Monthly Archives: October 2013

5 Easy Steps To Becoming Louis Potok

Boy, behavioral economics is everywhere these days! As a self-proclaimed “behavioral expert” I often get people asking me for a reading list. I’m sick and tired of rewriting this five times a day, so here goes: the definitive, well-ordered, short (looking at you, Shane Parrish) behavioral economics reading list.

  1. Influence (Robert Cialdini). This is a quick read, flashy and fun but substantive. Cialdini finds behavioral economics everywhere and the book is almost written as a guide for used car salesmen or other hucksters. He does a great job of weaving in the academic research with existing sales practices. For years I’ve been planning to hire a graphic designer to make a poster of Cialdini’s Six Principles of Influence — you know, if you’re looking for gift ideas.
  2. Nudge (Thaler and Sunstein). The book that got everyone talking. Thaler and Sunstein distill the literature into really digestible behavioral principles and focus on applying those principles to policy-making. The authors are pretty cool as well: Thaler is a perennial Nobel bridesmaid; Sunstein is a prominent “jurist”. whatever that means; and I can’t ignore writer-in-part John Balz who is now evangelizing everywhere about Chief Behavioralists.
  3. Thinking Fast and Slow (Kahneman). Take off the water wings, put on your goggles and inhale: you’re diving into the deep end. You will never see the world the same way and you will piss off friends and family with the names of behavioral effects. More important, you will actually understand the effects you name, and you will apply them correctly. You will remember the studies that uncovered them. You will understand the complex way they inter-relate. You will consider getting a PhD in behavioral economics. Your life will be better than it was.
  4. Poor Economics (Bannerjee and Duflo). An important look at how behavioral economics and randomized controlled trials are breathing new life into tired debates about development. Compared to the other books on my list, this book has a lot more field studies, impact evaluations, and non-Western research participants.
  5. Scarcity (ideas42 co-founders Mullainathan and Shafir): A fascinating new branch of research on how “scarcity captures the mind”. Turns out, as best the authors can tell, poor people are not optimizing under constraints. They are not genetically less capable than the rich. They are not suffering from a unique culture of poverty. Instead, the condition of being poor leads to making choices that are systematically different (better in some ways and worse in others), and you would do the same if you were poor. In fact, you do the same thing when you’re short on time. They don’t talk about this, but at some level this must be connected to the cognitive metaphors we use to understand time and money.

What other behavioral economics books do you consider must-reads?

The Three Levels Of Frustration

There are three ways to react to frustration and there’s a strict hierarchy of these responses. As you move from Level 1 to Level 3, you have to put in more effort but you get more return. The exact tradeoff between effort and return depends a lot on the exact situation, but overall Level 3 is always harder and more rewarding than Level 2, and so on. You’ve probably had each of these responses at different times, and I think some people are more prone to one than the next.

Level 1 : It’s the system’s fault that this is frustrating, I’m not going to do it.

This website is so poorly designed, I’m not going to sign up.

It’s so hard to have my voice heard in the political process, I’m not going to vote.

My company’s infrastructure makes project management really hard, I don’t know what to do.

I would say this categorizes about 90% of global frustration. Something is hard or thought-intensive? Don’t do it. And there’s a deeper level to your thinking: “Everyone else must have also gotten discouraged, but they’d fix it if that was a problem. So this can’t actually be that important, right?”

Level 2: I’m frustrated, and it’s the system’s fault, but I can solve the problem if I work harder.

This is probably the attitude of most externally-successful people. Yes, the system makes it difficult to do this. But difficult isn’t impossible, and in fact difficult is usually easier than it looks. So I’m just going to do it.

Level 3: I’m frustrated, it’s the system’s fault and I can solve the problem if I work harder. But, if I work even harder than that, I can fix the system and make everyone else’s life easier.

The most obvious example is a political revolutionary. But this is also what great coders do — solve the general problem they’re facing and publish the solution as a program. Or the best people in your organization, who create infrastructure to solve their problems, instead of pushing through for themselves.

The problem is I think that Level 3 is much harder than Level 2, or at least takes more time. And of course there are many different levels of “Level 3 Solutions”. Imagine that you think people are at your office don’t feel adequately appreciated by their coworkers. You could do nothing — Level 1. You could go out of your way to verbally appreciate people — Level 2. You could start an email thread for people to recognize their colleague’s hard work — Level 3. You could institute a weekly meeting for verbal recognition of successes — Level 3+. You could start a company that attempts to solve this problem in workplaces everywhere — Level 3+++. Different levels of “general solution” may be appropriate depending on what the problem is, your own skill, and your free time.

If you run an organization you want to empower people to do Level 3 as often as possible, and make it easy for them to do so. As an individual, this framework can be helpful so you can decide for yourself which level is appropriate every time you’re frustrated.

What are some examples you’ve seen of each of these levels?

(Thanks to Matt Darling for a helpful comment and the relevant XKCD.)