Lone Gunman

Inform­ing con­sumers of the calorific value of their food options doesn’t change their ordering/eating habits (pre­vi­ously), but remov­ing bar­ri­ers and mak­ing the health­ier options easy to order does.

That’s the con­clu­sion from Kevin Volpp’s lec­ture, ‘Using Behav­ioral Eco­nom­ics to Improve Health Behav­iors’.

Recent stud­ies […] have indi­cated that pro­vid­ing nutri­tional infor­ma­tion at restau­rants and rec­om­mend­ing a calo­rie intake have shown to be inef­fec­tive at reduc­ing con­sump­tion. How­ever, incen­tiviz­ing con­ve­nience of order­ing low calo­rie food, by clus­ter­ing these options together at the top of the menu, seems to have a sig­nif­i­cant impact. This indi­cates that tra­di­tional mea­sures of infor­ma­tional pro­vi­sion are not always suf­fi­cient to moti­vate changes in unhealthy behavior.

And on remov­ing seem­ingly incon­se­quen­tial bar­ri­ers to action:

One cafe­te­ria tested [how much effort peo­ple will go to to eat ice cream] by leav­ing the lid of an ice cream cooler closed on some days and open on other days.

The ice cream cooler was in the exact same loca­tion, and peo­ple could always see the ice cream.  All that var­ied was whether they had to go through the effort of open­ing the lid in order to get it.  Even that was too much work for many peo­ple.  If the lid was closed, only 14% of the din­ers decided it was worth the mod­est effort to open it.  If the lid was open, 30% decided it was ice cream time.

Bar­ri­ers and incen­tives are more pow­er­ful than good inten­tions. Kevin Volpp’s three big questions:

• Are there built-in default ben­e­fits to be had?
• In what ways can we make infor­ma­tion pro­vi­sion more precise?
• How can we shape incen­tives to get peo­ple to behave in a [desired] manner?

via Nudge (1, 2)

Type, colour, cur­rency sym­bols and vivid adjec­tives: all items to pay atten­tion to when design­ing menus–but not for aes­thetic reasons.

Sub­tle changes to menus can influ­ence our restau­rant decision-making, as is made obvi­ous by Sarah Kershaw’s excel­lent arti­cle on the psy­chol­ogy of restau­rant menus.

(If you’ve read the arti­cles in my pre­vi­ous post on this topic there is lit­tle new infor­ma­tion in this piece, but it is worth read­ing for the few tasty morsels that are new.)

Some restau­rants use what researchers call decoys. For exam­ple, they may place a really expen­sive item at the top of the menu, so that other dishes look more rea­son­ably priced; research shows that din­ers tend to order nei­ther the most nor least expen­sive items, drift­ing toward the mid­dle. Or restau­rants might play up a prof­itable dish by using more appe­tiz­ing adjec­tives and plac­ing it next to a less prof­itable dish with less descrip­tion so the con­trast entices the diner to order the prof­itable dish. […] Dr. Wansink said that vivid adjec­tives can not only sway a customer’s choice but can also leave them more sat­is­fied at the end of the meal than if they had eaten the same item with­out the descrip­tive labeling.

via @mocost

How much we trust peo­ple influ­ences much more than just our inter­per­sonal rela­tion­ships and can even cost us a con­sid­er­able amount of finan­cial harm.

The study con­clud­ing this (pdf) sug­gests that too much or too lit­tle trust has a finan­cial cost equiv­a­lent to that of not attend­ing uni­ver­sity and shows that if we trust too much we assume too much social risk, but trust too lit­tle and we give up poten­tially prof­itable opportunities:

Highly trust­wor­thy indi­vid­u­als think oth­ers are like them and tend to form beliefs that are too opti­mistic, caus­ing them to assume too much social risk, to be cheated more often and ulti­mately per­form less well than those who hap­pen to have a trust­wor­thi­ness level close to the mean of the pop­u­la­tion. On the other hand, the low-trustworthiness types form beliefs that are too con­ser­v­a­tive and thereby avoid being cheated, but give up prof­itable oppor­tu­ni­ties too often and, consequently, under-perform. Our esti­mates imply that the cost of either exces­sive or too lit­tle trust is com­pa­ra­ble to the income lost by fore­go­ing col­lege. Fur­ther­more, we find that peo­ple who trust more are cheated more often by banks as well as when pur­chas­ing goods sec­ond hand, when rely­ing on the ser­vices of a plumber or a mechanic and when buy­ing food.

via Tim Har­ford

An analy­sis of the edu­ca­tional back­grounds of tech com­pany founders has shown that an elite edu­ca­tion  does not pro­vide as much of an advan­tage as many expect. In fact the results seem to show that where one stud­ies has no cor­re­la­tion to entre­pre­neur­ial suc­cess, as long as one actu­ally does study.

