Imagine that you’re coming from work really hungry, and you’ve agreed to meet you friends at the local pub in 15 minutes. You need a quick bite, and get a Big Mac meal from the McDonalds next to your office. Of course, as usual, you get the regular side fries and a Coke. But wait – did you actually decide on that?
As far as psychology goes, my best guess would be: no, you didn’t. I certainly haven’t, many times. It’s what comes as standard, and it’s good, so why change what works? What happens is that instead of explicitly thinkin oh, I can get fries, or a salad or nuggets – which is the best? we’ll just go with the standard bundle without really thinking about it.
Well, a restaurant order is surely no big deal, but unfortunately we’re plagued by the same lack of attention also in more serious matters. We just don’t realize that one of the options is the default, but still changeable. Quite likely the most famous example of this is organ donation. Some countries have an opt-in system, which means that if you want to have your organs donated once you meet your maker, you’re going to have to explicitly state that. Other countries have an opt-out system, which means that your organs will be donated, unless you’ve explicitly told no. The big fuss about which system each country is using stems from the fact that countries with different systems vary widely in organ donation rates: those with an opt-in one have most of people not donating, and those with an opt-out one have over 90 % participation rates.
As far as psychology goes, my best guess would be: no, you didn’t. I certainly haven’t, many times. It’s what comes as standard, and it’s good, so why change what works? What happens is that instead of explicitly thinkin oh, I can get fries, or a salad or nuggets – which is the best? we’ll just go with the standard bundle without really thinking about it.
Well, a restaurant order is surely no big deal, but unfortunately we’re plagued by the same lack of attention also in more serious matters. We just don’t realize that one of the options is the default, but still changeable. Quite likely the most famous example of this is organ donation. Some countries have an opt-in system, which means that if you want to have your organs donated once you meet your maker, you’re going to have to explicitly state that. Other countries have an opt-out system, which means that your organs will be donated, unless you’ve explicitly told no. The big fuss about which system each country is using stems from the fact that countries with different systems vary widely in organ donation rates: those with an opt-in one have most of people not donating, and those with an opt-out one have over 90 % participation rates.
Why the case is so widely cited is because it’s such compelling evidence of the power of the default. For example, Germany and Austria are culturally very similar, but Germans have a participation rate of 12 %, while Austrians have a rate of 99,98 %. So it’s quite clear the effect is not due to cultural differences. And if you went around and asked Germans and Austrians about why people choose to donate or refrain from donating, they would quite likely be capable of coming up with some kind of reason. But, I’m also sure very few people would cite the default as the reason for their behavior! Certainly, it is the reason, but people would just try to rationalize their decision after the question, simply because they just haven’t given it a lot of thought.Well, you can still argue that no biggie – we’re so unlikely to die by accident that people are just not interested about organ donation, and save their energy for more meaningful decisions.
Unfortunately, it gets even worse. As Shlomo Benartzi and Richard Thaler – both professors of economics – have shown, the same default problem plagues retirement savings. An example that’s so ridiculous to be scary is from the UK. The UK has some defined benefit pension plans that are fully paid by the employer, and require no contribution from the employee. Essentially, it’s free money – the only thing an employee needs to do is to sign up. However, data on 25 such plans reveals that only 51 % of employees had signed up!
The lesson from all this is twofold. First, in many domains there usually is some kind of default option. Be it a retirement plan, a restaurant side dish or the seating on your brand new car, there’s usually an option that’s offered as the default. A lot of marketers are realizing the power of defaults, so I think we can expect the power of defaults to be even higher in the near future. The second lesson is that in decisions that matter, you should be paying attention to whether you’re really getting what you want – or just taking what’s within easy grasp. Especially with wily marketers using the lessons of behavioral economics against you, it’s a wise move to keep up your guard. This requires effort, of course. But hey, who said making important decisions was going to be easy?
Unfortunately, it gets even worse. As Shlomo Benartzi and Richard Thaler – both professors of economics – have shown, the same default problem plagues retirement savings. An example that’s so ridiculous to be scary is from the UK. The UK has some defined benefit pension plans that are fully paid by the employer, and require no contribution from the employee. Essentially, it’s free money – the only thing an employee needs to do is to sign up. However, data on 25 such plans reveals that only 51 % of employees had signed up!
The lesson from all this is twofold. First, in many domains there usually is some kind of default option. Be it a retirement plan, a restaurant side dish or the seating on your brand new car, there’s usually an option that’s offered as the default. A lot of marketers are realizing the power of defaults, so I think we can expect the power of defaults to be even higher in the near future. The second lesson is that in decisions that matter, you should be paying attention to whether you’re really getting what you want – or just taking what’s within easy grasp. Especially with wily marketers using the lessons of behavioral economics against you, it’s a wise move to keep up your guard. This requires effort, of course. But hey, who said making important decisions was going to be easy?
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