Freakonomics Radio - 281. Big Returns from Thinking Small

Episode Date: March 30, 2017

By day, two leaders of Britain's famous Nudge Unit use behavioral tricks to make better government policy. By night, they repurpose those tricks to improve their personal lives. They want to help you do the same.

Actually, one area that, in my failure to apply these very same principles, was when I was learning to drive. Allow me to introduce Owen Service. I'm the managing director of the behavioral insights team and one of the co-authors of Think Small. Think Small is a new book, details to come later. And the behavioral insights team is a quasi-governmental unit in Britain, more casually known as the Nudge Unit. Again, details later. For now, let's stick to service learning to drive.

I learned to drive in the traditional way. You know, I had an instructor who taught me the basics, and then I took the driving test and I failed. So I lined up another test, did a bit of practicing in between and then failed again. And I actually couldn't tell you how many times I failed to pass my driving test. I almost blanked it out of my memory, but probably seven or eight times before I eventually passed. Yeah, yeah, impressive. And what I should have done, and would have done if I'd have read our book beforehand was to step back and break down the process of passing a test into a series of different steps.

So I think one of the things that we often do when we fail at something is to just sort of go gung-ho into trying again. But one of the things that the literature shows, and I know that you've explored on this podcast, is that actually you should break down that process and then to focus on the things which need most attention and most work. That is, rather than focusing on the big goal, learning to drive, you should, in essence, think small. And that's exactly what I didn't do and was behind the fact that I ended up taking that test so many times. That's a very useful story, especially now I know that if you ever offer me a lift, I should probably turn it down, because even though you ultimately pass, plainly you have no natural skill for driving. So...

Today on Freakonomics Radio, Owen Service and his co-author Rory Gallagher, a fellow nudgest, get small on a variety of topics. I wanted to buy what I consider to be a very frivolous gift for myself. I wasn't morbidly obese, but I was definitely packing a few pounds. Nine out of ten people pay their tax on time. And then when I got home, I found out that the board didn't actually fit in the lift of my apartment. Yeah, exactly, yeah. What could possibly go wrong? And they go big, too, as in government big. One of the dirty secrets of government is actually that we don't know

whether what we're doing works a lot of the time. From WNYC Studios, this is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Dubner. We've just met Owen Service. Owen Service is a nice aptonym for someone in public service. Do you think your name played a role in your destiny? It's a good question from one of the authors of Freakonomics. It's something I thought about a lot, and I've tended to be at the end of many people's amusing jokes and anecdotes.

But the reality is that you can get the word service into so many different contexts that I could have been preordained to take a number of different routes. The National Health Service or On Her Majesty's Secret Service. The list is a long one, but ultimately public service is where I found my place. Service is a managing director of the Behavioral Insights team based in London. As for his co-author, Rory Gallagher. I head up the Behavioral Insights Team based in London. As for his co-author, Rory Gallagher. I head up the Behavioral Insights Team's operations in the Asia Pacific, and I'm based in Sydney.

The team's mission is to design policy interventions based on a scientific understanding of human behavior. Recently, for instance, hoping to fight antimicrobial resistance, they tried to persuade some prescription-happy doctors to go easy on the antibiotics. We had a very simple intervention, which was to write to those doctors who were prescribing the highest amounts of antibiotics and just let them know that they were in that top cohort and what are the other things that they could do to avoid over-prescription.

So it was primarily about feedback about where they sat compared to their peers, but also a set of specific actions that they then could take. And how effective was it? So it was very effective. Over the six-month period of the trial, GPs that received that specific letter prescribed an estimated 73,000 fewer antibiotic items than those who didn't receive the letter. Gallagher and Service, behavioral science investigators by day, became behavioral science practitioners by night at home with their families trying to work out their own issues. They became their own guinea pigs,

distilling the insights from big government policies into a self-help manual called Think Small. This is all about taking a long-term goal and then breaking it down into a series of manageable steps. And unless you get those details right, being very clear about what it is you're trying to achieve, by when and how, you actually won't get over those initial hurdles. Gallagher and Service both came from academic backgrounds. So I did a PhD in the social sciences, which looked at behavior change and health promotion in academic backgrounds. So I did a PhD in the social sciences, which looked at behavior change and health promotion in Southeast Asia.

