You must have been into a library; you stay silent. That is a classic social norm example. Another common one is littering. As we all know social norms can either be socially desirable or socially undesirable.
Every day we adhere to social norms that are an array of unwritten sets of rules we follow. In a way, these play a crucial role in the smooth functioning of a society. Once we deviate from it, we can expect negative consequences.
Robert Cialdini deconstructs the concept further; he describes two types of social norms: Descriptive and injunctive.
Descriptive (popular) social norms = What is being done
The descriptive social norm refers to actions that others seem to be doing. Irrespective of its impact – either socially desirable or socially undesirable – social norms exhibit a “contagious effect”. Take the example of littering; seeing others maintaining a clean environment persuades us to keep those places clean; in contrast, if we see others litter a place, we tend to follow it.
Robert Cialdini’s 1991 report provides evidence. He together with his team demonstrated how “littering begets more littering”. Not only that, they further showed when a norm began to change; in a perfectly clean environment, the subjects adhered to that social norm even with one litter; with the increase of the number of litters, the “slippery slope began”. We tend to change our perceived descriptive social norm from the ” no one litters here” to “everyone litters here”.
This certainly goes beyond littering, even to policy making!
The interesting thing here is that we, most of the time inadvertently, promote socially undesirable norms with our statements highlighting socially undesirable behaviours as the norm. It results in a dangerous “boomerang effect”.
David Halpern in his excellent book memoir – “Inside the Nudge Unit” (David Cameron’s unit where he worked) writes, ” I have lost count of the number of examples of Robert Cialdini’s “big mistake” that I have seen”.
Injunctive social norms = what ought to be done
in contrast to the descriptive social norms, injunctive social norms refer to actions that people either approve or disapprove of (as we perceive). It could either be a displaying “do not litter” notice, the presence of a designated place to dispose of garbage, or what we see that another person removes and properly disposes of the litter.
As I understand, there is a very important difference between the descriptive social norms and the injunctive social norms; the former can be situation-specific while the latter’s influence can be very robust. For example, Cialdini and his team’s research demonstrated seeing that someone picking up and removing litter from a clean environment (social disapproval) lead others to imitate that behavior not only at that particular place but in other settings also.
How can we apply the above concepts usefully?
- Using descriptive social norms is like a double-edged sword; it becomes effective only when most people engage in socially desirable behaviors; if most engage in socially undesirable behaviors it will backfire.
- If we suspect most people engage in socially undesirable behaviors, Cialdini suggests using injunctive social norm focus.
I will write in a later post how descriptive and injunctive social norms influence, for better or worse, during this COVID 19 pandemic.
This is a very common trap the decision-makers fall into. Find out how?
I will begin with two analogies: “Nail production” and the “cobra effect”.
The famous “nail production” analogy
A company announced to its employees that they were going to assess their productivity by the number of nails manufactured. The result was a large number of useless small nails; then, the managers came up with a different metric: the weight of nails manufactured. The result was few but heavy, again useless nails”.
This story itself could be a manufactured one; but, it is a good introduction to the concept.
However, Charles Goodhart, a British economist who served at the Bank of England monetary committee articulated the concept and first wrote about it in 1975.
The following sentence is the common reference used by experts to explain Goodhart’s law.
I found another interesting analogy to the concept.
This story relates to India’s British colonialism era. At that time, the rulers wanted to get rid of cobras prevalent on the streets. As a strategy, the rulers offered financial rewards to those who brought dead cobras; it was an instant success. However, with time, people started to breed cobras to claim more money. When the rulers found out their folly, they gave up the reward. As a result, they experienced more cobras on the streets because people released their “harvest”. (I do not know how far it was true).
Let us take another metric now:
Number of calls per hour
Suppose you want to expand your service and you decide to give incentives to your employees at the call center based on the number of calls made per hour. And you also set a target: 10 calls per hour. Now, the metric becomes the target. If you do not add another related metric/s with regard to quality, your employees will definitely achieve the measure at the expense of the quality of the call because they might be tempted to end a call within six minutes disregarding to meet the callers’ need.
