Tag: choice architecture

On Sludges

I had (and have) sympathy for Navin, but I have to confess that I did enjoy reading this tweet, because it is very much a teachable moment:

Why is this a teachable moment?

Because firms have an incentive to make it as difficult for you to “leave”. They make it as easy, painless and frictionless as possible for you to “join”, and they make it as difficult, painful and, well, friction-full as possible for you to leave.

Here’s Richard Thaler and Cass Sunstein on this phenomena:

Perhaps the most basic principle of good choice architecture is our mantra: make it easy. If you want to encourage some behaviour, figure out why people aren’t doing it already, and eliminate the barriers at a standing in their way. If you want people to obtain a driver’s licence or get vaccinated, make it simple for them, above all by increasing convenience.
Of course this principle has an obvious corollary: if you want to discourage some behaviour, make it harder by creating barriers. If you want to make it harder for people to vote, forbid voting by mail and early voting, and reduce the number of polling stations (and place them far away from public transportation stops). While you’re at it, try to make people spend hours in line before they can vote. If you don’t want people to immigrate to your country, make them fill out a lot of forms and wait for months for good news in the mail (not by email), and punish them for answering even a single question incorrectly. If you want to discourage poor people from getting economic benefits, require them to navigate a baffling website and to answer a large number of questions (including some that few people can easily understand).

Nudge, by Richard Thaler and Cass Sunstein, Chapter 8, pp 151, Kindle Edition

And they have a term for it too – sludge:

Any aspect of choice architecture consisting of friction that makes it harder for people to obtain an outcome that will make them better off (by their own lights).

Does not getting spam mails in his inbox make Navin better off, by his own lights?

Yes, of course!

Does the design of the unsubscribe (I’m being generous here) form add friction to the process of Navin obtaining this outcome?

Yes, of course!

That’s sludge in action.

And once you “see” it, you begin to spot it everywhere. Newspapers and magazines make it difficult for you to cancel your online subscriptions and banks make it difficult for you to file a complaint with the banking ombudsman, to give you just two examples. I’m sure you can think of many more from your own life, and Chapter 8 of the book Nudge has many, many other examples. Please read the whole chapter (and if you’re willing to humor me, the whole book).

And finally, this might resonate with people of a certain age (or maybe, even now, all ages?):

If you have the Monday blues, and now have an irresistible urge to drop everything else and watch the whole episode instead, it’s S04E04.

You’re welcome.

Opt-In, Opt-Out

I ended up paying somebody else’s electricity bill by mistake, and therein lies a tale.

About three weeks ago or so, an alert popped up on my phone. It was a notification from the Cred app. Or it may be that I saw this notification while doing something else on the Cred app. But whether it was a notification on my phone or within the Cred app, the call to action was clear. Two days left to pay your electricity bill, it said, inviting me to go ahead and pay.

Now, I usually pay the electricity bill by using either Amazon Pay or Google Pay, but I had no aversion to paying it via the Cred app. I already pay my credit card bills using the app, so why not electricity bills too? The amount that I had to pay looked right (based on what I remembered from the bill that the utility had sent me), and so I went ahead and paid.

And that was that, I thought.

Except we received, some days ago, the next month’s bill. And this latest bill said that we had to pay a whopper of an amount. Upon going through the fine print, we realized it was a whopper because I had not paid last months’ bill.

Except, of course, I had!

And so I dug through Cred’s sections, hunting down the notification re: I having paid the bill. And sure enough, there it was… except, on closer perusal, for one crucial fact. The consumer number wasn’t correct.

So what had happened?

I still get notifications in my inbox for electricity bills from the last apartment I used to stay in. We shifted out of that place in 2016, but I continue to get electricity bills for that apartment. And Cred, for some reason, decided for me that this was an electricity bill I needed to pay. And told me to pay it. And I went ahead and paid for it.

What is Cred? It is a start-up through which you can pay your credit card bills. There is a lot more going on there, but that is (maybe) a story for another blogpost. For now, it is an app that helps you pay your credit card bills, and that is good enough for us.

How do you go about adding your credit cards on the app? Well, you enter the number, you enter an OTP that you get on your phone, you jump through a couple of other hoops, and then you’re set. You get bill alerts, payment due day alerts, and there’s some gamification after you’ve made payment via the Cred app.

But the most important thing is that you have to opt-in when it comes to adding your credit card. It is not added in by default, you have to choose to add your credit card.

But the electricity bill? Ah, that was opt-out. I wasn’t asked to confirm if this was my bill. I’m sure I must have pressed yes at some point of time to a question along the lines of “Can we trawl through your inbox to identify bills you need to pay”, and I’m well aware of the fact that I was a lazy chump to do so. This blogpost is not me complaining about Cred, or saying something illegal happened.

But it certainly is about choice architecture. Having trawled through my inbox, and having surfaced an electricity bill, I sure do wish that Cred had added an additional verification step. If the name on the bill doesn’t match my name on Cred, maybe ask if this bill is mine? Or even if it does, still check if I should be paying this bill (maybe I’ve rented out that flat, and my tenant should be paying it, for example?).

And only post this confirmation should you be sending me a message to pay “my” electricity bill?

This is, of course, a well known problem in behavioral economics. See here, for example. Or open up the Zomato app! Just before you make payment, take a look at the fact that you’re paying INR 4 to the Feeding India Foundation – this is opt-out. That is, Zomato assumes you are willing to pay the 4 rupees, and you have to opt-out of paying it.

And Zomato will not send you cutlery by default – you have to opt-in to have the cutlery be sent to you.

And I do wish that electricity bill payments on Cred were opt-in, not opt-out!

P.S. This is a true story, but is also a useful way to segue into announcing that GIPE is hosting a week-long seminar on behavioral economics. I will be taking a couple of these sessions, and I now have skin in the game when it comes to talking about choice architecture. An ironical thank you is due to Cred, I suppose.

P.P.S I’m in touch with Cred about this, and while I am not asking for a refund, I do hope that they change their choice architecture. I’ll keep you guys updated 🙂

Livemint Interviews Cass Sunstein

Quick update, especially pertinent given the behavioral economics workshop at Gokhale Institute: Cass Sunstein interviewed by Anil Padmanabhan.

 

Who is Cass Sunstein, you ask?

Here’s a slightly old profile. Here’s the link to his Amazon author page. Here is an interview he did with Tyler Cowen. Here is his faculty page. Here’s a piece I loved reading (written by him).