Recently, the Behavioural Insights Team began altering the letter sent to British citizens if they failed to pay taxes on their car. The traditional letter was all text, informing the subject that if they didn’t pay now they would be hit with various penalties, including a clamped or and hefty fines. To increase the effectiveness of the letter, the scientists began experimenting with various forms of personalization. The first variant involved making a more specific threat, telling recipients that they would lose their particular model of car if they didn’t pay the tax. The second variant featured a personalized visual, so that the letter came attached with a photograph of the actual car question. While both approaches increased compliance, the customized picture was the most effective—it increased the compliance rate from 40 to 49 percent.
…the scientists have shown that people are significantly more likely to “tackle their goals,” such as starting a diet or going to the gym, after reaching a “temporal landmark.” They refer to this as “The Fresh Start Effect.” The power of this effect is large: According to the data, the typical undergraduate is 33.4 percent more likely to work out on the first day of the week and 47.1 percent more likely to work out on the first day of the new semester. This even applies to our birthdays, with the probability of going to the gym increasing by 7.5 percent on the day after a celebration. (Not surprisingly, the scientists found that this pattern doesn’t apply to our twenty-first birthday.)
Take a simple study on pens led by Avni Shah and George Wolford, psychologist at Duke University and Dartmouth College, respectively. The scientists found twenty different pen options, all of which cost between $1.89 and $2.39 and contained black ink. The subjects were told that the pens cost about $2, but that they could purchase any of them for a special discounted rate of $1.
Here’s where things get interesting. At first glance, offering people more pens might seem like a good thing, since they can find the pen that best suits their needs. Some people like ballpoint pens, others prefer roller-balls, or just care about the texture of the grip. Sure enough, offering people more pens led to a higher percentage of people buying pens, at least at first. When only two pens were offered, 40 percent of students bought one. However, when there were ten pens to consider, 90 percent of people found one they liked enough to buy.
But now comes the inverted U-curve—when more than ten pens were offered, people became much less willing to choose any pen at all. The drop-off was steep: when there were sixteen different pens to choose from, only 30 percent of subjects bought one.
The researchers were able to conduct a field experiment into how the introduction of technology changed the content of customer orders. According to the data, online customers chose pizzas that were more complicated and expensive, containing 33 percent more toppings and 6 percent more calories. Instead of just ordering a pepperoni pizza, they chose pies that featured highly unusual toppings, such as “quadruple bacon” or ham, pineapple, and mushroom. (When orders were placed online, bacon sales increased by 20 percent.)
Why does this matter? There’s solid evidence that experiencing such losses—noticing that our portfolio is losing money—leads to poor choices. In one lab experiment by Richard Thaler, Amos Tversky, Daniel Kahneman, and Alan Schwartz, subjects were far more likely to invest in a bond fund when feedback was given more frequently. Unfortunately, these low-risk bonds also generate lower returns over the long haul. As the scientists noted, “Providing such investors with frequent feedback about their outcomes is likely to encourage their worst tendencies…. More is not always better. The subjects with the most data did the worst in terms of money earned.” Such is the vicious circle of loss aversion, as our strong dislike of losses causes us to lose even more.
In one study of simulated driving led by David Strayer and colleagues at the University of Utah, subjects talking on their phones “missed seeing up to 50 percent of their driving environments, including pedestrians and red lights.” (They were also ten times more likely to not stop at a stop sign.) Another experiment by Strayer and colleagues found that people talking on their phones had slower reaction times than drivers with a blood alcohol level at the legal limit.
What causes these mental deficits? The scientists blame inattention blindness, which occurs whenever the amount of information streaming into the brain exceeds our ability to process it.
In 1985, at the dawn of the computer age, the psychologist Susan Belmore conducted a simple experiment on twenty undergraduates at the University of Kentucky. The students were exposed to eight different short texts and then asked to answer a series of questions about what they’d just read. Four of the passages appeared on paper (a sheet of white bond, single-spaced, forty-seven characters per line) and four appeared on the monitor of an Apple II Plus 48k computer. Belmore was curious if reading the text on a screen might influence both the speed of reading and levels of comprehension.
The results were depressing, at least if you were an early adopter of computer technology. “These data indicate that reading texts on a computer display is not equivalent to reading the same texts on paper,” Belmore wrote. “Overall, college students took 12 percent longer to read and comprehended 47 percent less with computer-presented text.”