However, I find, Drs. Gregg Fonarow and Boback Ziaeian expand it a little further in their editorial comment to the Journal of the American College of Cardiology. They say that this could happen when the metric is attached to financial incentives.
Metric attached with incentives! What incentives?
Here, the keyword is the incentive. Goodhart’s law comes into play when the metric becomes the target and it is attached with incentives – usually, but not always, with financial incentives.
Hospital readmission rates
Drs. Gress Fonarow and Boback Ziaeian captures this law in their editorial to the American College of Cardiology about hospital readmission rates with the following sentence;
According to them, sometime back, healthcare researchers observed higher readmission rates associated with some selected conditions of heart failure within 30 days of discharge. They wanted to reduce the 30-day hospital readmission rate by giving financial incentives to residents as well as financial penalties to the management if their hospitals failed to meet the target.
As expected they achieved the target, however not without unintended consequences.
A group of researchers led by Dr. Ankur Gupta in 2018 reported at JAMA Cardiology that hospital readmission reduction program was associated with reduced 30 – day and 1-year readmission rates but at the same time associated with increased 30-day and 1-year mortality rates.
The law can come into play not only with financial incentives. Consider the following example.
Number of research papers published
In the academic field, the number of research papers published is the standard metric in the advancement of science, economy, or any other academic discipline.
However, if the ultimate goal of this metric is either the expertise of the subject or the technical know-how of the paper publishing is, I think, Goodhart’s law does not come into play. It matters only when we consider this metric as a measure of personal academic advancement because it may lead to aspiring researchers to play around with data sets to show statistically significant results and spinning with the writing of abstracts and conclusions.
That means the operation of Goodhart’s law depends not only on the metric when it is attached with the incentives – either financial or otherwise – but with the target or goal that is expected to measure.
This is an introduction to Goodhart’s law. Those who have explored the concept further have come up with its variants. One such expert is David Manheim; those interested can listen to one of his interviews through the following link:
In 1957, Leon Festinger put forward the cognitive dissonance theory.
What does “dissonance” mean?
The word, “dissonance” refers to either a “lack of agreement” or an “inconsistency”.
In cognitive dissonance, we are entering into an internal clash among different cognitions – beliefs, thoughts, or attitudes.
Let us be clear this concept with a simple example;
Consider that someone likes to drink alcohol, and at the same time he or she thinks that alcohol seriously undermines health and causes other social and family problems. You see that both thoughts are in a clash.
What will happen next?
This conflicting dilemma creates unrest and shatters our mental peace. No one likes to live in that sort of situation. So, we weigh two options; either to change the behavior or defend the behavior by changing the cognition.
In the case of drinking, depending on several other factors, the drinker either change the behavior or reject the new cognition and instead stick to the old one.
In their latest book, “Mistakes Were Made (but not by me)”, Carol Tavris and Elliot Aronson update the cognitive dissonance theory. I found an excellent animated summary of this book on YouTube.
We can find another thought-provoking discussion with Carol Tavris and Elliot Aronson. You can read it here.
Not only in drinking, but we also experience this phenomenon in almost all our daily activities.
When buying something
Think that you are going to buy a car. After making the decision, we still continue to search for similar ones.
Why? We want to justify that we made a better deal.
Because we want to compare our buying price with others to make sure that we made a better choice.
The concept is frequently used in marketing, more commonly two techniques: “foot-in-the-door” and “door-in-the-face”.
In this technique, their first task is to get the door open by getting the foot inside the house. If the salesman is successful in this step, the chances are higher in selling at least one product to the homeowner.
However, the marketers apply it’s reversal also: “Door-in-the-face”.
The opposite of the Foot-in-the- door technique is the Door-in-the-face technique. In this instance, we start with a much bigger request that is unlikely to achieve. Then, it is followed by a much smaller one.
These techniques are in use in other fields too. Nancy Darling describes this technique in relation to parenting.
Most of the time we live in an illusion misjudging others. Why do I say that? In fact, I am not the one who demonstrated it first.
