Monthly Archives: January 2018

Review: Nudge

Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard H. Thaler, Cass R. Sunstein
My rating: 4 of 5 stars

The book presents two major concepts – Choice Architecture and Libertarian Paternalism and highlights why people make bad choices, when nudging helps and how to do it.

Choice Architects – these are people who have the responsibility for organising the context in which people make decisions

Libertarian Paternalism – where people should be free to choose but it is legitimate for choice architects to try to influence people’s behaviour in order to make their lives longer, healthier, and better. The reason for this is the difference between Humans and Econs

Econs – understand everything clearly and can always make the right decisions, compared to Humans who struggle to make the right decisions in some cases. It is where the difference between Humans and Econs is significant that Nudges can help steed humans and with embracing libertarian Paternalism towards decisions which make their lives better.

Humans suffer from:

  • Anchoring – where people get drawn towards an answer, e.g. a charity asking you to donate $100 will get a larger donation than one asking for $1 even if no one ever gives them the $100.
  • Availability – people build up an unhealthy fear or lack of fear because something is in their mind, e.g. the risk of a boat sinking if a boat has recently sank.
  • Representativeness – humans try to identify patterns of how similar things are. e.g. people would not expect a short person to be a basketball player
  • Optimism and Overconfidence – people over estimate their own ability, e.g. more than 50% of people will say they are above average.
  • Gains and Losses – people hate loosing things, loosing something makes people twice as unhappy as if they gained it.
  • Status Quo Bias – people tend not to want to change things, even simple things like ticking a box
  • Framing – the wording of a question makes a big difference to the outcome
  • Temptation – people are easily tempted and have low will power
  • Repetition – people have a routine (small such as eating snacks or longer) which they stick to and don’t like to change
  • Doing What Others Do and Think What Others Think – people like to copy others (e.g. telling people that 90% of people have completed their tax return is a big motivator for people to do theirs) and think like others (e.g. a popular song becomes more popular because people think they should like it)
  • The Spotlight Effect – people think others are paying much more attention to them than people really are
  • Priming – by asking people about something it changes their action (e.g. are you going to vote tomorrow? increased voter turn out)

When is it good to nudge?

  • Benefits Now—Costs Later – things you enjoy now but will cause issues in the future e.g. drinking
  • Degree of Difficulty – somethings are just more difficult e.g. selecting a mortgage
    Frequency – infrequent decisions probably need the most help e.g. selecting a university
  • Feedback – where there is no instant feedback for a choice e.g. selecting a pension saving
  • Knowing What You Like – e.g menus which suggest “Top selling” items
  • Markets: A Mixed Verdict – Market forces are not perfect, e.g. extended warranty is a product that simply should not exist.

Ways to architect choice:

  • Defaults – most people will choose this
  • Expect Error – design the process so that errors don’t happen or can be resolved easily. e.g. accepting a credit card no matter which way round it is put into the machine
  • Give Feedback – Well-designed systems tell people when they are doing well and when they are making mistakes as quickly as possible e.g. digital cameras showing a preview of the photo
  • Understanding “Mappings”: From Choice to Welfare – e.g. translating numbers into things people understand like physical objects
  • Structure Complex Choices – e.g. buying a house, filtering options to produce a subset for consideration
  • Incentives – Who uses? Who chooses? Who pays? Who profits? e.g. how are payments etc structures? people tend to forget about the opportunity cost and just consider the incremental cost such as the gas for a car and not how factoring in the cost of the car into the calculation.

The book goes on to present some applications of the above on topics such as money management, the environment, organ donation, healthcare etc.

Review: Leaders Eat Last

Leaders Eat Last: Why some teams pull together and others don’t by Simon Sinek
My rating: 4 of 5 stars

Humans get pleasure from a number of chemicals, these fall into positive selfish ones which are there for personal survival, positive selfless ones for the survival of the group and a negative one which cuts us off from the world.

Positive Selfish
Endorphin – enable us to perform hard labor
Dopamine – enables us to feel good when we make progress
Positive Selfless
Serotonin – is the pride we feel when those we care for achieve great things or we make people proud who care for us
Oxycontin – helps form bonds of trust, enabling better longer term problem solving between people who trust each other.
Negative
Cortisol – the feeling of anxiety, discomfort or stress caused by a weak Circle of Safety making us more selfish by inhibiting Oxycontin. Cortisol can’t work its black magic when we have someone by our side, only when there is the utmost confidence that the person at their side would do the same for them.

From these all personal emotions flow.

The responsibility of a leader is to provide cover from above for their people who are working below. When the people feel that they have the control to do what’s right, even if it sometimes means breaking the rules, then they will more likely do the right thing. Courage comes from above. Our confidence to do what’s right is determined by how trusted we feel by our leaders.

We don’t just trust people to follow the rules, we trust that they know when to break them. In weak organisations people break trust for personal gain – in strong organisations people break the rules because it is the right thing to do for others. If good people work in bad cultures people will be more concerned about following the rules out of fear of getting in trouble or loosing their jobs than doing what needs to be done.

