Mis-behavioural economics: We grade 3 popular theories

The human mind is a fascinating machine. But just like any machine, it isn’t without its quirks. It’s also no stranger to breakdowns.

Behavioural economics offers excellent examples of this – of our tendency to believe things that ‘sound right’ or carry a sheen of the scientific, loaned by the economics side of the equation.

Most concerning is the use of questionable trends and unverified facts to alter the behaviours of large groups of people, to influence population health, and to manage long-term development.

Here, we check three examples of behavioural economics to find out whether they’re fact, fiction or something in between.

10,000 hours to greatness

Reality score: 6/10 (extra points for lodging in our brains very effectively)

Propagated by Malcolm Gladwell in his book Outliers: The Story of Success, the 10,000-hour rule is a simple one. Practise anything for 10,000 hours and you’ll become an expert, a leader in your field.

And in case we haven’t emphasised this enough, Gladwell is not saying you’ll get good. He’s not using the term ‘10,000 hours’ loosely to refer to a lifetime of tireless honing of a chosen craft.

“Ten thousand hours,” he wrote, “is the magic number of greatness.”

It might be predictable – the idea of a ‘magic number’ has been ridiculed.

Michael Miller from Six Seconds: The Emotional Intelligence Network, wasn’t mincing his words when he wrote “It’s catchy, easy to remember, and more or less completely false”.

Dr Nathan Colin Wong, in the Canadian Urological Association Journal, called the idea an oversimplification: “Gladwell later describes how family, culture and friendship are all critical in any individual’s success”.

“We have all done more than 10,000 hours of walking, but we are not Olympic walkers. In fact, some of us still stumble and stub our toes,” says performance psychologist Gavin Freeman.

And yet, the theory can be useful. Much of the criticism is based on its over-simplification.

“There is a margin of truth behind the 10,000-hour rule,” Freeman says.

“The 10,000-hour rule comes into its own when you’ve done 10,000 hours of both purposeful and deliberate practice, meaning you’re goal-orientated and everything you do has been evaluated and expert-defined. If you do 10,000 hours of this type of deliberate practice, there’s a very good chance you’ll become an expert.”

Freeman has chosen his words carefully – describing a lifetime honing a craft (an hour a day of practice, five days a week comes out nudging 80 years, not to mention the time dedicated to the goal-setting, evaluation, consultation with experts) and he promises only ‘a very good chance’.

It doesn’t sound quite as enticing as the seemingly arbitrary ‘magic number’ of 10,000. Of course, just like the similarly derided-by-experts rule that everyone should take 10,000 steps per day, the ‘magic’ is simply a conveniently memorable number.

“That sort of number taps into the human desire for certainty,” Freeman says. “Our brains are always searching for certainty, so when an idea comes packaged so neatly, it gives us comfort. That’s a good thing.”

Nudge theory

Reality score: 3/10 (minus a few for the harm of its application)

Nudge theory was recently, disastrously part of the robodebt debacle.

Professor Cass Sunstein and Professor Richard Thaler introduced it in their 2008 book, Nudge: Improving Decisions About Health, Wealth and Happiness.

“A nudge is an intervention that maintains freedom of choice but steers people in a particular direction,” Sunstein told McKinsey & Company. “A tax isn’t a nudge. A subsidy isn’t a nudge. A mandate isn’t a nudge. And a ban isn’t a nudge. A warning is a nudge: ‘If you swim at this beach, the current is high, and it might be dangerous’. You’re being nudged not to swim, but you can.

Sunstein’s examples go on – nutritional information on a cheeseburger, a reminder of late fees before a bill is due.

“You can say no,” he said, “but it’s probably not in your best interest to do so.”

But as he also said in the same interview, there are good nudges and there are bad nudges. Robodebt’s is an example of a devastatingly bad nudge.

The robodebt letters, wrongly imposing debt on thousands of people, were designed to make recipients pay up quickly and without question.

Peter Martin, Visiting Fellow at the Crawford School of Public Policy, and author of Behavioural ‘experts’ quietly shaped robodebt’s most devilish details – and their work in government continues, says a conscious decision was made to not include a phone number for recipients of the letter to call.

The intention was to nudge people online. But that removed choice. The website’s functionality, or lack of, left recipients feeling helpless and without any options to query the debt.

Rhys Cauzzo, 28-year-old florist and artist, killed himself in January 2017 with a robodebt letter demanding $18,000 stuck to his kitchen fridge.