Imagine that you are listening to a lecture with your classmates. You want to ask a question from the lecturer to clarify a certain matter. However, you assume your classmates understand the presentation because they do not ask questions. Therefore, you won’t ask your question.
Your friends too won’t disturb the presenter for the same reason.
You all are experiencing “pluralistic ignorance”.
Miller and McFarland demonstrated exactly the same in 1987: their 22 study participants – university students – responded to a set of questions from a difficult-to-comprehend text. Professional help was assured if necessary. The questionnaire included the
- What percentage of other students you think will seek clarification?
- What extent do you understand the text? (The responses were on a Likert scale).
The students estimated that 37% of others would seek clarification; in fact, none sought any clarification. And, the understandability was no different at all.
This was not the first time that the pluralistic ignorance was studied; it was first demonstrated as far back as in 1931 by Daniel Katz and Floyd H. Allport with regard to racial discrimination in the US. At that time racial minorities were excluded from university dormitories and fraternities. They asked from 1,998 students about their personal objections and estimates about public opinion: 55% of them had no personal objection; however, they were concerned about public opinion. So, although they were the majority, they did not act like a majority.
As Katz and Allport coined, it is an illusion. We, most of the time, live in an illusion world misjudging others.
Even 40 years later, this racial bias existed among university students. Herbert O’Gorman demonstrated it using data from a national sample of 1190 students. The questions inquired whether they individually favored racial segregation and whether they believed that most other students favored segregation. The findings startled many – only 18% favored segregation individually while as many as 47% believed that most other students favored segregation – the silent majority support the minority’s opposing view. Interestingly, he also found that this paradox did not change either by age, education, or income level: a very powerful, robust phenomenon.
We meet pluralistic ignorance in almost every aspect of our lives, not only just in a classroom or racial issues.
The pluralistic ignorance was demonstrated as a reason for very low rates of taking paternity leave by Japanese men, alcohol use in universities, perpetuating unethical practices, smoking, illicit drug use, sexual behaviors, professional practice, and many more.
David Krech and Richard Crutchfield (1948) aptly summarised the pluralistic ignorance in this sentence: “No one believes but everyone believes that everyone else believes”.
In fact, many do not; we overestimate in most instances – sometimes, grossly. We falsely – rather erroneously – believe that many are in consensus with us with our judgements, and those who are not in consensus with us are not only a few in number but “deviant” also; this phenomenon was termed “false consensus effect” in 1976 by Lee Ross, Greene, and House from the Stanford University.
Ross et al. study series: 1976
Ross and his team asked from a group of students choose one out of two options to choose for a series of hypothetical situations, predict the percentage of students who would and wouldn’t choose their favoured option, and their opinion about the personal characteristics of the students who would and wouldn’t choose their option.
“Eat at Joe’s”
Of the four scenarios they studied, I briefly describe here the hypothetical “eat at Joe’s” study. They sought students’ willingness to walk 30 minutes around the campus wearing a signboard displaying “eat at Joe’s”. Then students were required to respond to the following questions:
- What % of your peers would do that?
- What % of them would refuse that?
- their choice?
The results were as follows:
- 53% of the students who chose to wear the signboard thought 64.6% of their peers would do that same.
- the rest – 47% – students who chose not to wear the signboard thought 68.8% of their peers would do that same.
As we can see that the students overestimated their peers’ opinions in favour of their chosen options than was the case.
Moreover, the students perceived the alternate opinions ” uncommon, deviant, or inappropriate”!
Does this resonate with you?
This is a cognitive trap into which we all fall.
A meta-analysis on false consensus bias: 1985
A decade after the Lee Ross et al., study – in 1985, Brian Mullen and his team meta-analysed as many as 115 studies that tested this bias. These studies covered a range of topics: smoking, food choices, sports, politics etc. The combined effects of all the studies became “highly significant and its effect sizes were of moderate magnitude”.
False consensus among heavy drinkers:1986
In 1986, Wesley Perkins and Alan Berkowitz analysed data that reflected attitudes about drinking from a representative sample of 1,116 college students in the New York state. The data also included responses to a series of survey questions about drinking behaviour. The students had to choose one out of five statements which best represented their own attitude as well as their perception about their peers’ attitude.
