Rotman Management — Spring 2017

16 / Rotman Management Spring 2017

What is a ‘choice architect’?

A choice architect is anyone who has responsibility for organizing

the context in which people make decisions. They create an en-

vironment that provides individuals the freedom to choose, but

they still influence peoples’ behaviour. For instance, we advise

governments on how to use choice architecture to help make citi-

zen’s lives healthier or better in some way. But, of course, choice

architecture can also be used to take advantage of people. No

matter what industry you work in, if you indirectly influence the

choices other people make, you are a choice architect.

Describe the ongoing battle between our two selves: The

Planner and the Doer.

As Kahneman describes in Thinking, Fast and Slow, humans be-

have as if there were two distinct systems in their brains: One is

automatic and the other is reflective. I have used a similar frame-

work to describe how people deal with problems of self-control.

In my model there is a long-sighted, reflective ‘Planner’ and a

short-sighted, impulsive ‘Doer’. When he sees something he

likes, he grabs it. The Planner, on the other hand, is the part of

you that thinks ahead and budgets your resources appropriately.

To-do-lists, grocery lists and alarm clocks are examples of our

Planner taking steps to control the actions of our Doer.

Unfortunately, the Planner doesn’t always win. One the

goals of my work has been to teach people how to alter their envi-

ronments to give themselves the best chance to make good deci-

sions for the long run.

What is your favourite example of successful nudging?

In my view, the domain in which nudging — and Behavioural Eco-

nomics in general — has had the greatest impact to date is in the

design of defined-contribution savings plans. It used to be that

people had to fill out a pile of forms, but with default enrollments,

they only have to fill out a form if they do not want to enroll. This

has basically solved the enrollment problem: Opt-out rates are

now very low — around 10 per cent.

When this started to happen, it was great, but we found that

the plans were auto-enrolling people at very low savings rates —

in the U.S., often at a rate of just three per cent. As a way to nudge

people to increase their savings rates, Shlomo Benartzi and I in-

troduced a plan called ‘Save More Tomorrow’. Under this plan,

workers are offered the option to increase their savings rate at a

later date — ideally, when they get their next raise. As such, once

an employee enrolls in the plan, her savings rate continues to in-

crease until she reaches some cap — or opts out. In our first study

of this approach, savings rates more than tripled in three years.

The Save More Tomorrow plan is a collection of what I like

they were planning to spend a year at Stanford in 1977-78 — so
I made it my business to get a posting there. I begged and
pleaded, and somehow managed to get a research grant to fund
my visit.
When Daniel and Amos arrived, I was already there — ready
to pester them. Kahneman’s office was just up the hill from
mine, so I made it a habit to wander up there to chat with him,
and would often find Tversky there, as well. We had a glorious
year together: They taught me Psychology and I taught them
Economics, and it turned into a 40-year friendship. Sadly, Amos
passed away in 1996.

Since Kahneman and Tversky’s work on biases like ‘availabil-
ity’, ‘representativeness’ and ‘anchoring’, a long list of other
biases has been identified (see page 17 for a sampling). You
have called this “both a blessing and a curse”. Please explain.
It is a blessing in that every bias provides a small glimpse into
how our minds work. To be clear, it was never Amos and Danny’s
intention to suggest that people are stupid: They always said that
they liked to study errors in judgment for the same reason some
people study optical illusions: Because they teach us something
about human perception.
The curse in having such a long list of biases is that it leads
some people to think they can explain anything by ‘cherry-pick-
ing’ a bias to fit the facts. But that is not what behavioural sci-
ence is about. It is a science: It’s about making predictions and
testing them.

Heuristics: The Original Three

Anchoring: The common tendency to rely too heavily on the

first piece of information we are offered (the ‘anchor’) when

making a decision.

Availability: Giving preference to information and events

that are more recent, that were observed personally, and

that were more memorable.

Representativeness: The presumption that once people

or events are categorized, they share all the features of other

members in that category.