Instant Genius - How science can help you make better decisions

Episode Date: August 20, 2023

From picking out what to wear in the morning, to choosing your profession or where to live, life is full of decisions, both big and small. But what can science do to help us make better choices? In this episode we catch up with Prof Sherheryar Banuri, a behavioural economist based at the University of East Anglia and author of the new book The Decisive Mind: how to Make the Right Choice Every Time. He talks to us about how even the smallest of decisions can have a huge impact on our lives, the traps we should look out for when making decisions and the simple changes we can make in our lives to make better choices. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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When you want savings, not surprises. It matters where you stay. Hilton, for the stay. This podcast is sponsored by name, audio and focal. Streaming has made music more accessible than ever, but true listening is about more than ease. It's about quality. British audio experts name audio,

alongside French acoustic specialist, focal, combine handcrafted tradition with cutting-edge innovation and high-end materials, delivering digital precision with analogue warmth. So you can experience exceptional sound at home. Music just as the artist intended. Visit name audio.com to learn more. Hello and welcome to Instant Genius, a bite-sized masterclass in podcast form. I am Jason Goodyear, commissioning editor at BBC Science Focus magazine. From picking out what to wear in the morning to choosing your profession or where to live. Life is full of decisions, both big and small. But what can science do to help us make better choices? In this episode, we catch up with Professor Sherryar Benori, the behavioural economist based

at the University of East Anglia, an author of the new book, The Decisive Mind. How to make the right choice, he talks to us about how even the smallest of decisions can have a huge impact on our lives, the traps we should look out for when we make decisions, and the simple changes we can make in our lives to make better choices. So you study human decision making, and that's quite an unusual, interesting topic of research, in my opinion. So how did you get into that? Well, it's a funny thing, well, sort of a long story, but I'll make it as short as possible. When I was going to do my PhD, I was interested primarily in issues of governance and public sector economics. And there specifically, I was interested in this issue of corruption.

So I was sort of trying to understand, you know, why people join public service, why they make the decisions that they do, oftentimes in full, you know, making decisions that hurt the public, oftentimes with full knowledge of that, particularly in developing countries. And so that kind of got me started down this path. And so one of the sort of methods that I landed on to study this was lab experiments. The good thing about lab experiments is it allows you to understand human decision-making in a sort of very controlled environment, sort of very clean environment. Imagine running physics experiments up in space, that sort of thing, right? So what I started to do was realize that, you know, corruption is a big, problem that affects big organizations. But there are people who are making these decisions on a

day-to-day basis. So what are those decisions like? And so as I got into the study, I got deeper and deeper. And one of the first experiments that I had done was actually comparing behavior by human subjects in a developing country versus a developed country in a corruption environment or a corruption context. And what I found was that in the absence of certain institutions, behavior is largely the same. So you would expect, you know, all these things about culture affecting decisions or, you know, if you grew up in a corrupt environment, you are more corrupt or, and I didn't find much evidence of that. So that got me interested in, you know, issues of motivation and what, what drives us, what makes us do things or makes us make the decisions

that we do. Yeah, that's really interesting. So you mentioned about lab research there. And it's, it doesn't seem to me like you could go, like say a physicist would go on about measuring the mass of a proton or something. So how does the experimental set up work in a lab setting like this? Well, in economics specifically, lab experiments have been relatively recent. I mean, I say recent. We're still talking about about 80 years now or so, or 60 to 80 years, somewhere around there. The lab experiments have been going on. And the idea there is that you simulate a real-world context.

So imagine, you know, people bargaining over items in a market. Now, you can go and study behavior in a market, and we often do. But the difficulty of studying behavior in a real market is that you don't have the control, right? So you can't run experiments like, what if I were able to change this? How would people react to that? that often you can't do. Closed lab experiment, you can do that. You can change the demand structures.

You can change the costs that firms have. And then you can look at how the market reacts. And so that sort of brought out this genesis of lab experiments in economics and economic decision making that, you know, proliferated into all sorts of different contexts now. Now they have lab experiments that, you know, corruption is one example, but also, you know, morality. Gosh, you name it, like firm behavior, worker behavior, things of that nature, yeah. Okay, so let's have a look then a bit more into the kind of nature of decisions and the way that you explain those in your book.