Of those five, two statements were as follows:
- “A frequent “drunk” is okay if that’s what the individual wants to do”.
- “An occasional “drunk” is okay even if it interferes occasionally with grades and responsibilities.
The above statements reflect very permissive (liberal) attitudes.
What do you think about their response?
Only 9.5% and 9.3% chose these two statements as their personal attitudes – altogether 18.8%; however, 29.5% and 33.2% perceived these statements as their peers’ attitudes respectively – altogether 62.7% of the total students responded!
They grossly overestimated – those who were, in fact, the minority perceived themselves as falsely in consensus with the majority – that the majority of their peers were with them.
This is how it happens; reasoning justifies themselves to continue their unhealthy drinking pattern. In this study, the researchers found that not only the group with liberal attitudes towards drinking demonstrated false consensus, they also reported more drinking levels than those with restrictive attitudes.
In fact, this was not the only study; a series of studies at different universities demonstrated the prevalence of this bias.
The false consensus among adolescent Smokers: 2009
In 2009, Otten et al. demonstrated this bias among Dutch adolescents. In addition to their own smoking behaviour, these adolescents estimated the proportions of their
- 1= none of my friends smoke
- 2= less than 50% of my friends smoke
- 3=50% of my friends smoke
- 4= more than 50% of my friends smoke
- 5= all of my friends smoke
They found that regular smokers overestimated the prevalence of smoking of their friends significantly higher than friends of nonsmokers’ smoking.
What may happen next? The false consensus bias may lead to the “self-fulfilling prophecy” with time: the minority becoming the real majority due to the influence of the false consensus bias.
Even those who do not hold the same attitudes may spread it like carriers spreading an infectious disease.
Think of this scenario: “A depositor empties his bank account because of his wrong belief that the bank is bankrupt. The word spreads like a wildfire; others follow suit. As a result, the bank becomes bankrupt”.
This, in fact, occurred in Greece in 2015.
This is the “self-fulfilling prophecy”.
As far back as in 1948, Robert Merton described this phenomenon using the above scenario.
So, this is what happens:
1. We make an assumption.
2. We change our action/behaviour based on this assumption.
3. Due to our action/behaviour, the assumption becomes true.
According to Merton’s words, it is like this: “A false definition evokes a new behaviour which makes the originally false conception comes true”.
Although Merton wrote about its negative consequences, it can result in positive consequences too.
Look at the following scenarios.
There are several variations of self-fulfilling prophecy.
1. Placebo effect: When someone believes that a particular substance, considered by the self as medicine, relieves pain, when it is taken, he or she feels no more pain. In reality, the substance has no scientifically proven mechanism to relieve pain.
2. Investment bubble: This happens when we apply reverse action of the bank bankruptcy case Merton mentioned.
3. Pygmalion effect or Rosenthal effect: This is another type of self-fulling prophecy. Here, higher expectations from either a student or an employee yield higher results.
4. Golem effect: This is the opposite of the Pygmalion effect: lower expectations results in lower outcomes.
Think of someone who smokes – and, you are trying to persuade the person to quit smoking. How are you going to start your journey?
Now, let us explore how researchers grappled with this problem during the past several decades.
1983: “Stages of change”
Since the early 1980s, two researchers – James Prochaska and Carlos DiClemente – had been working with smokers who wanted to quit. They observed that some quitted without any outside help. In order to explore the observation further, they recruited 872 middle-aged volunteers who were smoking from Rhode Island and Texas through a newspaper advertisement. After classifying them into five groups, the study participants were followed for two years. Prochaska and DiClemente published their findings in 1983.
In this study, they conceptualised quitting as a process (a journey) someone goes through in several stages – not as a one-time event. They considered the quitters would journey through four stages: from pre-contemplation to contemplation, action, and maintenance. Based on that premise, the participants were grouped into the following categories:
- Pre-contemplators (Immotives): those who smoked but no intention of quitting; “there is nothing that I need to change”.