So I studied a subject called social and political sciences at Cambridge. At the time, there wasn't really anything like it in the UK. I got a bit frustrated that I probably wouldn't be able to have the social impact that I wanted. It blended them together in a relatively unique way. And strange enough, David Halpern taught social psych on that program too. So that's where we originally met. I used to teach psychology at Cambridge.

And that is David Halpern. There was lifetime tenure, in fact, at Cambridge. What ultimately happened was that David had been pursuing an academic career, but then became a bit frustrated in terms of like the policy applications of academia. Halperin didn't want to be just another academic writing papers that stayed thinking about policy in government. Traditionally, that hasn't been true. In 2001, Halperin left Cambridge. He then joined a unit that was set up in central government called the Prime Minister's Strategy Unit. Oh, in service again. Which worked on long-term strategic thinking for the UK government. I often describe it as a bit of an in-house think tank or management consultancy for government. And that's where I found my first role in public service. But David Halpern began pushing his unit in 2007, but returned to government

three years later. Now there was a new prime minister, David Cameron. Owing in part to Cameron's personal enthusiasm, the behavioral insights team was born and set up shop right there in number 10 Downing. It came to be called the nudge unit after the book of that name by the American academics, Richard Thaler and Cass Sunstein. What happened in 2010 was that there was a coming together of a realization that there was really something about the world of behavioral economics and psychology routes that at the time started to enable us to say, well, we could create an institution out of these ideas rather than just think about them in application to ad hoc policy. How would you describe overall the mission or missions of the Behavioural Insights team? The Behavioural Insights team was created to spread a more nuanced understanding of human behavior into government policy. David Halpern often says that one of the dirty secrets of government is actually that we don't know whether what we're doing works a lot of the time.

And for that, for me, was a real revolution. This admission that the government really had no idea whether its programs worked, whether its spending was justified, suggested a new approach to policymaking, an approach that leaned heavily on running randomized controlled trials, real experiments, on a small scale before running off to spend big piles of money. I remember one early paper that I co-authored called Test, Learn, Adapt, which is all around running randomized controlled trials as part of the public policymaking process. And at the time this was published, it was almost unheard of for a central government to be publishing a paper along those lines. But it ended up being one of the most widely read publications that the Cabinet Office, which is the central government

department that coordinates the actions of other departments, had put out in that year. So it did really feel like there was this major sea change in thinking that took place that was symbolized in the institution that was the behavioral insights team. Given the potential for controversy of something called the nudge unit within the government with its nod toward, as Richard Thaler, one of your intellectual patrons, calls it libertarian paternalism, which could easily, you know, people could definitely get a little bit nervous about that. I gather that you were interested in some good early wins, solid victories, as small as they may be, that would indicate to the public and the press and the rest of the government that what you were doing was not some strange big brother subterfuge.

Yeah, you're absolutely right. It was quite important for us to be able to demonstrate in those early days that the principles that we might be applying could actually have an effect in practice. And the reality was that back in 2010, we didn't really know ourselves how effective they might be at scale in a policy context. And we made this conscious effort to pick off a few areas that would be relatively uncontroversial, where you could show the small changes to the way that you run a policy or an intervention or a public service could have a disproportionate impact. The earliest example of this, which kind of ended up becoming

like the archetypal example of our work, was the work that we began with the tax authority in the UK. While most people in the UK, as in the US, have their taxes withheld automatically, that's not the case for others, the self-employed, company directors, and so on. There are about 9 million of them. And very often these people fail to meet their deadlines. And the particular group of people in some of these earliest trials, of which there were probably around 40,000 to 45,000 individuals, and each of them owe on average around five thousand pounds. So we're talking about like fairly substantial sums of money. To those delinquent taxpayers, the nudge unit invoked what psychologists call social norms. We are influenced by what we see other people

around us doing and very often we underestimate the good behavior of others and drawing attention to what positive behaviors other people are actually doing as opposed to what we perceive them to be doing can have a strong positive impact. For instance, the fact that most people pay their taxes on time is a social norm. So the nudge unit sent out a number of letters with different wordings to see which one would best persuade the tax delinquents to pay up. The winner? No threats, no cajoling. It simply read, nine out of 10 people in the UK pay their taxes on time. You are currently in the very small minority of people who have not paid us yet. Talk for a moment about the magnitude of the effect of the first trial. Yeah, so the effects actually were surprising even for us. So the highest performing letter gets you about a 5 percentage point increase in payment rates within the deadline. 5 percentage point translating to what percent? To about a 15% increase in payment rates within the deadline. Five percentage point translating to what percent? To about a 15% increase in payment within, I think, 23 days of sending the letter.