So quite early on, you mentioned that all of our decisions can be plotted on this kind of graph with a set of axes. One is frequency and one is impact. So what exactly do you mean by that? Well, I mean, it's a sort of simplification of a lot of the decisions that we actually do, right? But that's one of the things that economists tend to do is we study things in simplified environments. So we basically say, well, let's strip away the context of your daily decisions. What we can do is we can understand how frequently you're making these decisions.

So this is about frequency. So do you make this decision over and over again? You know, every morning I get up, I brush my teeth. or, you know, I go outside, get a cup of coffee on my way to work, things like that, right? So those would be examples of high-frequency decisions versus low-frequency decisions like, you know, where do I want to live, do I want to get married, where I want to go on holidays, things like that. So that's how we're thinking about frequency. So stuff that decisions that get repeated on daily, weekly, you know, or sort of monthly basis,

versus low-frequency decisions that are what we would say colloquially once in a while. As opposed to, so that's one dimension. The other dimensions, the impact dimension, meaning that there's decisions that have high impact in our lives, meaning that they will affect us either now or in the future in a lot of important ways, versus decisions that have relatively low impact. So that means that we're making these decisions, but they don't really affect our well-being all that much.

And so what I'm asking the readers to do is sort of go through and do this cataloging exercise and understand how their decisions fit into these different sort of quadrants. Now, why is that important? It's important because what you'll find when you go through this introspection exercise is that there's lots of decisions that you're making on a daily basis or that don't ultimately affect your well-being all that much, right? Whereas there's decisions that you're taking that affect your well-being a lot. So if you have weight problems, reaching for that candy bar versus a banana,

that's a decision that's affecting your well-being. So that's a high-impact decision. What color shirt to wear, to work, for example. That might be an example of something that's a low-impact decision, particularly if you're working in a cubicle or don't have, you know, our customer-facing responsibilities. So what we find oftentimes is we spend a lot of mental resources. That's another theme that comes in the book.

Mental resources deliberating over decisions that ultimately may not have that much of an impact to our well-being and not spending enough resources, deliberating over decisions that do. So I might spend a lot of time picking out my outfits because I like them, right? But ultimately, they don't really matter in my line of work versus not spending. spending enough time deliberating about what I'm going to eat, which leads to me making some bad choices. So coming off the back of that then, one concept that I can certainly identify with that you imagine is the idea of decision fatigue. So can you tell us a bit about that,

please, and what we can do to fight against it? So, I mean, this is something that we've sort of recognized in the literature now a lot more robustly than we did before. So the way that we used to think about effort or fatigue is something that was physical. So, you know, we're working and that makes us tired. And, you know, so we're working in, I don't know, like a mine or something, or we're working, turning big cranks or whatever we're doing takes a lot of physical effort. And over time, physical resources get depleted. So we get tired. Similarly, a mental effort works in much the same way. And it's predicated on what's known as system one system two thinking or thinking fast and slow. This is a very popular concept why Daniel Kahneman in a in a best-selling

book. And the idea there is that system two sort of thinking requires mental resources. So things like learning, sitting in class, learning something new. That requires mental resources. And exerting those mental resources over time makes you tired. What you want to do then is preserve, what your brain wants to do is preserve mental resources. So at one point, it's kind of stops wanting to engage in system two processes and turn back on system one sort of processes. Now, system one processes are these, what Kanemann calls, you know, automatic, non-reflective thinking, right? That's just decisions that you're making. You know, some people say emotionally, um, other psychologists have termed them as heuristics, you know, some rules that you've set up that are in your mind,

that you're just automatically triggering based on contextual cues. But the idea there is that the more of system two sort of processes that you engage, over time, the more difficult it is to keep going. So that's this issue of mental fatigue. You get tired and you want to stop using those and sort of switch back onto system one. Then it becomes important what sort of decision, System 1 is making you do, right? So that's sort of more emotional, something that makes you want to feel good. So reaching for a packet of crisps after a long day of work, or on your commute back home,