“The correlation of all the information just absolutely points to the fact that he was pushed into taking his life,” his mother Jenny Miller told Rick Morton in an episode of the 7am podcast’s Inside Robo-debt series. Miller firmly believes that her son killed himself because of robodebt.

We asked Martin how a seemingly fanciful theory of behavioural economics could lead to such disastrous results.

“Behavioural economics has theories. Some are simply using a variant – this happened then that happened. We moved the Coca-Cola machine further away, therefore people drank less Coke,” he told us.

“That’s harmless, unless Coke is the only source of food on the island and you moved it 40km away, in which case it’s not harmless. These scientists are sometimes not thinking about the mechanism.”

In the robodebt case, it may have seemed that the choice architecture was arranging choices, rather than taking them away, Martin says. But effectively, it was taking choice away.

“Sure, people could look up the phone number, and some did,” he says. “But when people are highly stressed, they don’t always do rational things because they’re not thinking straight.”

‘Nudge theory’ has, somehow, not been tossed out by policymakers post-robodebt. Assistant Treasurer and Minister for Financial Services Stephen Jones, for example, said in April that there is “a role for nudges” in superannuation.

“Here’s the upside, here’s the downside of it. That’s what I mean by nudges. Here’s the tax benefits of it,” Jones said.

And while increasing access to quality advice and information that helps citizens understand and make informed decisions about their superannuation should be on the agenda, it’s worth being aware of how easily the discourse changes to ‘nudging’ citizens into particular decisions.

1% performance improvement

Reality score: 9/10 (always room to do better)

Much fanfare was made of the success of the 1% improvement theory when the previously average British cycling team, at the 2008 Beijing Olympics, won seven out of 10 gold medals.

The team’s success was put down to a program that focused on regular, tiny gains over a long period. Aerodynamics were adjusted in a wind tunnel. Dust was removed from the mechanics’ bay, improving maintenance. Cyclists were banned from shaking hands with anybody, meaning they’d lose less training time to illness. They even had their own mattresses and pillows brought with them on tours, so they slept and therefore recovered better.

The idea of marginal gains crept into business training and performance programs.

Then, the media began to point out that, with the British cycling team, success wasn’t all about the theory and approach, the 1% gains here and there. Other changes – likely to have greater impacts on performance than the removal of dust from the mechanics’ bay – were identified.

Team Sky, from which many of the riders came, had a budget of £34.5 million to spend on kit and hardware, including a new team bus with airline-style seats. Exemptions had been secured for the use of performance-enhancing drugs to treat legitimate medical conditions.

Soon the theory had plenty of detractors.

Still, Freeman says it is useful – and that it’s not wrong. In fact, breaking down gains is often the only long-term way to approach a performance challenge in sport, and is a sound way to approach the same in business.

“This is absolutely based in reality,” Freeman says. “For everything you do with an elite athlete, that 1% theory enables the athlete to focus clearly on the minutiae and mundanity of excellence.”

Why ‘mundanity’? That’s all about doing the same, tiny thing over and over again, Freeman says, to develop excellence.

The minutia is around how the individual or team goes about improving those tiny things.

“When you add up those things, you end up with the ultimate result,” Freeman says.

“I worked with a swimmer leading into the Olympics. They wanted to win a medal, but they were four seconds off the pace, and four seconds is actually quite a lot.”

Freeman and the swimmer broke that four seconds down – one second per year for four years. Then that one second per year was divided by the number of training sessions they would have each year.

“The improvement required, per session, or per week, or per month, was so small it was almost inconsequential,” Freeman says. “That removed the pressure the athlete was feeling about needing to be four seconds faster. They could see that it was possible, rather than simply giving up. In the end, their time improved by 4.9 seconds and they ended up on the podium.”

The lesson here is a good one – breaking down success into measurable segments.

Still, it’s not a scientific, measured 1%. The 1% theory has a lot in common with the 10,000 hours theory in that regard. There’s a bit of bulldust about it – it’s not useful or possible in a lot of cases to measure 1%, just as practising for precisely 10,000 hours without a whole lot of other circumstances falling into place does not guarantee mastery.

They’re useful ideas to keep in mind – lots of practice helps you or your team get better, and getting better happens bit by bit with every lesson learnt. But slapping the label ‘economics’ on these ideas gives them that sheen of science that can make their application dangerously palatable.