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Citizen Behaviour

Behavioural Design applied to shaping citizen behavior

Amsterdam

The Behavioural Design of Cities

By All, Citizen Behaviour

I have been thinking a lot lately about how spaces shape our behaviour. I believe that the COVID-19 crisis might change something profoundly about how we feel about living and working, and this could have a dramatic impact on how we think about living spaces, office spaces, public spaces and retail spaces. 

 

The lockdown uncovered a disturbing truth

Until the COVID-19 crisis hit us, we were collectively trapped in a narrative about living and working: Cities are the places where the opportunities are, so you need to live near or in a city to find a job. Commuting from the countryside became more and more insane. The psychological price you had to pay for living in an affordable house away from the city was having to spend 3 hours in traffic jams or being crammed in public transport during rush hours. So we ended up collectively fighting for the scarce spaces in the big cities. To give you an idea of the consequence: the value of our apartment in Amsterdam has doubled in 5 years. Completely unsustainable.

The same thing has happened with office spaces. The more a city attracts talent and entrepreneurs, the more office space they need, and prices are soaring. The same thing happened with retail spaces. As long as a city is growing in popularity, landlords could increase their rents to ridiculous levels (and a lot of them did) because if the current tenants couldn’t pay the rent, then there were ten others desperately waiting to give it a shot. I think this bubble is bursting.

Here’s why.

It became more and more apparent that all the young people I know are leaving the city in large numbers for two years. They loved Amsterdam, but they felt that the cost of living had reached a tipping point where they couldn’t afford it anymore. With pain in their heart, they had to give up their dream.

And then came the lockdown. And suddenly, people living in cities are starting to realise that they were sitting in overpriced tiny apartments and expensive office space because they are collectively trapped into thinking that they needed to be in the office from 9 to 5. However, a big hole was blown into this illusion within less than four weeks into the lockdown. We all discovered that we could be productive and creative and get high-performance team output using laptops, video conferencing, and collaboration software. This changes everything.

 

The importance of being thrown of a cliff

I cannot stress enough how significant this forced experiment is from a behavioural point of view.

Despite all efforts in the last decade to introduce “the new way of working, in reality, we all kept each other locked in the old way. Managers felt it was more convenient to manage and control teams on an office floor. Employers invested heavily in office space, so they thought it should be used properly. Employees felt that they were better able to manage their reputation while in the office (hence all the meetings). It was a stalemate, and the lockdown made us overcome this stalemate.

 

Implications for living

Why would you buy a 65m@ Appartement for € 450.000 in a big city, if you could buy a much bigger house with a garden within 30-60 minutes commuting distance? It makes more sense since you can work from home for most of the week and only show up at the office for creative sessions with your team. You and your team can carefully plan these sessions after rush hour.

I had a lunch meeting with a fellow entrepreneur yesterday. We met at about 30 minutes driving from Amsterdam, where – to my surprise – he picked me up with his boat to take me to his summer house on an island in the middle of a lake. He was running his company of 25+ staffers from his summer house and only went to the office once or twice a week. Later, when I grow up, I want to be him 🙂

Could it be that we will massively start to re-appreciate living in the countryside? If we can do our work from home, why wouldn’t we live close to nature or close to outdoor recreation? This could be the beginning of new ways of thinking about real estate development. If the home office is the centrepiece of people’s daily activity, how would you design new houses or new neighbourhoods? It would make much sense to work from your garden and have leisure opportunities nearby: boating, fishing, biking, walking, boot-camping, playing golf.
If I had to design a new village from scratch, I would start with home-working professionals as my first design principle.

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Implications for working

Why would you pay an exorbitant price for office space if you could flip the default: What if the new default way of working is that you work from wherever you like to work and that you visit the office only for creative workshops with your team? Wouldn’t it make more sense to have smaller offices and offer your employees subscriptions to make use of co-working spaces all over the country (if they don’t like working from home)? Instead of investing in employee mobility, why wouldn’t we incentivise companies to include perks for people working from home, like comfy chairs, big screens, (virtual) gym subscriptions, etc.

 

Implications for retail 

What will happen to retail space if the number of people who live and work in cities stops rising? Retailers are already suffering from the e-commerce boom. At a certain point, there’s simply no way to make a profit if:

  1. Their rent is sky-high.
  2. They’re getting out-competed by Amazon.
  3. The number of people coming into town is decreasing.

How can we re-think the way we design retail spaces?

The problem with shopping streets is that they have become so expensive that only international retailers can afford the rent. The effect is that these places have transformed into mono-cultures. If you want to excite people for retail spaces, you need to think outside-in. They are not there only to buy stuff. They want to have a great time with their partner, mum or friends. They want to have a great afternoon together and feel great about themselves. That’s their deeper motivation. So it would be best if you thought about how you can help them fulfil this more profound need by offering them things to discover or explore, opportunities to be indulged and spoiled, spaces to connect and be playful, etc. 

There’s an exciting story about the city of Mulhouse, on the border between France and Germany. They were able to bring their high street back from the deaths. One of the interventions that blew back life into the retail streets was that 75% of new shops were independent. Their presence transformed the place into a place for excitement and discovery. Within three years, the commercial heart of the city was thriving again. 

 

Conclusion

Both inhabitants, retailers and entrepreneurs have reached the limits of their capacity to keep up with inflating prices. I argued that the psychological conditions are ripe for the bubble to burst. This will force us to fundamentally re-think the way we design our spaces for living, working, and leisure, with the working-from-home professionals and their needs and desires at the core of how we create. 

 

Tom De Bruyne

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Mark Blyth

Why Government Spending is about Designing Behaviour

By Citizen Behaviour, Government & Politics

In this blogpost,  I want to shine the Behavioural Design lens on economic thinking. I believe that how governments deal with the crisis has got everything to do with Behavioural Design.