looking at through signs of like fast food restaurants, I don't know. I'm doing a lot of fast food type things, but I find that's relatable, at least for me. That increases the likelihood of you making a decision that ultimately is not good for you, right? that in that moment will make you feel good, but ultimately will not. So having said that then, what's the difference between decisions and habits? Ah, great. So this is a, it depends on who you ask, I guess. That's the short answer of these things. But, I mean, psychologists, so some famous psychologists, like Ger Diger-enzer, for example, will classify habits as heuristics. So these are rules of thumb that you automatically follow,

again, system one sort of thinking, that you're not rationally thinking about. So getting up in the morning brushing your teeth, that you could say is a habit. You're not actively thinking that you have to brush your teeth or locking the door as you walk out the door. That's not something that you're actively thinking about. That's just something that you automatically do. And that gets triggered by the context in which you're in. So lots of books have talked about trying to build in better habits as opposed to decisions which particularly for economists are very much grounded in system two. So this is about

rational sort of thinking, picking the action that is the optimal one, which requires resources to do, mental resources to do. So, I mean, I think to answer, just to sort of sum up, I mean, a key distinction I think for me is habits take less resources, mental resources, resources on a daily basis, and decisions take more mental resources. No one goes to Hank's for his spreadsheets. They go for a darn good pizza. Lately, though, the shop's been quiet. So Hank decides to bring back the $1 slice. He asks co-pilot in Microsoft Excel to look at his sales and costs to help him see if he can afford it. Co-pilot shows Hank where the money's going and which little extras make the dollar slice work. Now, Hank has a line

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information. So yeah, I think another common thing that people will be able to relate to when they're thinking about decision making is the idea of reward. So what role does reward play and, you know, what kind of different types of reward are there? There are many different types of rewards. Typically, the ones that we think about are the material rewards. So lots of times, you know, those are the ones that actively leave to mind. I mean, I go to work because I get a paycheck. The paycheck is my reward for exerting effort for doing the work that I do. So generally that's the way that, and particularly economists, I think,

where we're the most guilty of that, forcing people to think in terms of material rewards almost exclusively. Psychologists, on the other hand, have a more varied sort of spectrum of rewards. And that's an idea that now has become mainstream in economics as well. And the idea there is that there's rewards that are extrinsic, so things that are separate from yourself. So money comes into those, but also social pressures, right? I do, you know, I stand in the queue because people get mad if I don't stand in the queue, you know, things like that.

So there's social pressure at not a material. pressure, but social one. But then there's also intrinsic rewards. So psychological motivators, and that have to do what's coming from within. So, you know, I'm in my spare time. I'm a gamer. I like playing games a lot. It does take a lot of effort, particularly some of the newer games. They require me to do a lot of things and spend a lot of time on them. And the only real reward that I'm getting from there is, you know, progression in the story or more points or being able to beat my buddies and so on. So the rewards aren't necessarily material in the traditional sense, but they're social rewards or psychological rewards. And so in the book, I'm opening that

aspect of rewards up a little bit and asking people to think a little bit more broadly about that. So people talk about, well, getting a personal trainer if you want to get fit. Well, one of the things that the personal trainer will do is give you these other forms of rewards, right? We'll actually manage your structure for you. People look for gym buddies, for example, that's an aspect of social reward or social punishment, right? I have to call up the gym buddy to say, hey, I'm not going to come. That's sort of mentally taxing, and so you don't want to do that.

Therefore, that makes you motivated to go to the gym more, things like that. So thinking about that, sort of coming off the back of that, then, How about the long-term fee, the short-term effects of decisions that we make? You know, what sort of role do they play? Well, the literature is quite clear on that. I mean, we worry in how much we value short-term over long-term. This is what economists, a technical term, would be hyperbolic discounting, but you can also think of this sort of broadly as patience.

And the idea is that we differ in our capacity to delay immediate, rewards for future rewards. There's some classic experiments. I'd urge anybody who's more interested in this to look up the marshmallow test or videos on the marshmallow test is a cute example of this where researchers would offer children a marshmallow. So they leave it in front of them on a plate and say, well, if you wait until we come back, you can have two marshmallows. So the idea is that then they leave the child alone in the room and then the child has to decide to fight off the tendency to eat the one marshmallow in the hope of getting to, and that has, you know, the initial experiments were run many, many years ago and have some important implications for us.