At the cost of close to zero, yeah? Yeah, close to zero. That was what really started to pique the interest of other government departments. Indeed, the nudge unit was beset by requests for help from within the British government and elsewhere. It began to consult with a number of governments and set up some satellite offices in New York, Singapore, and Sydney. It inspired a similar unit in the States. We covered that in an earlier Freakonomics Radio episode called The White House Gets Into the Nudge Business. Although we should note that was the Obama White House.

The Trump White House isn't very into the nudge business, at least not yet. The original British nudge unit, meanwhile, has ensured its longevity by going quasi-private. So the unit is co-owned by the UK government, the cabinet office, Nesta, a social innovation charity, and the employees. And the Nudge unit's success led Rory Gallagher and Owen Service to want to spread the gospel via their book, Think Small. So it's not just about public policy, but it's about what you can do in your personal lives, in your work lives. And that, we felt, was a missing space.

Coming up after the break, the kind of personal goals that service in Gallagher pursued. I moved to Bondi Beach, a beautiful part of Sydney. And like all expat Brits, had the dream of wake up in the morning and going surfing every morning before work. And what they learned about such pursuits. It takes some effort. It's particularly tricky to do, though, once you've appearances a most respectable citizen. Educated at Cambridge, now a senior official with the British government's behavioral insights team. He was, however, drinking a bit too much.

I realized that I had slipped into a bit of a routine in which I would come home from work and I would generally be quite tired and I'd feel like I deserve a glass of wine. So I'd maybe crack open a bottle of wine, have a small glass, prepare some dinner with my wife, pour her a glass, maybe pour myself another glass over dinner. And over time, I realized that I was slipping into what in the UK is referred to as middle class drinking, which is when drinking becomes more of a habit than a treat. The UK's chief medical officer had released new guidelines recommending that adult men drink an average of no more than three to four units of alcohol per day.

But the reality is that a rule of that kind is actually quite difficult for somebody to apply in practice. You know, what is a unit of alcohol? You can work it out, but it takes some effort. It's particularly tricky to do that once you've had a glass of wine. I did think twice about including this in the book, but I think it's actually a really nice illustration of the practical effects of this thinking small approach. The thinking small approach, as codified by Service and Roy Gallagher, calls for a seven-step path to problem solving. The first is to set a goal.

In this case, with middle-class drinking, that was pretty simple. Service wanted to cut back. The next step? Make a plan. One of the key rules in the plan chapter is that if you really want to achieve something, you need to think about how you can make it simple for yourself to do the thing that you want yourself to do. The chief medical officer's advice on drinking no more than three to four units per day was anything but simple. So Service's plan included what's called a bright line. The principle of a bright line is that you set yourself a very clear rule that is obvious if

you have transgressed. So if your rule is don't drink more than three to four units of alcohol on average per day, it's quite difficult to know whether you stepped over that rule. So the bright line that I set myself was no drinking during the week at home. It would be really obvious to me if I then stepped over that rule. And it resulted in me actually almost completely cutting out alcohol from my weekly routine at home. And that was a positive effect for you, yes? Yeah, it was actually. I estimated that I've drunk about 80 fewer bottles of wine. That was probably a bit more now. After the goal and the plan comes step three, making a commitment.

Let's say, for instance, you've made a commitment to exercise. Rory Gallagher, before he moved to Australia, had set a goal of keeping fit. He made a plan by joining a gym near his home in London. But he almost never went to the gym. I was often working late in the office, and by the time I commuted back, I was too tired to go to the gym. So in this case, I thought that the simple fix here would be simply to move that gym, rather than being where I lived, to being at work. But actually, I found that didn't quite have the effect that I had hoped it had. Because it was right on the doorstep of my work, I could always put it off for the next day. Then, Gallagher had an idea. He commandeered the whiteboard in the

Nudge Unit's office. And I wrote up very clearly for all of the team to see that I would go to the gym twice a week for the next three months. Voila, a commitment made in public, which increased the stakes. He didn't want his colleagues to see him fail. But there was another component, a commitment referee, someone willing to keep you on task. Gallagher says that significant others are terrible referees. When you don't feel like following through, they'll conspire with you to let you off the hook. Instead, he turned to a colleague, which happened to be Owen Service. I asked Owen to be my commitment referee to see if