- Contemplators: those who smoked during the year before the study but seriously thinking about quitting; “I know that I have a problem that needs to address”; “But, I am not ready yet”; “I have other priorities at the moment”.
- Recent quitters: those who quit smoking less than 6 months
- Long-term quitters: those who had not smoked more than 6 months
- Relapsers: those who attempted during the year before the study but failed
Their study did not limit just to describe the stages only; they wanted to find out how these volunteers “processed their cognitive and emotional challenges” throughout the stages.
“Processes of change”
Based on their prior knowledge, the researchers defined ten processes of change. These consisted of five cognitive and affective constructs while the rest were behavioural. The following were those according to their published paper with a sample item for each variable.
Cognitive and affective processes
- Consciousness-raising (getting the facts): “I look for information related to smoking”.
- Social liberation (notice public support): “I notice public places have set aside places for non-smokers”.
- Self-reevaluation (creating a new self-image): “My dependence on smoking makes me disappointed in myself”.
- Environmental reevaluation (noticing your effect on others): “I stop thinking that my smoking is polluting the environment”.
- Dramatic relief (paying attention to feelings): “Warnings of health hazards move me emotionally”.
- Self-liberation (making a commitment): “I tell myself that I am able to quit if I want to”.
- Counter-conditioning (substituting): “I do something else instead of smoking when I want to relax”.
- Reinforcement management (rewarding): “I am rewarded by others when I do not smoke”.
- Stimulus control (managing the environment): “I remove things from my workplace that reminds me of smoking”.
- Helping relationships (getting support): “I have someone who listens when I need to talk about my smoking”.
How they assessed the change processes
The researchers created a 40-item self-report questionnaire to measure the change processes; and, the respondents answered the questions on a 5-item Likert scale (1 = not at all; 5 – repeatedly).
In addition, their smoking status was also assessed and the respondents’ saliva was tested to validate self-reporting of the smoking status. During the two years of follow-up, the researchers interviewed them every six months.
Their findings: Four stages of change
I depicted their findings in the following graphic; the integration of the four stages – pre-contemplation, contemplation, action, and maintenance – into the processes of change variables.
Let us go through the above graphic.
The pre-contemplators were not interested in seeking information in contrast to contemplators. Making a commitment – for those in the action stage – seemed to be the most highly rated activity. The self-reevaluation became important for both groups who were in contemplation and action stages. And, those in the action stage valued high being rewarded and getting outside help too. Finally, those in the maintenance stage rated high in coping skills such as substitution and stimulus control but, interestingly, not public support and being rewarded. Both maintenance stage strategies seemed to be useful in the action stage as well.
They also added more evidence to their previous percentage distributions of different stages in a population: 40% each in pre-contemplation and contemplation stages, and less than 20% in the preparation stage. These proportions seem to vary by countries; for example, 70% of Germany’s smokers were in the pre-contemplation stage.
Self-efficacy, temptation, and stages of change
Our perceived ability to do a certain task will increase the chances of doing that task, according to Albert Bandura’s self-efficacy theory which was formulated in 1977. Research has shown this self-efficacy construct even predicts the likelihood of engaging in a certain behaviour/task including smoking. This association does not change with the type of measuring scale indicating how robust and powerful this construct is.
With regard to the stages of change, prior to 1985, Prochaska, DiClemente, and Michael interviewed 957 volunteers who were smoking with a self-efficacy scale. In addition to self-efficacy question items, it included questions related to temptation level for smoking. The researchers hypothesised self-efficacy and temptation as a critical dimension – a mediator – in the behaviour change journey. They measured these constructs using a 31-item scale: the self-efficacy by asking how confident they were to avoid smoking at home, office etc and the temptation by asking hos tempted they were to smoke at those situations.
This study found that the study participants travelled through different stages of change at different speeds and different directions. For example, while some contemplators moved forward to the action stage, another group stepped backwards to the pre-contemplative stage – even some stalled at the same stage. I drew the following graph using mean scores shown in their paper; we can appreciate how temptation and self-efficacy mean scores changed with the stage of change among smokers.