The choices they make all have one intended goal: To positively influence the behaviour of the players in the economic ecosystem: citizen, entrepreneurs, investors, etc. Their interventions matter a lot because if they are based on wrong thinking about how incentives shape behaviour, they will result in worsening the crisis.

Mark Blyth

The economy is the sum of our beliefs of what it is

The health of an economy is nothing more or less than the collective believe we have about the future. If we are collectively convinced that things will go wrong, we will together cause the economy to contract. If you use this frame to look at the behaviour of the players in the marketplace, then the first thing you’ll notice is that the stock markets seem to be drunk with optimism again. Investors bet massively on a belief in a sharp recovery.

However, I’m not sure if we can use this signal for the real economy. Financial markets and the real economy don’t seem to have much in common these days. The stock exchange reflects more a collective belief in which companies will dominate markets in the future, and these dominating firm don’t correlate well with employment, prosperity and tax-income for the countries that host them.

 

‘Austerity is the dumbest idea ever.’

In the past, I have written about the Scottish Political Economy professor Mark Blyth, the author of the book ‘Austerity: The History of a Dangerous Idea’ (and the man behind the picture above). This lecture was the first lecture that made me understand fiscal policy-design and macro-economics (bonus: he’s a great speaker).

He makes the case that austerity is the dumbest idea ever. An idea that is gaining new momentum now since economy professor Stephanie Kelton published The Deficit Myth . The central idea that both economists propagate is that countries are not households. Countries can print money and can profit from negative interest rates, which means they get paid for lending. In other words: Countries that spend during crises, recover much faster. I wrote about this before in the blog “When accounts rule the country: On irrationality and politics“.

If this is true, then we can be hopeful that we can rebound soon, given the fact that the EU, as well as national governments, are pumping nearly unlimited amounts of capital into the economy. The question remains if this money eventually trickles down to citizens, employees, and SME’s, or if they end up filling the unlimited pockets of multinationals, and their investors. If you have inspiring sources on this topic, please share them with me.

The stimulus package debate, as seen through the lens of behavioural design

Why am I writing a newsletter on economic thinking? Because I think the choices governments are making to save the economy have every to do with behavioural design and behavioural economics.

Here’s why:

  • First of all, a lot of the debates around fiscal policy seem to be completely irrational, something I have written about in the past. The fact that the Nordic countries keep insisting that the southern European countries need to feel the pain for their sinful spending behaviour in the past hasn’t got anything to do with solid economic thinking, but everything with moralism.
  • When you read Mark Blyth, a thriving economy is an economy where people have money to spend. A contracting economy follows from people who are afraid to spend. European Countries so far have been doing a great job to make sure that people can keep on spending. They seem to have learned the lesson from the financial crash of 2008. This is possibly an excellent indicator for a fast rebound. He summarizes this argument very eloquently in this 5-minute video.
  • Third, every intervention in the economy is a behavioural intervention. The way governments design their funds will trigger intended and unintended behaviours. Quite often, the money is not being used by those who could benefit the most from it. Quite commonly, the money is being used by ‘smart’ investors who use cheap capital to fill the war funds of technological disrupters so they can conquer the market and kill all competition. And the reason why they love these companies is that digital companies, in the end, deliver a far higher ROI, because the cost of reproduction of digital products is near zero and they rely far less on physical labour. In other words: If the rules around the abundance of cheap capital are not designed with a greedy capitalist in mind, they will only make things worse. For more on this topic: see this blog I wrote last year on The Behavioural Design of The Economy, on incentives and rewards.

I hope this gives you a new view on how to think bout these abstract concepts like Eurobonds or recovery funds. In the end, they are designed to shape the behaviour of players in the economy. If you understand how they shape behaviour, you can start thinking about the question if they are designed well or if they don’t make any sense at all.

Tom De Bruyne

You can e-mail me at tom@sueamsterdam.com, or follow my Behavioural Design Mini-courses on LinkedIn, or learn more about behavioural design on our website and blog.

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Thoughts on the setup of a Corona Advisory Team

By All, Citizen Behaviour

The course of history for the upcoming decade needs to be written in a couple of weeks. Massive failure is not an option. The situation is too dangerous for dogmatic thinking. It’s time to let scientists, behavioural economists, designers and makers to join forces and embrace a build-measure-learn attitude to nudge people safely into the one-and-a-half-meter economy.

Here are 5 principles to set up a Corona Advisory Team that needs to shape society after the Big OpenUp.

 

Kahneman system 1 and 2

From Intelligent lockdown do smart OpenUp.

There’s a growing call in the public debate for the next group of scientists the government should rely upon, to fix the crisis. Up until now, most countries relied heavily on virologists and epidemiologists. With the opening up of society, it’s time now to shift gears and bring in the psychologists, economists, designers of public space, social geographists, etc. 

I think that’s a great idea. Just like we relied on smart people to guide us quite successfully through the intelligent lockdown, we will now need to rely on smart people to guide us through the intelligent OpenUp. The ultimate task of this board is to design behaviour on a massive scale. It needs to figure out the 1000 billion dollar question on how to reboot the economy, without re-activating the COVID-19 virus.

As a consultancy for behavioural change, I think we learned a few things on how to set up a projects like this . So thought it might be a good idea to draft a checklist of criteria for setting up these boards. 

Principle 1: The method is as important as the people

The fundamental principle for this board to run effectively is to have a creative methodology and an experienced facilitator that knows how to guide a multidisciplinary group through that process. If you need to come up with interventions to influence minds and shape behaviour on a massive scale, you need to go through a step-by-step process of gathering behavioural insights, generate hypothesises, prototype ideas and test them as fast as you can. 