I actually followed through on this. But I also wanted to use a sort of reward to help give me that turbo boost or an incentive. A reward. That's the fourth step in thinking small. Reward is about putting something meaningful at stake, using small rewards to build good habits. For instance, if you go to the gym as planned, you'll allow yourself to binge watch your favorite TV show while you're working out. We explored this pairing in an earlier episode. It's called temptation bundling. So what if you only let yourself get a pedicure while catching up on

overdue emails for work? That's Katie Milkman from the University of Pennsylvania who coined the phrase. Or only let yourself go to your very favorite restaurant whose hamburgers you crave while spending time with a difficult relative who you should see more of. Those would all be examples of temptation bundling. In these cases, there's a positive reward attached to a behavior that's hard to commit to. You could, of course, also attach a punishment instead of a reward. That's what Rory Gallagher decided to do with his exercise commitment. And he picked the worst possible punishment he could imagine. I said that if I didn't follow through on that commitment, if I didn't meet that goal,

that I would wear the shirt of the enemy team, Arsenal, to the office, who Owen happened to support at the time. You're a Spurs supporter, I understand? I am, that's correct. And so you hate Arsenal with every fiber in your body? I wouldn't go that far, but they're certainly not our closest friends. Do you think the punishment of possibly wearing the Arsenal jersey was what actually was most successful in urging you to follow through on your commitment? I actually think it was a combination of things.

So first was actually being very specific about what my goal was. So before that, it was to get fit or go to the gym. But I didn't have a specific goal. And in this case, this was to go twice a week for three months. I then made it very public and accountable. So rather than just thinking that in my own head, it was up in the middle of the office for everyone to see. And each week I had to tick off which days I had been to the gym. So there was a public accountability element to it.

And then finally, there was that punishment waiting for me at the end, which I couldn't bear to face. And how often did you then go to the gym during those three months? I did manage to stick to that. In fact, often more than twice. So, Gallagher never had to put on that Arsenal jersey, which as a Spurs supporter was its own reward. But, he says, it is important to note that rewards can often backfire, even financial rewards. Consider a study by the economists Bruno Frey and Felix Oberholzer-G. It concerned the Swiss government's plan to build a facility to store nuclear waste. In surveys, roughly half of Swiss respondents said that despite the risk, they'd be okay with having that facility in their community. When asked why, they articulated a sense of civic duty.

But then, when the economists reframed the survey and attached a reward of several thousand dollars per person per year for living near such a nuclear waste facility, they got a surprising result. What they found is when they offered financial compensation for that, people's willingness to accept that actually went down. And we see that in lots of other areas as well. There's really interesting work going on at the minute to try and understand what motivates people, for example, to give blood. And the common hypothesis and some of the evidence seem to be that actually you needed to appeal to people's sense of reciprocity

and social good in order to encourage people to give blood and that actually putting any sort of financial reward or prize around that would actually squeeze out those intrinsic motivations. So the reward step of thinking small can obviously be tricky. The next step, less so. It calls for creating leverage by sharing your goal with others. Share is about asking for help, tapping into your social networks, and then using group power. Step six, feedback. Feedback is about knowing where you stand

in relation to your goal. It's about making it timely and focused on effort and comparing your performance to those of other people. It's no good to just say, you know, how am I doing? You need specific, actionable feedback that enables you to do something with that feedback. And finally, once you've mastered the first six steps of thinking small, comes number seven, which is stick.

Stick is about practicing with focus and effort. It's about testing and learning, and it's about reflecting and celebrating success. This notion is probably familiar to most of you. It, too, showed up in a couple of our previous podcasts, specifically How to Become Great at Just About Anything, which featured the research of Anders Ericsson, and How to Get More Grit in Your Life, which featured the work of Angela Duckworth. That's right. I want to redefine genius, if you will. I want to define genius as greatness that isn't necessarily effortless, but in fact, greatness that is earned, however you do earn it.

In Duckworth's reckoning, that means finding a way to be resilient, to push through the inevitable failure that accompanies experimentation and growth. Rory Gallagher had one such failure when he first moved to Australia, and he found himself living next to a great surfing spot. I moved to Bondi Beach, a beautiful part of Sydney, and like all expat Brits, had the dream of waking up in the morning and going surfing every morning before work. But goals are hard to achieve. And even with these tools, it's not absolutely guaranteed that you're going to get it right. You aren't going to reach those goals unless you get the details right.

