190 // Behavioral Design

Oct 4, 2022

A lively dive into how the architecture of choice steers our spending and decisions. Fun thought experiments reveal mental accounting and why identical costs feel different. Social belonging and social-proof nudges are shown as powerful motivators. Practical ideas on reframing norms and flipping the script to steer behavior in your favor.

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INSIGHT

Mental Accounting Makes Equal Costs Feel Unequal

People mentally account for money differently so identical costs feel different based on context.
James Lenhoff contrasts a $15 lost ticket versus a pre-bought ticket left at home to show framing changes choice.

INSIGHT

Found Money Feels Free While Paychecks Feel Sacred

Richard Thaler's concept of mental accounting explains why found money feels spendable while earned money is protected.
James points out lottery or raffle winnings often get blown compared with paychecks of the same amount.

ANECDOTE

Hotel Towel Signs Boost Reuse With Social Proof

Hotels increased towel reuse by switching from environmental messaging to social norms messaging.
A sign stating 75% of guests reuse towels raised reuse to 44%, and room-specific framing rose reuse to 49%.

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James talks about behavioral design, also known as the architecture of choice. Sometimes this has been thought of as a way to control people, but it's a fascinating psychological area. It profoundly impacts how we make decisions in our purchasing and our spending. In general, it's how we frame our choices.

It turns out that the way we frame something will affect our decision even though the cost or outcome would be the same. Certain ways of framing are more appealing to our minds. Social incentives also seem to be one of the most potent motivators. Instead of falling for reframing marketing ploys, let's pay attention to our thoughts and behaviors and flip the script for our benefit.

Episode Highlights:

[03:59] James has been aware of how easily marketing agencies and advertisers can manipulate us. Companies make a huge effort to get people to take specific actions.

[04:59] The movie ticket example of behavioral design. Would you buy another ticket if you left your ticket at home? Would you use a credit card if you lost your ticket money? The cost is the same, but our brains process the choices differently.

[06:40] Marketing agencies are realizing that this is how our brains work. They are framing decisions in a way that takes advantage of this cognitive system that calls our attention to things differently.

[06:56] Mental accounting. We treat sources of money differently even though it's all money. The way we get resources changes the way we think about what they are for.

[08:09] One thing that is valuable to us is belonging or being part of the group. The hotel towel example.

[11:45] The financial power of decisions is not necessarily more powerful than the social incentive. It turns out social incentives are more important.

[12:52] It's hard to get people to save when the financial incentive is years or decades down the line. We might need to start looking at social incentives.

[14:18] The logic of creating a social incentive for things that add to our success. Successful people make these decisions. Is there a behavior that you are struggling with? Flip the script on it.

[16:37] Look at the things that you're struggling with. Where are you lacking discipline? What behavioral design are you being subject to? What messages are you hearing or telling yourself?

[17:48] How do you flip the message and create your own behavioral design? Choose which thoughts you want to keep thinking.

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