The 628 U.S.-born tech founders [sur­veyed] received their edu­ca­tion from 287 unique uni­ver­si­ties. Almost every major U.S. uni­ver­sity was rep­re­sented. The top ten insti­tu­tions in this group accounted for only 19 per­cent of the entire sam­ple. In other words, 81% of the tech com­pany founders came from “reg­u­lar” schools. […]

The aver­age sales rev­enue of all star­tups in one of our sam­ples was around $5.7 mil­lion, and these com­pa­nies employed an aver­age of forty-two work­ers. Star­tups estab­lished by tech founders with Ivy League degrees had aver­age sales and employ­ment of $6.7 mil­lion and fifty-five work­ers, respec­tively. The suc­cess of these two groups markedly con­trasted with star­tups estab­lished by tech founders with only a high school degree. Those founders had aver­age rev­enues and employ­ees of $2.2 mil­lion and eigh­teen, respec­tively. […] In other words, it didn’t mat­ter so much if you grad­u­ated from an Ivy. What made the great­est dif­fer­ence was hav­ing a higher degree.

Sim­i­lar results were uncov­ered in an analy­sis of com­pany founders from India and China.

The analy­sis also chal­lenges the belief that entre­pre­neurs start their ven­tures fresh out of full-time edu­ca­tion, with the fol­low­ing results shown for how long after grad­u­a­tion dif­fer­ent grad­u­ates found their companies:

• MBA grad­u­ates: 13–15 years
• Com­puter Science/IT grad­u­ates:  13 years
• Bachelor’s degree hold­ers: 17 years
• Applied sci­ence majors: 20 years
• PhD hold­ers: 21 years

The crux of the argu­ment: “The Ivy-Leaguers may be able to get their bud­dies from [big-name VC firms] to return emails, but they aren’t going to be any more suc­cess­ful at build­ing companies.”

America’s dete­ri­o­ra­tion as a leader in the engi­neer­ing and man­u­fac­tur­ing fields can be attrib­uted largely to the fail­ings of the elite busi­ness schools, sug­gests Noam Scheiber, Rhodes Scholar and senior edi­tor at The New Repub­lic.

Busi­ness school grad­u­ates are now edu­cated toward high paid finan­cial ser­vices jobs, lead­ing grad­u­ally to an “era of man­age­ment by the num­bers”. Exec­u­tives are now more adept at buy­ing and sell­ing assets than run­ning indus­trial com­pa­nies, and this pre­oc­cu­pa­tion with ROR has resulted in “a [reluc­tance] to invest heav­ily in the devel­op­ment of new man­u­fac­tur­ing processes”.

Since 1965, the per­cent­age of grad­u­ates of highly-ranked busi­ness schools who go into con­sult­ing and finan­cial ser­vices has dou­bled, from about one-third to about two-thirds. And while some of these con­sul­tants and financiers end up in the man­u­fac­tur­ing sec­tor, in some respects that’s the prob­lem. Har­vard busi­ness pro­fes­sor Rakesh Khu­rana, with whom I dis­cussed these ques­tions at length, observes that most of GM’s top exec­u­tives in recent decades hailed from a finance rather than an oper­a­tions back­ground. […] These exec­u­tives were fre­quently numb to the sorts of inno­va­tions that enable high-quality pro­duc­tion at low cost.

[…] In their land­mark Har­vard Busi­ness Review arti­cle from 1980, “Man­ag­ing Our Way to Eco­nomic Decline,” Robert Hayes and William Aber­nathy pointed out that the con­glom­er­ate struc­ture forced man­agers to think of their firms as a col­lec­tion of finan­cial assets, where the goal was to allo­cate cap­i­tal effi­ciently, rather than as mak­ers of spe­cific prod­ucts, where the goal was to max­i­mize qual­ity and long-term mar­ket share.

via Arts and Let­ters Daily