Why the default option is so enticing, and how it’s used against you

Click to read this story at PeopleScience.com

Laziness is one of humanity’s most powerful driving forces.  It’s also perhaps the greatest insight from the field of behavioral science — or the one that’s been put to the most practical use, anyway. It goes by the fancy name “default bias,” and societies around the world are now using it to great effect. Its most obvious implementation might be enrolling workers in retirement plans by default, and forcing them to opt out if they really don’t want to save for the future.  Of course, the opt-in, opt-out structure has caused a lot of harm, too. Companies use it all the time to trick people into agreements, or fees, they’d otherwise reject.  So “status quo” bias is surely a mixed bag.  But you should know about it, know how it’s being used against you, and know what it can do for you.

It’s the subject of my latest “Know Your Nuggets” piece at PeopleScience.com.  Click to read it over there; here’s an excerpt to entice you:


More subtle factors are at play, too. Richard Thaler, in his book about the power of defaults, Nudge, placed some of the blame on loss aversion. His research suggests that people fear losses much more than they enjoy gains – by a ratio of 2:1. In other words, you’d have to win $200 to balance out the pain of losing $100. This emotional reaction makes people overly risk averse. How does that apply to defaults? When making any choice, there’s always the chance things will go wrong. If you move, what if the neighbors aren’t nice? What if the new place needs unexpected repairs? For the risk to be “worth it,” the gain needs to be dramatic. You might not move to save $200 a month. You’d probably move to save $1,000 a month. Or for a pool, or a much shorter commute. (Editor’s note: Or to live next to a coffee shop that delivers, i.e. don’t edit midafternoon.)

To be fair, there are plenty of good reasons that people stick with defaults rather than make changes. Transaction costs, or switching costs, are quite real – especially if you live in a crazy real estate market like New York. Sometimes, people are paralyzed because they believe they lack the expertise to choose, which is also rational. If you aren’t a building inspector, how would you know about potential future repair costs on that house?

But ultimately, sticking with a default is a choice, too, and many times, people stick with defaults as a form of “mindless choosing,” as Thaler puts it. Gretchen Rubin, author of The Happiness Project, warns about a negative human tendency towards “drift.” People stick with sub-optimal choices at jobs or in relationships, and days turn into weeks, then months. Years later, they wonder why their life seems so far off course. Like a freighter ship that made a small navigation error at the beginning of its journey, they are left wondering how they ended up where they are.

Click to read the rest of this story at PeopleScience.com

 

About Bob Sullivan 1320 Articles
BOB SULLIVAN is a veteran journalist and the author of four books, including the 2008 New York Times Best-Seller, Gotcha Capitalism, and the 2010 New York Times Best Seller, Stop Getting Ripped Off! His latest, The Plateau Effect, was published in 2013, and as a paperback, called Getting Unstuck in 2014. He has won the Society of Professional Journalists prestigious Public Service award, a Peabody award, and The Consumer Federation of America Betty Furness award, and been given Consumer Action’s Consumer Excellence Award.

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