The Decision Strategist

Just a quick post about referencing effects. It turns out we think a sale is a bigger discount if the right-most digit is low instead of high. You can read about it on Science Daily. It’s probably a case of a referencing bias. Since products are priced at a flat amount ($200) or just below ($199), we see low numbers and assume they are a discount from the higher value.

It’s a great example of our implicit references and how they can affect our decision making. I wonder if marketers will start pricing sale items at $191 instead of $189.

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In Want Versus Should in Advertising I talked about how our want self gets activated more strongly for short term consumption decisions and our should self gets activated more strongly if consumption will happen later.

It occurs to me that this behavior isn’t limited to consumption. The behavior plays out in all decisions. Do I want to go running or keep laying on the couch? Am I going to eat ice cream? Do I want to apologize to my spouse? Basically all those decisions whose long term rewards make the short term cost worthwhile.

It’s easy to plan to do them in a few days, but that’s because we have our long term hats on. When the moment of action comes, we’re thinking with our short term hats.

Discipline is usually characterized as how good you are at thinking with the long term hat over the short term hat, but we all fall prey to the negative aspects of the short term hat.

Not to make the short hat a villain. The short term hat may play a role in a lot of the positive spontaneous behavior that we as humans value. Spontaneous displays of affection or acts of generosity and support.

The million dollar question is what methods can we use to emphasize long term decision making when we know that’s ultimately what is good for us, but still encourage short term creative spontaneity?

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The confirmation bias, where we are more likely to believe something if we’ve seen or heard it often, is extremely powerful. New research discussed at Mind Hacks is showing that the confirmation bias is so strong that retracting false information actually makes people believe it more strongly.

The article discusses a government flier that attempts to debunk flu myths by marking them true or false, but instead only reinforced false beliefs, and information about the Iraq war that was retracted the next day but still strongly believed. The tactic of releasing early and often is used by all groups in a conflict, such as 9-11 conspiracy theorists and the U.S. government.

The implications of this behavior are really astounding.

The more we see or hear something, the more we believe it to be true

Consider how many different ways this trait plays out:

Branding

The more we see a brand, either through advertisements or through use, the more we think it is a good deal. If many other people have made a decision, we trust that decision as the right one. This can be good, as in the case of quality tools and equipment, or it can be bad, in the case of brand name shoes that are of the same quality as less well-known shoes.

Companies capitalize on this also. The Motorola RAZR was wildly popular, but if you look at a new RAZR now, you’ll notice that it is made of more cheap plastic parts than the older phones (at least I did, am I wrong on this one?).

Politicians

The more ads we see, the more credibility we are likely to give. Of course, we are also adverse to those ads, but typically only to candidates who are not from our party.

Perpetuation of Beliefs

Beliefs about a wide variety of things in the natural world or in society are extremely hard to stamp out, even if they’ve been widely disproven. This isn’t just for urban legends, it’s also for physics before relativity, geology before plate tectonics, and all other knowledge revolutions. Tomas Kuhn has a great book called The Structure of Scientific Revolutions.

In the absence of irrefutable proof, prevalence appears to matter more than the strength of the idea. There are still people who believe that the earth is flat and that the sun revolves around the earth.

Decision making in the context of the confirmation bias is very difficult, as our confirmation biases tend to come through as intuitive gut feelings, much like automatic associations. The obvious strategy suggested by the confirmation bias is to flood the environment with your message. Competition between these different memes is an interesting subject.

-zot

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In the battle over what we want to do, much of it can be framed in terms of a struggle between our ‘want selves and our ’should’ selves (some info from HBS). The want self wants the candy bar, cigarette, beer and ice cream now. The should self recognizes that you’ll feel better in the long run if you don’t.

It turns out that which self is stronger depends to some extent on whether we expect consumption to be sooner or later. Decisions that make an immediate difference are decided using the ‘want’ self, and longer term decisions, even just several hours away, are made using the ’should’ self. Candy next to the checkout lane is so effective precisely because eating it will happen very soon. We never buy a candy bar from the checkout lane so that we can eat it later on.

Marketers use this idea to get you to make ‘want’ decisions. “Drive it away now” and “Own your house immediately” are ploys to get us thinking in terms of immediate consumption and make decisions using that framework.

If you’re looking for ways to fight advertising, it can be helpful to recognize which self is active during your decisions. Do you really want to spend $2,000 on a plasma TV so you can go home and watch the game (I have to admit a love of technology. I would have a hard time saying no if I had an extra $2,000)?

The 30 Day Hold List

This is why the 30 day hold list for things works so well. The idea is simple: any time you want to buy an expensive new toy put it on a hold list for 30 days. If you still want it at the end of that 30 days, go ahead and buy it, but otherwise, cross it out.

The hold list forces your ’should’ self to do the thinking and devalues the importance of the ‘want’ self. The result is that you only buy the toys you really want, and the others you realize you don’t need.

-zot

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