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THE IMPORTANCE OF UNDERSTANDING EACH OTHER: A GLIMPSE INTO THE WORLD OF BEHAVIOURAL ECONOMICS

Author: Sophie Moore


Webamp spoke with Christina Gravert, professor in behavioural economics at the University of Copenhagen and Co Founder of Impactually, about how she stumbled upon the world beyond classic economics and the importance of admitting you will never know it all.

Christina began her journey towards becoming a behavioural economist with no idea that was where she would end up. Upon completing a Bachelors in Economics and going on to do her Masters degree in International Economic Consulting, she envisioned herself going along the route of public policy and consulting work. And yet despite having a wealth of education under her belt, she had an inkling that she still had more to learn. This inkling would prove to change the direction of which she was headed towards where she is today. A position opened up as a PhD student at Aarhus University where she became fully immersed in the world of behavioral science. Something that had previously been a side interest, explored only through reading books in her spare time suddenly became her main focus. Having previously believed that behavioural science was “too fun” to be the basis for a PhD in economics, Christina began to join the dots between the two, realising the ways in which they were much closer than she thought as a student. Following her interests is something that has served her well, identifying and asking questions about the way things are done and the way we move through our daily lives. This curiosity has seen Christina move from strength to strength over the years, completing a PostDoc in Gothenburg, landing a tenure-track assistant professorship in Copenhagen and even starting her own business.

“After finishing my PhD I thought it would be nice to be able to do more direct consulting work and to inform people about how behavioural science is used outside of academia and outside of research. That's when I started Impactually with Nurit Nobel who has a psychology background so we brought economics and psychology together to bridge the gap between science and practice.”

But what exactly is the difference between economics and behavioural economics? Well, classic economics tends to look at people as being fully rational, like perfect computers. It would assume for example that if someone wanted to lose weight, they would identify that they need to eat less calories and go to the gym more often, and then as long as they were physically able, they would do it. But behavioural economics would look at why a lot of the time people don’t do the things they know they need to do to achieve their goals. It looks at the fact that a person is able to afford a gym membership and healthy food and yet they still don’t go to the gym and they’re not eating well. It is concerned with looking at these human deviations from rational thinking. 

“Behavioral economics helps us to design better, more human centric policies. For example, we want to understand why some students who could take student loans or apply for scholarships to get them through university don’t make use of these offers. Traditional economics often does not have an answers. We need to add the psychological factors in as well."

It makes a lot of sense to try and understand the factors that don’t fit in with expectations, to try to prepare for the unexpected and make sense of the complexity of human beings. This can be applied to every area of life, these deviations from rational thinking crop up everywhere and so being able to understand them and even attempt to predict them can allow policies and frameworks to be drawn up to accomodate for them. It's so important for a business to be able to truly understand its customers and even its employees to allow for better communication for everyone. It allows people to do their jobs better. Christina’s research and constant curiosity has helped many companies and individuals better understand themselves and the people around them. One of the areas that her research has led her to dive deeper into is the relationships between reminders and changes in behaviour. A reminder triggers attention, it makes you think of a particular thing and are reminded to take some kind of action. The more reminders you get about something, the more likely you are to rank it as being important. But reminders can pile up, they can become overwhelming and yet somehow there are instances where we still don’t take action on the thing we’re being reminded to do. The longer we put it off, the guiltier we feel. And yet despite knowing there is a quick fix to the mounting sense of guilt we feel- just getting on with it and doing it- we still put it off. Christina’s research aims to find out why.  

“Say you get reminded that you wanted to call your grandmother and you've been putting it off for a week so then you feel bad about it. We’re trying to look into how reminders affect people's behaviour and if they for example make people feel guilty but don't get them to change behaviour, like you feel bad for not having called your grandmother but then you still don't call her.”

The insights this research brings can bridge the gap between these deviations and possible solutions. They can help us do smarter business, understand our target markets better and turn potential customers into paying ones. It's about getting a balance between giving someone a subtle reminder and bombarding them. Too much and you’ll turn people away, too little and they’ll drop off the radar forever. 

“It’s relevant for things like online marketing, you don't want to send people too many reminders. But then if you don't send someone an email they probably won’t do anything. We don't have to remind people to eat something because they'll eventually get hungry, it’s not the same with things that are not part of our habits or that are biological desires.” 

