Have You Nudged Anyone Lately?
If you want someone to do something, make it easy. It sounds obvious — so why have leaders been so slow to embrace this proven principle?
PEOPLE HAVE BEEN ‘NUDGING’ EACH OTHER for as long as humankind has existed. We are always busy persuading and encouraging those around us to do one thing or another. Indeed, many biologists think that much of human development was powered by the complex patterns of influence that characterized early human social groups.
Yet when it comes to governments and businesses, many have turned their backs on the messy skills of ‘softer persuasion’. Instead, they have packed their toolkits with tools shaped by the ‘rational’ disciplines of Economics and Law.
In recent years, however, governments and businesses alike have started rediscovering this wider set of influences on human behaviour. It has been a fascinating rediscovery.
Defining the Nudge
A ‘nudge’ is essentially a means of encouraging or guiding behaviour, but without mandating or instructing, and ideally, without the need for heavy incentives or sanctions. In everyday life, it’s a gentle hint; a suggestion; a conspicuous glance at a heap of clothes that we’re hoping our kids might clear away. Nudges stand in marked contrast to obligations, strict requirements or the use of force. For Cass Sunstein and Richard Thaler, originators of the concept, a key element is that nudges avoid shutting down choices, unlike laws or other formal requirements. As we shall see, nudges are a subset of a wider, more empirical and behaviourally-focused approach to policymaking.
Consider how a law actually works: A parliament or executive passes a resolution that says that henceforth, there will be a new requirement for people or businesses to do something in a particular way. The lawmaker normally attaches a sanction or penalty to those who fail to comply, such as a fine or imprisonment. But the link between the passing of the law and actual behaviour is very distant.
Laws are also premised on an arguably naive model of human behaviour: They assume that somehow, people will have heard about the new law and realized that it applies to them. They then assume that people will weigh the costs of breaking the new law with the risk of being caught, and conclude that they should comply. They also assume that in the moment and context of temptation, all of this will come to mind, and that these
considerations will outweigh other pressures and temptations.
Unsurprisingly, the passing of new laws is often a far from perfect way of affecting behaviour. Citizens may be ‘required’ to fill in their tax returns on time, but every year, millions fail to do so. We’re not supposed to drop litter, but parks and public spaces are often strewn with it. Even the very existence and scale of the courts and judicial system can be argued to be testament to the frequent failure of the law-based approach.
In contrast, sometimes behaviour changes with a surprisingly light touch. For example, over the last decade, many countries have introduced bans on smoking in public places. There were grave concerns that the new laws would be both unpopular and unenforceable. However, in this case, they have proved highly successful. The smoking ban, in the UK at least, has been subject to almost no enforcement. In essence, smoking bans have been self-policed, built around a new social norm — and tacit public support — for smoke-free environments.
Subsidies and incentives have a similarly mixed success rate. Sometimes, seemingly-small subsidies or taxes have had rapid and dramatic impacts on behaviour. For example, the introduction of a small difference in price between leaded and unleaded fuels in the UK and elsewhere led to a rapid switch to unleaded fuels. Similarly, requiring retailers to charge consumers a tiny amount for a plastic bag has been shown to dramatically reduce their use. On the other hand, many much larger subsidies and taxes, such as those intended to drive savings or increase energy efficiency, have proven to have limited impact.
The fact is, nearly all government (and corporate) policies have a behavioural component, and hence behavioural analyses start to unpack what makes some policies/strategies work and others flop. In so doing, they open the door to alternative and potentially much more effective approaches. In recognition of this, the UK government launched its very own ‘nudge unit’ in 2010, and I was tasked with heading it up. The Behavioural Insights Team (BIT) was born.
The study of human behaviour reveals that many of our abilities as human beings rest on mental shortcuts or heuristics. It also leads you to respect these heuristics. In our early days at BIT, we leaned heavily on a framework called MINDSPACE to help guide our work (see sidebar). But after the first year or so of battle-hardened application — and many workshops and conversations — we developed a simplified framework for day-to-day use: EAST.
Like MINDSPACE, EAST is a mnemonic: If you want to encourage a particular behaviour, you should think about making it Easy, Attractive, Social and Timely. The EAST framework does not cover every nuance of the behavioural literature, but it does offer a good starting point.
My colleagues and I have found that frameworks like EAST enable rapid engagement of a new problem — a sort of mental checklist that can be run through quickly to enable the identification of some simple ideas for early testing. In this article I will delve into the first principle of this framework.