But the point about those and, you know, adaptations of those experiments with adults and with animals and many different contexts is that there's a very high premium on rewards now. So the power of now is very, very strong. We want rewards now, right, because the future is uncertain. I mean, even in evolutionary biology, they'll talk about it, right? You don't know if you're going to live tomorrow. So why would you delay rewards for tomorrow? You don't know if tomorrow is going to come.

Nowadays, that's different, but yet our thinking still remains the same. So people have a high premium on rewards for the short run. This could be money, but it could be psychological. It could be social. And so trying to kind of push back those initial instinct. for rewards that are going to occur in the future. I mean, that's the sort of secret to achieving long-term goals, long-term aspirations,

but that requires a lot of mental resources to push off your instinct of rewards now. So this idea of instant gratification is perhaps one reason why we would make a bad decision. But what do we know about other reasons? What are some common reasons or common bad decisions that people make? examples of common bad decisions. I mean, healthy eating is the classic one. Again, that's

gives you a sense of reward right now. And in fact, well, I'll tell the story. I have a really good friend who works in sales. And not to sort of point out this firm. I mean, there's lots of different firms like that, but in this one particular firm. And he sort of points out that, you know, this is the easiest sort of sales job that he's ever done because the product, that are being created, they sell themselves. People want crisps, right? Even though people know that they are not good for them, but they still want them. And that's a classic example, something that provides you with a sort of instant gratification,

even though that you know consciously that over time they're not good for you, right? They're not over time. They can be quite damaging. So that's an example. You know, other things could be like, and basically how I'm thinking about back. decisions in the book is any decision that runs counter to an aspiration or a goal that you have. So if your aspiration is to, say, write a book, any decision that takes you further away from writing that book, long sessions of gaming, for example, which is a problem for me, is something

that I would classify as a bad decision. So leave that up to the reader to classify bad decisions for themselves. But the idea is that something that kind of moves them further away from where they'd like to be. So let's shift gears a little bit now, then. So what do we know about what is going on in our brains when we're confronted by a decision? Basically, the classic model, the way we think about it, which is a simplified model of the brain, but I think it's a very, very powerful idea, is this idea that I mentioned of Kanemann's system one, system two thinking. Of course, Kanaman made it sort of accessible and simplified it for a very massive audience and been wildly successful in doing so. The idea there is very simple that there's deliberative decision-making, that system two processes, and then there's emotional or reactive decision-making system-one processes.

And so when confronted with a decision, we go through a sort of mental calculus. I mean, it's very, very quick. But the idea there is that you try and decide whether. something is even deliberating, is even worth deliberating. So you're trying to understand whether the rewards are worth the effort that you're going to put in, the mental effort that you're going to put in. And lots of times, your brain will say, no, it's not worth the effort, just make a decision and move on, right? So for Americans, selecting a health insurance policy is a very good example of that, right, where there's all these parameters and things like that.

I mean, and this could be for, you know, picking between different types of loan products or things like that. These are complicated decisions that we look at and we're like, oh, my God, there's so much information out there. Let me just use some quick heuristic and get it over with. And so that's essentially what's happening. So the first thing is we're trying to understand whether the rewards are worth the effort. And lots of times the rewards that we're thinking about are the instant rewards. and they're also colored by our overconfident. So imagine you'll spend a lot of time picking out the destination for your holiday,

but you'll spend no time at all picking out the insurance for your holiday. In fact, I think for a lot of us we don't even maybe even travel without insurance when we can because we have this idea that one, it's not worth the effort, nothing's going to happen, I'm going to be fine, right? So there's all of these different mental processes that are, guiding us towards making what could be a very, very bad decision. So that's essentially the idea. So having said that, I mean, I know this is something that I can relate to. Why do we make the same bad decision over and over again, even though we know it's a bad decision to make?

Well, that's a complicated. There's a complicated answer to that. I mean, there's a series of different things that could be at play. For example, you might, you know, think that the instant gratification that you feel is worth it. So the context right now, I mean, I might open a bag of Chris because I'm tired, but I'm tired now and I won't do that tomorrow. And then tomorrow happens and I get tired again and I'll make the same decision again. So, you know, the way that we think about now is different from the way that we think about tomorrow. And so there's a comedians talk about, oh, yeah, I'm going to have a drink tonight because tomorrow, that's a different mean. I don't have to deal with that person, right?

