Tag Archives: Richard Thaler

Thinking in a Second Languages Reduces Decision Bias 

Boaz Keysar

Boaz Keysar

People who can think in a foreign language are more able to rationally analyze risk compared with evaluating risk in their native language, found University of Chicago’s Boaz Keysar, Sayuri L. Hayakawa, and Sun Gyu An.

Sayuri Hayakawa

Sayuri Hayakawa

When volunteers analyzed risks presented in their native language, they were risk-averse when considering potential gains and more risk- tolerant when considering possible losses.
However, they were did not show this risk assessment bias when they considered the same risks vs rewards in a foreign language.
Using a foreign language reduced loss aversion and increased acceptance of hypothetical and real bets with positive expected values.

Micheline Favreau

Micheline Favreau

This effect could occur because foreign languages are typically processed more slowly than in a native tongue, leading to more deliberate cognitive processing, argued Concordia University’s Micheline Favreau and Norman Segalowitz.

Norman Segalowitz

Norman Segalowitz

Foreign language processing generally requires greater cognition-intensive systematic, analytical effort, leading to increased emotional and cognitive distance than in a native tongue, suggested Princeton’s Daniel Kahneman in his distinction between Thinking Fast and Slow.

Stefano Puntoni

Stefano Puntoni

Even when people fully understand language nuances including colloquialisms, impolite words, terms of endearment and reproach, they react less emotionally in a foreign language, according to self-report and electrodermal measurements, found Erasmus University’s Stefano Puntoni, Bart de Langhe of University of Colorado, and Cornell’s Stijn M.J. van Osselaer.
As a result, more than half the participants preferred the riskier option presented in a foreign language instead of the native tongue.

Richard Thaler

Richard Thaler

This finding confirmed participants’ tendency toward myopic risk aversion, or greater sensitivity to losses when thinking and acting in their native languagedescribed by University of Chicago’s Richard Thaler, Amos Tversky of Stanford, Princeton’s Kahneman, and Alan Schwartz of University of Illinois.

Amos Tversky

Amos Tversky

Among more than 140 native Korean speakers and more than 100 English speakers in Paris, Keysar’s team confirmed the same pattern of enhanced deliberation and reduced framing effects in a foreign language in hypothetical low-loss, high-gain bets.
Just 57 percent of Korean-speaking participants accepted bets offered in Korean, contrasted with 67 percent when offered in English, suggesting heightened deliberation in a second language.

Daniel Kahneman

Daniel Kahneman

Likewise, more than 50 English-speaking volunteers who spoke Spanish as a second language received $15 in $1 bills, which could be kept or bet on a coin toss.
For every lost toss, participants lost $1.
However, if they won, they kept the $1 and earned another $1.50, a significant return on the chance bet.
When conducted in participants’ native English language, 54% accepted bets, whereas when presented in Spanish, 71% agreed to bet.

Alan Schwartz

Alan Schwartz

“They take more bets in a foreign language because they…are less affected by the typically exaggerated aversion to losses … People who routinely make decisions in a foreign language rather than their native tongue might be less biased in their savings, investment, and retirement decisions, as a result of reduced myopic loss aversion” wrote Keysar and colleagues.

-*How do you reduce “myopic risk aversion” in your native language?

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Still Fulfilling Your New Year’s Resolutions?

-*Did New Year’s Resolutions fade as quickly as the month of January?

Katherine Milkman

Katherine Milkman

If so, University of Pennsylvania Katherine Milkman has a recommendation to resume the good intentions toward goals: “Nudges”—small environmental interventions that can shift behavior to increase adherence to challenging commitments, whether at work or in personal life.

Hengchen Dai

Hengchen Dai

Milkman collaborated with Wharton colleague Hengchen Dai and Harvard’s Jason Riis to investigate “temporal turning points” – moments that feel like a new beginning, like New Year’s Day or beginning a new job or school.

Jason Riis

Jason Riis

Milkman, Riis, and Dai reported several examples of the “fresh start effect”:  They found that the number of online Google searches for the term “diet” increase following temporal landmarks like the beginning of a new week, month, year, or semester; a birthday or a holiday.
The largest increase—82% above the baseline—occurred immediately after New Year’s Day for nine years they studied.

Similarly, the number of gym visits of 12,000 undergraduates over 18 months increased in January, then declined, with smaller increases at the beginning of each week, each month, and each term.

 This pattern also occurred among 43,000 participants in a goal-setting website, stickK, over 30 months.

Members can set goals and contractually agree to consequences for failing to attain them, such as community sanctions to monetary payments to disliked organizations.
The greatest number of contracts—145% above the average rate—were signed at the beginning of the New Year, and more contracts were signed at the beginning of each week.

Richard Thaler

Richard Thaler

Commitments to pursue and return to goals increase after these “notational boundary,” described by Richard Thaler of University of Chicago.
A temporally-triggered “fresh start” can compensate for limited willpower and persistence by giving people a chance to restart their commitments.

Besides “temporal turning points,” self-designed “nudges” can be contingency plans for a specific corrective action when confronted with the temptation to deviate from the goal path: “Whenever situation x arises, I will initiate the goal-directed response y.”

Peter Gollwitzer

Peter Gollwitzer

New York University’s Peter Gollwitzer calls these mitigation plans “implementation intentions,” which result in better adherence to goal-directed efforts when developed before tempting situational cues.

Stephen Ciccone

Stephen Ciccone

The stock market’s “January Effect” of better-than-average performance early in the year may result from the “fresh start” phenomenon, although Stephen J. Ciccone of University of New Hampshire argues that it may be more affected by investor optimism and the “false hope syndrome.”