Advice for the Ages: Make it Easy
John was in his late twenties. He had decent grades at school and a job he enjoyed. He was already an assistant manager, and rising fast. His employer, a large retailer, offered good benefits, including a great pension. He remembered the details from when he first joined, and from a seminar they did for staff the previous year: For every pound he put in, his employer would put in the same amount, and the government added more on top. It was a no-brainer, and he knew it. The only problem: John hadn’t actually signed up.
Like many people, John knew that he should start saving for his pension, and it was something he actually wanted to do. He’d seen his grandparents struggle with money, and he knew
Sometimes, behaviour changes with a surprisingly light touch.
that a few pounds put away now would be worth a lot more in the future. But it also involved paperwork, a bit of hassle, and it didn’t feel like something that had to be done today. Retirement was years away, after all. ‘Yes’, he thought, ‘I’ll do it tomorrow, or maybe next week.’
In 2012, something happened: His employer wrote to him to say that, as a result of a small change in the law, they would now automatically enroll him in the company-sponsored pension scheme, unless he indicated that he would rather not partake. If he didn’t want to enroll in the scheme for now, it was simple: He just had to ask to leave the scheme within a month, and he would get another prompt in a couple of years’ time.
The ‘default’ had been flipped, from one in which John would have to actively choose to join the pension scheme (‘opt in’), to one in which he would be automatically enrolled unless he said otherwise (‘opt out’). John read the letter, and went to a short talk on the new arrangements. It was a bit of a relief: He didn’t have to do anything. His pension was sorted.
John was not alone. Within six months of this change (which targeted all large UK firms), more than a million new savers started pensions. In short, more than 90 per cent of eligible workers chose not to opt out. The proportion of the employees of large firms saving for pensions rose from just over 60 per cent, where it had hovered for decades, to over 80 per cent (the overall percentage is pulled down by those who were not immediately eligible for a pension, such as those on extended leave). By early 2015, this simple change in the default had led to more than five million extra UK workers saving for their pensions.
This stunning result illustrates the power of a simple nudge to change behaviour, and to turn around a problem that policymakers on both sides of the Atlantic had wrestled with for half a century. Despite subsidies running into many billions — more than £20 billion per annum in the UK and $100 billion in the U.S. — millions of people apparently preferred not to save. It was enough to make many experts conclude that there was something deep in Anglo-saxon culture against saving: We just preferred to live and spend for today.
The primary tool, employed on both sides of the Atlantic for decades, had been the use of generous tax breaks and subsidies to encourage people to save. And yet, as one leading economist put it, many people continued to ‘leave money on the table’. Recent analysis by Harvard Economist Raj Chetty has shown just how cost-ineffective such tax subsidies are. His analysis, using European data, shows that every $1 of taxpayers’ subsidy to encourage people to save more for their pensions led to a miserly one cent of extra saving by workers. The main effect of these huge subsidies was simply to encourage a small minority of savvy savers — perhaps 15 per cent — to move their investments into the most tax-efficient schemes. In contrast, changing the default to one in which savers were asked to ‘opt out’ led to substantial increases in saving, literally overnight — and very little reduction in saving elsewhere.
Changing the default also beats educational efforts, hands down. A wide variety of studies by behavioural economists shows that financial education — though often called for by industry and some politicians — has very modest effects. These studies
show that efforts such as seminars on saving leave participants feeling more knowledgeable and intending to save more; however, this fails to translate into actual increases in savings. In contrast, changing the defaults — allowing people to opt out of future saving, rather than opting in — had much bigger impacts on medium- to long-term savings behaviour.
Still, just because changing the default works, is it what people really want? Policymakers on both sides of the Atlantic worried greatly that many people would object to the idea that they had been automatically enrolled in a pension. “Not so,” explains David Laibson, professor of Economics at Harvard. “It is hugely popular. U.S. survey data suggests that nine out of 10 workers who have experienced the pension opt-out support the changes in 401(k) defaults. And even among the small minority who do opt out, more than seven out of 10 of them still think the opt-out is preferable to an opt-in arrangement.”
As well as being extremely effective, changing the default so that savers are automatically enrolled illustrates how we can often achieve better outcomes by making it easy for people to do things that they would quite like to do — if only it were more straightforward.
