAL POWER: WHICH IS MORE ADDICTIVE? We have all seen it happen, when someone gets a taste of power they want more and more. Some could say that they become addicted. Recent research in neuroscience has shown that this maybe the case as the feeling of power has been found to have a similar effect on the brain to cocaine. Social power or high social status have been found to change the brain by triggering increased levels of testosterone and its by-product 3-androstanediol in both men and women. This in turn increases the level of dopamine in a part of the brains reward system called the nucleus accumbens, which can be extremely addictive. Similarly, when cocaine enters ones system it also increases the level of dopamine in the nucleus accumbens, which can lead to similar levels of addiction as social power. Morgan and colleagues illustrated this relationship (social power and cocaine) by firstly developing a hierarchy amongst monkeys then examining how susceptible they were to cocaine addiction. The monkeys dopamine levels were taken when each were individually housed (no social hierarchy) and then when they entered social housing (where a social hierarchy organically emerged). Results showed that the dopamine levels of the individually housed monkeys did not differ, whereas once these monkeys were socially housed the dominant high social status monkeys showed a significant increase in the levels of dopamine in their system compared to the submissive low social status moneys. The researchers then introduced these monkeys to cocaine and allowed the monkeys to self-administrate. They found that the low-status subordinate monkeys administered significantly more cocaine than the dominate high social status monkeys. The authors noted that as the dominant monkeys had such a high level of dopamine in their system, they did not need the boost of dopamine that cocaine gives as much as the submissive, low-dopamine monkeys. These studies show how alterations in ones social status can produce significant biological changes including vulnerability to cocaine addiction and how, in fact, social status can be as addictive as cocaine! Morgan, D., Grant, K. A., Gage, H. D., Mach, R. H., Kaplan, J. R., Prioleau, O., & Nader, M. A. (2002). Social dominance in monkeys: dopamine D2 receptors and cocaine self-administration. Nature neuroscience, 5(2), 169-174.
  • 8. Spotted: The goal-gradient effect at the gym, Highbury We know that visualisingyour goals can make them feel more tangible, which then motivates you to try harder in pursuing them. The Life Fitness brand of cross-trainers seem to have realisedthis, and have included a visual of a running track and a count of how many laps to help you see how far youve already come. As we learned in Junes O Behave!, the goal-gradient effect occurs when the closer you are to achieving your goal, the more driven you are to continue; so seeing youve already run two laps will spur you on to keep running for longer than a simple clock showing how much time has elapsed would. REAL LIFE NUDGE OF THE MONTH UPCOMING EVENTS Inequality and the 1%: What goes wrong when the rich become too rich by Professor Danny Dorling Tuesday 7thOctober, 6.30-8.00pm at LSE http://www.lse.ac.uk/publicEvents/pdf/2014-MT/14-0567-EventsLeaflet-Winter2014-FOR-WEB.pdf The Mind is Flat: the Shocking Hollowness of Human Psychology online course by Professor Nick Chater From Monday 13thOctober https://www.futurelearn.com/courses/the-mind-is-flat-3 Behavioural Boozeonomicswith the London Behavioural Economics Network Tuesday 14thOctober, 7.00-10.30pm http://www.meetup.com/London-behavioural-comms-monthly-informal-drinks/events/200120022/
  • 9. Cosa Garrahan @CiosaGarrahan ciosa.garrahan@ogilvy.com BROUGHT TO YOU BY Juliet Hodges @hulietjodges juliet.hodges@ogilvy.com Pete Dyson @pete_dyson pete.dyson@ogilvy.com