Since the publication of the smokers’ two-year journey in 1983, a plethora of studies appeared in research journals on this subject. A decade later, in 1992, Prochaska and his research colleagues reviewed those and expanded their original four-stage model into a five-stage one; they added “preparation” as a separate stage in-between contemplation and action stages.
“Preparation” as a stage of change
The authors seemed to have been convinced that people tried (rehearsed?) some minor behavioural activities before they embarked on real action; for example, reducing the number of cigarettes, delaying the first one (DiClemente et al., 1991 etc.
In contrast to the preparation stage, those in the action stage stayed abstinent and maintained the new state for a period of one to six months according to the authors.
Some of those who are in this stage may march forward to the maintenance stage abstaining smoking beyond six months; they may adopt some more actions – such as counterconditioning and stimulus control – to prevent relapse. Research shows that those who enter into this stage shuttle between this stage and other previous stages 3 – 4 times before stabilizing in the maintenance
From a linear pattern to a spiral pattern
Prior to 1992, Prochaska and others considered that the shuttling through the stages follows a linear pattern; however, with the emergence of new evidence, they conceptualised the journey through the stages much like a spiral pattern – not linear.
According to the new evidence, in the field of addiction, although we travel upward from pre-contemplation to maintenance through several intermediate stages, many may spiral all the way down up to the pre-contemplation stage. Or else, they might stay at any stage sometime – sometimes even years. However, some of them may again move upwards armed with new attempts. Research has shown, according to the authors, about 15% of smokers regressed to the pre-contemplation stage; however, 85% of them climbed again either to the contemplation or preparation stage.
1994: Weighing pros and cons: Decisional balance
In a paper published in 1994, Prochaska discussed another aspect of the stages of change model: the decisional balance or weighing pros and cons. He postulated that this construct was key to move from one stage to another. In fact, he expanded the Janis and Mann’s decision-making model introduced in 1977. The model argues that we make decisions after weighing four major consequences:
- Anticipated gains or losses to the self
- Anticipated gains or losses to the significant others
- Approval or disapproval from the significant others
- self-approval or disapproval
Prochaska reviewed twelve problem behaviours which tested stages of change model and the above four constructs; in fact, eight because each variable consisted of two opposing ends – gains or losses; and approval or disapproval. The study participants responded to the questions on a 5-point Likert scale ranging from (1) not important to (5) extremely important.
Then came the most interesting part; those in the pre-contemplative stage scored higher standard T scores for the costs of changing behaviours than its benefits and the scores of those in the action stage reversed. In other words, pre-contemplators’ anticipated costs of changing behaviours were higher than their anticipated benefits of changing the behaviour; however, the pattern reversed among contemplators and those in the action stage; they weighed higher the anticipated benefits of behaviours than its costs of changing the behaviour. And, he reported another interesting finding; those in the action stage weighed lower the anticipated costs of changing the behaviour than the contemplators.
How can we translate into action?
First of all, I believe the above findings are very strong because Prochaska drew his suggestions by analysing studies addressing 12 different problem behaviours.
Although the above findings were from cross-sectional studies, we can theorise, as Prochaska did, that, first, we should raise the target audience’s perceived benefits of changing the behaviour to transport them from the pre-contemplation stage to the contemplation stage. Then, we need to reduce their perceived costs of changing into the new behaviour.
Interestingly, he further claimed that the rate of increase in the benefits was “at least twice as great as” a decrease in the costs when actors move along the stages from pre-contemplation to action.
Strong and weak principles
Based on the above results, Prochaska published another paper in 1994, confidently introduced two principles: strong principle and weak principle.
The strong principle
The strong principle states that progressing from pre-contemplation stage to the action stage requires an increase of one standard deviation in the pros (benefits) of the healthier behaviour; the increase equates to a minimum of 20% increase of variance of the expected change. It also includes its own mirror images: increase in cons (costs) of not making a healthier change – either of failure to acquire healthy behaviour or failure to stop the unhealthy behaviour.