That's a different. And that's a sort of interesting sort of subconscious way that we think about it because we're feeling good now. We believe that we're going to continue feeling good tomorrow, even though the decision that we're making now are not, are going to not make us feel good tomorrow. So that's the idea that we view our future selves very differently. from our present selves, we highlight the present self a lot more. We care about the present self a lot more. And we have this sort of belief or confidence that the future self is going to be the same as the present self. And those sort of bundled together.

I mean, this is a oversimplification, but I think it helps make the point that, you know, these bundled together put us in this constant sort of loop of repeating bad decisions over and over again because we think, oh, tomorrow, tomorrow I'm not going to do this. But in fact, tomorrow you're going to do it. The exact same thing. So let's have a look at how we can make better decisions then. So in the book, you talk about something that you call the four insights that we can perhaps use as tools to help us make better decisions. So could you give us a brief overview of how that works and how you would advise somebody to make a better decision? Yes. So the core behavioral insights that are sort of underpinning all of this is stuff that we've actually already talked about.

So the first one is about mental effort, you know, decisions, repeated decisions take effort. The second one is about patience that now is very, very important than tomorrow. There's also a difference between our perceptions or our view of the world, or even, indeed, our view of ourselves, and how we actually are in reality, right? So we believe that we're stronger than we are. In the pandemic, there is a very famous example of overconfidence bias that most people believed that their likelihood of catching COVID was essentially zero. Right? That's what they believe.

And the idea was that, of course, it wasn't, but that's the perception that they carry around in their heads. And so that was, you know, sort of an important aspect or the third sort of behavioral aspect. And then the fourth one, which we talked about, is the role of motivation, that we have different sources of motivation that are driving us to do things. We overly focus on one, which is material, but we have psychological motivators and social motivators. Now, we put all of these things together. And essentially, what allows us to make better decisions is to be introspective, right? The important thing is to sort of focus on a goal or an aspiration or something that you want to achieve. What that allows you to do is then distinguish high impact decisions

from low impact decisions. So what you can do is you can say, well, any action that contributes or moves me closer to this goal or this aspiration is something that's a high impact decision. and therefore it is worthy of deliberation or using mental resources to get me there instead of decisions that are not contributing to my well-being. The other side of it, though, is that as economists in particular, we're really concerned about finite resources. So we're basically, you know, one of the biggest rules that we have is that we're constrained in the resources.

And so mental effort is the same as. any other resource. We're constrained in that. So we need mental resources to drive towards our high-impact decisions, which requires us to think about low-impact decisions that we can kind of push away and not worry about so as to free up our mental resources for the high-impact decisions. A great example, one of my favorite examples is about, our famous examples, is about Steve Jobs wearing their same outfit every day, the black turtleneck sweater and jeans. And there, the idea,

lots of other CEOs do the same thing. The idea is that's one decision that they've kind of taken out of their lives. So that they've said, I don't need to deliberate over this. I don't need to spend resources over this. I can free up those mental resources and apply them towards something that matters.

So that's an example. I mean, it's individualized, so it's important for you to identify those decisions for yourself and the frequency with which you have to make those. So if you have to do it once in a while, that's easy to free up those mental resources. But if you have to walk away from crisps every day, that's hard. And so you want to free up daily decisions and replace those with decisions. Thank you for listening to this episode of Instant Genius, brought to you from the team behind BBC Science Focus. That was behavioral economist Sherry Arborneri. To

Read more about the science of decision making, pick up a copy of his book, The Decisive Mind, How to Make the Right Choice Every Time. The current issue of BBC Science Focus magazine is out now. Pick up a copy wherever you buy your favourite magazines or download us on your preferred app store. You can also find us online at www.sciencefocus.com. This podcast is sponsored by name, audio and focal. The texture and emotional depth of music can be lost through digital sources or pause. signal. Name Audio believes you can have digital precision with analog warmth. Alongside French acoustic specialist vocal, name creates high-end audio systems combining innovation with craftsmanship,

so you can listen to music, just as the artist intended. Discover more at name audio.com.