The key is to design policies in such a way that these reminders don’t come across as irritating, to gently nudge in the right direction instead of pushing. Nudging can be used in many different contexts, from design and policy making to having whole government units dedicated to it in all areas of running a country. 

“The way you design stairs, where you put them in the building can determine how people use them. You can nudge them to take the stairs over the elevator if you place them more prominently. From a design perspective, how you design the choice environment can nudge certain behaviours. And it doesn't just have to be the design of a building, it could be the design of a website or the design of interactions within the working environment. An example I often give is when you put these reusable cups next to the coffee machine instead of plastic ones, people just take them because they're not really paying attention. But if you only have paper or plastic cups there instead people will take them.” 

It's funny to think about how much of our behaviours are subconscious, how much of our lives we live in autopilot. It can seem scary at first to think that it is possible for businesses and organisations to nudge us into certain behaviours but ultimately it means we have to work less ourselves. If we are reminded to take action on things instead of having to remind ourselves, it's more convenient to us. We can give an element of control to an entity outside of ourselves without losing complete autonomy over our lives. By being nudged to use reusable cups instead of single use ones we do our part to save the planet. By being nudged to use the stairs instead of the elevator we maintain our fitness levels and build up our strength. 

The trajectory of Christina’s career has seen her make discoveries about the way the world works, about how we find our places in the world as individuals and how we react in certain situations. It has to be noted that she has found success for herself in an industry that rarely sees women at the top. It has allowed her to seek answers for why this is and work out how it can be changed.

“You are usually in the minority in this field, economics is very male dominated. Usually it's about 70% men. It's an interesting personal experience that has also inspired part of my research. For instance in one project we looked at how women react to negative feedback compared to men. If you tell somebody they're not good enough, if you're talking about ability, it has a very negative effect on women whereas for men it seems to be the opposite. If you tell a man they're not good enough they try to prove you wrong. They try harder, they compete harder, while for women this kind of feedback leads them to give up quicker. If you change your tact and tell a woman that it was just down to luck or that maybe they didn’t try hard enough then it's more likely that they will continue to compete as well. So this gives us some insights into how to design feedback mechanisms in a way to help women, especially in very highly competitive areas where there is a high risk that women could become discouraged.” 

Information like this is invaluable to pretty much everyone that works within an organisation of some kind, it allows you to approach situations in the way that is going to benefit all parties in the most effective way. It will ensure everyone communicates efficiently and clearly without misinterpretation or emotions being triggered by certain approaches to feedback. 

In her consulting work, Christina’s aim is to understand the mechanisms and provide others with the information they need to prepare them for bumps along the road in certain situations. It’s about looking at the bigger picture and understanding the many reasons why something may play out in a way that isn’t logical or rational or expected. 

“We can see that in many competitive industries there’s few women at the top and it cannot be explained by them having lower skills then men, by outright discrimination or by their preferences for having kids and staying at home. Part of the low share of women at the top might come from women selecting themselves out of the career because of imposter syndrome - they do not feel competent enough. In our research, we carefully keep everything identical about a competitive situation except the type of feedback our participants get when they lose. That allows us to say, with everything else being equal that it matters most for women if they get feedback that they are not good enough, rather than being told they are unlucky or did not try hard enough.”

By looking at problems such as these within the modern workplace we can see what needs to be done to challenge them. We can give people the support they need to reach their full potential and no longer be held back from who they are destined to be, men and women alike. It's so incredibly important that this kind of research is done, for the world we will live in tomorrow and for years to come. If we are able to design the way we work in a way that encourages each and every one of us to stop playing small and pushes us to be the best we can truly be, the future will be an incredible place. And we have to give a lot of thanks to people such as Christina who are putting in the effort to understand us all better and give us the information we need to move towards working in ways that encourage us to play as big as we dream we could be. There's an importance in having a thirst for knowledge, a drive to learn more and to never cease asking questions. We must remind ourselves that we will never know it all, there is always more to learn, about the world, about ourselves and about each other. 

A huge thank you to Christina for these valuable insights into the world of behavioural economics. See more of the incredible work she does at Impactually, connect on LinkedIn and find her on Twitter.

If the world of leadership and marketing sparked your interest, read more at NicolaiVittrup.com, or connect on LinkedIn. For any SEO, PPC or web related needs head over to Webamp.

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