The 20% increase in the variance of either quitting benefits or costs of the costs of not changing the habit is not easy. How can we achieve to that level? Prochaska opined that in addition to individual-level interventions, public health policies also need to be aligned. What are the individual level interventions? They include raising the consciousness about the benefits of quitting and the costs of smoking and self-reevaluation skills. Assisting them to digest the benefits of quitting may be adequate, according to Prochaska. Obviously, we can raise its perceived benefits only.
Prochaska argues that public health interventions can be used to raise its actual benefits. how? It is by raising taxes; smokers have to pay more buying cigarettes. He suggests another interesting method which is still valid – raising their insurance premium and reducing insurance benefits!
However, no such interventions were available when he wrote this paper – in 1994.
The weak principle
Acquiring new behaviour carries some costs too. This weak principle addresses that problem; it says moving from pre-contemplation to action stage requires half a decrease of a standard deviation (0.5) in the costs of acquiring a new (healthy) behaviour. Unlike in the case of strong principle, this equates to 5% reduction in the variance of the costs considered. It also has its mirror image: the benefits of not making the behaviour change.
However, Prochaska observed that the weak principle was not as consistent as the strong principle across the problem behaviour.
Fourteen years after the above study, researchers – Kara Hall and Joseph Rossi – tested these strong and weak principles for more problem behaviours. Quite remarkably, they found the same findings to the point of one standard deviation with regard to the strong principle and 0.5 standard deviations for the weak principle. They meta-analysed data from studies covering as many as 48 problem behaviours published between 1983 and 2003. The Preventive Medicine journal published the study in 2008.
Choose one out of the following two options:
- Option 1: a sure gain (100% chance) of gaining $ 240,
- Option 2: 25% chance of gaining $ 1000 or a 75% chance of gaining nothing
Which one do you choose?
Now, choose one of the following two options.
- Option 1: a sure loss (100%) of $750,
- Option 2: 75% chance of losing $1000 or 25% chance of losing nothing.
Which one do you choose?
According to Daniel Kahneman and Amos Tversky, two renowned American Psychologists and the authors of the Prospect theory, 84% chose the first option in the first scenario and 87% chose the second option in the second scenario.
This is one of the major tenets of the Prospect Theory of Kahneman and Tversky – when we are confronted with a sure gain, we do not take any risks (we averse the risk); however, when we are confronted with a sure or almost sure loss, we take the riskier alternative (we seek the risk to averse the loss).
Think of this situation now:
You have three bowls; the middle one with water at room temperature, the left one with warm and the right one with cold water; now, immerse your left hand into the warm water and the right hand into cold water; now immerse both hands into the middle bowl. You will experience warm in the right hand and cold in the left hand.
So, the above interpretation varies relative to the reference point which is the middle bowl in this case.
Kahneman and Tversky say that the same applies to financial and other situations too. In other situations the reference point is usually the status quo; it can also be the future goal.
So, anything above the reference point is considered as gains and anything below the reference point is considered as losses. We also can change the reference point at any time.
Now, think of a situation that turning on a weak light in a dark room and turning on the same light in a brightly lighted room. You see the difference. The weak light has a larger impact in the darkroom. Similarly, Kahneman and Tversky say that the perceived difference between $100 and $200 is larger than the difference between $900 and $1000.
Our differential responses to gains and losses
What is the nature of the relationship in increments of gains and losses relative to the reference point?
To me, this is the most interesting part of this theory. They say it is S-shaped which is succinctly explained by the following graph.
The top-down line is the neutral reference line which is our perceived psychological value. Anything towards the right side from you is considered gains and anything towards the left side from you is considered as losses. There is a very interesting point here; this S-shaped curve is not symmetrical to either side of gains and losses.
Observe closely; the loss curve is steeper than the gain curve. How do you interpret that? Kahneman and Tversky say that we respond more strongly to losses than the gains even when the corresponding differences are the same. They name this phenomenon as loss aversion.