There’s so much knowhow on how to guide teams to high-performance output in a context of extreme uncertainty: Lean Startup, Design Thinking, the Behavioural Design Method, to name a few. The team needs to agree to one method and stick to it.

Principle 2: Put human irrationality at the core of what you do

Your goal is to open up society again, while at the same time getting everyone to stick to elementary rules of precaution. Most people aren’t evil or anti-social; they simply forget to think. Or worse, they observe the spontaneous behaviour of other people and assume they can follow that norm. Before you know it, everything falls into pieces. To craft policies for the intelligent open-up demands a deep understanding of how people think, feel and behave. A lot of policies are designed with rational, disciplined people who act in their self-interest in mind. These interventions are doomed to fail. 

Principle 3: Establish rules for good judgement. 

I have written about rules for good judgement in a previous post “How to smell bullshit? Seven rules for good judgement“. The team needs to operate in a context of high uncertainty, flawed data, considerable risk and incredible public sensitivity. There’s a lot of science out there on how to get to better judgement in groups. To name a few principles I mentioned in my blogpost:

  • Superforcasting principles: a set of techniques to predict with fewer biases
  • The use of mental models for decision-making: the discipline to look at the problem through multiple scientific concepts
  • Blue team / red team approach: the discipline to set up a team that argues for counter-arguments, with the purpose of spotting flaws, wishful thinking or other biases in the reasoning

Principle 4: Prototyping and testing before implementing

Behavioural change requires experimentation. The success of an intervention is very sensitive to ‘little big details’. Sometimes it’s just the wrong word, a wrong timing or an unexpected second-order effect that could completely turn the intervention useless. Humans are complex beings operating in complex systems.

Every little act signals something to the group and vice versa: Everything their social network thinks or says, deeply affect their thoughts, feelings and behaviours. 

When your task as the Corona Advisory Team is to design behaviour on an unprecedented scale, there’s only one way to make progress: Rapid experimentation. Expect a lot of experiments to fail, with the simple idea to stumble upon winning strategies a lot faster.

Principle 5: Select people with skin in the game. 

I applaud the experiment that the Dutch Government had done last week. They organised a hackathon to speed up the process of finding an app that could work to track and isolate infected people, while at the same time respecting privacy. Although the hackathon resulted in a ‘failure’, in the sense that it didn’t produce a winning prototype, I think you can also think of it as a success.

The government went through a steep learning curve without having spent millions of taxpayers money. And they learned that the usual consultancy suspects – companies that are very good at understanding how to win tenders – are probably not the best builders. The reason is simple: They have no skin in the game. They don’t have the maker, builder, tweaker or hacker skills that are so desperately needed for this job. 

If the government wants to set up a Corona Advisory Team, I would urge the government to use the principles I outlined above. Don’t go with the usual team of pundits and advisors. Go for a board of practitioners. Or at least: Give them an equal share-of-voice: People who think in terms of understanding the problem and experimenting with solutions. People who move fast, know how to make, build, measure, learn and adapt. People who are humble about the fact that they operate in high uncertainty, but are willing to experiment their way out of it. 

If you want to read more thoughts on this topic on the Behavioural Design Blog:

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You can also hire SUE to help you to bring an innovative perspective or your product, service or marketing in a Behavioural Design Sprint.  You can download the brochure here, or subscribe to Behavioural Design Digest at the bottom of this page. This is our weekly newsletter in which we deconstruct how influence works in work, life and society.

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Nassim Taleb

How to be anti-fragile when the virus hits the economy? (update 22/03)

By All, Citizen Behaviour

Update 18/03

We are now 8 days further into this crisis and the world has gone into various forms of lockdown. There’s a big debate on whether this is the right strategy. It could be the worst of two worlds: We will harm the economy and when shit will hit the fan, we’ll be even more vulnerable. Nassim Taleb takes – as always – a radically different approach. He argues in this paper that lockdown could literarily wipe the virus out in 2 or 3 months. Hopeful.

Update 22/03

I have added a couple of nuances at the end of this blog on austerity.

Update 23/03

Nassim Taleb (the subject of this post) argues that this pandemic is NOT a Black Swan. This doesn’t contradict this blog below. I have included the implication of this argument below.


 

As I’m writing this piece (March 10th 2020), the virus is raging through the economy. Stock markets are heading towards catastrophic losses, and governments are forced to take draconic measures. The virus is going to hit the economy hard. How do we make sense of this all? And what’s the best way to respond as businesses and as a society?  The most useful mental models that come to mind are the concepts of ‘Black Swan Events’ and ‘Anti-fragility’ by Nassim Nicolas Taleb.

Nassim Taleb

Nicolas Nassim Taleb

Covid-19 s a classic Black Swan Event

In The Black Swan, Nassim Nicolas Taleb argues that we humans assume that the world is a fairly predictable place. We believe the stock market will keep on growing. We act upon the belief that the world will keep on evolving towards more prosperity. We assume interests will remain so low; you’d be crazy not to borrow. We keep pumping CO2 into the atmosphere because we believe that nature will keep on absorbing most of the damage we inflict upon her. Taleb argues that we all think we live in Normalistan, and we make all of our decision based on a firm believe in Normalistan. This conviction works very well,… until it doesn’t.

Taleb argues that Normalistan is an Illusion. Once in a while, an extreme and unexpected event happens that turns everything on its head. The classic example is a crash of the stock market. In 2008 everyone was drunk with optimism about the ludicrous profits they could make on the stock market and in the housing market, until the day that Lehman fell.

Taleb calls these events’ Black Swan Events’: Highly improbalistic events that instantly reshuffle everything we thought we knew about the world. People always thought all swans are white until one-day explorers brought a black swan from Australia. This urged us to revise our understanding of the world instantly. Taleb himself made a fortune as a trader betting against ‘black swan events’. He took insurance against the crash of stocks, waited for years until the stock market crashed and got incredibly rich. For a similar story; Watch the Big Short on Netflix.