Janet Polivy

Janet Polivy

University of Toronto’s Janet Polivy and C. Peter Herman describe the “false hope syndrome’s” unrealistic expectations about the likely speed, amount, ease, and consequences of self-change attempts, and subsequent disappointment of these optimistic aspirations.

Ciccone found that investor sentiment, as measured by the University of Michigan’s Index of Consumer Confidence, peaks in January and suggested that optimistic bid up stock prices of firms with higher levels of uncertainty.

C. Peter Herman

C. Peter Herman

Typically, these firms are unable to meet the optimistic expectations, and disappoint investors when they under-perform.
However, this pattern continues each year, probably due to the combined impact of  “fresh start effect” and the “false hope syndrome.”

Unrealistic optimism has been well-documented in overestimates of personal abilities, future performance and the impact of achieving goals, as well as underestimates of the time and effort to achieve goals.

Jeffrey Jensen Arnett

Jeffrey Jensen Arnett

Jeffrey Jensen Arnett of Clark University found that both 200 adolescents and more than 200 adults held optimistic biases regarding the risks of smoking even though the strong majorities of smokers and nonsmokers in these groups agreed that smoking is addictive and causes death for “most people” who smoke.

However, the adolescent and adult smokers doubted that they would die from smoking even if they smoked for 30 or 40 years, and most adolescents believed that they “could smoke for a few years and then quit.”

Roger Buehler

Likewis Roger Buehler

Likewise, most people underestimate time required to complete tasks, called “planning fallacy”  by Wilfred Laurier University’s Roger Buehler, Dale Griffin of University British Columbia and University of Waterloo’s Michael Ross.

Dale Griffin

Dale Griffin

They found that 465 volunteers:

  • Underestimated their own but not others’ completion times for academic and nonacademic tasks
  • Focused on future plans rather than comparing with similar past experiences when making completions time estimates
  • Attributed their past errors in predicting completion times to external, transient, and specific factors, implying less personal accountability for misjudgments.
Mike Ross

Mike Ross

Volunteers were able to eliminate their bias toward inaccurately optimistic estimates when they explicitly considered connect relevant past experiences to inform current estimates.

Fiona Jones

Fiona Jones

The optimism bias can be reduced by setting modest, attainable goals, according to University of Leeds’ Fiona Jones and Adrian Coggins with Peter Harris of University of Sussex and University of Hertfordshire’s Hilary Waller.

They compared 119 volunteers’ expectations about their participation in a twelve-week-long exercise course and their actual attendance, and found that participants who set smaller goals were more likely to achieve and maintain the goal behavior over time.

-*How effective are “temporal turning points” to initiate and re-start positive behaviors toward your goals?
-*How do you guard against optimism bias and “false hope syndrome” in planning and executing toward your goals?

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“Nudging” Compassion, Resilience to Reduce Conflict, Stress

David DeSteno

David DeSteno, directs Northeastern University’s Social Emotions Lab, where he investigates cognitive and neurological mechanism related to social behavior.
In Out of Character: Surprising Truths About the Liar, Cheat, Sinner (and Saint) Lurking in All of Us , and at his PopTech talk, he shared how he investigated whether evoked compassion and empathy is associated with reduced aggression.

He described experiments in which volunteers solve math problems for money.
In some conditions, one of DeSteno’s associates posed as another volunteer and noticeably cheated to earn more money than the real volunteer.
In other conditions, the confederate abided by the rules.

For some experiments, the cheating confederate, a professional actor, evoked empathy and compassion by saying that she was  worried about her brother, who was just diagnosed with a terminal illness.

In these situations, the volunteers were less likely to intentionally inflict discomfort on her in the following study of “taste perception,” a measure of aggression.

In this experimental trial, the volunteer measured a discretionary amount of extra-hot sauce into a cup for the cheating or non-cheating confederates to taste.

Volunteers poured five times more hot sauce for cheating confederates than non-cheating confederates, but they treated cheaters who evoked empathy the same as non-cheaters.

DeSteno noted most people are willing to help others who have some similarity to them, such as a shared identity of sharing a religious faith or hometown, or even are moving together as in conga lines, military drills.

He suggested that movement “synchrony causes separate identities to merge into one,” and demonstrated this trend in a music perception study, where volunteers in the same room tapped their hands on sensors when they heard tones.

In some conditions, the tones were synchronized so the volunteers were tapping at the same time as other volunteers, and in other conditions, the tones were independent.
De Steno found that 50% of volunteers who tapped at the same time were willing to help other volunteers, whereas 20% of those who tapped at different times helped others.
He concluded that volunteers felt more similar by tapping together, so felt more compassion, and were more likely to help others.

DeSteno is investigating social media like Facebook as a platform for sharing similarities to reduce aggression in conflict, cyber-bullying, victims of distant natural disasters.

He  said uses Cass Sunstein’s and Richard Thaler’s idea that small behavioral and organizational changes can “nudge” people to healthier, safer, more productive, and prosperous habits outlined in Nudge: Improving Decisions About Health, Wealth, and Happiness 

Their practical recommendations for designing effective “choice architecture” are consistent with DeSteno’s research-based findings:

* Align incentives with desired outcomes
* Identify possible alternative outcomes in familiar terms
* Provide default options that favor desired outcome behaviors
* Offer prompt, relevant feedback about choices and outcomes.
* Expect deviation from the targeted outcome, and build in ways to prevent, detect, and minimize this variance.
* Structure complex choices to reduce the difficulty of decisions-making

-*How have you seen “similarity” affect workplace collaboration and support?

-*Where have you seen organizations implement “choice architecture” to encourage employee behaviors toward positive goals?

BJ Fogg

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