Derek Siver’s first follower:
One evening, a crowd numbering about 100 were sitting and chatting on a greenery garden in front of a beach. Suddenly a young lad stood out, marched forward, and started to dance according to the tune of the music playing behind. He was without his shirt. A little while later, another guy joined him. Another few minutes later, about 4 – 5 both boys and girls joined them. Soon, another 10 – 20 more stood and were them; all were dancing and enjoying together; later almost all were there; few of them did not join the massive crowd – they were still sitting. This is all about the Diffusion of Innovation Theory and leadership.
The above short description is from the super famous Derek Sivers’ short video clip that I watched on YouTube. You can watch it through this link. Since 2010, about 5.3 million views have been recorded to date!. Or, you can listen to his TED talk on the same video clip through this link.
It was all about leadership! His TED talk was about how to start a movement.
When we announce a novel idea to an audience, how might they respond to it? How many may grasp the idea? How many will reject it? How the rest of the crowd will react?
Diffusion of Innovation Theory
We can explain the behavior of this group of people with the help of the famous “Diffusion of Innovation Theory”. This theory was a brainchild of the late Everett Rogers. He published its first edition in 1962. It followed four more editions until 2003 before his demise in 2004.
According to the theory, whenever a new idea, product or service is introduced, we can identify five groups of people in regard to different ways we respond to.
S – curve
So, a pattern exists whenever a new idea, product, service or whatever comes to light in front of an audience. As I mentioned earlier, we can recognize five groups according to Rogers.
Innovators are risk-taking futurists; they promptly understand the usefulness of the innovation and willing to take the risk. Not only that, they are willing to be partners of the project. They constitute 2.5% of the target population. The leading dancer and his first followers in Derek’s video are innovators.
This segment of the audience steps out only if they are convinced about the benefits of the innovation. They are economically and socially well off, hence not much cost-sensitive. They constitute 13.5% of the target population. Moreover, this group possesses certain crucial characteristics – they are opinion leaders, role models, prefer to be trend-setters, and even adventurers.
The early majority (Pragmatists)
If we can forge really strong connections with the previous two groups – innovators and early adopters – the group next in line are the early majorities. They are larger in numbers than the previous group, as we can appreciate, about 34% of our target population. They are “pragmatists” because they do not take action without solid evidence; they are cost-sensitive; they do not take risks; they prefer simple tasks
The late majority (Conservatives)
This group is as much larger as the early majority group consisting of 34%. However, they are cautious and will not go with the crowd until they are convinced with others who are around them must have joined the new trend and also subject to heavy peer pressure. They are very cost-sensitive. Reluctantly, they might join with the rest of the crowd because they fear they will not be fitting into the mainstream. However, they could easily be influenced by laggards – the last group.
Although, very few in number, this is a very critical group that influences – negatively – the movement or project’s success. They are unlikely to join the rest; instead, they will be very critical and likely to influence the late majority. They tend to say this is not the way we have always been doing things. They are suspicious of new things. They need much more support, mentoring. This group is lesser in numbers – 16% – than the early and late majority groups – sometimes not worth spending time on them.
Why we blame someone? According to social psychologists, it occurs as a knee-jerk response to a situation that we perceive our inability to handle the situation. Instead of acknowledging our limitations or lack of skills dealing with it, we tend to shift the blame to someone.
It is a cognitive bias; social psychologists name it either “internal (or dispositional) attribution” bias. We attribute the problem to someone’s innate characteristic rather than the external situation that might have influenced them to act in that way.
However, If we ourselves had to accept its responsibility, we gain tend to shift the blame not to ourselves but some external environmental characteristic such as weather.
Either way, we want to preserve our self-esteem; so, it is also called “self-serving bias”.
Let us think of a “group think” situation.
When we, as a group, community, or country, observe “undesirable” (according to our interpretation) behavior within our group, we tend to think it is because of another country’s influence, sometimes rather western influence, or a plot by another country. In this way, we save our collective self-esteem.
However, when we observe either the same or similar behavior among outsiders (as perceived by the interpreters), we might say that is how they are – something innate to themselves.
Either way, we save our own self-esteem. We are self-serving ourselves as a group.