Poster of the film The Big Short

The Big Short – On Netflix

 

How to deal with black swans: Anti-fragilty

After writing the Black Swan, Taleb followed up with the book ‘Antifragile: Things that Gain from Disorder‘, in which he came up with strategies to deal with Black Swan Events. He argues that most systems cannot cope very well with disorder or unexpected events. Big corporations, for instance, are very robust, which works very well in times of economic booms. However, robustness becomes highly problematic in times of crisis or the face of technological disruption and rapid market transformation. A big corporation is like a tanker, that has a significant advantage in calm, open waters, but is hopeless when it needs to manoeuvre fast and agile.

The opposite of a fragile system is a system that gets stronger from disorder. For instance: Netflix runs the Chaos Monkey on their servers. The chaos monkey is a script that attacks servers or groups of servers. Netflix inflicts constant unexpected attacks upon itself to get stronger when it has to deal with attacks from the outside world. Taleb calls these systems anti-fragile.

Antifragile systems benefit from disorder, obstacles, unexpected events, or change. Silicon Valley, for instance, is very anti-fragile, because it counts on lots of startups to fail because they expect a tiny group of startups to become massively successful. By allowing lots of failure to happen, it increases its chances of stumbling upon success.

Antifragile by Nassim Taleb

Antifragile by Nassim Taleb

Covid-19 is a Black Swan Event

This brings me to the Corona virus. This is a classic black swan event. Out of nowhere, it suddenly threatens the global economy, the unstoppable rise of China, the American elections, etc. Trillions of dollars of values already evaporated in the course of days. And we’re just getting started.

The virus is ruthless in bringing to the surface which systems are anti-fragile and which ones are not. Let’s look at some observations of how obviously fragile our economy is:

  • The world economy, with its just-in-time delivery of goods and services, is very vulnerable. All industries that depend on Chinese production capacity are now screwed.
  • The obsession with ferocious growth through enormous amounts of corporate debt, suddenly becomes highly problematic, now that investors want to get out of high-risk value papers as soon as possible. Debt-filled companies don’t have reserves for dealing with crises.
  • Most health care systems in the world are utterly unprepared for a pandemonium. In our collective free-market obsessions with cutting away redundancies, we optimized to cope with Normalistan. If the spreading of the virus continues as it does today, the US will run out of hospital beds within two months. 
  • Lot’s of SME’s are rapidly getting into trouble: Orders get cancelled, and incomes drop sharply, while at the same time it’s not that easy to cut costs quickly. You can’t fire your staff with a snap of your fingers.
  • The travel industry is not anti-fragile. Airlines are getting big blows. The first airline Flybe has already gone bankrupt. Airline margins are very low, competition is killing, and the business model can only function through continuous growth.

The efficiency maffia holds a firm grip on the economy. And they usually get away with it, until they get surprised by a black swan event. They collectively shout in despair that they had never seen in coming.

The problem is: There are always going to be Black Swan Events. You never know when, but they’ll happen. We have to design our systems – society, work, our personal lives,… – with the expectation of black swan events at heart.

 

Anti-fragility in the face of Corona

What do anti-fragile systems look like? Who will get stronger from this virus-induced economic recession in the making? Here are a couple of principles

  1. The ability to change course fast: anti-fragile systems benefit from a capability to coordinate for rapid change. Singapore got much credit for being the world standard for how to deal with the virus. The government has set up a massive fever-surveillance system, so nearly nobody can remain under the radar for too long (and infect others). Their capability for massive mobilization makes them slightly less fragile.
  2. Companies that have no debts and healthy cash reserves: In times of optimism, it’s very tempting to listen to your accountant and pay dividends. I’m glad we nearly always politely listen to our accountant and then do the exact opposite. We try to protect ourselves against our own optimism bias. We expect bad times to happen and plan for it.
  3. A diversified product offering: Airlines are very vulnerable because, in the case of a pandemonium, people will stop flying for business. But they’ll still need to talk to the business partner they were going to visit in the first place. If airlines would have invested in high quality video conferencing, they might have helped a lot of companies and event organizers to solve a huge problem. The Job-to-be-done of business traveling is not the journey, but to facilitate high-value meetings. It’s not because people stop traveling, that their underlying motivation for traveling has disappeared. For more on Job-to-be-Done: See our post on The Influence Framework.
  4. A Culture of Experimentation: This is a unique moment in time to experiment with video conferencing and collaboration software. Companies that are already used to working from home and video conferencing have an advantage. We are now rapidly experimenting with software tor virtual classrooms and for virtual sprints. If people can’t travel, then we’ll have to redesign our learning experience within a couple of weeks.
  5. Speed up innovation: If your staff now suddenly has time on their hand, then use this opportunity to invest in your content, brand, reputation. Never waste a good crisis, because it allows you to invest in the things you usually don’t have the time for while the economy was going strong.
  6. Take a lot of small risks, instead of one big risk. When the world becomes highly unknown, embrace fast experimentation. Prototype ideas, run pilots and try to get promising signals as soon as possible.

I don’t know how this crisis will evolve, and of course, we didn’t see this one coming. And to be honest, there’s no way to tell if this will play out well. We have to embrace it and practice anti-fragility.

Update 22/03/20

On several occasions I have been writing against fiscal austerity. In my argument, I followed the classic Keynsian argument that governments should do the exact opposite of what people need to do when in debt: spend more. This argument has been defended by Nobel Prize Laureates Joseph Stiglitz and Paul Krugman and has been argued for, both with strong data-support and with a highly entertaining Scottish accent by Mark Blyth, the author of the book “Against Austerity”. (must watch lecture).

