What’s wrong with behavioural economics?

Online quiz illustrating what's wrong with behavioural economics

I’m massively into behavioural economics. It’s a lens through which I view the corporate environments I work in. And it’s a body of knowledge and research I refer back to frequently.

I first became aware of behavioural economics six or seven years ago. I chatted to a chap in an airport business lounge who told me that his entire team had been told to read Daniel Kahneman’s Thinking Fast and Slow. Intrigued, I ordered a copy.

Reading it, I felt jolts of excitement. I just couldn’t stop thinking about the book. I kept applying it to my work and to life. What would Kahneman think about that? I started asking myself.

It was like when the optician drops that “just right” lens into place and you can see all the letters with sharp clarity. I became a bit obsessed. I went to see Kahneman speak. I read lots of other BE books.

Here, I thought, was a defence and easy explanation for a lot of the work we do at Wordtree (basically going into an organisation, ripping up their approach to all communications and starting again). Here was researched, proven evidence of how people think and what spurs them to act – in the context of financial markets, transactions and decision-making. Joy!

I can honestly say that it’s changed the tone of the conversations I now have to get organisations to buy into wholesale communications changes…

Before BE

Corporate lawyer: My profession needs no guidance in the English language, so bugger off and stop booking meetings with me because I’m not going to let you dumb everything down. If people don’t understand something as simple as the communications that have been through my hands, then they should just let people who’ve been to Oxbridge do the understanding for them.

Me: That’s an interesting view, but I’m not sure your clients, colleagues or suppliers understand their obligations, which is maybe why your compliance rates aren’t what you’d like them to be…

After BE

Corporate lawyer: Bugger off.

Me: Off the top of your head, what’s 37×18.2?

Corporate lawyer: Looks backfooted.

Me: OK, that’s you thinking slowly… but if I asked you what 2×2 was, you’d know without thinking. When it comes to communications with legal wording, you understand them like 2×2 – because you’ve spent years living with this stuff, it’s at your fingertips and it makes immediate sense. But for everyone else, it’s like working out 37×18.2 or even 37×18.2 cubed.

Corporate lawyer pauses for thought. I, meanwhile think, Kahneman, I bloody love you.

Of course, as Rory Sutherland often says in his “BE Impresario” role, behavioural economics is simply psychology repackaged.

His view is that corporate boards have an issue with psychology. It just seems too fluffy and girly to be taken seriously. But “behavioural economics” sounds serious, businessy and manly. (Actually, I don’t think I’ve ever heard Rory Sutherland make the girly/manly comparison – but I have heard him use fluffy/serious.)

And I think this begins to get to what I think is the inherent flaw in behavioural economics – that “rational” is posed as a norm, or at least a benchmark. Anything that isn’t “rational” is seen as deviance – or a “bias”.

People like Dan Ariely have written fabulous books about the upside of irrationality – but by even talking about “irrational” I think he and the rest of behavioural economics positions regular human thought and activity as inferior. And I have a problem with that.

For me, it means that while the observations that BE makes are fascinating, accurate and humongously helpful to businesses, having a core premise that human beings are (or at least, can be) irrational is a waste of energy.

And sometimes newcomers to BE seem to believe that because they’ve flipped open the lid to human behaviour and had a peek inside, somehow that makes them part of the “rational” or “not stupid” crowd. Look how smart I am, their excited LinkedIn posts seem to say, I am a bias-free zone! It’s only those stupid people that have biases. I know how it works now, and I’m 100% RATIONAL.

You even get people writing posts like: Is it ethical to use BE in business?  It’s like they think they’re in Hogwarts and they’ve plundered the dark arts library and now possess a spell of incalculable power. “My goodness me, should I even be allowed to use this?” they wonder.

But fundamentally, human beings are irrational. We build frameworks of belief based on the information we have to hand. We then look to have that framework of belief reinforced and agreed with.

We are all self-appointed heroes in our own, delusional narrative of how the world works.

Being aware of this doesn’t reverse its universal truth. And neither does it mean that “irrational” is bad. Quite simply, it just is.

Human beings are not rational – so don’t benchmark against rational

For far too long, business has put “rational” on a pedestal. Rational is seen as trustworthy and masculine. It’s seen as being a way of making decisions based on all the available data, rather than on silly, frivolous, petty, feminine emotion.

It’s a seductive premise, because it means that everything, if you just do it rationally enough – is predictable and controllable. It just happens to be a load of old rubbish.

People are complex and nuanced – driven by story and emotion rather than fact.

A confirmation “bias” isn’t an irregularity or deformity of thinking that needs to be corrected (in the way that bigotry, for example, should be corrected).

Instead, it’s a simple description of how we all perceive information. All of us. We can’t not perceive information in this way – even if we’re aware that we’re doing it.

People aren’t stupid

Having biases doesn’t make you dumb, it makes you human. And human beings think and act in a wonderfully irrational way.  We are not robots or algorithms (and let’s not forget that algorithms are programmed by irrational people). We don’t calculate probability. We don’t think deeply (or even at all) about a lot of the decisions we make. Which is, in part, how we’ve made such a great job of surviving as a species.

“Irrationality” isn’t a curse or something to rid ourselves of. It’s just an inescapable fact.

Bias schmias

Throughout BE, there’s a line in the sand. On the right side is behaviour we’re told would be “rational” to expect – thought through, impartial, sensible decision-making. On the left is the behaviour you actually get – not thought through, emotionally-driven, automatic and influenced.

And the way that BE’s often interpreted is right, good – left bad. So you get deviations from the right side described as “aversions” and “biases”.

Which I think is upside down. Much as I love Kahneman and Tverksy’s work, I wish they’d found a different way of positioning it – a way that didn’t suggest that the ideal human would be a Vulcan.

It’s time we celebrated being human for what it is – rather than keep trying to squeeze ourselves into ideals that just don’t fit.

Want to share your thoughts on BE with us? Drop us a line or give us a call – we’d love to hear them.