Responsibility is not doing what we are told, that’s obedience. Responsibility is doing what is right – even if that has repercussions (e.g. a fine) but we can only be responsible in a trusting environment.

Trust is like lubrication. It reduces friction and creates conditions much more conducive to performance.

It is how people work together which is the biggest indicator of success.

The better the product, services and experience a company is able to offer its customers, the more it can drive demand for those products, services and experiences. And there is no better way to compete in a market economy than by creating more demanding and having greater control over the supply – which all boils down to the will of those who work for us. Better products, services and experiences are usually the result of the employees who invented, innovated or supplied them. As soon as people are put second on the priority list, differentiation gives way to commoditization. And when that happens innovation declines and the pressure to compete on things like price, and other short-term strategies, goes up.

When we have less, we tend to be more open to sharing what we have. People with little share because they realise that it might be them on another day who need it.

When we divorce ourselves from humanity through numerical abstraction, we are, like Milgram’s volunteers, capable of inhuman behavior. When our relationship with customers or employees becomes abstract concepts, we naturally pursue the most tangible thing we can see – the metrics. Leaders who put a premium on numbers over lives are, more often than not, physically separated from the people they serve. When a leader embraces their responsibility to care for people instead of caring for numbers, then people will follow, solve problems and see to it that that leader’s vision comes to life the right way, a stable way and not the expedient way. Leadership is about taking responsibility for lives and not numbers. All managers of metrics have the opportunity to become leaders of people.

When we do not feel safe from each other in the environments in which we work, our instincts drive us to protect ourselves at all costs instead of sharing accountability for our actions. Hording information is a sign of mistrust and self-preservation. If leaders feel they need to be the most knowledgeable then people hide what they don’t know for fear of having others question their authority. Good leaders share knowledge, ask for help and make introductions to create new relationships within their network.

People do more when they see the results of their effort, not just statistics but the actual people impacted by their work.

For people to make the right choices they need to have a sense of higher authority – God, a noble cause, a compelling vision for the future or some other moral code and not a shareholder, customer or market demand. This is essential so that people can feel they can raise their hand when something is going against this.

Dunbars number of 150 people that we can recognise, beyond this people don’t know each other and can’t form bonds of friendship. Traditionally this was the size of a village but these days could limit the size of a factory or office.

Between money or time & effort people value the time & effort someone gives more than the abstract value of money. We value a boss who spends time with us more than someone who just gives us a bonus.

In organisations where there is no safety, people hide mistakes and problems for fear and self-preservation.

The most common display of a lack of integrity is telling people what they what to hear and not the truth

For integrity to be present honesty is key, not to spin something to make it sound better.

Teams led by a directive leader initially outperform those led by an empowering leader. However, despite lower early performance, teams led by an empowering leader experience higher performance improvement over time because of higher levels of team-learning, coordination, empowerment and mental model development

Command and control puts a lot of pressure on succession planning which is a large gamble to find someone as good as the current leader.

There is no legal standing to the idea that shareholders are the true owner of corporations. They simply own shares, which are abstract representations. In legalese, corporations own themselves. And given that shareholders are not the true owners of corporations, corporations have no legal requirement to maximise share price, as many have claimed.

Would you get rid of your own children if you made a little less money than you expected in the year? Then why would you consider sacking people to be able to make the financial targets.

Employees and customers often know more about and have more of a long-term commitment to a company than shareholders do” Focus on customers, employees and products.

Dopamine addictions cause rivalry, competition and although regularly used to boost performance of an individual actually reduces the performance of the organisation.

These days people are impatient driven by two things: First is a gross misunderstanding that things like success, money or happiness, come instantly. Even though our messages and books arrive the same day we want them, our careers and fulfillment do not. The second millennials have grown up in a world in which huge scale is normal, money is valued over services and technology is used to manage relationships. The economic systems in which they have grown up, ones that prioritise numbers over people, are blindly accepted, as if that’s not the way it has always been. If steps are not taken to overcome or mitigate the quantities of abstractions in their lives, in time they may be the biggest losers of their parents’ excess.

Millennials think that, because they have grown up checking their phone then working then sending a text then working some more, they are better at multitasking. They are not better at multitasking. What they are is better at being distracted. Social media is the drug of the twenty-first century.

It is not when things come easily that we appreciate them, but when we have to work hard for them or when they are hard to get that those things have greater value to us.

Serve the people, who will service the customer, who will ultimately drive the business and benefit the stakeholders. In that order.

When a company declares that its cause is to become a global leader or to become a household name or to make the best products, those are selfish desires with no intended value to anyone beyond the company itself (and often not even everyone in the company). Those causes can’t inspire humans because those causes aren’t causes. No one wakes up in the morning inspired to champion that. In other words, none of them is a cause bigger than the company.

Leadership is always a commitment to human beings.