American Economist, Author of Freakonomics
American Economist, Author of Freakonomics
The brilliant rationalist had encountered a central, frustrating tenet of human nature: behavior change is hard. The cleverest engineer or economist or politician or parent may come up with a cheap, simple solution to a problem, but if it requires people to change their behavior, it may not work. Every day, billions of people around the world engage in behaviors they know are bad for them?smoking cigarettes, gambling excessively, riding a motorcycle without a helmet. Why? Because they want to! They derive pleasure from it, or a thrill, or just a break from the daily humdrum. And getting them to change their behavior, even with a fiercely rational argument, isn?t easy.
The conventional wisdom is often wrong.
The data don?t lie: a Chicago street prostitute is more likely to have sex with a cop than to be arrested by one.
The data suggest that happy people are more likely to get married.
Stories also appeal to the narcissist in all of us. As a story unspools, with its cast of characters moving through time and making decisions, we inevitably put ourselves in their shoes. Yes, I would have done that too! or No, no, no, I never would have made that decision! Perhaps the best reason to tell stories is simply that they capture our attention and are therefore good at teaching. Let?s say there?s a theory or concept or set of rules you need to convey. While some people have the capacity to latch on directly to a complex message?we are talking to you, engineers and computer scientists?most of us quickly zone out if a message is too clinical or technical.
People who buy annuities, it turns out, live longer than people who don?t, and not because the people who buy annuities are healthier to start with. The evidence suggests that an annuity?s steady payout provides a little extra incentive to keep chugging along.
Remember those British schoolchildren who made up answers about Mary?s trip to the seashore? The researchers who ran that experiment did a follow-up study, called Helping Children Correctly Say ?I Don?t Know? to Unanswerable Questions. Once again, the children were asked a series of questions; but in this case, they were explicitly told to say I don?t know if a question was unanswerable. The happy news is that the children were wildly successful at saying I don?t know when appropriate, while still getting the other questions right.
Resources are not infinite: you cannot solve tomorrow?s problem if you aren?t willing to abandon today?s dud.
Roland G. Fryer Jr., while discussing his names research on a radio show, took a call from a black woman who was upset with the name just given to her baby niece. It was pronounced shuh-TEED but was in fact spelled Shithead.*
Say, however, that it was possible to develop a bank algorithm 99% accurate. Let us assume that the United Kingdom has 500 terrorists. The algorithm correctly identify 495 of them, or 99%. However, as there were about 50 million adults in the UK who have nothing to do with terrorism, the algorithm also mistakenly identify 1% of them as terrorists, or 500,000 people. In the end, this wonderful algorithm, with 99% accuracy, would point very high number of false-positive - half a million people who would be outraged, rightly, when they were hunted by the authorities on suspicion of terrorism.
Shaw reportedly said. I have made an international reputation for myself by thinking once or twice a week.
Simply admit that the future is far less knowable than you think.
Since the science of economics is primarily a set of tools, as opposed to a subject matter, then no subject, however offbeat, need be beyond its reach.
Smart people love to make smart-sounding predictions, no matter how wrong they may turn out to be.
So it may be that going to the hospital slightly increases your odds of surviving if you?ve got a serious problem but increases your odds of dying if you don?t. Such are the vagaries of life.
So when it comes to solving problems, channeling your inner child can really pay off. It all starts with thinking small.
So, absent the chance to make every job applicant work as hard as a college applicant, is there some quick, clever, cheap way of weeding out bad employees before they are hired? Zappos has come up with one such trick. You will recall from the last chapter that Zappos, the online shoe store, has a variety of unorthodox ideas about how a business can be run. You may also recall that its customer-service reps are central to the firm?s success. So even though the job might pay only $11 an hour, Zappos wants to know that each new employee is fully committed to the company?s ethos. That?s where The Offer comes in. When new employees are in the onboarding period?they?ve already been screened, offered a job, and completed a few weeks of training?Zappos offers them a chance to quit. Even better, quitters will be paid for their training time and also get a bonus representing their first month?s salary?roughly $2,000?just for quitting! All they have to do is go through an exit interview and surrender their eligibility to be rehired at Zappos. Doesn?t that sound nuts? What kind of company would offer a new employee $2,000 to not work? A clever company. It?s really putting the employee in the position of ?Do you care more about money or do you care more about this culture and the company?? says Tony Hsieh, the company?s CEO. And if they care more about the easy money, then we probably aren?t the right fit for them. Hsieh figured that any worker who would take the easy $2,000 was the kind of worker who would end up costing Zappos a lot more in the long run. By one industry estimate, it costs an average of roughly $4,000 to replace a single employee, and one recent survey of 2,500 companies found that a single bad hire can cost more than $25,000 in lost productivity, lower morale, and the like. So Zappos decided to pay a measly $2,000 up front and let the bad hires weed themselves out before they took root. As of this writing, fewer than 1 percent of new hires at Zappos accept The Offer.
Social scientists sometimes talk about the concept of identity. It is the idea that you have a particular vision of the kind of person you are, and you feel awful when you do things that are out of line with that vision.
Solving a problem is hard enough; it gets that much harder if you?ve decided beforehand it can?t be done.
People respond to incentives, although not necessarily in ways that are predictable or manifest. Therefore, one of the most powerful laws in the universe is the law of unintended consequences.
Sometimes in life, going straight up the middle is the boldest move of all.
People respond to incentives.
Many of life's decisions are hard. What kind of career should you pursue? Does your ailing mother need to be put in a nursing home? You and your spouse already have two kids; should you have a third? Such decisions are hard for a number of reasons. For one the stakes are high. There's also a great deal of uncertainty involved. Above all, decisions like these are rare, which means you don't get much practice making them. You've probably gotten good at buying groceries, since you do it so often, but buying your first house is another thing entirely.
Many of our findings may not be very useful, even they may be inconclusive. But that's okay. We try to start a conversation, not having the last word. And that means that in the following pages can be found a few things I disagree. In fact, we found them not disappoint.
Morality, it could be argued, represents the way that people would like the world to work, whereas economics represents how it actually does work.