Nov 2, 2018
This behavioral economics
foundations podcast episode is about defaults.Today’s episode on
defaults is going to absolutely blow your mind. You may think you
know how defaults work, but you will not believe how they impact
you, your business, and really everything. It’s amazing.
You probably don’t realize it,
but defaults are everywhere. Basically, every choice has a default.
Think of the default as what happens if you do nothing – or if your
customer does nothing. More often than not, when presented with a
series of options people will go with the default. Listen in to
learn how critical it is to consider the default option,
complexities of choice architecture, and more.
- [16:44] You probably think you
already know all you need to know about defaults, but I'm going to
blow your mind today.
- [17:26] Every choice has a
default. Doing nothing is a default. People often go with the
default, and this is connected to status quo bias.
- [18:32] People are more likely
to keep things the way they are – maintaining the status quo and
not take an action to change things.
- [18:56] In business when you
are presenting options it is CRITICAL that you consider what is the
default and what will be more likely to be chosen.
- [19:09] This is getting into
Choice Architecture, which will be the focus of a series of
episodes as it is very complex – I had a whole class dedicated to
the topic of Choice Architecture in my master’s
- [19:37] Defaults are the way
our brains really showcase just how lazy they are. This is where
all the “should’s” of the world come to die.
- [20:41] An example of default
retirement savings. Options 1 and 2 leave defaults that are
consistent with past behavior instead of considering the
- [23:29] Option 3 is have people
commit when they are in a cold state to commit some of their future
earnings to retirement. This is an easy commitment for the brain to
make because of time discounting. People are also less likely to
opt out than they would be to opt in.
- [24:27] 78% of people opted to
use this program when it was offered to them.
- [25:33] This is a really
creative solution that could be applied in many other areas to help
people to have better lives.
- [26:04] Too many programs and
approaches are trying to get people to change their natural
- [26:26] When push comes to
shove the subconscious is the one making the
- [26:53] You can’t tell your
subconscious to not be subject to defaults and status quo
- [27:37] An example of defaults
and how they impact you. This one comes from Kahneman’s
Thinking, Fast and
- [28:35] If you make a bet and
come up wrong, but everyone else did too, you are much less likely
to be ridiculed than if you went against the herd and made a losing
bet no one else made?
- [31:15] If people make a choice
and step away from the status quo (the doing nothing) and lose…they
feel increased regret.
- [32:02] In your business, is it
the default for your customers to do business with you? Or are you
asking them to change their behavior to buy?
- [32:40] Consider subscription
services to anything in the world. The act of turning off the
auto-renewal or canceling the subscription would require taking an
- [34:37] Setting up automatic
payments for mortgages, insurance and auto loans are defaults that
- [35:20] Make it easy for people
to opt out if they want to.
- [36:02] Most people will not
put in the effort to cancel, but you want to make it so they don’t
WANT to cancel.
- [36:17] What sort of service
can you provide that includes a regular, automatic payment to you
as the default? Is there a way to make buying from you the
- [37:58] Most people use the
default settings on their computers. It's better to be able to go
with the recommendations of the people who built the thing. They
know how it works best and if anything doesn’t suit your style you
can always change it, right?
- [42:18] A badly placed default
can make people want to get out of everything and completely change
- [43:01] The ethics of choice
and defaults. There is a lot of debate in behavioral economics
about the right way to use defaults and choice
- [43:12] Is it our
responsibility to help people with a well-placed
- [43:45] You want to make it so
people still have a choice. Make sure people aren't harmed if they
go with the default and give them the option to choose something
- [44:31] Add in some sensible
defaults if you have a complicated product or service. Most people
will choose a pre-selected option.
- [45:00] What is presented first
is also more likely to be chosen.
- [45:19] People now need to make
a choice to opt into overdraft protection. This goes against the
status quo bias and most people won't do it even though it is in
their best interest.
- [46:18] How do you choose what
is best for most people?
- [46:57] 95% of people support
organ donation but only 43% are signed up as donors. You have to
opt-in to be a donor and that is why there is such a small sign up
- [47:27] Some states are
thinking about switching to presumed consent. This would mean you
would have to opt out.
- [48:31] For your business,
remember that you have many defaults impacting your customers and
how they interact with you.
- [50:51] When you look at your
business, how can you use defaults to benefit your company and your
- [52:22] Next week on episode 21
we are going to talk about one of the concepts I hinted at in this
episode – habitual buying.
Thanks for listening. Don’t
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