The Power of Reducing ‘Friction’
As indicated, if you want someone to do something, a pretty good start is to make it easy. In Economics, there’s a phrase that captures this simple concept: ‘Friction costs’. As in Physics, from where the phrase is borrowed, it helps to explain why otherwise ‘perfect’ models might sometimes throw out predictions at odds with messy real-world observations.
For those who studied Physics at school, the phrase ‘calculate, ignoring frictional effects’ will be familiar. Economists have deployed similar simplifications to make the world more amenable to elegant mathematical models. But in the real world of people and bureaucracy, friction matters a great deal. Just as a real weight pushed across a real table will soon grind to a halt as a result of friction, a human impulse to do something soon grinds to a halt when it becomes a hassle. Hence John, the young worker mentioned earlier, really did mean to start saving, and to get that ‘money on the table’: He just didn’t get around to it, because it involved effort and tedious paperwork — and was less attractive than all the other things he could be doing in the next hour or day.
Frictional costs are not a peripheral issue. Rather, they often make all the difference between something happening or not — be it a stone rolling down a slope, or a policy succeeding or failing.the fact is, humans have a deep-rooted tendency to take the line of least resistance, be it cutting the corners across a park, to deciding what to eat. Try putting out a selection of fruit in your office, or even at home, and see what’s left at the end of the day. Chances are, it’ll be the oranges: They are just that little bit more hassle to eat compared with an apple, or that master of convenience, the banana.
The simple insight that ‘hassle and friction have big impacts on behaviour’ opens the door to countless policy interventions — as well as to use (and abuse) by companies.
Businesses work hard to make it as easy as possible for you to sign on to a new deal: To get a mobile; to try out a new product for 10-day period for free; or to walk out of the showroom with a new car. However, most will not make it as easy to return the product or end the deal. They’ll go to great trouble to make sure that when it comes to paying the instalments or renewing a subscription, it’s an effort to opt out, but as easy as possible to renew.
If it’s a product you are happy with, there’s no problem. But if you aren’t sure about it and genuinely want to try it out, thinking you’ll cancel it in the offer period is generally a mistake: The frictions are now working strongly against you. As the literature shows us, even a small amount of friction will defeat most of us. Hence the retailer, or manufacturer, can afford to offer dramatic
The human impulse to do something grinds to a halt when it becomes a hassle.
discounts on the ticket price provided there’s a bit of effort involved in claiming the money back. The fact is, most of us will never get around to it, even though that’s what helped to persuade us to make the purchase in the first place.
Businesses can also take out friction in ways that consumers can find very helpful. For example, pharmacies can make life much easier for patients on repeat prescriptions by automatically sending, by post, a new batch of medication just before the old prescription runs out. This can save both patient and doctor quite a lot of hassle in getting and collecting a new prescription, saving tens of millions of dollars in the process.
Of course, there is little point in passing a law, introducing a benefit, or running a public information campaign intended to influence behaviour if no one knows about it — or if the information is so dense and complex that it is not clear what is being asked of people. As such, the most fundamental application of ‘make it easy’ is to make sure that your information and messaging are simple to understand.
When you last received a letter from the government, was it clear what it was asking you to do? If you were asked to pay a bill, was it obvious how to pay, or were there three different addresses, several phone numbers and the ‘how to pay’ details buried somewhere on the back? Our work in BIT has taught us to be almost obsessive about removing such frictions. Even the tiniest extra hassle can make a significant difference.
Sometimes, however, the answer may be to add more friction — at least when you are trying to encourage people not to do something, or to pause for thought before doing something that they might later regret. That’s because many of the decisions we make in life make use of our automatic or ‘System 1’ parts of our brain, as Daniel Kahneman has shown. In some situations, the role of the ‘nudger’ may be simply to put a bump in the road to jolt the person’s ‘System 2’, or active reflection, back on.
Examples of such ‘bumps in the road’ include introducing mandatory cooling-off periods for financial products; having a required delay between a store offering cheap up-front credit and the person’s ability to use the card (even if just 30 minutes); and requiring that certain products, such as cigarettes, are only sold over the counter. A little friction, it turns out, is not always a bad thing.
The world is full of examples of frictions removed or added to shape our behaviour. Policymakers and business leaders alike should never forget to ask the question, ‘Could we make this easier?’ Go ahead: Make it easy; take out the friction. Or, depending on your goal, add some.
Dr. David Halpern is a British psychologist and head of the UK Government’s Behavioural Insights Team. He is the author of Inside the Nudge Unit: How Small Changes Can Make a Big Difference (Penguin Random House UK, 2015), from which this article was...