However, in the wake of this epic crisis, you could also argue that running a surplus in good times wasn’t a bad idea after all. Both the Dutch and the German government now turn out to have deep pockets for both supporting their economy and lend astronomical amounts of money. The Germans are waking up with the realisation that Merkel wan’t crazy after all.

This is what Economics Professor Tyler Cowen writes on his blog (which really is the essential go-to place during their crisis):

Of course the content of the spending matters a great deal, but this is in principle the right thing to do.  But here is the catch: out on social media, and in the old days of the blogosphere, there was so much Merkel hatred: “the austerity queen who killed thousands,” etc.  But now she has been vindicated.  We all can agree that a government should (on average) run surpluses in good times and deficits in bad times.  Well…2011-2012…those were the good times.  Yikes.

Merkel goes up in status with this, big time.  And of course it is no surprise that a bunch of Germans would have a better sense of what the bad times really can look like.

Update 23/03/20

Nassim Taleb insists that this is NOT a black swan. For the simple reason that the outbreak of a  global pandemic was a highly probable and predictable event. We were warned for it by leading scientists for decades, and we had multiple occasions where we could have tested our capacity to deal with it  (e.g. the SARS-outbreak). He is therefore very harsh on companies that decided to use the abundant availability of cheap capital in the last decade to buy back their own stocks, which would drive up the value, that in turn lead to bonuses dividends for management and shareholders. Taleb on Twitter:

“Explain to me why we should spent taxpayer money to bailout companies (airlines) who spent their cash buying their own stock so the CEO gets optionality, instead of having a crisis buffer. We should bail out individuals based on needs, not corporations”.

BTW: this is the theme of his latest book, called “Skin in the Game”, in which he argues that a lot of terrible decision making could easily be avoided if the ones who took the decision can be both awarded and punished for their decisions. This crisis might teach shareholders something about expecting more skin in the game from the management of the companies they invest in.

Also read: Live like a Hydra: how to practice antifragility in your personal life.

Watch the complete overview of our blogs on behavioural design.

Contact me: tom@suebehaviouraldesign.com.

 

When Accountants rule the country

When accountants rule the country – irrationality and politics

By All, Citizen Behaviour

The dangerous economic myths
underlying political decision-making

When Accountants rule the country

Picture by Neil Moralee, shared under a Creative Common license

This is going to be a slightly longer post than usual. I want to share a couple of thoughts on a subject that fascinates me: irrationality in governing. I want to argue that billions of Euro’s are being spent by governments, based on bad economic ideas. These ideas are very pervasive, because they provide politicians with the illusion that they’re working very hard. But in reality, they’re making things worse.

How do you want your tax money to be spent?

As a tax-payer, you want to assume that your government uses its tax-income to make smart, rational decisions. You would like political debates to be about which investments would yield the highest societal return. Should we invest more in education? In infrastructure? In the military? Should we invest more in stimulating entrepreneurs to develop thriving businesses that generate jobs? Or should we focus more on redistributing wealth to encourage the poorest to get out of poverty? Should we accelerate spending in green energy, or is it better to remain addicted to burning cheap fossil fuels?

Spending billions based on irrationality

Your average Western government has to make a yearly decision on how to spend billions of Euros, Pounds or Dollars. So you want that decision to be based on evidence and facts. You don’t want it to be based on irrationality. 

The problem is: this is how governments think. 

In the book “Money and Government: The past and future of economics“, History Professor – and Keynes biographer – Robert Skidelsky argues very eloquently that governments worldwide use bad economics to make big decisions on government spending. And some problematic myths form the foundation of these lousy decisions.

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Myth 1: Whenever possible, leave things to the market. 

The underlying idea is that governments are not productive and bureaucratic, whereas markets tend to create increasingly better service for less money. This cliche is very pervasive and very wrong. Mariana Mazzucato demonstrates in “The Entrepreneurial State” that every piece of innovation that sits within an iPhone has been funded and developed with governmental funding. And vice versa: Markets have a deep tendency towards monopolies, profit maximization and obsession with shareholder value. This market tendency becomes problematic when it concerns critical services like health care and public transport. 

Myth 2: Governments need to be prudent with money

Our Dutch government loves to compliment itself with having one of the best budgets in the world. Our national debt is rapidly decreasing due to the disciplined cost-cutting efforts of our government. Every European government decided that the best answer to the financial crisis was austerity. Sounds reasonable. If you’re in debt, you have to stop spending and start paying back. But ‘reasonable’ is not the same as ‘rational’. The rational thing to do to prevent the economy from further contracting, as many economists have argued, is precisely the opposite: increase spending. Economies are not the same as households. The reason why this myth is so powerful is that there’s a lot of signalling power in it: Being strict on the budget allows politicians to signal that they are working hard and responsible. 

Two fascinating stories illustrate the point how wrong this myth is: 

  • Belgium suffered far less from the financial crisis than other Western-European countries. The Reason: They weren’t able to form a government for more than 1,5 year – rewarded with a Guinness World Record mention – so they didn’t have the opportunity to make stupid decisions.
  • Portugal, one of the worst economies in Europe defied the European Austerity-doctrine and started investing in wages, pensions and work. To everyone’s surprise, it quickly became one of the best-performing economies in Europe. Read this background article: “No Alternative to Austerity? That lie has now been nailed“.

Myth 3: There’s no magic money tree (spoiler: there is)

In an excellent essay on Robert Skidelsky, David Graeben shares a shocking statistic: Almost 85% of all Members of Parliament in the UK has no clue about how money is created. And yet they have to decide upon billions, even trillions of Pounds/Euros/Dollars. He writes:

 “There is no magic money tree,” as Theresa May put it during the snap election of 2017—virtually the only memorable line from one of the most lackluster campaigns in British history. The phrase has been repeated endlessly in the media, whenever someone asks why the UK is the only country in Western Europe that charges university tuition, or whether it is really necessary to have quite so many people sleeping on the streets.

