About the book

I have had this book in my waiting list for at least three years. I should not have waited for this long to read Nudge. Paperback reading experience, again.

How was the book?

In the beginning of the book many of the topics that Thaler and Sunstein brings up are truly topical. And somehow this book reminds me of Kahnemans “Thinking, fast and slow”. Authors wants the reader to think how he can “make things click”. What makes people do things?

Authors come from the tradition of behavioral economics, but they call themselves as choice architects. What are choice architects? They are people who can design approaches that help people to make choices or decisions easily and with low cost.

Basic idea of nudging is part of libertarian paternalism. Libertarian paternalism’s aim is that “people should be allowed to be free to do what they like in order to make their lives longer, healthier and better”. Nudge is the essence of altering people’s behavior. It is “the intervention which is easy and cheap to avoid”. Or people should “go their own way at lowest possible way”. The last concepts which are widely used by the authors are Humans and Econs. Humans behave like humans, but Econs act with rationale in their mind.

I must give credit to Thaler and Sunstein, because at the end of the book they raise critical ideas their writings might arouse. One thing though was not evaluated. Why should we budge people to make decisions when they obviously are not motivated? Authors have numerous cases where people didn’t make active decisions and after the nudging the conversion rate change. Of course Thaler and Sunstein urge choice architects to do their job, because authors want to make “people live longer, healthier and better”. But which decisions people should be budged with nudges?

What are the key learnings of the book? 

Key learnings are of designing a nudge:

–      Rules of thumb are used to make decisions quick and easy. But rules of thumbs include biases also. Nudge would be a rule of thumb.

o  Anchoring into helps to “measure” things, but can also lead to false measures.

o  Availability brings the proximity of an event into our decision, but it can also lead astray.

o  Representativeness helps us to identify, but might give wrong signals to our thinking.

–      Optimism and overconfidence is part of human nature which means also that we might fail to take preventive steps. Nudge would “remind of a bad event”.

–      Gains and losses plays an important role in our thinking, because of loss aversion. Many of us make decision based on the loss aversion if it might occur. People “hate losses twice as much as the like gains”. Nudge would be emphasizing the gains over losses.

–      Status Quo Bias leads to the fact that people “stick with their current situation” and it might lead to lack of attention. Default wins because of status quo bias. But the decision which is default is a strong tool and it should be considered with great detail. Nudge would be default.

–      Framing is a kind of default, but it puts the topic into a perspective. Framing should be used with a caution. Nudge would be the frame.

Understanding the choice environment is a crucial issue. When do we need a nudge? Know that helps on designing the choice environment. We need nudges when the decision includes the following:

–      self-control issues such as benefits now – costs (dieting, exercise) 

–      degree of difficulty is high (choosing a mortgage)

–      frequency is low (choosing a collage)

–      feedback is seldom (long term processes)

–      knowing what you like is untested (a new restaurant).

How to design a choice architecture? Build the architecture based on NUDGES

–      (Wright) iNcentives on the right people

–      Understand mapping what makes people better of

–      Defaults should be yes-or-no decisions and default must the best cost-efficient option available

–      Give feedback, because it improves performance.

–      Expect error, because people will make mistakes

–      Structure complex choices to simply the decision with priorities and cut-off levels.

Two minor learnings are:

–      How to use social influence? It has three aspects such as:

o  Information for example how other have behaved,

o  Peer pressure for example people learn from others. I.e. following the heard. 

o  Priming. For example “Don’t Mess with Texas” anti-littering campaign. Creative nudge which was framed into the sense of belonging.

§ A tip. Ask what will people do and influence behavior. For example shall one eat fatty food.

–      How to use mental accounting? People are good on accounting options. Mental accounting might increase the possibility for people saving money, exercising more, reading etc. 

What should I personally do? 

Give feedback, because it improves performance.

Summary

The book in six words: “Freedom of choice with nudges that improves living.”