And in this case, I got the details wrong. First was I said, right, I'm going to commit to going surfing once a week. I'm going to buy a board and I'm going to see if I can go with a friend. But I got crucial details wrong in each of those aspects. So the first problem was, although I made a commitment, I didn't say specifically what day, partly because surfing depends on the conditions, how big the waves or how small.

It was very easy for me to say, well, the conditions aren't quite right today, I'll go another day. And because I was doing other things like going for beach runs and cycling, I was able to sort of give myself the fallback that, well, I'm doing other fitness work, so it doesn't really matter.

Second of all, I didn't test and learn. So what I really should have done is try to find out what type of board would work for me. But I dove in straight away, got this huge 10-foot board that I bought off Gumtree, very excited to get going. And then when I got home, I found out that the board didn't actually fit in the lift of my apartment. So in order to even get it out of the building, I required my partner to help me down this very tight stairwell which somewhat took out the sort of spontaneity of waking up in the morning and going surfing when you require a hand just to get out of the building and third of all i actually went surfing with a friend of mine jack who's actually a pretty decent surfer and so when we get down he'd just sort of swim out to the back of the lineup and start with these big waves and

i'd be floundering around sort of in the wash. And so whilst it's very important and you can draw on others, in this case, what I really should have done is joined a surf school or found someone else who was learning to surf and learnt with them. I have to say it's very comforting that someone as smart and experienced as yourself can fail so badly. Of course. Look, as I said, achieving goals is a difficult thing and it's important to recognize where things aren't working. And in this case, I recognized, look, just the other things going on at the moment that this wasn't going to be something I could spend the time and effort to do. And actually, I should focus on other parts of my life, which I felt were going to make me happier ultimately.

It strikes me, look, I love the work that you're involved in and I find it exciting, and I think it's kind of revolutionary, frankly. That said, a lot of the solutions that social science researchers come up with and that you then integrate, many of them strike me as essentially common sense. Like, of course, if you want to accomplish this behavior, you need to make some kind of commitment device. Or of course, if you want to tackle a big, broad, complex, abstract problem, you need to, you know, think small and take small steps. So talk about the degree to which you're not merely, like a lot of academia does, kind of canonizes or makes formal what people in the real world have known for millennia. And I think you're right that we see this as applied common sense, but unfortunately,

it isn't applied anywhere near commonly enough. So many people will recognize the sorts of tools, but what this tries to do is help systematize that so they can apply it routinely in everyday life. And to take one of your examples there around commitment devices, I mean, I'm not sure people do realize how powerful they can be, and often they get them wrong. So just telling someone that you want to do something, people might see that as a commitment device. I want to recycle more. I want to write a novel. And just saying that publicly is my form of commitment device to the fact I'm going to follow through. If you do it in that very vague and open and public way, actually that has no effect at all and can actually backfire because you get a bit of a warm glow just by telling

people of your good intentions. So in order for a commitment device to be effective actually you need to make it specific you need to write it down and make it accountable with a referee so those small details can make all of the world of difference between people thinking they're using these tools and actually potentially backfiring and using them in the way that they're intended and having the outcomes that we want. That was Rory Gallagher and his Nudge Unit colleague and Think Small co-author, Owen Service. Coming up next week on Freakonomics Radio, we continue this conversation and expand it,

really, really expand it. We'll hear again from grit champion, Angela Duckworth. The one problem that really confronts humanity in the 21st century is humanity itself. And temptation bundler Katie Milkman, too. The biggest problem that needed solving was figuring out how to make behavior change stick. Milkman and Duckworth are putting together a massive project with all kinds of scholars and all kinds of partners. Banks and schools and fitness centers and drugstores. Their mission?

To take everything that's been learned so far in places like the Nudge Unit, in academic research departments, and apply it to one problem. A problem that if we fixed it could truly solve every social problem we could think of. That's next time on Freakonomics Radio. Also, a quick reminder, if you make a donation to WNYC, the public radio station that produces this show, you will be automatically entered to win an all-expenses-paid trip for two to New York City. And I will take you and your plus one out to lunch anywhere you want to go. And you'll also get a tour of WNYC.

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