The truly extraordinary thing about May’s phrase is that it isn’t true. There are plenty of magic money trees in Britain, as there are in any developed economy. They are called “banks.” Since modern money is simply credit, banks can and do create money literally out of nothing, simply by making loans. Almost all of the money circulating in Britain at the moment is bank-created in this way. Not only is the public largely unaware of this, but a recent survey by the British research group Positive Money discovered that an astounding 85 percent of members of Parliament had no idea where money really came from (most appeared to be under the impression that it was produced by the Royal Mint)”

Because nobody knows how money is created, Richard Werner, a German Economist, decided to go and find it out for himself, by applying for a job at a bank. To his disbelief, he discovered that bank tellers don’t balance out the loans and mortgages they issue against a reserve. They simply create the money out of thin air and expect it to be paid back with interest.

What happens when accountants rule the country

So, if banks can create money out of thin air, purely based on the confidence that it will return one day with interest, why couldn’t governments do this? It’s called investing. The big crisis of today is a crisis of imagination. Governments have come to think of themselves only in terms of accountants, or as the instance that only takes money and prosperity away instead of creating it. 

It reminds me of my own experience with accountants years ago. Our accountants always used to be very proud and satisfied when they looked at the quarterly numbers. In the mind of the accountant, a great company is a company that performs well on a balance sheet. I hated these conversations. I still do. Because what accountants don’t see is that an excellent looking balance-sheet can mask all kinds of deep problems: terrible clients, 80-hours work weeks, a significant dependency on junior staff, unhealthy competition, etc.

An accountant could be looking at a company that is terminally ill, and still think it’s doing great. And since they talk numbers and spreadsheets, I tended to think they knew what they’re talking about. You don’t need much imagination that the same thing is going on on a government level. Dutch politicians recently lamented that they are performing well, and yet people keep being dissatisfied and disappointed. Voters are such ungrateful bastards. 🙂

Tom De Bruyne, February 2020.

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Make Liberalism Horny Again

By All, Citizen Behaviour

Dear reader,

In this newsletter, I often talk about the virtues of prototyping. As I argued many times before, I think ‘doing’ is a much faster way to make process than abstract strategizing. If you start making things, you will get to learn incredibly fast what you need to do to improve your product. You will also learn very fast if people emotionally connect with the idea.

Prototyping is the fastest route to learning if an idea is viable and likeable.

Society as a wicked design challenge

A couple of weeks ago, I had the opportunity to experience the power of prototyping firsthand. Together with Mark Thiessen and Tim Versnel, two friends I met while working for the Dutch Liberal Party VVD, we decided to record our conversations and learn if they might be worth podcasting. All three of us are intrigued by the wicked design problem of how to design the ultimate liberal society. We define the liberal utopia as a society that fosters the highest amount of freedom, opportunities, prosperity and wellbeing for as many people as possible. We firmly believe that societies where there is plenty of opportunities to learn, to grow and to fail, no matter how wealthy your parents are, are worth fighting for.

(Continue reading below)

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We like to think of this liberal utopia as a behavioural design challenge. If you want to create this society, you will need to think hard about how to influence the behaviour of every stakeholder: citizens, corporations, entrepreneurs and politicians.

This liberal utopia is the big hairy audacious goal that connects all of our conversations, whether we discuss governance, populism, climate crisis, innovation or policies.

Make Liberalism Horny Again

After we recorded our first conversation, we were not embarrased with the outcome, so we decided to continue to give it a couple of attempts. The next day Tim got a call from the editors from Nieuwsuur, a prime time political TV-show in the Netherlands because they heard about our prototyping through the grapevine. Five days later a camera crew showed up to record our second episode.

I was in a bit of cheerful mood, so when they asked me what the goal of the podcast was, I blurted out “We want to make liberalism horny again”. One week later, the editors used this quote for the headline of the item. What I didn’t realize at the time of the recording was that the narrative that they wanted to create was a narrative of a new “young” generation that wants to re-shape the Dutch Liberal Party. It was only a matter of hours after the TV item aired, that we got overwhelmed with messages from people within and outside the party. We even heard that “horny liberalism” actually made it to the VVD- party executive meeting. 🙂

The Power of Prototyping

What amuses me the most is that we hadn’t even published our first episode and the podcast already became a phenomenon. We neither had proper recording gear, so the sound quality was utterly embarrassing. We also had no idea how we wanted to talk, as you will notice if you can get beyond the first 10 minutes. However, through prototyping, we quickly learned that the idea had leverage. We even discovered that there was a big appetite for this content amongst people who want liberalism to flourish, and that includes people from the competing Dutch Liberal party D66. We would never have discovered this if we had waited till we got it just right. Even worse, I think we probably wouldn’t have succeeded in eventually publishing our first episode.

I think it was Stanford Professor Steve Blank, an authority on startups, who once famously said: “If you’re not embarrassed by your first release, you probably released too late”.

The interview that was used as teaser (Dutch).

Our website “De nieuwe vrije eeuw” + link to the podcast (Dutch)

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The disastrous behaviour that triggered Chernobyl

The disastrous behaviour that triggered Chernobyl

By All, Citizen Behaviour

I just finished reading “Midnight in Chernobyl“. A chilling and magnificent book on the world’s greatest nuclear disaster. But as much as it is a book about Chernobyl, it’s above all a book on behavioural design. The book provides a fascinating peek into how totalitarian regimes like the Soviet Union profoundly shape the behaviour of its constituents.

