Rotman Management Spring 2020

AT ITS CORE, every organization is really in the same business: behaviour change. Businesses try to convince consumers to switch to their products, healthcare organizations try to get people to take their medications, and governments try to convince us to pay our taxes on time. The good news is, wherever human behaviour is involved, there are opportunities for behavioural insights to overcome organizational challenges. Traditional Economics assumes that people make decisions based on cold-headed logic. The ‘Econs’ it describes are great at processing data and value the future as much as the present. Behavioural Science paints a very different — and more realistic — picture: It shows that we humans are actually emotional and impulsive; that we are heavily influenced by others and by the context we find ourselves in; and…

NO ONE WOULD ARGUE that the Internet has transformed the way we live, work and play. Today you can make ‘friends’ around the world without ever saying hello; compare products from dozens of shops without leaving the house; or plan a date with a stranger without breaking a sweat. But while the benefits of life online are significant, so too are the economic and social costs. By now, most readers are familiar with the term ‘nudge’; but there is a darker side to the evolution of online and digital markets: ‘Sludge’ and other techniques seek to harness our behavioural biases against us rather than for us. Nobel Laureate in Economics Richard Thaler, a long-standing adviser to the Behavioural Insights Team, often signs his books with the maxim ‘Nudge for good’. In this…

You have said that every organization is fundamentally in the same business. Please explain. Whether it be a for-profit business or a government agency, every enterprise is in the business of behaviour change. In each case there is a collection of individuals interacting with other individuals with a particular goal in mind. It could be a sales team dealing with external customers to sell a product or service; HR managers dealing with an employee base to optimize productivity; or a CFO dealing with shareholder concerns. All of these interactions involve some form of desired behaviour change. Some scholars have focused on the persuasion aspects of changing behaviour, but I would argue that what we are really doing is helping people get things done and make welfare-enhancing decisions more easily. Once you accept…

IN FALL 2016, THE LEGISLATURE OF THE NETHERLANDS wished to increase the percentage of Dutch residents who consented to organ donation. The nation’s House of Representatives narrowly passed a highly publicized bill intended to change the donation consent procedure from one requiring explicit consent (an opt-in default) to one of presumed consent (an opt-out default). Under the policy change, residents would automatically be considered donors unless they returned a letter or went online to elect out of participation. The bill was motivated by recent successes that policymakers around the world have had in applying insights from Psychology and Behavioural Economics to promote better decisions. In particular, policymakers have made gains by modifying choice architecture — characteristics of the environment in which options are presented, such as how relevant information is described…

NOTE: This interview took place in January 2020 At the beginning of the final report of the Expert Panel on Sustainable Finance, you state that the relationship between the economy and the environment “is at a vital inflection point.” Please describe the current scenario. Too often, discussions about the economy and the environment are framed around one or the other. That needs to change. Our economic and environmental aspirations need to become one and the same, because fundamentally they are indivisible. We are at a pivot point right now: We are increasingly seeing the impact of climate change in the form of more extreme weather, flooding, forest fires and hurricanes. As the world continues to get warmer, these extreme weather events will become even more pervasive. Weather patterns are going to shift,…

SELF-CONTROL FAILURES CONTRIBUTE to a range of outcomes in our society, from educational achievement and retirement savings to the obesity epidemic. Not surprisingly, people with greater self-control fare better in terms of health, wealth and many other dimensions of human flourishing. Unfortunately, temptations — rewards that provide short-term gratification but impede people from long-term goals — are ever more abundant today, thanks to convenience stores, one-click shopping, social media, 24/7 streaming, and other newfound vices. In a recent paper, we synthesized the research on approaches to reducing failures of self-control, organizing them as approaches that are either cognitive or situational in nature. In this article we will summarize some of the key cognitive strategies for improving self-control. We will categorize these strategies under two headings: interventions that are self-deployed and interventions…