The leadership of the Soviet Union created a magnificent illusion that the ultimate workers’ paradise of True Communism was on the horizon if everyone stuck with the plans of the Party. The best way to understand the behaviour of the people inside the Party is to look at it through the lens of a sadistic game. The higher you got in the ranks, the more effort you had to put in defending your position. Inversely, the most dreadful thing that could happen to you is to fall out of the Party’s grace.

The disastrous behaviour that triggered Chernobyl

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It’s, therefore, no surprise that the Communist Game Design produced only ruthless and sociopathic men who made it to the top. It also created a culture of lies, secrecy, and false reporting for the simple reason that no one in the communist hierarchy wanted – or could afford – to hear bad news.

Why they didn’t want to hear bad news had to do with the two obsessions of the former Soviet Union: ludicrous targets and the competition with the West. Goals that were not going to be met, triggered fury and outrage at the top, and creative corner-cutting at the bottom of the pyramid. The Soviet Union leadership always had to prove that they were able to pull off the impossible. They had to do this to maintain the illusion that it was far more capable than those bloody western capitalists. Not being able to meet the impossible was the equivalent of treason.

Being loyal beats being right

In a culture like this, rational decision-making becomes impossible. Every fact will be interpreted through this obsessive lens: “Could this fact hurt my reputation”? or “Could the Party lose face if this fact were true”? You don’t want this decision-making process when you’re building a nuclear reactor, operating one, or when you’re trying to contain it after the explosion. Reactors got built with lousy material, and prototype tests were skipped, because deadlines were sacred. Known critical errors in the design of the reactor were discarded (because it could hurt the reputation of the Soviet nuclear community), safety protocols were overruled, because deadlines had to be met,… And at every stage there always was a bullying chief who made sure people didn’t step up.

Adam Higginbotham writes:

“The accident and the government’s inability to protect the population from its consequences finally shattered the illusion that the USSR was a global superpower armed with technology that led the world. And, as the state’s attempts to conceal the truth of what had happened  came to light, even the most faithful citizens of the Soviet Union faced the realization that their leaders were corrupt and that the Communist dream was a sham”. (p. 276)

Societies shape behaviour

Midnight in Chernobyl is a fascinating story of how behaviour of a whole nation is shaped by the invisible rules of the game. Everyone is trapped inside the rules of this game, not in the least those at the top.

When you approach it from this angle, then the book pairs surprisingly well with Life.Inc. In this book, Douglas Rushkoff argues that we in the West have entirely internalized corporate thinking. We’ve become obsessed with success, we have started to see everything as assets, and we divide the world into winners and losers.

If you need to bring two books with you on holiday that will teach you a lot without being boring business books, then these are the ones.

Update February 17th 2020:

It’s also quite interesting to observe that a similar pattern is taking place in China in the context of the Corona virus outbreak.. The Chines Government is trying to contain the virus, but are now experiencing unpleasant surprises, due to  overly optimistic reporting from the local governments. People just didn’t want to report bad news, because it could hamper their changes for making career. This is a perfect illustration of Goodhart’s Law:

“When a measure becomes a target, it ceases to be a good measure.”

In other words: When your promotion depends on the things you measure, you start cooking the numbers.

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How one buddha statue transformed a community

By All, Citizen Behaviour

This story began in 2009. Dan Stevenson, a resident of Oakland’s Eastlake Neighborhood, was fed up with people littering garbage in a traffic-diverting median at the intersection of two streets. He was used to drug dealing and prostitution in the neighbourhood, but as long as they didn’t cross a line, he didn’t feel the urge to act.

But the new median in the road turned out to become an open invitation for people to dump their garbage. And the moment one item got dropped, it signalled social proof to other people to follow the example, and this triggered more undesired behaviour.

Dan Stevenson came up with an idea: “What if I would put up a Buddha Statue?” He figured: Buddha is pretty neutral. A Jesus Christ statue is too controversial. But with Buddha, you can’t be offended. His idea was that the gaze of the Buddha might have a second-thought effect on criminals and litters.

What happened next, according to the The San Fransisco Gate is the following:

“He hoped that just maybe his small gesture would bring tranquillity to a neighborhood marred by crime: dumping, graffiti, drug dealing, prostitution, robberies, aggravated assault and burglaries.

What happened next was nothing short of stunning. Area residents began to leave offerings at the base of the Buddha: flowers, food, candles. A group of Vietnamese women in prayer robes began to gather at the statue to pray.And the neighborhood changed. People stopped dumping garbage. They stopped vandalizing walls with graffiti. And the drug dealers stopped using that area to deal. The prostitutes went away.

I asked police to check their crime statistics for the block radius around the statue, and here’s what they found: Since 2012, when worshipers began showing up for daily prayers, overall year-to-date crime has dropped by 82 percent. Robbery reports went from 14 to three, aggravated assaults from five to zero, burglaries from eight to four, narcotics from three to none, and prostitution from three to none”.

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Hostile Design 

The makers of the 99%invisble-podcast, where I heard the story, framed this intervention as an example of hostile design. Design that aims at deterring bad behaviours. A bit like the paint in Hamburg’s party district that bounces off your pee when people urinate against it. Similar to the park benches that were designed in such a way that homeless people cannot use them as a bed.

I wouldn’t exactly call this intervention hostile. What I really like about this intervention is that one single attribute redefined the perception of the physical space from a trash bin to a sacred place. And once it was redefined through this statue, it started to shape people’s behaviour. It quickly became a holy shrine for the Buddhist community. And they began to take care of the place. Once they figured out that Dan Stevenson was behind it, the Vietnamese community started to bring him presents and paying him their respects.

What I also love about this story is that it’s such a powerful example of how little our brain needs to alter the experience of what we see. We don’t need many cues for our mind to attribute a completely different meaning to what we see. One Buddha statue from a home depot store sufficed to transform the perception, the experience and the meaning of place. And it redefined the behaviours that were expected and those that were forbidden.

As Charles and Ray Eams once summarized one of the essential lessons in design: The design is not in the details. The detail is the design.

Psychological magic is everywhere.
We have to learn to see it.

You can hear the whole story on the 99% invisible podcast

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Pissing in the well

By All, Citizen Behaviour

Have you ever been to Ubud in Bali? Ten years ago it was the closest you could get to paradise. Today it transformed into a mass tourism nightmare. KFC’s next to McDonalds, an abundance of yoga studios and a plethora of overpriced organic restaurants, carefully catered to get the last dollar out of the pockets of the sophisticated soul searcher.

Vang Vieng in Laos is even worse. Once a little hidden gem on a river transformed itself into a binge-drinking paradise for English and Australian youngsters. The number one activity in Vang Vieng is tubing, which comes down to descending the river on a tube while being drunk. The view that made Vang Vieng so incredibly beautiful is now gone because they built backpacker huts in front of it.

These are just two classic examples of the concept of “pissing in the well”. A well is a common good in a community that – if managed well – provides prosperity for everyone. If a community in a remote village manages its access to water well, everyone will be able to thrive. If one person decides to damage it for personal gain, the well will dry up and everyone will suffer or die. This phenomenon is also often referred to as the tragedy of the commons.

We’re pissing in every well we find.

The wrongness of the core idea of capitalism that progress is made when everyone pursues their self-interest is never better illustrated than in the tragedy of the commons. The list of tragedies is endless:

  • We live in Amsterdam. It’s a beautiful city, but real estate speculation and mass tourism are gradually turning it into Disney-like attraction.
  • Watching a Frozen-movie with the kids on TV can be a joyful family experience until they ruin it with five advertising blocks.
  • We want to drive our cars as fast as we want to while musing about the beauty of the countryside. But while doing this, the quality of what’s left of nature is rapidly declining, precisely because we’re slowly suffocating it.

I can go on and on.

We, humans, tend to piss in every well of beauty and prosperity we find.

I don’t know the solution to the problem, but I do know that the psychology of happiness points to some exciting directions. The key to living a happy life is not about consuming the things you want to have or to buy experiences. Life long happiness is all about living a meaningful life. It’s about forming deep relationships with others, through which your sense of self transcends. Happiness is about learning new things. And it’s about contributing to a more significant good.

Find happiness in restoring the wells in 2020.

So instead of pissing in the wells we visit, why not dedicate ourselves to joining forces to restore the wells that we are in the process of destroying:

  • Bring back the sense of belonging in the communities we live;
  • Restore the wildlife in our regions;
  • Join forces to speed up the transition to a carbon-free world;
  • Restore the opportunities for kids who grow in poverty to get access to good education, proper role models and enough opportunities to climb the social ladder.

These are the wicked behavioural design challenges for 2020 we are going to focus on. To restore the wells of beauty, meaning and prosperity, what a great mission for the next years.

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A cunning plan to nudge people into electric driving

By All, Citizen Behaviour

The climate change issue is by far the most wicked behavioural design challenge in our lifetime. In about 10-20 years we will need humanity to change the fossil fuel motorblock under the hood of prosperity. And we will need to do this while we’re all high on consuming everything our carefully manipulated desires are told to want. This is the daunting taks for our generation.

There’s going to be a big need for behavioural designers to answer questions like: How are we going to get people, business and politicians to change their behaviour?

Let’s zoom in on cars to begin with: How do you get people to switch to driving electric? It’s actually much simpler than you think.

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There’s a big debate going on in the Netherlands right now. The Dutch government was forced to come up with measures to lower the level of CO2 emissions urgently. They came up with the idea to reduce the maximum speed on all highways from 130 till 100 km/hour. The argument seemed more than fair: It’s a relatively small effort, and it saves thousands of jobs in construction. You can read more about it in this article from The Guardian.

The country went bonkers, and the resentment was both fueled and harvested by the far-right populist parties. People don’t want to be told how fast they can drive. The topic is consistently being framed as a complot from the urban elite against the hardworking people.

At the same time, the government decided to stop giving tax incentives for buying electric cars. By the way: it was also brilliantly framed by the opposition as the Tesla-tax. A tax-cut that would only benefit people who are rich enough to buy a Tesla.

What if they would have approached both problems as behavioural designers?

As is all too often the case, the measures were taken with a lousy understanding of human decision making in mind. You don’t have to be a behavioural scientist to understand that taking away a privilege will backfire, no matter how good the intentions. Bas Erlings and Sophie Hermans, the campaigning masterminds behind the Dutch Liberals did a masterful job in framing the issue. They immediately framed it as a “lousy measure they only made to prevent thousands of people working in the construction business would sit at home at the Christmas table without a job”. The “lousy measure”-frame was repeated in national and international media.

But with a little bit of creativity, this could have been a fantastic opportunity to boost the transition to electric driving. The only thing they needed to do, was to allow electric cars to drive 130 in the fast lane. Every time you would see an electric car passing you on the highway, you would essentially see a riding billboard for electric driving. If you combined this with free parking and free chargers in the city-centres, where parking space costs a fortune and are challenging to find, that would spark a rush on electric cars.

However, this requires policymakers to think human-centered instead of looking at the problem through the traditional rational frame. You don’t need to incentivise humans if you can tap into psychological value: The desire to outsmart traffic, to have comfortable parking space and even the desire to be part of a smart group of people who outsmarted the masses by going electric.

But the problem, of course, is that these measures are just a little bit too exotic to say yes to if you are a policymaker. And therefore it’s a lost opportunity. As I argued many times before in this newsletter: policymakers should at least hire behavioural economists or behavioural designers to spot golden opportunities for behavioural change.

Read more about this topic in a blog post I wrote a couple of months ago: How Norway nudges its citizen to drive electric.

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